Entrepreneurship and New Venture Creation - SAMPLE

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Entrepreneurship and
New Venture Creation
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© Amity University Press
All Rights Reserved
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No parts of this publication may be reproduced, stored in a retrieval system or transmitted
in any form or by any means, electronic, mechanical, photocopying, recording or otherwise
without the prior permission of the publisher.
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Advisory Committee
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Chairman : Ms. Monica Agarwal
Members : Prof. Arun Bisaria
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Dr. Priya Mary Mathew
Prof. Aindril De
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Mr. Alok Awtans
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Dr. Coral J Barboza
Dr. Monica Rose
Mr. Sachit Paliwal
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SLM Review Committee

Mr. Gaurav Agarwal
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Ms. Nitika Khanna

Ms. Rashmi Saxena
Ms. Renu Singh
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Ms. Mona Chaudhary

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Published by Amity University Press for exclusive use of Amity Directorate of Distance and Online Education,
Amity University, Noida-201313
Contents
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Page No.
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Module -1: Introduction 01
1.1 Concept of Entrepreneurship
1.1.1 Definition, Nature and Need
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1.1.2 Scope of Entrepreneurship
1.1.3 The entrepreneurial Mindset.
1.1.4 Characteristics of Entrepreneur
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1.1.5 Functions of Entrepreneur
1.1.6 Promotion of Entrepreneurship
1.1.7 Generating and exploiting new ideas
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1.1.8 Corporate Entrepreneurship
1.2 Perspective
1.2.1 Theoretical Perspective of entrepreneurship and intention
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1.2.2 Entrepreneurial Traits
1.2.3 Entrepreneurial Environment
1.2.4 Entrepreenur, Entrepreneurship and Enterprise
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1.2.5 Relationship between Entrepreneurship and Management
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1.2.6 Difference between Entrepreneurship and Management
1.3 Types
1.3.1 Entrepreneurship Styles
1.3.2 Types of Entrepreneurs
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1.4 Innovation
1.4.1 Creativity and Business Idea
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1.4.2 Innovation and Entrepreneurship

1.4.3 Types of Innovation
1.5 Importance
1.5.1 Importance of Entrepreneurship
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1.5.2 Growth of Entrepreneurship

1.5.2 Counseling Entrepreneurs and Follow -up
1.5.3 Entrepreneurial Culture
1.5.4 Indian Scenario of Entrepreneurs
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1.5.5 Ten steps to become an entrepreneur

Case Study
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Module -2: Evaluating Entrepreneurial Options and Startup Opportunities 106

2.1 Project Identification
2.1.1 Understanding the idea and an opportunity.
2.1.2 Purpose and Need for Project Identification
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2.1.3 Methods for Identifying New Project Ideas

2.1.4 Steps in Project Identification
2.1.4 Screening of potentially promising project ideas
2.2 Project Formulation Feasibility Study
2.2.1 Stages in Project Formulation
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2.2.2 What is a Feasibility Study
2.2.3 Components of Feasibility Study
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2.2.4 Format of Feasibility Report
2.3 Project Report
2.3.1 Need for developing a Project Report
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2.3.2 Components of a Project Report
2.3.3 Project Report Vs Feasibility Report
2.4 Project Appraisal
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2.4.1 What is a Appraisal Process
2.4.2 Technical
2.4.3 Fianancial Analysis
2.4.5 Profitabiltiy Analysis
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2.4.6 Socio-Economic Appraisal
2.5 Ownership Structure
2.5.1 Sole Proprietorship
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2.5.2 Parnership
2.5.2 Joint Stock Company
2.6 Startup finance and sources of finance
2.6.1 Startup Capital r
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2.6.2 Business Model
2.6.3 Financial Projections
2.6.4 Sources of Finance
2.6.5 Internal Sources of Finance
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2.6.6 External Sources of Finance

2.6.7 Instruments
2.6.8 Capital Marlet Instruments
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2.6.9 Venture Capital

2.6.10 Features of Venture Capital
2.6.11 Venture Capital Process
2.6.12 Venture Capital Financing Process
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Case Study
Module -3: Understanding Startup Finances, Capital & Other Requirements & Developing Team and
Presenting Business Plan 243
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3.1 Financial Projections

3.1.1 Understanding Financial Projections and forecasting ?
3.1.2 Elements of financial projection
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3.1.3 Steps to making financial projections for your new business

3.1.4 Forecasting expenses and revenue
3.1.5 marketing and operational plan
3.2 Business Plan
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3.2.1 Importance of a business plan

3.2.2 Elements of a business plan
3.2.3 Tailoring the Business Plan to Specific Audiences
3.2.4 How to Write the Perfect Business Plan
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3.2.5 Why Some BP Fail – Common Pitfalls to be Avoided
3.2.6 Examining sample business plans
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3.2.7 Understanding the investor’s perspective and presenting the business plan.
3.2.8 Valuation of business plan and the elevator pitch.
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3.2.9 Evaluation of Business plan-Introduction
3.2.10 Faith in Entrepreneur and Entrepreneurial Team
3.2.11 Markets, Competition and Growth Strategies
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3.2.12 Risks, Returns and Rewards
3.2.13 Financial Ratios
3.3 Role of Government Institutions
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3.3.1 Role of Government in promoting Entrepreneurship
3.3.2 Institutions rendering support for promting entrepreneurship
3.3.3 Institutions set up by Central and State Government
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3.4 The importance of team
3.4.1 Importance of team work in a startup
3.4.2 When teamwork fails
3.4.3 Forming and Building Teams r
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Case Study
Module - IV 345
4.1 Entrepreneurial Challenges
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4.1.1 Entrepreneurial challenges as an individual

41.2 Entrepreneurial challenges as an entrepreneur
4.1.3 Skills of managing business risk enhancing success.
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4.1.4 Entrepreneurial Motivation

4.1.5 Innovative Motivation
4.1.6 Nature of emplyee morale
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4.1.7 Measures to improve morale

4.1.8 Steps to success of morale
4.2 Legal Form of new venture
4.2.1 Various types of business ownership
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4.2.2 Sole Proprietorship and its features

4.2.3 Advantages and disadvantages of sole proprietorship
4.2.4 Joint Hindu Family Business
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4.2.5 Advantages and disadvantages of Joint Hindu Family Business

4.2.6 Partnership and its feature
4.2.7 Types of Partnerships
4.2.8 Coopertive Society and its features
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4.2.9 Types of cooperative Societies

4.2.10 Advantages and disadvantages of cooperative Societies
4.2.11 Joint Stock Company and its features
4.2.12 Merits and Demerits of Joint Stock Company
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4.2.13 Types of Companies
4.2.14 Comparative analysis of forms of organisations
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4.3 Legal Issues related to venture
4.3.1 Legal Basics that Every Indian Startup Should Know
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4.3.2 5 Essential Legal Issues To Address Before Securing Venture Capital
4.3.3 Legal issues faced by entrepreneurs
4.3.4 Intellectual Property Rights in India
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4.3.5 Patents
4.3.6 Copyrights and related rights
4.3.7 Copyright protection in India
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4.3.8 Trademarks
4.3.9 Bankruptcy
Case Study
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Module - 5: Emerging Trends, Technologies and Practices in New Venture Creation 465
5.1 Technology-enabled Trends that will Help Shape Businesses and Economy

5.1.1 Technology Trend awareness
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5.1.2 Technology trends facing business in 2021 and beyond
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5.1.3 8 Technology-Enabled Trends | Marketing
5.1.4 Understanding Technical intelligence in business
5.1.5 Understanding Technology Intelligence
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5.1.6 Technology intelligence : opportunites and threats

5.2 Technology Business Incubators
5.2.1 Incubators: Launchpads for modern economy
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5.2.2 Unique Benefis of TBI

5.2.3 Stages of Incubation at TBI
5.2.4 The Procedure of Incubation
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5.2.5 Special Considerations for Nascent Incubators

5.2.6 Centre for Innovation, Incubation and Entrepreneurship (CIIE), Examples 15
5.3 Emergence and growth of new technology–based companies
5.3.1 Emerging New Technologies
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5.3.2 New Technology based companies

5.3.3 Intrapreneuship
5.4 Corporate Entrepreneurship
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5.4.1 Corporate Versus Intrapreneurial Culture

5.4.2 Climate of Intrapreneurship
5.4.3 Strategies for growth
Case Study
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Entrepreneurship and New Venture Creation 1
Module -1: Introduction

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Structure:
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1.1 Concept of Entrepreneurship
1.1.1 Definition, Nature and Need
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1.1.2 Scope of Entrepreneurship
1.1.3 The entrepreneurial Mindset.
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1.1.4 Characteristics of Entrepreneur
1.1.5 Functions of Entrepreneur
1.1.6 Promotion of Entrepreneurship
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1.1.8 Corporate Entrepreneurship
1.2 Perspective
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1.2.1 Theoretical Perspective of entrepreneurship and intention
1.2.3 Entrepreneurial Environment r
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1.2.4 Entrepreenur, Entrepreneurship and Enterprise
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1.3 Types
1.3.1 Entrepreneurship Styles
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1.3.2 Types of Entrepreneurs

1.4 Innovation
1.4.1 Creativity and Business Idea
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1.4.2 Innovation and Entrepreneurship

1.5 Importance
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1.5.2 Growth of Entrepreneurship
1.5.2 Counseling Entrepreneurs and Follow -up
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1.5.3 Entrepreneurial Culture

1.5.4 Indian Scenario of Entrepreneurs
1.5.5 Ten steps to become an entrepreneur
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Case Study
Amity Directorate of Distance & Online Education

2 Entrepreneurship and New Venture Creation
Unit - 1.1: Concept of Entrepreneurship

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Objectives
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At the end of this unit, you will be able to:
●● Explain the concept of entrepreneurship.
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●● Steps for becoming an entrepreneur.
●● The factors that affect the entrepreneurial mindset.
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1.1.1 Definition, Nature, Need
Entrepreneurship is derived from the word entrepreneur. An entrepreneur is a
person who is engaged in the development of an idea or concept in practical terms. An
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entrepreneur is responsible for bringing new ideas to the market as well as delivering
something new in the market. A company that is set up by an entrepreneur is known as
an enterprise.
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Entrepreneurship is an activity that makes maximum utilization of natural and
manmade resources to convert an idea into action. Entrepreneurship is a business
process that is implemented by an entrepreneur or an individual who is engaged in the
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entrepreneurial activity and organizes and tries to reduce the uncertainty in the market.
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Entrepreneurship is the activity of starting a business and successfully running it to
fulfill the needs of the customers.
Entrepreneurship involves a complicated process for making optimum utilization

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of the resources. The entrepreneurial activity starts with the generation of an idea
according to the demand and need of the customers. When an entrepreneur identifies
this need in the market and converts it into an idea, the feasibility of the idea is
checked. The feasibility of the idea is checked based on the market acceptability of
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the idea. The entrepreneur must not implement the business idea without undergoing
a proper research and development activity. The entrepreneur should also ensure that
the company has enough risk-taking capacity and future potential growth regarding the
idea.
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The major objective of any entrepreneur is to be involved in risk-taking activities so

that the wealth and profit of the company can be increased. To stay in the market, an
entrepreneur will have to continuously be involved in innovative activities and have a
creative approach to solving problems.
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Entrepreneurship includes the risk of an entrepreneur to make a profit and

create a new business entrepreneur in the market. It is not always necessary that the
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entrepreneurs must deliver a new business concept, they can become an entrepreneur
through acquisition and other business concepts also.
The entrepreneur has the ability and power to develop and organize an idea into a
business enterprise concept and make a profit. The major objective of any entrepreneur
is to get maximum profit from the business, reinforce and develop employment
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generation activities in the market. An entrepreneur or an individual is not only

responsible for making maximum profit and wealth from the production and marketing

of a product, however, as an entrepreneur, but the individual is also responsible towards

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society. Entrepreneurs must always deliver their best.
Nature of entrepreneurship
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●● Entrepreneurship is an economic activity- Entrepreneurial activities are
concerned with the generation of profit and the creation of wealth for the business.
Entrepreneurship activity deals with optimum utilization of scarce resources and
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utilizing the resources in a manner that can give more benefit to the company. The
economic resources and the creation of wealth for the company are derived in
terms of economic value. The company will generate profit in the form of monetary
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benefit, that is, the profit and the entrepreneurial activity, and the profit cannot be
separated from each other.
●● Innovative activity- When an entrepreneur enters into business, he will have
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to implement and search for new ideas in the market. The new ideas can be
generated through the demand and the needs of the customers which are
unfulfilled by existing competitors in the market. The entrepreneur should
implement and evaluate those business models that are demanded by the
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customers. The entrepreneur can work upon different concepts and identify the
opportunities in the market to generate new innovative ideas.
●●
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Risk bearing- One of the major factors that affect entrepreneurship activity is the
risk-bearing capacity of an entrepreneur. When an entrepreneur brings a new idea
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to the market, he should have the capacity of bearing different types of risks in the
market. New ideas and innovative concepts are always temporary and the result of
such ideas might always not give a positive response. The entrepreneur will have
fear and the risk of unacceptance of the business idea in the market.
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●● Profit motive- The major objective of starting a business in the market is to

generate profit and meet the daily requirements. The entrepreneur will try to
deliver his best in the market so that maximum acceptability of the ideas will be
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done from the customer’s side and the company can get better profit potential.
●● Organizing function- Entrepreneurship is an organizing function because it is
an activity that organizes all the factors of production together to manufacture
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and produce a valuable product or service. The factor of production will include
land, labor, capital, and the entrepreneur. The entrepreneurial activities include
coordinating with the factors of production and the entrepreneur engaging in
production activities.
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●● Gap filling- Entrepreneurship is an activity of filling the gaps in the market. There
are certain demands and needs of the customers that are needed to be fulfilled by
the companies. The entrepreneurial activities will remove the deficiencies in the
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market and deliver the needed product in the market. By doing so, the company
will get a competitive advantage and the preferences of the customers.
●● Allocation of resources- An entrepreneur must ensure that the resources within
the company are allocated according to the requirement of the business. He must
also ensure that the company does not have insufficient resources and no access
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to resources for production. A balanced allocation of resources must be done by

the entrepreneur.

Need for entrepreneurship

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The need for market expansion and a highly competitive market has been
encouraging individuals to enter into entrepreneurial activities. This is the major reason
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for the expansion of the business sector in any country.
●● Dream- It is the dream of many people to start a business and to develop

something creative in the market. This dream is converted into entrepreneurial
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activity and it benefits society. The passion and the power of delivering
something innovative, and incorporating it as a business tycoon, motivates
many individuals to start an entrepreneurship activity.
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●● Learning- Many individuals want to learn and deliver something new in the
market. The learning ability and the need of learning to stay in the market
motivates an individual to innovate a business idea regularly.
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●● Employment opportunities- Through entrepreneurial activities, the
entrepreneur can generate employment opportunities for the skilled and
unskilled laborers in society. It is the responsibility of the entrepreneur to
incorporate a hybrid form of a business model that constitutes an equal
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contribution of manpower and technology so that the employees and
individuals get a chance for employment in the business.
●● Increases the economic wealth of the country- Entrepreneurial activities
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help in increasing the economic wealth and economic position of a country
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in the international market. The more a country encourages entrepreneurial
activities, the more chances of employment and development of a strong
economy take place.
●● Fulfill the demand -The entrepreneur has a major objective of fulfilling the
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demands of the customers in the market. The company is established to

deliver goods and services to the customers so that the demands and needs
of the customers can be fulfilled.
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●● Become a market leader- The entrepreneur must have an objective of

becoming a market leader through innovative concepts. The entrepreneur can
become a market leader when the creative concepts and the thinking of the
entrepreneur are different compared to other competitors in the market. The
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entrepreneur must always deliver something new and innovative to lead the
market.
●● Improving the living standards of a country- Entrepreneurship provides
equal opportunities to all individuals and this can enhance the living standard
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of a country. When a country encourages international business through

acquisition and merger, the company is not only establishing a business but is
also accepting the culture of another country. Learning and adopting different
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countries’ cultures encourages and improves the living standard of a country.
1.1.2- Scope of entrepreneurship

There are multiple scopes for entrepreneurship as the need for entrepreneurial
activity is increasing as each day passes by. The major scopes of entrepreneurship
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are:-

●● Desire to grow in the future- The need for entrepreneurial activity is

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increasing because an individual does not want to limit his or her creative
ideas to other companies by delivering them in the form of employment. An
individual wants to expand and wants the recognition of his idea on a bigger
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platform by starting entrepreneurship in the market.
●● Desire to earn more profit- An individual wants an increase in salary every
day and a fixed annual salary is not sufficient for an individual to meet his daily
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requirements. The need to earn more revenue and profit in life motivates an
individual to start an entrepreneurship activity.
●● Lack of employment opportunities- It is very difficult for an individual
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to get employment opportunities in the market. The need for employment
opportunities is decreasing in the market and companies require highly
specialized and experienced employees and this reduces the chance of
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fresher and less-skilled employees for employment opportunities. This is a
major reason that motivates entrepreneurs to be involved in entrepreneurship
activities.
●● Government schemes- Various government schemes are motivating
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entrepreneurs to be involved in entrepreneurship activities. The government
will provide full support to all kinds of entrepreneurial activities in the market
so that the economy will be boosted and the newly established companies
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can provide more employment opportunities in the market.
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●● The market demand- Market demand is increasing every day and the
customers and the consumers keep demanding more specialized as well as
unique products. This motivates individuals to start a business that fulfills the
requirements and concepts of the customers. This will benefit the company as
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a newly established business with a highly customer-centric organization will

help in engaging in creating a new venture in the market.
●● Promotes new business- Entrepreneurship promotes new business
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ventures. With a creative imagination, the entrepreneur can utilize his skills
and creative mindset to make optimum utilization of the available resources in
the environment.
●● Societal change- The normal activities motivate societal change. When an
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entrepreneur brings an idea that promotes environmental change and does

not harm the society or is engaged in reusing the waste societal elements,
it encourages social change and motivates people to recycle and use
environmentally friendly products. By doing so, the entire period is not only
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motivating its objective of earning profit but also promoting good health and
welfare of the society.
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1.1.3 Entrepreneurial mindset

The entrepreneurial mindset is a set of skills and abilities of an individual to
identify the opportunities in the market. The mindset of any person is determined by
the creative aspect of an individual. An entrepreneurial mindset will include the various
challenges in the market and how an individual will overcome and learn from these
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challenges. Every individual will have their way of handling problems and challenges.
Some individuals and entrepreneurs may take a challenge negatively while some may

adopt it as a positive opportunity.

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The mindset of an entrepreneur has a major impact on the performance and value
of the business. When an entrepreneur builds a creative mindset in the business, the
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entrepreneur can get the benefit of more acceptability from the customers.
An entrepreneurial mindset will include the educational qualification and the

experience of an individual related to the problem. The entrepreneur must always
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believe in developing creative approaches to a problem so that competitive advantage
in the market can be achieved.
An entrepreneurial mindset constitutes a specific set of beliefs and thoughts that an
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individual possesses in their behavior. The major aspects that relate to entrepreneurial
mindset include: -
●● The mindset should always focus on achieving the objectives of the
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organization and should be highly engaged in the business objectives. It
should also direct and motivate individuals towards achieving the business
goals.
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●● The entrepreneur should have the ability to influence other individuals and
take ownership of it.
●● An entrepreneurial mindset should not be short-term learning and knowledge-
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oriented but it should see every problem as an opportunity and should highly
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focus on solution-oriented creativity towards solving a problem.
●● The entrepreneur should also be a curious learner, that is, he must have a
curiosity to solve a problem and learn from opportunities.
●● The mindset should also constitute a humanistic approach because when an
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entrepreneur has value for other related parties before solving a problem this
shows that the entrepreneur is concerned about the behavior and benefit of
other related parties.
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●● Before implementing any idea the entrepreneur must test the ideas into
different situations through micro experiments so that the level of creativity in
an idea can be identified.
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●● The mindset should also have a positive influence over the community and
should critically guide society towards a feasible solution.
An entrepreneurial mindset can be developed through experience. To gain
experience and knowledge about the mindset of an entrepreneur and develop a
creative mindset, the entrepreneur should go through different situations so that the
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entrepreneurial learning experience can be developed.
Ways to Develop an entrepreneurial mindset

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●● Be positive- In a world full of competition, the entrepreneur will fear loss

and will always have a fear of different risks associated with production and
manufacturing activities. A positive approach towards solving any problem
will help the entrepreneur enhance their performance and deal with problems
easily. Negative thoughts will decrease the performance of an entrepreneur
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and will also create a negative environment in the organization. A positive

approach will motivate the staff members and encourage the employees

to work towards the organizational objectives. The positive approach

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in the organization can be developed through research and developing
psychological thinking in the business.
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●● Have creative concepts- The entrepreneur should have a creative mindset
and must be involved in making decisions based on creative ideas. The
entrepreneur should ensure that the company always delivers innovative
and creative concepts to its customers. To build better creative ideas, the
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entrepreneur should do proper research and development activities and
must evaluate the necessity and requirements of the customers. The creative
concepts and mindset can be developed by continuously working towards
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fulfilling the customer demands because the needs and requirements of
the customers change all the time and it is difficult for all the companies to
develop and deliver creative ideas to the customers.
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●● Have a different approach to solving a problem- The entrepreneur must
have a different and realistic approach to solving a problem. The entrepreneur
should evaluate the problem and find its different solutions as the company is
dealing with different segments of customers and the company must evaluate
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the mindset and thoughts of different customers. It is always not necessary
that a company should only evaluate the needs of a particular customer
segment because, when a company tries to satisfy a single customer segment
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and does not take care of the other segments, the company may lower
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or reduce its market reach. Hence, a problem must be solved with different
approaches so that possible challenges in the future can be identified.
●● Read daily- An entrepreneur must be a learner and a reader because these
two qualities will make the entrepreneur a better analytical person. The market
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is changing every day and the entrepreneur must have information regarding
the environment and economy. Proper knowledge regarding the market will
ensure the entrepreneur can identify the problems and challenges that the
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international market or other business segment is facing. This will help the
entrepreneur to prepare for future challenges and problems.
●● Face challenging situations- If an individual wants to develop an
entrepreneurial mindset, he must ensure that he can face every challenge and
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should not avoid any challenge. Because, if an individual tries to avoid any
problems or challenges related to the business, he cannot develop a creative
approach for the business. If an entrepreneur wants a competitive advantage
in the market, he should ensure that the company and the individuals are
facing every challenge rather than avoiding it. When an entrepreneur avoids
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business challenges, the customers may have a perception that the business
is not ready to take challenges and is only operating in its comfort zone.
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Importance of entrepreneurial mindset

An entrepreneur will have various types of benefits and the importance of an
entrepreneurial mindset keeps increasing every day due to competition in the market
and to raise the standard of quality in the market.
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●● Establishing a creative mindset- An entrepreneur’s mindset is more

concerned with the creative approach of solving a problem. If an entrepreneur

has an objective of surviving in the market for a longer period, then he

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must follow a creative approach to solve the problem. Because, when an
entrepreneur does not have a creative and futuristic approach towards a
problem, the company’s chances to get a competitive advantage in the market
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will reduce and other competitors can take advantage of this situation. Hence,
it is necessary that the entrepreneur works regularly with a creative mindset
and solves problems, and comes up with innovative ideas.
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●● Value creation- As an entrepreneur, a major requirement of any individual is
to create particular values for the company. By engaging in an entrepreneurial
mindset, the entrepreneur can create value for its business. The
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entrepreneur must deliver something good and beneficial to its customers.
The entrepreneur must create goals for the company and always provide
good values against the financial and monetary benefits received from the
customers.
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●● Gain the greater trust of the customers- The entrepreneur can get the
greater trust of the customers with a creative mindset. If an entrepreneur
especially focuses on building valuable customers for its companies and
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increased market share, the business value and entrepreneur value can
be increased. The company will trust a business that is dedicated to the
customer’s value and hence, with a creative approach and good mindset, the
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entrepreneur can get the trust of the customers.
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●● Creates accountability- The entrepreneur can build accountability
towards society and towards its customer. The entrepreneur must not
blame the system and process for its actions. The entrepreneur should take
accountability for a business venture and should focus on its business actions
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and not blame any other entity for its actions. The entrepreneur should take
responsibility for any problem that will occur due to the action of any business
element. The entrepreneur should also try to fix that problem without passing
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on the problem to any other party and must take full accountability for the
results.
●● Problem-solving- The entrepreneur should solve various types of problems
with his creative approaches. By developing an entrepreneurship mindset,
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the entrepreneur solves difficult problems in the business venture. There will
be problems related to business expansion and mergers. These problems
will require a critical, analytical, and creative approach. Various factors need
to be analyzed before making a big decision and hence the entrepreneur
must always focus on developing and starting every business factor before
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its approval. When an entrepreneur has a creative mindset, it will creatively

evaluate the problem and will try to solve those problems in a better way.
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Entrepreneurial process
●● Idea generation: - The first step in the entrepreneur mindset process is the
generation of an idea. It can be generated through the internal and external
environment and economics, to develop an idea that benefits the society and
tries to solve the maximum problems of the customers. The idea can be an
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extension of a previous idea or a new or fresh idea based on the customer’s

demand. If an entrepreneur has a unique and different idea about the other

companies in the market, the company can get the benefit of maximum
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customer satisfaction and lead generation. The idea can even be generated
by solving previous problems of the customers that were not solved by other
companies in the market. This way, the company can get various opportunities
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to generate different ideas in the market.
●● Opportunities evaluation- The entrepreneur must have the ability to identify
the problems in the market and evaluate the problems. The entrepreneur can
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identify the opportunities and deliver the best by implementing business ideas
by giving time and energy. The opportunities in the market should include
creating a relationship with the other assets. The entrepreneur can work on
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the business functions and invest in different physical properties.
●● Planning- Once the idea is evaluated and the opportunities in the market are
identified, the entrepreneur should work on the planning phase. The planning
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will include plans related to the financial goals of the company and ways of
achieving them. Once the company plans the different ways of achieving an
objective and reducing complexities through a better planning structure, the
company can easily achieve the business objectives.
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●● Company formation- Once the company has enough opportunities in the
market and is ready with the business plan, it should launch the business
idea in the market with a creative approach. The entrepreneur must develop a
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creative business approach towards every problem so that the customers get
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attracted to the new idea. In the initial stage of the business development, the
company will find it difficult to generate leads and attract customers, but when
a company has a different way of presenting a business idea and a different
way of solving a problem, then the company will easily get major advantages
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in the market. The company can give benefits to the customers through
effective strategies and operating plans.
●● Growth- When the company launches a business idea in the market and the
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business idea gets a good response from the customers, the growth of the
company can be identified. The major emphasis of a business is to generate
revenue and move towards sustainable development and growth of the
business. At this stage, the planning phase is executed and the business
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processes take place. The manufacturing and the production activities are
done at this stage, with which the growth of the business can be evaluated.
The concept of cognition and metacognition in the entrepreneurial mindset.

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Cognition refers to the mental process. The concept of cognition in

entrepreneurship includes attention, memory power, and understanding of languages
by an entrepreneur. It also includes the problem-solving and decision-making
capacity of an entrepreneur. It is derived from the Latin word meaning ‘to know’ or ‘to
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conceptualize’. The entrepreneur can conceptualize a problem by processing the

problem with his knowledge and information. It is used when an entrepreneur deals with
thoughts and processes. The mental stability and the mental state of an individual are
measured through cognition. The entrepreneur’s intelligence level is also included in the
entrepreneurial cognition.
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In the cognition phase, the entrepreneur considers the business process with its
judgments, and with the knowledge, the entrepreneur cannot make decisions based

on the perceptions and the future possibility of profit. The entrepreneur will have
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to evaluate a situation or a problem based on his knowledge, experience, and value
creation aspect. A decision should give future value to the business and should deliver
a growth aspect to the company.
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In cognition, the entrepreneur’s skills and abilities are evaluated. The way of
assessing a problem and using his mental abilities and skills to solve a piece of the
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problem that is related to product development, innovation, expansion, merger, or
starting a new business is included in entrepreneurial cognition.
Social cognition theory includes a way of optimizing personal effectiveness and
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using personal behavior to study entrepreneurship. In the social cognition theory,
the entrepreneur will have to evaluate his mental models and solve the idea with
knowledge.
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The concept of metacognition is included in the cognition phase. Metacognition is
the ability of any individual to become flexible according to the given situations and also
self-regulate within the given environment. Metacognition is more dynamic compared
to the cognition stage and includes adaptable cognitions and achieves the desired
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outcomes for the company. Metacognition includes self-motivation and constitutes the
different tasks that the entrepreneur should fulfill.
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The entrepreneur can get benefits from metacognition because through
metacognition, the entrepreneur evaluates different and difficult situations and tries
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to think in a higher-order manner. Metacognition deals with higher thinking, that is,
thinking differently compared to other entrepreneurs. When the entrepreneur of a
business thinks that a problem cannot be solved, the company should focus on making
responsible decisions for the company. Metacognition will give various benefits to the
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company and will also give a competitive advantage in the market to the companies.
Through metacognition, the entrepreneur evaluates alternative courses of action and
tries to evaluate every problem.
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1.1.4 Characteristics of an entrepreneur

The characteristics of an entrepreneur determine the nature and personality of
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the entrepreneur in the business. An entrepreneur must pursue different types of

characteristics so that his business venture is ready for future challenges.
●● Professionalism
Entrepreneurs must have a professional approach to handling problems.
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Professionalism is a quality every entrepreneur must possess and they must behave
like a professional and develop a culture in its value. Professionalism includes qualities
such as behaving like a well-disciplined person and incorporating the qualities of a
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well-established and disciplined entrepreneur. As a professional, the entrepreneur

should also be reliable and must always possess reliability and accountability towards
the business problems. The reliability will result in trust which the customers and
employees can return to the company. A professional and well-structured business
organization is more likely to get better benefits in the company as the customers will
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always favor a well-structured and well professional organization. Professionalism is an

important aspect of an entrepreneur. If an entrepreneur behaves unprofessionally, the
customers will not approve.
●● Creative
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Entrepreneurs should be creative in their work. Creativity does not only refer to
solving problems creatively but also includes innovative activities that exhibit a creative
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approach. Creativity in business will motivate the entrepreneur to think differently
compared to the other competitors in the market. It is not always necessary that
problems need to follow a certain standard in the market, however, the entrepreneur
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can creatively solve the problem based on his thinking capacity. When an entrepreneur
solves the problems and implements a creative approach in the business, he gets
various benefits for the company and also increases the competitive advantage of
the company. With creativity, the entrepreneur can come up with new solutions to the
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problems and the solutions will always be out of the box. By identifying the problems
and the unfulfilled demands of the customers, the entrepreneurs will have better
opportunities. If an entrepreneur has a creative mind, he can easily deal with large-
scale problems.
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●● Planning
The entrepreneur must also have the ability to plan and organize their thoughts in
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a business standard. Planning does not always include financial resources planning;
it includes planning for the challenges and problems that could occur in the future.
Entrepreneurs must be ready to achieve business goals in the future through efficient
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planning structures. It is generally assumed that, if a company fails in a product, the
company fails in the market. It might not be due to the fault of the company as a whole,
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the planning process of the company might not be done effectively and that might
be why the plan failed in the market. Planning is an important characteristic that an
entrepreneur should pursue. The entrepreneur must be effective in planning the activity
and must make optimum utilization of the resources. The plan of the company should
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not focus only on present business goals and the entrepreneur must create a mindset
and frame the plans of the company according to the future business goals. Hence, the
entrepreneur should ensure that the company has future business plans.
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●● Risk-taking
The entrepreneur should also have a risk-taking capacity in the market. The
entrepreneur should not avoid the risk in the market and should always focus on
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undertaking the different risks in the business. If an entrepreneur tries to avoid

the risk in the market, he will not get the competitive advantages in the market. The
entrepreneur must consider the risks when the company has an objective of long-term
growth and achievement of higher profits in the business. In such a case, he should
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focus on taking various types of risks. Risk can be related to internal and external
markets. It is always unpredictable, and hence the entrepreneur must be ready to
deal with every situation. He should undertake every activity that includes business
expansion through risk-taking. The entrepreneur must deliver its best in different
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situations and must not avoid risk in the market.
●● Passion
The entrepreneur should also have a passion for his work. The passion in work
can be defined as entrepreneurs who are always motivated and do not require any
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external element for motivating the business employees and the entrepreneurs. The
entrepreneur should have a self-motivation element and should always drive for the

betterment of the company. The motivation and passion for the work must come from
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within and become the best in the market. When an entrepreneur has a passion and
determination towards his work, it will be easy for the entrepreneur to work as he/she
will enjoy the work that he or she is doing. Passion will also motivate an employee to
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work extra hours in the office without getting hesitant because the entrepreneur will
assume it as a responsibility and will not try to avoid this responsibility.
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●● Knowledge
Entrepreneurs must have adequate knowledge about the market. The key success
element of any company is knowledgeable about the market. The entrepreneur must
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have knowledge related to the company as well as the external market. Entrepreneurs
must also have adequate knowledge regarding governmental rules and regulations.
If an entrepreneur does not have adequate knowledge about the market, it can result
in various limitations for the company. Entrepreneurs can enhance their knowledge
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by regularly reading and analyzing the external environment. If an entrepreneur
has better knowledge about the advertisement norms and rules and regulations
of the government, it will be easy for the entrepreneur to evaluate a proposal. A
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knowledgeable entrepreneur can identify the strengths and weaknesses of a company
and can lead a healthy organization.
●● Social skill
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It is not always necessary that entrepreneurs should pursue only entrepreneurship
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activities and should focus on delivering the business idea in the market. An
entrepreneur should also work towards social skills that include activities related to the
betterment of society. These activities will result in delivering a better quality of products
and services to the customers and maintaining good relations with the customers.
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There are various ways through which an entrepreneur can implement and maintain
better relations with the customers. Timely feedback and timely solution to queries will
help the customers rely upon and trust the business. The entrepreneur should have
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the skill of maintaining good relations through effective management of time so that
the customers do not switch from the company. They should develop the skill of hiring
and talent sourcing and through this, the company can ensure better customer service
through skilled manpower.
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●● Open mindset
An entrepreneur should also have an open mind where he should take business
idea expansion and innovative ideas from employees, customers, and other related
parties. The entrepreneur should also welcome the business opportunities in the
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market. An entrepreneur should not be closed-minded where he focuses only on his

ideas and does not give importance to other ideas. He should have an open mind
towards learning. Entrepreneurs should not resist learning from their customers and
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employees. Entrepreneurs should learn from their mistakes and always try to find
a better solution to the problems. The entrepreneur should also have an open mind
towards failures. The entrepreneur should not be demotivated from the failures and
should not overlook the failures as well. He must always have a mindset to learn from
the failures and challenges.
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●● Empathy
The entrepreneur should have empathy towards the working staff and must pursue
empathy towards the employees. He must ensure the benefits of the company from the
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viewpoint of the employees. It is not always necessary that employees of the company
always think well about the company. The entrepreneur must ensure that the perception
and the thinking attitude of the employee matters to the company and the company
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should take care of it. The entrepreneur must think from the point of view of the
employees so that the problems related to work culture and organizational environment
can be identified. The reason for unhappy employees can easily be identified through
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empathy.
●● Decision making
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The entrepreneur should be a good decision-maker. The entrepreneur should
evaluate various types of situations in the market and then make fruitful decisions for
the company. Every business aspect is related to entrepreneurial activities because
entrepreneurs should always make better decisions for the company and should not
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make decisions based on perceptions. An entrepreneur is a person who is responsible
for making the major decisions for the company and should always focus on the
business goals and visions of the company. Such an attitude of the entrepreneur should
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lead the organization and decisions that will benefit the company in the future should be
made. The decisions should also have a long-term approach rather than a short-term
approach. An entrepreneur must make decisions for the company such that it reduces
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the business problems and guides the company towards growth.
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●● Effective management
An entrepreneur is an effective manager because, in the initial stage of the
product development and business establishment, the entrepreneur will perform the
role of a manager. The entrepreneur should ensure that the work is done effectively
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and efficiently. The entrepreneur must also ensure as a manager that he or she makes
optimum utilization of the available resources and does not make excess stock of the
finished products. The entrepreneur should also make sure that the needs and wants
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of the employees in the business are fulfilled and the employees in the organization
are treated as a part of the business. The entrepreneur must ensure that the delegation
of the responsibilities and the roles of the employees in the organization is distributed
according to their qualifications and working experiences.
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●● Leadership
The entrepreneur will also perform the role of a leader. As a leader, the
entrepreneur should ensure teamwork towards the achievement of the organizational
goal. The entrepreneur will also have to make necessary arrangements regarding
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the business development and ensure the equal growth of the employees. The
entrepreneur must work as a leader to motivate the employees and work together with
them. A leader must have the quality of working with the team and should not always
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command the team. The entrepreneur will delegate responsibilities in the business
according to their working experience. Rather than always commanding the team,
the entrepreneur, as a leader must motivate the team towards the achievement of the
organizational goals. As a leader, the entrepreneur should always focus on working
with the team together so that the company can work towards achieving the business
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objectives. The entrepreneur should pursue the qualities of a leader because, as a

leader, he must take care of all the employees in the business and promote empathy
and sympathy in the business.
●● Multidimensional
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An entrepreneur should also be multidimensional, that is, he/she should perform
multiple tasks at a single time. The entrepreneur should work in various dimensions
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and should ensure that the company can achieve overall growth. If a company is only
dependent on the entrepreneur, then he should have the quality of always delivering
the best to their customers. As an entrepreneur, the individual should follow and acquire
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different experiences so that the company can operate in different segments. The
customers are ever-changing and hence the company and the entrepreneur should
make sure that the satisfaction of the customer is the top priority of the company.
When an entrepreneur gives major importance to customer satisfaction and the role
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of customers in the business, the employees will learn from the entrepreneur. The
entrepreneur should ensure that the company is operating on different dimensions and
taking care of every segment of the business.
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The characteristics of an entrepreneur include problem-solving abilities to generate
profit for the company. The entrepreneur, as an individual, should always be ready
to face risk in the market. He should be calm and must handle problems easily. The
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entrepreneur must not panic in difficult situations and should motivate the employees
towards the company’s objectives. If an entrepreneur is simple and gives more
importance to the employees, the employees will feel like a part of the company.
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1.1.5 Functions of an entrepreneur
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The entrepreneur will have to perform various types of functions in the market
and by doing so, the entrepreneur will be able to build a successful business and can
successfully lead the company.
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●● Planning
The first function that an entrepreneur will have to perform is planning. Before
implementing an idea in the market, the entrepreneur must plan about different aspects.
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As an entrepreneur, the individual will have to plan about the available resources in the
market and the arrangement of these resources. Every major and minor requirement
of the business will be planned by the entrepreneur before the establishment of a
business. When an entrepreneur establishes a business, he or she must plan for the
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sources of finance. There are multiple sources of finance available in the market,
but the entrepreneurs must plan according to the requirement of the financial needs
and the nature of the business. Planning regarding the future is very essential for
an entrepreneur so that future requirements of the business can be evaluated. The
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entrepreneur will also have to plan for recruitment activities and the sources of
recruitment for the business. Planning will help the entrepreneur in predicting the
requirements of the business. Entrepreneurs can also plan for the future requirements
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of budget and essentials for the business.
●● Selection of location
When undergoing an expansion of the business or acquisition activities, an
entrepreneur has to make requirements for selecting a location. The location is
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approved after considering various requirements. It is selected based on its reach

towards the market. The plant location must be located near the market so that the

acquisition of raw materials and other requirements such as labor and professional help
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can be easily accessed. The company can also easily arrange for essentials from the
market. When a company is established far from the local market, the arrangement
of unskilled labor becomes very difficult. The entrepreneur must select a place that is
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feasible for everyone and also satisfies the government norms.
●● Arrangement of land
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When an entrepreneur is evaluating the location, he also has to evaluate the land.
The land must be legal, that is, no government legal allegation should be there on the
land. The land should not be too costly and the entrepreneur must also evaluate the
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type of land needed. The entrepreneur must evaluate the land-based on government
regulations. There are various types of regulations for different states and hence, the
entrepreneur should first identify the different regulations of the Government and then
understand the type of land in the market. Entrepreneurs cannot establish or build a
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business on any land as there will be certain limitations or disadvantages when land is
selected without research.
●● Arrangement of capital
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The entrepreneur is also responsible for arranging different types of capital for the
business. The requirement of the capital for the business will change according to the
business activities. Sometimes the entrepreneur will require a huge amount of finance
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for business acquisition or merger. The sources of finance depend on the nature and
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type of the business activities and entrepreneurs must select a source of finance after
evaluating various benefits and disadvantages. The entrepreneur, in the initial stage of
the business, should not arrange finance through equity and should arrange finance
from debentures and loans. This will help the business in growing without delegating
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the entrepreneurial roles. Arrangement of capital is a critical activity and hence, the
entrepreneur should have the skills of evaluating the financial needs of the company on
various factors.
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●● Arrangement of labor
A business will require various types of laborers. The entrepreneur will be
responsible for arranging different types of manpower in the business. When a business
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is dealing in the manufacturing activity, it will require a large number of unskilled local
laborers. The entrepreneur will have to gain several unskilled laborers in the production
activity. When a company is dealing with a highly technological-based business, it will
have to arrange for skilled labor and professional technicians. Entrepreneurs will have
to make sure that the company maintains a balance between skilled and unskilled
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labor. Both types of business are equally important in a business and are also equally
important in bringing profit for the company. The arrangement of good labor for the
company is the role of the entrepreneur. The entrepreneurs can even hire a labor
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contractor that can make arrangements for unskilled labor for the company.
●● Arrangement of raw material

An entrepreneur has the responsibility of arranging the raw materials for the
company. The arrangement of raw materials will include various aspects. The
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entrepreneur will have to undergo a research activity for evaluating an effective and
cost-efficient supplier for the company. The entrepreneurs cannot make arrangements

for raw materials based on the needs of the company. This is because the entrepreneur
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will have to first evaluate the different types of suppliers available in the market and
then shortlist the supplier that is providing the best quality of raw material at an effective
cost. The cost and the quality of the raw materials matter to the company the most
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because if the supplier supplies low-quality raw material, the finished product will also
be of low quality. The entrepreneurs will have to make necessary arrangements for the
company accordingly.
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●● Arrangement of technology
Every day new technology is launched in the market that focuses on evaluating
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the technological changes in the market. The entrepreneur cannot always rely on
the same type of technology in production. The entrepreneur should improve its
technological background every year. The entrepreneur will have to undergo some
research and analysis activity for evaluating the best technology for the business. He
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will have to make necessary arrangements for evaluating the technological needs in the
market. The arrangement of technology is necessary for an entrepreneur because the
competition keeps increasing in the market every day and to stay in the market and to
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give tough competition to its competitor’s technological enhancement, is very necessary
for the business. The entrepreneur cannot work on the same technology and the up-
gradation of the technology should be done every year or at least the technology should
be renewed.
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●● Coordination with factors of production
An entrepreneur should maintain coordination with the factors of production.
The factors of production will include land, labor, capital, and the entrepreneur. The
entrepreneur should maintain a balance and coordination between land, labor, and
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capital. The entrepreneur should also arrange for good and feasible sources for the
company and as well as arrange for skilled and unskilled labor. The entrepreneur is
also responsible for the arrangement of various sources of finance. The sources of
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finance are eliminated and selected based on the requirement of the company and the
nature and type of the business. It is not always necessary that the company should
only arrange funds through a single source of finance. The company should ensure that
the entrepreneur is maintaining a balance between different sources of finance and is
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preparing a mixed portfolio.
●● Division of labor
The major responsibility and function of an entrepreneur are to delegate the work
of the laborers in the business. Division of labor includes the assignment of past work
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of the laborers in the company. It is the responsibility of an entrepreneur because, if

an entrepreneur does not delegate the responsibilities according to the experience and
knowledge, then the laborers will not perform their best. It is also necessary to delegate
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the work so that the laborers cannot blame others in the team for not accomplishing a
task. If the division of work is divided equally, the laborers will be liable to complete the
work and will not resist doing a part of the work.
●● Quality check of the product

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When an entrepreneur is engaged in the production and manufacturing business,

he will have to ensure that the finished product of the company is of the best quality.

There are various types of quality checks that the entrepreneur can implement in the
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business by which the quality assurance of the product can be done. The customers
want a supreme quality of product and the entrepreneur is liable to deliver such a
quality to the customers. If an entrepreneur does not deliver a superior quality of
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product to the customers, the customers might feel cheated and will switch from the
company. This will give the competitors an advantage of expanding their customer
base. Quality assurance is very important in every product and if a company does
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not manage the quality in a single product or the customer gets a defective product,
the entrepreneur should apologize for it as the entrepreneur will be responsible for
delivering a bad quality of product to the customers.
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●● Increase the sales of the company
The entrepreneur is not only responsible for producing the product in the market
but is also responsible for effective selling. The entrepreneur must hire sales executives
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for the business so that they can increase the sales of the company. Entrepreneurs
must ensure that the company is engaged in increasing its sales every year. The
company should also hire salespersons that can engage in selling activities. This
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will increase the sales of the company and will also create awareness amongst the
customers about the product. Good sales executives for the company will give more
revenue and increase the sales and proportion of the company in the market.
●● Advertisement r
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The entrepreneur is also responsible for engaging in effective advertising
strategies. If a company is operating in different states and is a multinational company,
the advertisement plays an important role in the company. For creating awareness
about the product in the market and delivering the information about the product in
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the market, advertisement plays an important role. Different advertising strategies

such as digital advertisement, advertisement on hoardings, newspaper advertisement
play an important role in creating brand awareness and awareness regarding the new
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product in the market. When a company is launching a new product in the market,
the entrepreneur is responsible for implementing a better advertisement strategy so
that every segment of the customer can relate to the product and will try to get more
information about the product. Advertisement plays a very important role in generating
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profit and customers for the company. The selection of the advertising strategy is a
major role of an entrepreneur. If a company selects an incorrect advertisement strategy
that does not give revenue or profit in the market and does not create awareness about
the product in the market, then the entrepreneur will be responsible for selecting such
an ineffective strategy.
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●● Creation and search for the market

Whenever an entrepreneur takes the responsibility of generating revenue for the
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company and increasing its market share, he also has the responsibility of searching
for a better market. The company or the entrepreneurs cannot launch the product in the
market without a search for its customers. The major responsibility of an entrepreneur
is to search for the customers and the customer segment that will purchase the product.
This is because the market will benefit the company and also help the entrepreneur to
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build marketing strategies according to the customer segment. If the company does not
have a market, the first responsibility of an entrepreneur will be to create a market. The
creation of the market is a difficult task but the entrepreneur can deliver the need of the
product in the business and that can create the demand in the market and also create a
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customer base for the company.
●● Maintaining relation with external parties
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The entrepreneur is also responsible for maintaining a good relationship with
external participants of the external parties that include the government, suppliers,
and other related parties. If a company or an entrepreneur does not have a good
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relationship with these external parties, the functioning of the business will become
difficult in the market. The entrepreneur is responsible for maintaining good relations
with suppliers and treating the suppliers as part of the company. Even though these
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parties are outside the company, they will have a major impact on the business. The
entrepreneur is the representative of the company and hence, maintaining good
relations with these external parties is the responsibility of the entrepreneur. The
entrepreneur must formulate and implement various regulations of the government in
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the business and this includes taking the necessary licenses of the government and
working under the government rules and regulations. If an entrepreneur does not work
according to the government requirements, the business functioning in the market will
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become difficult.
●● Supervision
The work of an entrepreneur is not limited to production and manufacturing
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activities as he/she is also responsible for supervising and guiding the laborers in the
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company. The major role of an entrepreneur is to supervise the employees according
to the business requirement. The entrepreneur should also guide the employees in the
business. By doing so, the entrepreneur reduces the confusion and reputation of the
work. The entrepreneur will act as a guide to the employees according to his or her
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knowledge and experience and the entrepreneur can support the employees in the
company. If employees do not get any supervision or guidance from the entrepreneur,
then the work within the company will get delayed and more confusion will be there.
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●● Payment to all factors of production

When the business is small and is new in the market, the entrepreneur will
perform all the roles and responsibilities of different managers. As a finance manager,
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the entrepreneur will be responsible for the distribution of the salaries and making the
payment to all the factors of production. The entrepreneur is responsible for arranging
the sources of finance in the market and providing the employees and other related
staff with payment. The supplier will also get the amount for supplying the raw material
from the entrepreneur. The entrepreneur will be responsible for providing timely
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payment to its staff members and external parties. The company will function better
with the factors of production and the factors of production should always be motivated
through financial benefits. So, the entrepreneur will be responsible for distributing the
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payment to its staff.
●● Maintaining and delivering the quantity of production

The entrepreneur is not only responsible for maintaining the quality of the product
and delivering it to the customers but is also responsible for maintaining and delivering
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the set quantity of the product to its customers. The company should be capable of
producing bulk products and delivering them to the market. The entrepreneur should
design the business model in such a way that urgent business orders can also be
managed by the employees. The company should maintain a flow in the production
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activity and should also be capable of delivering finished products in time. The
entrepreneur is also responsible for providing training activities to the employees so that
the employees can work under pressure and can deliver the set quantity of products in
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the market.
●● Risk-taking
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Risk is uncertain and is not visible and the role of the entrepreneur has
increased danger and is not visible as well. The entrepreneur will have to prepare
himself for the unforeseen risk in the market. The entrepreneur is an individual who
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will undertake different types of risks in the market so that the company can deliver
the best in the market and can get a competitive advantage. The entrepreneur is
always surrounded by various types of risk and will always have to work in difficult
situations. The entrepreneur will be responsible for always delivering his best in the
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market and avoiding the various types of risk will result in no competitive advantage.
The entrepreneurs could avoid the risk through proper analysis and research about
the market. The entrepreneur should also have the ability to handle the risk. He can
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analyze the risk of government regulations, market condition changes, and competitors.
The entrepreneur can benefit from the industry if he can effectively handle the risks.
These are the various types of functions that are required for an entrepreneur.
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These functions are the core of any entrepreneur’s ordinal activity and the entrepreneur
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is bound to perform these basic functions. The other functions of an entrepreneur
include creating a healthy environment for the employees and delivering social values
to society.
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1.1.6 Promotion of entrepreneurship

Promotion, in general terms, refers to moving a step forward or establishing a
new identity in the market. The promotion also refers to when an individual gets more
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recognition and gets more pay scales.
Promotion of entrepreneurship refers to building the business or identification of

a new opportunity in the market. The promotion of entrepreneurship is necessary to
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stand out in the market with a creative idea. When a company has achieved a certain
production level or certain customer segment and wants to expand in the market and
also identifies an idea for the expansion of the market, it is known as promotion. The
promotion in entrepreneurship includes moving a step forward in the business through a
different concept or an innovative and creative idea.
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Promotion is the first step in the creation of stability in the market. It refers to
creating stability through more advancement and better business expansion ideas. This
is the stage where the company tries to give tough competition to its competitors in the
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market by elaborating its business concepts and business model in the market.
The company will not get promotion in the market through easy expansion of ideas
as proper investigation and research is required for expanding and growing in the
market. The entrepreneur will have to undergo investigation as well as research and
(c
development activities for promotion in the business.

In business terms, promotion refers to all those activities that an entrepreneur

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does to modify the business concept and deliver something new in the market. The
entrepreneur will have to perform different types of activities and also have to engage in
multiple functions for the establishment of the business.
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After attaining a certain position in the market, the entrepreneur will have the
objective of promoting its business. Promotion in the business is very necessary so that
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the entrepreneur and the company do not remain stable and establish a new concept in
the market with creative thinking.
Promotion starts from the stage of business development and stays in the business
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for a longer period. The entrepreneur that engages in the promotion of entrepreneurship
will get more benefits in the company compared to the other competitors in the market
because promotion refers to moving forward in the market through different concepts
after research and development. The entrepreneur will get the benefit of more customer
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segments and better customer services as well.
There are different ways through which the promotion of entrepreneurship can be
explained:-
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●● Promotion constitutes 4 major elements; that are discovery, investigating,
financing and assembling. The entrepreneur will first discover the business
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idea in the market and do an investigation, that is, the research and
development activity. Further, the entrepreneur assembles the required
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resources for promotion and then implements the business idea through
financing.
●● Promotion includes business development activities and the roles and
responsibilities of different employees in the business. The major contribution
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of different employees in the business is taken so that the company can

deliver something better in the business. The major objective of promotion is
to deliver better business services to its customers.
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●● Promotion is the personal identification of business opportunities. When an

entrepreneur identifies different business opportunities in the market, he has
the objective of generating greater revenue and profit in the business.
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●● Promotion constitutes all the financial and non-financial activities that a

business undergoes to develop a better business in the market and deliver
something good to its customers.
Nature of entrepreneurial venture promotion

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●● Promotion is a process and is not a single activity. When a company

accomplishes a certain set of business objectives, then the company will
engage in building higher customer value in the market. It is not a set of
)A
activities but processes that will continue until the business exists in the
market.
●● Promotion is the aggregation of all the different activities of a business. It
includes finance, research and development, and other activities. It does not
comprise a single business activity but a set of activities are necessary for the
(c
promotion of business.

●● The promotion of entrepreneurship starts with an idea. An idea is necessary

Notes
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for the promotion of business because, with the idea, the company steps
forward in the market and tries to deliver something new to its customers.
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Functions of an entrepreneur as a promoter
●● As a promoter, the entrepreneur has to continue the creative thinking activity.
If the entrepreneur does not have a creative mindset towards a problem, the
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business promotion will become difficult.
●● The entrepreneur has to undergo research and development activities. This
includes the entrepreneur having to explore the market requirements and the
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needs of the customers in the market.
●● As a promoter, the entrepreneur must ensure in which manner the new
business unit will be established and whether the company should be the
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acquiring company or should start its business unit.
●● The entrepreneur will also have to define the strengths and weaknesses
of the project proposal in the promotion of the business. By doing so, the
entrepreneur will identify his opportunities in the market and know the threats
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of the business idea as well.
●● The entrepreneur cannot decide alone on promotion as he has to consult
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professional and market experts to give a greater idea about the business
expansion and promotion of the business in the market.
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●● The entrepreneur has to do a preliminary study about the project proposal.
The entrepreneur cannot promote the business without consulting the
advisors and undergoing a preliminary study. This will give a major idea about
the acceptability of the promotion idea in the market.
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●● As a business promoter, the entrepreneur must arrange for necessary raw

materials. The entrepreneur will have to identify the need for raw materials in
the business so that the promotion can be done easily. If the raw materials
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and the required business essentials are not available for the promotion idea,
then the implementation of such an idea will be difficult for the entrepreneur.
●● The entrepreneur should also arrange for necessary technological
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requirements for the promotion of the idea. The advanced technology will
benefit the company as the production and manufacturing of the products can
be done easily with the help of advanced technologies.
●● The entrepreneur must arrange for sources of finance for the business
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promotion. The initial capital requirement will be larger and hence the
entrepreneur should select such a source of finance that is easily available to
the entrepreneur and business for the promotion of the business.
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●● When the business is expanding through promotion, the entrepreneur has

to arrange for business experts, that is, the underwriters and auditors of the
business so that the business activities can be done easily.
Need for promotion in entrepreneurship

(c
●● The major need for the promotion of entrepreneurship is due to a highly

competitive market. Entrepreneurs should be the best in the market and should
deliver something creative and innovative compared to their competitors.

Promotion is done by an entrepreneur because the competitors in the market

Notes
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keep improving their business services and customer base with different
effective strategies. This motivates the entrepreneurs to do business promotion.
in
●● Promotion of entrepreneurship is also done because the entrepreneur wants
to expand its reach of products and services in the market. This can be done
only if the entrepreneur has a creative mindset of expanding its business
through promotion. It will help in delivering the business concept and business
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idea to a greater customer base and will also help in the generation of leads
for the company.
●● The entrepreneur requires more wealth and more regulation in the market.
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This is the major reason for the promotion of entrepreneurship. The
entrepreneur will have the willingness of generating more profit and more
economic benefits and this can be done through the expansion of the
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business idea. When the entrepreneur does not follow the promotional
activities and remains stable in the market, only limited customers will
purchase the product and the reach of the company will be limited to its local
market. Business promotion is very necessary for a company to expand its
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reach and business growth through creative ideas.
Process of entrepreneurship promotion

●● Search for a new idea r
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The promotion of the business starts with searching for a new idea in the market.
The entrepreneur can get the idea from various sources. When an entrepreneur
undergoes the business evaluation and analysis properly, he will be able to identify
various types of opportunities and problems in the market. When an entrepreneur
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does not take the problem negatively and assumes it as an opportunity for business
expansion, a new idea of business promotion can be executed. It depends on the
creative thinking of an entrepreneur to evaluate a business problem negatively or
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positively as an opportunity.
Once an entrepreneur has selected a business idea, after proper evaluation

and need of the customers in the market, the entrepreneur can assess the idea. The
preliminary assessment is necessary to identify the technical requirements of the
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business and the technical problems that might occur after the implementation of the
idea. An entrepreneur cannot implement the business idea without doing a preliminary
assessment. The preliminary assessment will help in identifying the major problems
related to the business as well as the future and what can be the possible solutions for
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the business idea. The promotion of entrepreneurship is moving forward in the market.
So, the preliminary assessment will help in identifying whether the business will get
benefits and further expansion opportunities in the market or not. These factors are
)A
important to be analyzed in the preliminary assessment of an idea.
●● Detailed analysis
When an entrepreneur evaluates a business idea, it should further identify and
work on different business ideas that are shortlisted. The entrepreneur should do a
(c
detailed analysis of the business promotion ideas that are the major challenges, and
the problems related to the promotion of the business idea can be identified. Through
detailed analysis, the entrepreneur can evaluate those business ideas that can give

a competitive advantage in the market. Entrepreneurs will also get the benefit of
Notes
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identifying and walking on the best and effective business ideas. It is very necessary
to do a detailed analysis so that the entrepreneur can eliminate ineffective business
promotion ideas.
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●● Selection of the best idea
When an entrepreneur evaluates different ideas through different businesses, the
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entrepreneur will select a business idea that is most feasible and will give major profit
to the company in the future. The entrepreneur cannot select a business idea based on
projections and assumptions. The detailed analysis of the business ideas will help in
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selecting the best business idea for promotion. The selection of the best business idea
is necessary so that the company can get a competitive advantage in the market and
can also grow in the market without any barriers and hurdles.
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●● Arrangement of resources and personnel
Selection of the best business idea is done and after that, the entrepreneur will
have to do the arrangement of the resources for the execution of the business idea.
The entrepreneur will have to undertake detailed research and analysis of the market
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so that the sources of raw material and the different sources of personnel can be
identified. The arrangement of resources is necessary for the execution of the business
idea. The resources include raw materials, technology, and plant and machinery. The
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entrepreneur will have to arrange these resources effectively and the company should
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not spend a large amount at this stage. The entrepreneur also has to identify the type
of people required for the business execution. If the business idea is highly advanced,
the company will require technical staff. But if the business idea is production and
manufacturing of the product, then the company requires more unskilled labor. At this
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stage, the entrepreneur will analyze the requirement and the sources from which the
resources can be arranged.
●● Selection of the location

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The entrepreneur will have to identify the location that is best for the execution
of the business. The best location can be selected by considering several factors.
The company has to first identify a cost-effective location. That is, the company does
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not have to pay an extra amount for the land and it should also be available to the
entrepreneur at a lower cost. The selection of the location also depends on the
market reach. The location of the business should be near the market. If the company
establishes a business far from the market, the arrangement of the factors of production
will be difficult for the entrepreneur. It will be difficult for unskilled laborers to be a part of
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the company. Hence, the entrepreneur should select a location that is near the market
so that the company can easily arrange for the raw materials and can easily supply the
finished products in the market. The location should not be too close to the citizen area
)A
and should not be too far from the market, so that availability of the product and raw
materials becomes easy for the entrepreneur.
●● Financial planning
Financial planning is a very important aspect of any business promotion activity.
(c
The entrepreneur should do proper analysis and plan and for this, the entrepreneur
should maintain a budget for the company and must recognize the best sources of

finance in the market. It is necessary to arrange finance for the business promotion
Notes
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activity from different sources. This is because, when an entrepreneur follows and
makes two sources of finance, the changes in the equity market will not affect the
business decisions. Financial planning also includes the determination of the budget
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for the company. The entrepreneur should be forced to define the budget so that the
financial needs of the companies can be identified. When an entrepreneur does not
establish a budget for the company and arranges funds based on assumptions and
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predictions on the future, the company might face the problem of over-financing. A
balance should be maintained in the business so that the company does not face the
problem of lack of finance in the business.
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●● Launching the idea
Once the entrepreneur arranges for the financial requirements of the company, the
entrepreneur is ready to launch the business idea in the market. The execution of the
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business idea is a crucial step because the growth and the downfall of the company
depend on the business idea. The entrepreneur should select the best time for business
execution. The idea should be launched at a time when the demand for the business
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idea is required in the market. This will give a competitive advantage to the company
in the market and will also give various benefits of business recognition in the market.
Launching the business idea should be done on a large scale and the company should
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adopt necessary promotional activities of the business in the market. This will give an
advantage of business recognition in the market.
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●● Advertisement
Once the business is implemented and the idea of promotion is executed in the
market, the entrepreneur has to plan the advertisement strategies. The entrepreneur
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must ensure that the business development of the company takes place through
effective advertisement strategies. Advertisement plays an important role in creating
public awareness about the business idea in the market. The entrepreneur can undergo
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large-scale advertisement promotion through onboarding and digital platforms. This

will help in creating awareness about the product on a larger scale at the same time.
Business development can be done easily through the adoption of advertisement
strategies in the business.
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●● Managing the business

After creating awareness about the product and the business promotion idea in
the market, the entrepreneur has to manage the company effectively. Undergoing
business development and advertisement strategy is not enough for the company.
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To become the market leader, the entrepreneur must do proper management of the
business. The entrepreneur should effectively manage the business and show the
employees and related staff of the company to deliver what is best for the promotional
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activities of the company. The entrepreneur should also ensure that the delegation of
the responsibilities and authorities in the business is done in an effective manner and
duplication of the work is avoided.
The business promotion process is similar to business development because,

(c
when promotion in entrepreneurship is done, either a new segment of the business

is added or the reach of the business is expanded. The requirements of business
promotion are similar to the business development process.


Notes
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Entrepreneurs can generate business ideas from multiple sources. The new ideas
in the market can be related to the need of the customers for the new opportunity in
in
the market. The entrepreneur that identifies technological advancement and possesses
greater information about technologies can also get the benefit of new ideas.
New entry refers to entering into a new market or offering a new product or service
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to the customers. The entrepreneur will always prefer to wake up to a business that
gives new opportunities in the business. The entrepreneur must work on new business
strategies so that the growth of the company becomes easy.
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Business strategies and actions play an important role in the generation and
exploitation of a new idea in the market. The new business entry can be positive or
negative. A new business can help differentiate the company from its competitors
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and get a competitive advantage in the market. But the new business will also create
various challenges for the entrepreneur because the entrepreneur will have to prepare
the employees and staff by providing them training to work according to the new
business idea.
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The new entry into the market can be done in various ways. The company or
the entrepreneur can enter a new market through a new product or can extend its
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market reach in different locations. The company can even expand by creating a new
organization in the market.
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The entrepreneur has to adopt various strategies and make various decisions to
generate a business that maximizes the benefits of the company and minimizes the
loss and cost of the company. Entrepreneurial strategies play a very important role in
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representing the business through unique actions and reactions. The new market entry
is based on the knowledge and experience of the entrepreneur. The entrepreneur will
have to be critical and creative because proper analysis and feedback of the customer
are required to generate opportunities in the market. The entrepreneur will also have to
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utilize different resources so that a bundle of benefits can be offered to the customers.
Feedback plays an important role while entering into a new market or a new idea
generation. This is because, when an entrepreneur or a company takes feedback
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from its customers and suppliers, the company usually identifies the loopholes of the
business that can be converted into opportunities.
Generation of new markets and identification of the opportunities requires a

bundle of resources so that the execution of the idea will be easy. The resources in
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the company should be available to the entrepreneur so that the entrepreneur can get
a competitive advantage in the market through business execution. The entrepreneur
will also have to understand the requirements of the market and should also pursue
)A
adequate market knowledge so that the challenges and problems in the future can be
avoided.
Process of generating and exploiting new ideas

●● New entry
(c
The first step is to identify the new ideas entering the market. The entrepreneur
can identify the new entry in the market by evaluating the demand of the customers

in the market. The entrepreneur will have to face various types of challenges while
Notes
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implementing the business idea. The entrepreneur can either expand his business or
start a new product line for the customers. He has to evaluate various types of elements
for framing the entrepreneurial strategies. The generation of new entry opportunities will
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depend on the decision-making of the entrepreneur and the other resources available in
the business. The resources will play an important role in the execution of the business
idea. The entrepreneur can get long-term benefits by the generation of new ideas in the
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market and generate profit out of it.
●● Generation of New entry opportunities
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Generation of new entry opportunities in the market can be done through optimum
utilization of the resources. Resources are the building blocks of the company because,
without the resources, the final product cannot be produced. It acts as an input in the
production process. The resources can be combined in different ways to raise the
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company to a superior level. The bundle of resources should be valuable, rare, and
immutable. Valuable reports of the resources should give certain opportunities and
reduce the threats for the company and must produce those products that give
si
more value to the customers. Rare means the resources should be different from its
competitors and no other competitor should pursue it. Immutable means the usage of a
combination of resources is difficult and costly for the competitors.
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The entrepreneur can get the identification of new opportunities in the market
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through advanced technologies in the market and by analyzing the market. Market
knowledge is very important to identify the need and opportunities available in the
market. Technological knowledge will help the entrepreneur expand his business in the
market through better technological use.
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●● Identifying the attractiveness of the new market

The entrepreneur will have to identify and determine whether the product is
valuable, rare, and immutable. The opportunities for new market entry can be identified
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by generating more information about the market. Prior knowledge and information will
give a better idea about the market opportunities. Knowledge of an entrepreneur can
be increased by proper research on the new market opportunities. The entrepreneur
should have prior knowledge so that the challenges and problems related to business
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expansion and new entry opportunities can be identified. The entrepreneur should
focus on giving more time to gain greater information about the customer demands
so that better information about the customer can be identified. The more time the
entrepreneur invests in market and customer research, the better knowledge about the
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customer demand can be identified. The entrepreneur will also have to consider the
cost associated with the market research.
●● Entry strategy for new entry exploitation

)A
The entrepreneur has to identify the entry-level strategies for new entry
exploitation. The company should be the first mover so that the company can get the
cost advantage and the competitive advantage in the market. The firm can spread
the fixed cost of the business and can face competition easily. The first movers in the
(c
business get the benefit of a rapidly growing market and they also get the benefit of
competitive advantage and preferences of the customers. The first movers are the ones
who identify the business opportunities and convert them into a business idea. The first

mover in the market can also select the suppliers and another external part is related to
Notes
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the production and manufacturing activities. It will help in building strong relationships
with suppliers and distributors. The first movers will get the advantage of satisfying the
customers through effective strategies because no other competitor is available in the
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market at the initial stage.
The entrepreneur gains maximum participation in the market by becoming the first
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mover. The entrepreneur can learn from different specialized and professional people
in the market and monitor the changes in the market so that the performance of the
company can be identified in the market. To get a good advantage in the market, the
entrepreneur should be a key success factor so that this business success can be
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determined in the market.
●● Risk reduction strategy
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A new business entrepreneur or a new business idea will have to consider
the risk factors in the market. Risk is the probability of loss and is unpredictable.
The entrepreneur can overcome the risk by implementing different strategies in the
business. The risk can occur from technological changes, government changes in the
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rules and regulations, market demand changes, and competitive strategy change.
The entrepreneur that identifies the risk in the market can easily work on the business
challenges and problems. The entrepreneur can even identify and determine the scope
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of the market and develop long-term strategies for business. The scope of the company
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can be increased through improving the business strategies and enhancing the portfolio
of the business. When the entrepreneur works on the expansion of the company, he will
have to determine the risk factors. The entrepreneur must implement those strategies
that reduce the risk and uncertainty in the market and by doing so, the entrepreneur
can enhance the performance of the company in the market and can also generate
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more profit for the company. The entrepreneur should follow a systematic and stable
approach towards the reduction of the risk. The company can even reduce the risk and
cost of the business through research and development. Research and development
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play an important role in the business enhancement and reduction of the uncertainty
and risk factors in the business.
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1.1.8 Corporate entrepreneurship

Corporate entrepreneurship is a concept that is used to develop products and
services inside an existing organization. It helps in creating value and generating
more revenue and wealth for the company. The concept of corporate entrepreneurship
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encourages the employees and other existing staff members in the business to think
like an entrepreneur and solve business problems. This is a major benefit to the
company as the business problems and other related problems of the business are
solved by the entrepreneurs and employees.
)A
Corporate entrepreneurship is also known as intrapreneurship and encourages

the employees and other related staff members to behave like entrepreneurs and
solve business problems. With this, the company motivates the employees to become
a part of the organization and develop ideas that can lead to innovative products and
(c
development.

Corporate entrepreneurship will encourage the employees and will also help in
Notes
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the growth and development of the employees and the company. The productivity and
the morale of the employees can be increased through corporate entrepreneurship.
When the employees of the companies act as a problem solver and an entrepreneur,
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the company will get a major competitive advantage in the market. The employees will
become the assets of the company as they help in identifying the opportunities and
threats of the business in the market.
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Corporate entrepreneurs are not created by the company but the motivation within
the employees will help in the development of corporate entrepreneurs. Corporate
entrepreneurs are created with curious and open-minded entrepreneurs as these
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entrepreneurs adopt business strategies and are open to business problems. They
are not limited to their work role in the business and also perform the role of problem-
solving. This encourages them to become a part of the organization and will also
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improve their performance in the market. Corporate entrepreneurship is not limited to
problem-solving, but as a corporate entrepreneur, the members of the business identify
major opportunities in the market and try to eliminate the challenges in the future.
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Corporate entrepreneurs are not motivated through financial benefits and it is
a passion for any employee to become a corporate entrepreneur. The major goal of
corporate entrepreneurs is to make the company better in the market through their
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creative ideas and improve the customer service of the company.
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Corporate entrepreneurs follow different management approaches and try to
support the business and create better communication in the business through their
regular business enhancement.
The major goal of corporate entrepreneurship is to develop business ideas that are
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better than the competitors and focuses on small organizational changes.
Importance of corporate entrepreneurship

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Corporate entrepreneurship is very important in the business to get a competitive

advantage and grow in the market. It will help in increasing the market share of the
company and improving the organizational structure and innovation activities in the
business.
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1. It helps in growth
When a company is focusing on increasing its market share and reach of the
company in the market, corporate entrepreneurship will be a better solution. It will help
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in solving the business problems and also result in consistent innovation activities. The
growth of the business will become easier because the company will focus on overall
development by taking creative and innovative ideas from the employees as well. The
)A
employees are given major emphasis in the company and the significant role of the
employees will help in increasing the profit and growth of the company in the market.
2. It helps in increasing the employee’s morale

Corporate entrepreneurship helps in increasing the morale of the employees as the
(c
employees will feel that the company is appreciating their ideas and will feel like a part
of the company. Corporate entrepreneurship acts as a motivation for the entrepreneurs

and through this; the employees can get more freedom of thought and can give their
Notes
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reviews and viewpoint on certain problems. The employees will have the freedom to
identify various opportunities and will not work only for financial benefits because
through corporate entrepreneurship, they will get recognition in the business. This will
in
increase their productivity because the entrepreneurs will feel valued and motivated
which will help in boosting their confidence and enhancing their skill sets.
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3. It helps in getting a competitive advantage
Employees understand the business function better than the entrepreneur.
They work with external parties and communicate with external parties regularly.
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Employees have a direct connection with the suppliers and the customers. This will
help in identifying the external business opportunities and threats in a business. The
entrepreneur can even get a competitive advantage in the market by easily analyzing
the opportunities in the market. Employees have a better relationship with the clients
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and they will get more critical information compared to the entrepreneur. This will help
in identifying the next move of the rival companies and help in modifying the strategies
of the company according to the competitors. Collection of critical information regarding
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the market is a very easy task for the employees and can help in getting a competitive
advantage in the market.
4. Increase employee’s retention r

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Corporate entrepreneurship will give more job satisfaction to the employees and
will help in retaining the customers for a longer period. The employees will feel secured
and will trust the company that will reduce the staff turnover ratio in the business.
Corporate entrepreneurship will also attract other talented people towards the business
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and will allow employees to become a part of an innovative business.
Characteristics of corporate entrepreneurs

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●● Corporate entrepreneurs should be courageous and confident and should

deliver their suggestions to the entrepreneur in a well-organized manner. The
corporation is mainly involved in challenging a business decision and will also
provide new suggestions to the company. A corporate entrepreneur must have
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the confidence and courage to deliver their business idea or suggestion to the
company in an easy manner.
●● The entrepreneur should be curious and open-minded. He should
overcome the thoughts and challenges of the employees. The entrepreneur
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should improve performance by taking feedback from its employees. The

entrepreneur should not focus only on the development of the business
through its own experiences and decisions but should make the employees a
major part of the business.
)A
●● Corporate entrepreneurs are not driven by financial motives. They have

a passion for transforming the business and accepting the challenges of
innovation and fulfilling customer demands. The major objective of corporate
entrepreneurs is to think about business consumers and engage in those
(c
activities that will benefit the company.

●● The entrepreneur should have a learning concept and should learn from
problems and mistakes. Entrepreneurs should not have a negative approach
towards the problems and should not resist taking a lesson from the previous
Notes
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failures.
Key elements for becoming a successful corporate entrepreneur
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1. Decentralization of management structures
A corporate entrepreneur should focus on decentralizing its management activities
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and should not focus only on making all the business decisions. The entrepreneur
should create a structure in the business which gives equal opportunities to the
employees in the business. A successful corporate entrepreneur decentralizes its
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management structure and does not focus on the accumulation of the business
activities in the hands of the entrepreneur.
2. Formal process
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The project process should not be comprehensive and should support business
development. The process should not be informal and the entrepreneur should support
the project proposal with time and money. A corporate entrepreneur can be developed
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through an effective and formal project process. By doing so, the entrepreneur can
ensure that equal participation of the employees is taking place and the corporate
entrepreneurs can be identified.
3. Open communication
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The company should motivate open communication between different
departments and between internal and external business environments. By doing
so, the entrepreneur can easily identify those individuals that are willing to provide
their suggestions and creative concepts to the development of the business. If the
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company does not follow open communication, the employees will face difficulties
in communicating their business ideas to the higher authorities. The exchange of
information will become easier if there is open communication.
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4. Risk-taking
A corporate entrepreneur is an individual who is ready to take the risk and does
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not avoid the business opportunity due to higher risk in the market. A company can
achieve major success in the market when the corporate entrepreneurs are taking risks
and the business idea is supported by the risk-taking ability of an entrepreneur. The
entrepreneur who takes more risk will give more creative and innovative ideas in the
business.
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Advantages of corporate entrepreneurship

●● The major advantage of corporate entrepreneurship is that the company can
)A
make optimum utilization of the resources by taking ideas and suggestions from
the employees. The company can even provide a reduction of waste in business
development. The optimum utilization of the resources is necessary so that the
company and the entrepreneur can deliver the best in minimum resources.
(c
●● Corporate entrepreneurship provides the benefit of brand recognition in the market

when a company encourages different business ideas and expansion ideas in

the market. This will help in enhancing the performance of the company and the
Notes
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business in the market and will help in brand recognition of the company in the
overall market.
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●● Corporate entrepreneurship will give equal opportunities to the employees in the
business and will motivate the employees in the organization to become a part
of the company. This will encourage self-motivation within the employees and the
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employees will feel valued and recognized in the business.
●● Corporate entrepreneurship will also help in giving a competitive advantage in
the market because, when a company is working according to the employee’s
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suggestions and business ideas, it means that the company is taking care of the
employees and is also getting the benefit of detailed feedback of the customers
through employees. This will help in getting a competitive advantage and
regulation in the market through innovative concepts.
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●● Corporate entrepreneurship will also help in increasing the sales of the company.
When the employees become a part of the decision-making of the company, the
employees will provide proper feedback regarding the ground level working of
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the business and the problems the company is facing to increase the sales in the
market. The employees will give better suggestions and solutions to the business
regarding increasing the sales in the market. By incorporating the suggestions of
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the employees in the business, the company can enhance sales.
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Check your understanding.
1. Entrepreneur mind set is constituted of a _ approach.
2. The entrepreneur of a business organisation will provide _opportunities to the people
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in the market and will help in increasing the economic benefits.

3. Entrepreneurship is necessary for improving of an economy.
4. The major objective of an entrepreneur will include taking _ for increasing_.
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5. The entrepreneur in the market are being developed to fulfill the_ of the people.
Summary
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●● The word entrepreneurship is being derived from the word entrepreneur that
means and individual that is capable of bring a new idea in the market and is also
capable of producing the product and services for satisfying the customers.
●● Entrepreneurship is a complicated process that includes multiple processes and
m
evaluation of multiple factors.

●● Entrepreneurship is an economic activity that includes utilisation of the resources
for the purpose of generating profit.
)A
●● The entrepreneur is known for risk bearing activity because the entrepreneur is
responsible for taking risk in the market and generating profit.
●● The entrepreneur is also responsible for becoming a market leader and thinking
creatively to fulfill the demands of the customers as well.
(c

Activity
Notes
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1. Assume that you are an entrepreneur so what could be the different needs of
an entrepreneurship activity.
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2. What could be different ways of developing the entrepreneurial mind set in an
individual?
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Question and exercise
1. Briefly explain the nature of entrepreneur.
2. Why there is a need of entrepreneurship in the market?
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3. What could be different ways of developing an entrepreneur mind set in an individual?
4. What is entrepreneur null process explain in brief?
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5. Explain the concept of corporate entrepreneurship with the features of corporate
entrepreneur.
Glossary
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1. Feasibility – it refers to checking a business idea in the market and capability of a
business idea fulfilling the various requirements.
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2. Mind-set - mind set refers to the personal opinion and viewpoint of an individual
related to any concept or theory.
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3. Multidimensional- multidimensional concept includes taking into consideration
various aspects that could help the business organisation in generating profit or
growth in the market. It includes taking into consideration various factors that affect
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the business.
4. First mover advantage – it is a concept that related to getting a competitive advantage
in the market. First movers are the ones that are responsible for creating a positive
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impact on the minds of the customers and also capable of delivering unique product
in the market.
5. Decentralisation- decentralisation refers to distribution of the work activity within the
business organisation.
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Further reading
1. Book – billions of entrepreneurs.
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Author- Tarun Khanna

2. Book - social entrepreneurship in India
Author- Madukar Shukla
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Answer
1. Humanistic 2. Employment.
3. Living standard. 4. Risk and profit.
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5. Demand.

Unit - 1.2: Perspective

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Objective.
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At the end of this unit you will be able to:-
●● Evaluate the theoretical perspective of entrepreneurship.
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●● Evaluate the relationship between entrepreneurship and management.
●● Differentiate Entrepreneurship and management.
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1.2.1 The Theoretical Perspective of Entrepreneurship and Intentions.
Entrepreneurship consists of various theories because there are certain
assumptions regarding the internal and the external environment. The entrepreneur and
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the related parties need to understand these theories so that the theoretical perspective
related to entrepreneurship could be cleared. It is further considered to be the intentions
of the entrepreneur and includes the intentions of the other related parties in the
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business. Different thinkers have different perspectives related to entrepreneurship and
they have tried to build different theories according to their research and development.
These theories provide conceptual information regarding entrepreneurship.
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The theoretical perspective of entrepreneurship: -
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1. Innovation theory: -
This theory was started by Joseph A. Schumpeter. There are various assumptions
regarding the innovation theory.
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●● The entrepreneur has the objective of developing something new in the

market.
●● The entrepreneur will try to implement creative concepts and his or her
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experiences to fulfill certain tasks in the organization.

This theory states that when an entrepreneur decides on implementing innovation
activities in the business the entrepreneur is disturbing the circular flow of the economy.
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Because before the innovation activities the circular flow of the economy was stable
and when innovation activities were implemented the circular flow was being disturbed.
This will lead to disequilibrium in the economy. There could be various reasons for
innovation activity. The major objective of any entrepreneur is to generate profit and to
attain a certain level in the economy. This could be done through innovation activities.
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The innovation could be of new products, methods of production, entering into a new
market, and recognizing the new source of supply of raw material.
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2. Social change theory:-

This theory is being stated by Max Weber. This query was devoted to the social
changes in the environment. According to this theory, the religion and ethics of the
people have a greater impact on entrepreneurship. Religion, beliefs, and ethics play
a very important role in the entrepreneurial culture. This theory has a concept of
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capitalism. It refers to the economic system in which the market forces of demand and
supply are allowed to play freely. The theory focuses on the impact of entrepreneurship

through religion. Different religions have different assumptions and different

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perceptions regarding entrepreneurship. He believes that Hinduism did not encourage
entrepreneurship activities. Because Hinduism lays minimum emphasis on wealth
creation. This created a mental attitude in the society and it depends upon the religious
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beliefs of the people. There was certain criticism regarding this theory because this
theory is invalid and does not have realistic assumptions.
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3. Uncertainty bearing theory:-
This theory was given by Frank H. Knight. According to this theory, an individual
or an entrepreneur cannot estimate the probability of uncertainty and the risk in
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the business. Because the entrepreneur and entrepreneurship activities are being
affected by multiple factors so the probability of their occurrence cannot be statistically
estimated. In this theory, a major assumption is being made regarding the nature of
the entrepreneurs. The entrepreneur undergoes the entrepreneurship activities on pure
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profit by undergoing uncertainty activities. The reward and the profit are uncertain but
entrepreneurs offer wages and salaries to the employees regularly. The criticism of this
theory is that the theory describes the role of the entrepreneur to bear uncertainty.
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4. Entrepreneurial group theory:-
This theory was founded by Frank W. Young. This theory states that the
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development of any entrepreneur is based upon the entrepreneurial groups in the
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organization. This theory states that the behavior of any individual is being affected by
the behavior of a group or the group level pattern. The entrepreneurs of the individuals
in the organization worked as a part of the group and the behavior of the group had a
major influence on the individual’s behavior. The family background and the members
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of the family affected the general values of the group because through these groups the
entrepreneur gets experiences and exposure to stay in the market. The initiatives and
the actions of any entrepreneur are the outcomes of the experience generated through
family background and the group members. The emphasis of the group members and
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the values of the group members have a major impact on the individual’s performance.
An individual entrepreneur will take any easy tips and will perform better because of the
group behavior.
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5. Economic theory of entrepreneurship:-

This theory was stated by Pepuek and Hassis. According to this theory, the major
objective and main factor of any entrepreneur is the economic incentives. Economic
gains in the business initiate creative ideas and entrepreneurial initiatives. Any business
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that is being established in the market has some economic objective that is generation
of profit. The psychological motivation of the entrepreneur is the economic gains that
will lead to an increase in income and profit of the company. These psychological
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economic benefits are necessary to stay in the market and develop economic
motivations.
6. Theory of need of achievement:-

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This theory was given by Mc Clelland. According to this theory, there are certain
achievements and there is a desire in the entrepreneur’s mind to achieve certain
goals in the business. These achievements are related to specific activities. These

achievements are also based upon the past performance of the entrepreneurs. The
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achievements could be related to becoming excellent in the market and it is a natural
human tendency that every individual wants to achieve something better than the
previous one. According to this theory, a major factor of entrepreneurship development
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was being recognized. There is always a desire in the mind of the entrepreneur to
achieve development and success in the business. The achievement in the business
could be done through organizing motivational training programs for the entrepreneurs
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so that they could improve their skills and abilities in the business.
7. Behavior theory:-
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This theory was given by John Kunel. According to this theory, the development of
any enterprise is dependent upon the existing and past social aspirations. This theory
has the following essential elements.
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●● The behavior of the individual could be transformed into entrepreneurship by
demand composition.
●● The opportunities in the market could be identified due to various factors such
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as training opportunities, and production methods.
●● The labor composition is constituted of different factors such as aspiration of
life.
8. Cultural theory:-
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This theory was given by B.F. Hauslin. According to this, during the development of
the enterprises, it is possible only when social procedures are unstable and alternatives
of employment for two persons are widely available in the market. According to
this theory, the cultural marginal groups have a special influence on the economic
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development of an economy. Social groups have a greater impact on developing

innovation activities in the market and this theory also focuses on the economic
development of any nation based on cultural similarities. Cultural factors will have a
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major impact on the performance of the economy because personality behavior and
development activities encourage more creative concepts and assumptions.
9. Cultural value theory:-

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This theory was developed by Kroken. According to this theory, the major
emphasis of entrepreneurship activities is on the cultural values and social approvals
of the people for entrepreneur development. The entrepreneur is the role model
and personality for the society so the entrepreneur must have cultural values and
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expected rules for economic development. The major emphasis and the success of the
entrepreneur are being influenced by the determination of an entrepreneur towards his
or her work and profession. The other factors will include the functional requirements of
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the business group and the expectations of the group about the role of the entrepreneur
in the business. The role of the entrepreneur is known not only to guide the business
and generate profit but should also motivate the business entities.
10. Socio-cultural value theory:-

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This theory was stated by Stokes. This theory includes social-cultural and
economic transaction factors that play a very important role in the economic

development of a business. The social-cultural values such as the social factors and
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the psychological factors affect the business organization and are necessary for the
development. When an entrepreneur wants to undertake economic transition in the
business it is necessary to estimate the social-cultural values of the employees and
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other related factors. This theory also includes the mental thinking of an entrepreneur.
Mental thinking creates direction for the entrepreneur for the development of the
organization. This also includes the group volume because it has a major impact on
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attracting entrepreneurship.
11. Baumol’s view on entrepreneurship:-
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According to Baumol, the role of an entrepreneur is very important for the
economic growth of the company. The economic growth of the organization is
dependent upon the output and the price of the product. According to him, a hypothesis
was being created that stated that the supply of the company varies according to
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society. Productivity is being affected by multiple factors and the entrepreneur should
reduce the unproductive activities in the organization to generate more economic
wealth.
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12. Peter Drucker’s view on entrepreneurship:-
The entrepreneurs always have the objective of generating a profit and the
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entrepreneur will search for various unique aspects in the market that could give
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various opportunities. He focused on successful innovation activities of an organization
so that the company can get the benefit of innovative opportunities in the market.
Innovation is a combination of Government facilitation and innovative entrepreneurship.
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Entrepreneurship intention:-
The intention of entrepreneurship is being defined as the state of mind of an
individual to implement various activities and work towards becoming an entrepreneur.
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By evaluating the entrepreneurship intentions, the behavior and particular attention of

the entrepreneurs could be identified.
The entrepreneurship intentions define the future objectives of a company. The

intentions of any entrepreneur could be related to job satisfaction or the generation
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of more wealth and profit in the organization. It is the subjective thinking of an

entrepreneur that includes the perspective and Passion of the entrepreneur.
The intentions of an entrepreneur are also being affected by the external

environment such as the family level and the knowledge at the individual level. The
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intentions of entrepreneurs should always relate to economic development and the

social benefit of society. This is necessary so that the entrepreneur can achieve the
profit objective and deliver something beneficial to society.
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The intentions of the entrepreneur may even change according to the situations in
the market and the educational qualification of the individual. Passion and educational
qualifications are the three variables that affect the intentions of any individual.
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Traits are the characteristics that an entrepreneur must have to deal with market

changes and competition. The better traits an entrepreneur has the more he or she
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could fulfill the goals of the company.
Below are the entrepreneurial traits:-
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1. A good leader
An entrepreneur has to be a good leader that will include the qualities of motivating
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the team towards achieving the organization’s objective. The entrepreneur should
always focus on managing the teamwork of the employees and should also give equal
opportunities to the team members so that the team members feel connected with the
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organization. The work of a leader is to work with the team rather than give orders
to the team. The leader should always focus on solving the problems of the team in
an empathetic manner. The entrepreneur as a leader has to maintain good relations
with the investors and other external parties so that the business functions and can
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be done very easily. Leadership is all about leading others and working together to
achieve the objectives. The leader should give examples and it should also provide
experiences to the employees so that the employees feel motivated towards the work.
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The employee should also focus on learning from different leaders in the industry so
that the employees could get better experiences from the market. First, the leader can
implement different leadership styles in the business for evaluating the performance
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and implementing a better leadership style. As a leader, the entrepreneur should
perform all the activities that are necessary for business objective achievement.
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2. Confidence
Entrepreneurs should always have confidence in all the business activities that are
being done by him or them. Confidence makes you achieve all the difficult situations
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very easily. The entrepreneurs should have confidence while dealing with external
parties such as suppliers and financial institutions so that better relations could be
built with them. Being confident will help the business in many ways and will also be
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so helpful in daily activities. The entrepreneur can easily plan the business activities
according to the mindset. The entrepreneurs will always have the positivity of doing
the work and will always feel confident in taking the decisions for the company. The
success of the company is connected with the confidence of the entrepreneur. When
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the entrepreneur is communicating along with external parties such as suppliers and
other business organizations the entrepreneur must have confidence in body language
and verbal communication. If the entrepreneur does not deliver confident behavior
in front of the external parties then the major objective of the company cannot be
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delivered to them. The confidence among the entrepreneurs could be built through
various role-play situations and dealing with external parties. The appearance of the
entertainer will also predict the confidence of the entrepreneur. If the entrepreneur is
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dressed properly in formal attire then the entrepreneur will get self-confidence while
communicating with employees and other members.
3. Optimistic
Optimism means always having positive behavior and not focusing on the negative
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aspects. An entrepreneur is a person who is involved in making critical decisions for

the company so the entrepreneur is responsible for always having a positive approach
towards the work so that the challenges in the organization could be easily handled. If
the entrepreneur has a negative approach towards the problems then it will become
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very difficult for the company to fulfill the business objectives on time. Being optimistic
will help the entrepreneur overcome the problems very quickly and will also act as a
self-motivation tool. To become optimistic the entrepreneur should always be around
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people that give positive energy and always motivate the individual. The entrepreneurs
should have the approach of identifying the positive aspects and the problems so that
the problems could be handled very easily. To handle difficult situations it is necessary
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to always have positive thinking so that decision making and the business could
become very easy. The optimistic behavior of the entrepreneur will bring positivity within
the working environment of the organization and will also encourage employees to work
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positively so that the business problems could be handled very easily.
4. Passionate:-
The entrepreneur should be passionate about the work that means determination
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and should have passion towards the success of the company. Being passionate
will help in achieving the business organization’s objectives very easily. To become
passionate about the work the entrepreneur should always start the day by reminding
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about the business goals and always focus on achieving future success in the
organization. Self-motivation is very necessary to become passionate about the
work the entrepreneur should remind themselves about the reason why they start
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an organization that could act as a positive tool and a self-motivation factor for the
entrepreneur. It is also very necessary that the entrepreneur deliver this passion to the
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employees so that the employees and the suppliers engage in business in an equal
manner as that of the entrepreneur. The passion within the end entrepreneur and the
company employees could be generated to positive behavior. The employees within the
organization should always be trained with real-life examples so that they are always
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motivated towards the business organization. It is necessary that a Passion for work
and the passion of accomplishment of the business objective is being created so that
the employees and the entrepreneur are enthusiastic about the work. Entrepreneurship
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not only limits the passion to them but they should also deliver and communicate this
passion to employees and suppliers. This will help in creating a positive approach and
will also give a positive impact on the performance of the business. The entrepreneur
should not only focus on business objectives or achievement of the profit of the
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company as a source of livelihood but should cultivate belongingness that will help in
connecting with the business and achieve business goals.
5. Proactive:-
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Proactive refers to getting prepared for future changes. The entrepreneur should
be a proactive person so that the entrepreneur can identify the opportunities and the
challenges in the future. This will help in addressing the challenges and in a better
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manner. The entrepreneur should always be proactive rather than reactive. A proactive
approach in the business will help the entrepreneur undergo research activities and will
help in identifying the customer demands in the market. Through this, the company can
even identify the threats and competitive strategy in the market. The long-term success
of any business is being dependent upon the proactive approach of the entrepreneur.
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Through a proactive approach, the entrepreneur can analyze the business operations
and could also improve the business activities according to the market changes. In a
highly competitive environment, the entrepreneur should be proactive because this will
help in identifying the needs and will also help in making long-term business strategies
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for the company.
6. The entrepreneur should be disciplined:-
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The entrepreneur should be disciplined because being disciplined will help
in achieving success in the market. Discipline means following certain business
essentials so that the timely delivery of the product and services takes place and the
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customer queries are being sold on time. Discipline is necessary for the business
so that the employees work according to the professional goals of the company.
Discipline will ensure business uniformity and will also encourage the employees
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in the organization to behave and work in a well-disciplined manner. The discipline
within the organization will also motivate the employees to achieve the target within
a time limit. To do things in the right manner discipline within the organization is very
necessary. To generate discipline activities within the entrepreneur, training sessions
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could be implemented that will include tasks that must be completed in a particular
time. Development of the work ethic in the organization and professional behavior will
encourage discipline and the organization. Implementation of the discipline within the
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work culture of the employees is very necessary so that the employees are always
limited with a time frame for the accomplishment of the goals and are given a major role
in a well-structured business organization.
7. Open-minded:-
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The entrepreneur should be open-minded. That means the entrepreneur should
always encourage feedback and suggestions from the employees. This will help
the entrepreneur make better decisions and also motivate the employees to give
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suggestions to the company. If the company and entrepreneur are always encouraging
the employees to provide their precious feedback and suggestions to the company then
the business can easily identify the opportunities in the market. The employees are
the ones that are directly connected with the customers so they know better about the
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customer requirements. By taking the suggestions and opinions from the employees the
workflow within the organization can be maintained and new ideas could be generated
in the organization. The entrepreneur should not have a close-minded approach
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towards the employees and the customers. The company and the entrepreneur
should focus and should motivate the feedback from the customer so that the required
changes in the business can be done. Keeping an open mind helps in taking valuable
suggestions and opinions from the external parties and will help in enhancing the
business ideas according to the requirements of the customers. The workflow within the
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organization could be improved by taking suggestions from employees. The problems

in the employees could be reduced by giving major emphasis on the opinion of the
employees in the business first of the employees at a major entity in the organization
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that is always working towards business objectives so feedback and opinions of the
employees should be welcomed.
8. Being kind and empathetic:-

The entrepreneur should deliver kindness to its employees and the external related
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parties. The employees should not be overburdened with the work and should get enough
time to refill themselves. The entrepreneur should focus on providing better working

conditions to the employees in the organizations so that they could perform best in the
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company. Sustainable development should be followed within the organization also that
the health of the employees is being taken care of. The employees in the organization
should be given employee benefit programs and should be updated every year according
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to the requirements in the market. The entrepreneur should ensure that the company
is taking strict action against sexual harassment and inequality in the organization. The
company should not encourage politics within the organization for achieving a better
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position in the business. The promotion within the company should be done based on
the performance and the experience of the employees and not based on politics. The
viewpoint of every employee is important for the company and the company should
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always behave and should show kindness to the employees.
9. Competitive:-
The success of any enterprise is dependent upon the way the company and the
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entrepreneur handle the competition. The entrepreneur must motivate the employees to
be competitive in the market. Because the need of the customer is increasing every day
and globalization is encouraging stronger competition in the market. The entrepreneur
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should have more competitive strategies and should keep track of the competitor’s
success. This will help in ensuring that the employees and entrepreneurs are always
ready for delivering the best in the market. The entrepreneur should identify the
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business tactics that work best for the company and improve the performance of the
business in the market. Evaluation and analysis of the competition are very necessary
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so that the company does not get a major loss due to the improved strategies of the
competitors. The company should always try to motivate its employees to deliver their
best in the market so that maximum customers can be generated for the company. The
company should even use employee analysis that will help in building better strategies
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in the market. The employees are directly connected with the customers and have
greater knowledge about the preferences of the customers so this will help in giving
tough competition to the other companies in the market.
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1.2.3 Entrepreneurial Environment
The entrepreneurial environment means the environmental factors that affect the
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business organizations. The functioning of the business is being affected by multiple

factors. These factors are related to political factors, social factors, economic factors,
legal factors, technological factors, and others.
The term entrepreneurial environment is derived from two words. The term
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entrepreneurial refers to the factors that affect the business enterprise and the second
term is an environment that includes the environmental changes and the environmental
factors that are affecting the business. Both the terms are connected because the
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functioning of the business cannot be done without evaluating the environmental

factors. The entrepreneurs in the market have to study the legal formalities and
changes in the market so that the business could easily adopt the changes and could
give tough competition to its competitors by being updated regarding the environmental
changes.
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Business functions in the external and internal environment and the functioning and
performance of the business are dependent upon these factors. The entrepreneurial

environment is necessary to evaluate because whenever a business develops a new

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company or expands the existing business these environmental factors are necessary
to evaluate.
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Entrepreneurial environment is a combination of different factors and business
environment elements that affect the development of entrepreneurship in the market.
If the business organization does not evaluate the environmental factors that affect
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a business organization then it becomes difficult for the entrepreneur to execute the
business plan because the business will function within the external environment and
the behavior and changes of the external environment have a greater impact on the
business functioning.
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The entrepreneur will have to evaluate the available resources in the market by
analyzing the natural environment. This will help the enterprise evaluate the available
resources in the market and will also help in evaluating the need of the company for
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production.
Whether the business organization is big or small it is necessary to operate and

function within the external environment. The entrepreneur cannot avoid the external
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factors affecting the business. By evaluating the political factors the company can
ensure the policies of the Government and make required changes in the business
organization. The company mustn’t be following legal procedures for business because
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when the company avoids government rules and regulations there could be multiple
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challenges that could occur in the business organization.
The environmental factors have a major impact on the business and the
entrepreneur will have to evaluate the recent trends in the market and should
also undergo proper legal research and development activities. By doing so the
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entrepreneur will ensure that the company is following the recent and updated
environmental changes and is also following the rules and regulations of the market.
The customers will prefer those business organizations that are following government
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regulations and are working according to the external environment.
Importance of an entrepreneurial environment:-

●● An entrepreneurial environment is necessary to evaluate because a business
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is functioning within the external environment. The changes in the external

environment have an impact on the business’s functioning. If the entrepreneur
is regularly evaluating the external factors then the changes in the external
factors could easily be adopted in the business environment.
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●● It is necessary to examine the changes in the external environment so that the

business organization does not face any difficulties at the time of expansion or
for taking any major decision for the business.
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●● The entrepreneurial environment will help in creating better relations with the
external market and external environment that will include creating better
relations with government and suppliers.
●● It helps in the recognition of business problems that could occur due to
changes in technological factors or legal factors. When the legal rules
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and policies change it has a major impact on the business organization.

There could be various challenges that could occur due to changes in legal

formalities. By evaluation of the external environment, the problems related to

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rules and regulations of the Government and laws of the government could be
reduced.
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●● The changes in the natural environment such as the increase in pollution
in the environment will encourage the business to adopt sustainable
development ideas in the business. At the entrepreneur evaluation of the
entrepreneurial environment, the natural challenges and the changes in the
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natural environment could affect the business functioning. The entrepreneur
will be liable to adopt the environmental changes and work according to
nature. This will encourage sustainable use of resources and sustainable
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development of the organization by encouraging innovative ideas related to
sustainable development.
●● It will also encourage the optimum utilization of the natural resources without
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making maximum use of them. This will create a limit for the business
organization for the use of the natural resources of a country.
●● Evaluation of the entrepreneurial environment will help in identifying the
technological changes and the upgraded technologies available in the
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market. This will help the organization adopt these technologies according
to the requirements of the business and encourage the employees to work
according to upgraded technologies.
●●
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It will also help in evaluating the various motives of the customer for
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purchasing the product of the company. The attitude and consumer behavior
can be evaluated to the entrepreneurial environment when evaluating the
social factors.
●● The labor laws and the tariff regulations could be evaluated through the
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entrepreneurial environment. The taxes and government regulations are

necessary to understand because every business organization will have some
liability to pay to the government.
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Characteristics of the entrepreneurial environment:-

1. Important part of human life:-
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The entrepreneurial environment is an integral part of human life because the

human is born and grows in the external environment. The environment is very
necessary for any individual to grow and generate a source of income for or meeting
his or her requirements. The environment is the aggregate of various external factors
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such as natural resources that are necessary for the development of human life.
Individuals can undergo entrepreneurship activities for earning a source of income. The
entrepreneur must evaluate the factors that affect human life.
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2. Changing environment:-
The external environment will not remain stable for a long period. The changes
in the external environment could occur due to government regulations or due to
technological advancement. The entrepreneur has to evaluate the changes and must
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adopt the changes in the business functioning so that business function could be
done easily. The entrepreneurial environment will have to evaluate and understand
the need of examining the external environment. Regular up-gradation in the external

environment will create a problem for the entrepreneur but the entrepreneur must
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identify the potential opportunities in the market by proper analysis of the external
environment. This will also help the entrepreneur in making changes in the methods
and systems of the company. The strategies of the company could be modified
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according to changes in external factors.
3. Entrepreneurial environment is being affected by various factors:-
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The entrepreneurial environment is being affected by external factors such as
political factors, legal factors, technological factors, social factors, and cultural factors.
It is very important to evaluate the effect of these factors on the business. The business
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environment is being affected by these factors because the business is operating in
an external environment. Evaluation and analysis of the external factors will help the
entrepreneur identify the business opportunities and challenges in the market.
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4. Help in maintaining regular contact with different factors:-
An entrepreneurial environment will help in maintaining regular contact with each
other. Because when the organization is functioning in the market it has to maintain
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better relationships with political factors such as the government. This will help in
ensuring better relations with the government and will also help in gaining maximum
support from the government. The business will also have to maintain good relations
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and contacts with the legal authorities so that permission regarding the business
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merger and acquisition-related activities could be done very easily. Maintaining regular
contact with the external environment will help in improving the knowledge of the
entrepreneur related to the external market. This will help in functioning according to the
requirements of the external market.
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5. External factors bring challenges for the company:-

External factors are not always very easy to evaluate because these factors are
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uncontrollable in nature and the business enterprise cannot control the functioning of
the external market. This will create various challenges for the company because the
changes in the external market are uncontrollable and the business has to adapt and
recreate the strategies according to the external market. This will create the problem
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of up-gradation and major changes in business functioning regularly. The company

will have to recruit market experts to analyze the changes and implement them in a
better way in the organization. The changes in legal formalities regarding acquisition or
merger will create problems for the business because the entrepreneur and the legal
team of the company will have to understand every process in a detailed manner. This
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will become a very time-consuming and expensive process for the company.
6. Compulsory changes:-
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When the changes in the external market admin then it becomes necessary
for the entrepreneur to implement these changes within the organization for stop the
entrepreneur have to compulsorily adopt the changes because if the entrepreneur does
not make these changes in the business functioning then the company will not get
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the benefit of competitive advantage and the customers will not rely on the outdated
company. The entrepreneur has the limitation of adopting the changes and regularly
updates the changes within the organization. If the entrepreneur fails to do so the

problems related to legal formalities and the political factors will affect the company. If
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rules regarding legal formalities and operations of the company are being declared by
the government then it is mandatory for the entrepreneur and the company to follow
them if the company does not follow them the government can take legal action against
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the operations of the company.
7. Responsibility towards the external environment:-
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The business organization is also responsible for the external environment.
The entrepreneur will have to provide its financial details to the government and
other related organizations so that the related parties to the business could know
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the performance of the company. The business also has a responsibility towards the
natural environment because the business functioning is being done within the natural
environment so the entrepreneur has the responsibility of undergoing sustainable
development activities and incorporating those business activities and operations that
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harm the environment.
8. Encourage the exchange of information:-
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The external market and business organizations encourage the exchange of
information within the business and outside the business. The exchange of information
will help in creating better communication with the external environment entities. The
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information related to tax liabilities of the business and the financial statement of the
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company should be given to suppliers, customers, and legal bodies. This will create a
positive value for the company in the minds of the customers because the business
organization is transparent and delivers its information to the external market.
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1.2.4 Entrepreneur, Entrepreneurship, Enterprise

An entrepreneur is a person who is responsible for creating a business idea and
bears the cost of business functioning. The entrepreneur will invest some capital in the
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organization to earn some reward in the form of profit from the company.
The idea of establishing the business has been generated by the entrepreneur
and the entrepreneur is responsible for taking the business to new heights. The
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entrepreneur can be an innovator, producer of goods and services, execution of

business procedures, and various other activities.
The entrepreneur plays a key role in the business for managing the business
activities and the entrepreneur also has a key role in developing the economy of the
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country. The entrepreneur will make maximum utilization of his or her skills, abilities,
and knowledge to initiate an idea and take the risk of implementing it in the market.
Not every individual can become an entrepreneur because for becoming an

)A
entrepreneur the individual must have the ability and the capacity of taking risks in
the market. The risk factors in the market are unpredictable and cannot be estimated
before the occurrence of any event. The entrepreneur is the individual that is always
performing the role of a manager and a leader to improve the business functioning.
(c
Enterprise is the business for which the entrepreneur is taking risks and the
market. The enterprise can be defined as the business entity that is being established
by the entrepreneur to generate profit from it.

Entrepreneurs can expand their business functioning by establishing different

Notes
e
enterprises in different locations. It could also be a project that is being undertaken by
an entrepreneur to meet business objectives.
in
The business enterprise should have a name for easy recognition in the market
by the customers. It is the business for which the entrepreneurship activities are being
undertaken by the entrepreneur.
nl
Entrepreneurship is the ability of an entrepreneur to organize and develop a
business and run the business in the market. Entrepreneurship is an ongoing process
that includes the creative and innovative skills of an entrepreneur for the successful
O
running of a business.
Entrepreneurship is the development of a business organization in the market and

fulfillment of the needs and wants of the customers through a business organization.
ty
The demands of the customers’ needs to be fulfilled by a company and the
individual kind incorporate various creative ideas and engage in creation for extraction
of business value by fulfilling the customer demands.
si
Entrepreneurship will have economic value because the entrepreneur establishes
the enterprise in the market for the objective of earning profit and wealth by undergoing
entrepreneurship activities.
r
ve
Characteristics of entrepreneurs:-
1. Knowledge:
The entrepreneur should know the internal and external business environment.
Knowledge of handling business problems is very important. The entrepreneur should
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also make sure that the success of any organization is dependent upon the knowledge
of the entrepreneur first and enhance his or her knowledge regularly. It will help in
getting a greater idea about advanced technologies and competitive strategies in the
U
market. An entrepreneur should possess complete knowledge about the market so that
business decisions can be made in a better way. Incomplete business knowledge will
make it difficult for the entrepreneur to make business decisions and sometimes the
entrepreneur and the enterprise could get affected by incomplete knowledge.
ity
2. Risk-taking capacity:-
The entrepreneur is the person that will represent the business in the market.
The must-have to the capacity of taking risks in the market and evaluating the future
m
risk factors by doing so the entrepreneur can differentiate different types of risk that
will affect the business organization. Anticipating market risk is very necessary for the
business organization so that required market changes can be done by the business in
)A
the future. Though risk cannot be predicted correctly but by incorporating the analytical
skills and experience of the entrepreneur the major risk factors of the company can
be identified. This will help in identifying the consequences of the risk and will also
help the business organization make requirements for dealing with risk factors. The
entrepreneur should always be ready to face the risk because the company and the
(c
entrepreneur that successfully deals with risk factors are the ones that get long-term
profit in the business.

3. Proactive:-
Notes
e
The entrepreneur should be proactive, which means ready with future business
plans. The entrepreneur should evaluate the future requirements of the organization
in
and should always have a backup plan for dealing with the challenges and problems of
the business. Being a proactive person will help the entrepreneur identify the business
problems before their occurrence and take necessary measures to handle those
nl
problems in a better way. By doing so the entrepreneurs will get the benefit of easy
identification and solution of the business problems at the time of occurrence.
4. Creative:-
O
The entrepreneur should be creative in its business solutions. This will help the
entrepreneur to get a competitive advantage in the market because the customers
and other related parties of the company will encourage the creative ideas of the
ty
entrepreneur. The entrepreneur must evaluate the opportunities in the business
so that creative and innovative solutions to business problems could be evaluated
by the entrepreneur. Being creative will give the advantage of being unique in the
market and becoming the market leader first or creative ideas are more likely to get
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customer support and a creative mindset will also help in solving the business problems
differently.
5. Problem-solving:- r
ve
The entrepreneur should have the skill of solving business problems. The problems
could be related to the functioning of the business organization or the problems of the
employees. The entrepreneur must have the ability and the skill of solving the problems
in such a manner that could benefit the organization and the related party. The
ni
entrepreneur must not always think about their benefit while solving the problem. The
entrepreneur must always evaluate the situation in an overall manner so that various
perspectives related to the problem could be identified. The business’s problems are
U
difficult to examine and the entrepreneur should have the ability to make the best
decisions for the company and the employees.
6. Empathy-
ity
The entrepreneur should be empathetic, which means the entrepreneur should

think from the perspective of the employees and the other party. This will help the
entrepreneur identify the problem of the individual from the viewpoint of the employees.
It means evaluating the mindset of the employee and understanding the thoughts of
m
the employees. The entrepreneur should be empathetic towards the employees and
other parties so that their problems could easily be understood by the entrepreneur.
This will encourage the well-being of the employees and also create a happy working
)A
environment for employees.
Characteristics of entrepreneurship:-
●● Evaluation of the product:-
The entrepreneurship activities should examine the product and different factors.
(c
Generating greater ID about the product specializations and market performance

of the product will help the entrepreneur make better strategies and business

decisions. By examining the product in different factors will help entrepreneurs make
Notes
e
essential changes regarding their demands and market condition of the product. The
entrepreneur must evaluate whether the product or service offered by the company
can fulfill the customer demands because this factor will define the success of
in
entrepreneurship activities in the market. If the product or the service offered by the
company is satisfying the customers and the company is also able to generate more
leads in a particular time then the financial position of the entrepreneur and the
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enterprise will increase. This will help in the better delivery of entrepreneurship activities
in the market.
●● Develop business organization:-
O
The major function of entrepreneurship activities is to develop the business
organization by undergoing production and manufacturing activities. The main objective
of the establishment of a business in the market by the entrepreneur is to fulfill the
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demands and requirements of the customer. The entrepreneurs will have to fulfill these
demands and requirements by undergoing entrepreneurship. The way the company
and the entrepreneur fulfill the requirement of the customer differentiates its functioning
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in the market.
●● Organize the business:-

The entrepreneur is the person that starts the business but entrepreneurship is the
r
ability of an entrepreneur to organize the business idea and convert it into business
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activity. The entrepreneur must have the skills and abilities to convert and organize
the business ideas so that business activities could be organized in a well-structured
manner. The role of entrepreneurship is also to reduce the uncertainty in the market by
organizing the business structure and activities.
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Difference between entrepreneur, entrepreneurship, and enterprise.

●● The major difference between the three is that entrepreneur and enterprise is
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a tangible entity and entrepreneurship is an intangible entity.

●● An entrepreneur is a person that starts a business organization and turns the
business idea into reality by creative ideas. Entrepreneurship is the activity
that is being undertaken by the entrepreneur for converting the business idea.
ity
The entrepreneur undergoes entrepreneurship activities for the establishment

of the enterprise in the market.
●● An entrepreneur is a person, entrepreneurship is a process and enterprise is a
business entity.
m
●● The entrepreneur is the real body that represents innovative ideas in the
market. The innovative ideas are then converted into a physical or a man-
made business organization that is termed an enterprise. The entrepreneur
)A
establishes the enterprise for or undergoing the entrepreneurship activities.

●● The entrepreneur will get the reward in the form of profit. The enterprise will
get the reward in the form of recognition in the market and brand value.
●● The entrepreneur has the skills and abilities to make plans for the enterprise.
(c
Entrepreneurship follows these planning procedures in its business

functioning.

●● An entrepreneur is the innovator of an idea whereas entrepreneurship is

Notes
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converting the idea into innovation for the enterprise.
●● The entrepreneur is considered as the coordinator of the business
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organization that coordinates the roles and responsibilities and the business
activities and the market. Entrepreneurship is the process of implementing
coordination in the organization.
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There are various similarities and dissimilarities between entrepreneur,
entrepreneurship, and enterprise. The major objective of all three entities is to
implement the business idea and convert the business idea into a profitable business
organization. A combination of all three elements is very necessary for establishing a
O
business in the market. Without the role of the entrepreneur, the enterprise cannot be
made and the entrepreneurship process cannot be implemented. All three elements are
interconnected with each other.
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Entrepreneurship refers to activities that have been done by an entrepreneur to
si
formulate the business. Entrepreneurship will include the establishment of the business
in the market by making business innovation activities and risk-taking activities.
Entrepreneurship is more concerned with innovation because an entrepreneur

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when establishing a business in the market will firstly identify the needs and demands
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of the customers and then will solve the customer problems by innovative and creative
products or services.
Entrepreneurs will identify various sources of ideas in the market by producing

goods and services in the market. The major objective of any entrepreneur to undergo
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the entrepreneurship activity is to make wealth and profit from business functioning.
Big organizations and business enterprises hire managers for their business
regulation and for undertaking management activities in the business. In small
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enterprises, the entrepreneur can perform the role of a leader and the manager the role
of an entrepreneur. It is easy for the entrepreneur to perform all the different types of
roles in a small business.
ity
Entrepreneurship activity is majorly based upon profit creation activities because

the entrepreneur will take risks in the market to generate wealth and profit from the risk.
Entrepreneurship is the ability of an entrepreneur to deliver the best in the market

and develop its business activities to involve in production and manufacturing activities.
m
Entrepreneurship is not always connected with production and manufacturing activities

but the entrepreneur could also deliver services and could engage in the delivery of the
products.
)A
The role of an entrepreneur is to guide the employees and workers in the

organization. The entrepreneur will also come to make sure that business objectives
are being achieved and will take necessary decisions related to creation and innovation.
To stay in the competition for a long period the entrepreneur will organize its business
(c
activities effectively and efficiently so that business objectives are being achieved and
minimum wastage of resources is done by the enterprise.

Entrepreneurship is an ongoing activity from starting the business enterprise till its
Notes
e
shutdown. Entrepreneurship will implement the plans created by the entrepreneur and
will make sure that business operations are being done according to the planning of the
company.
in
The innovative idea of business development is being given by the entrepreneur
and entrepreneurship is responsible for implementing that innovation activity in
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the business. Entrepreneurship is the process of implementing all the creative and
necessary business ideas into the organization for ensuring that the business activities
and the functioning of the business take according to the requirements of the market.
O
Management refers to the art of getting things done through others most
effectively and efficiently. Management means incorporating various business strategies
for coordinating the work environment in the organization.
ty
Management will include planning according to the external market and
requirements of the business and working on the plans of the company for achieving
the business objectives. Management will include formulation of strategies for the
organization and coordinating with different internal and external environment parties to
si
fulfill the plans of the company and objectives of the company.
Management is managing the things within the organization by using the personal
r
skills and knowledge of the manager. Management is the art of utilizing the skills and
knowledge of the employees within the organization so that the employees and the
ve
team of the company can work together to accomplish the desired goals and objectives
of the company in the minimum time.
Management will include the skills of the entrepreneur and we’ll always focus on
ni
the goals of the company. Management is a goal-oriented process that as a basic goal
is defined by the business for which the business organization exists in the market. The
goals of the company should be simple and clearly stated to every employee so that it
becomes easy for the employees and the related staff in the organization to achieve the
U
business goals.
Management will utilize the available resources of the business in the best possible
manner and will ensure that the wastage of the business resources is not being done by
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the employees. The management must achieve the business goals within the minimum
available resources.
Management is the achievement of the business organization’s objectives by

motivating the entrepreneurs within the organization and implementing proper plans.
m
The management will decide on recruitment of the employees and training programs.
Management is the process of planning the financial resources and other related
resources of the organization. It further organizes the manpower within the organization
)A
and defines the organizational structure of the business. The recruitment of the
manpower and timely training and development program of the employee is being
arranged and management also ensures that proper direction is being given to the
employees for the achievement of the business goals. Controlling the performance of
the employees and the actions of the business is being done through management.
(c
Thus it is a combination of planning, organizing, staffing, directing, and controlling.

Management will also include providing equal opportunities to the human resource
Notes
e
in the organization so that the performance of the employees within the organization is
being improved by taking critical decisions in the company. Management is not the work
of a single individual but it is a group activity that is to be performed by all the members
in
of the company.
Management is an intangible activity that means it cannot be touched or seen but
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the presence of management can be felt in the organization functions. One can see
management within the organization by analyzing the performance of the company and
the satisfaction level of the employees.
O
Relationship between Entrepreneurship and Management
●● Entrepreneurship is the way of starting a business in an organized manner in the
market. Entrepreneurship is being seen at the time of starting the business in the
ty
market and will disappear when stabilization in the business occurs. It will again
occur at the time of new product development or at the time of innovation activities
in the market. Management is an ongoing process that refers to managing the
things in the business organization in an orderly manner. Both the activities are
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related to enhancing the performance of the business organization in the market.
●● The work of the manager is similar to that of the entrepreneur because both
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individuals are engaged in making decisions for the business. The difference
between the decision-making elements is that the manager is responsible for
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making the decisions that will help in better evaluating the business performance
and managing the things within the organization. Entrepreneurs will take those
decisions that will bring more profit to the company and are related to the
expansion of the business.
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●● Management and entrepreneurship both have to be creative in their aspects.

Both individuals must be solving the problems within the organization in a creative
manner. It is necessary because when the business is dealing with a highly
U
competitive environment creative decision-making becomes very necessary.

Entrepreneurs and managers have to identify opportunities from the problems
and convert those opportunities into business ideas or better management of the
ity
business.
●● Entrepreneurship and management are engaged in the survival of the business.
The entrepreneur will make those decisions that will enhance the performance
of the organization in the market and will ensure the long-term survival of the
business in the market. Management will help in making those decisions for the
m
business that relate to survival and better coordination of the business activities.
●● Management will have the major objective of growing the business in the market.
)A
To remain in the industry the management will do all the necessary activities to
improve the potential of the organization. The growth of any business could be
measured based on the sales volume of the company. Entrepreneurship also
has the similar objective of increasing the sales and business performance of the
company in the market.
(c

●● The major objective of the establishment of any business is the generation of profit
Notes
e
in the market. Management is working for the business profits so that indirectly
the income of management could be increased. Management will have to ensure
that the organization makes a profit through its business activities. Profit will
in
provide more incentive and success to the company in the market. The objective
of entrepreneurship is also to increase profit so that the employees in the company
could get more salary and the company could make major decisions regarding
nl
expansion and development of the business activities.
●● The roles and responsibilities of the management will include problem-solving
activities. There could be various problems in the business related to the
O
delegation of the authorities and work within the organization. The problems could
also relate to management activities in the organization. Management will ensure
resolving these problems so that work can be done effectively and efficiently.
Similar roles are being performed by entrepreneurship. Entrepreneurship will also
ty
make sure that the business-related problems are being solved so the business
could grow in the market.
●● The role of management and entrepreneurship is not limited to making profit
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and wealth. The management also undertakes a social objective that is using
environment-friendly products in the business and identifying the sustainable
development opportunities in the market. Similar roles are being performed by
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entrepreneurship. Entrepreneurship will make sure that businesses grow in the
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market without harming the environment. The business organization must give
equal value to the environment that is being taken by the business.
●● Entrepreneurship and management are involved in the success of the business.
The roles of both entities are to develop a positive working environment within the
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organization so that the employee feels connected with the company and feels
that the company is giving equal importance to the employees. Coordination with
the employees is also very necessary for entrepreneurship and management.
U
●● Entrepreneurship and management are involved in conflict management activities.

Entrepreneurship will make sure that the conflict within the company related to
the functioning of the employees and the internal conflicts of the employees are
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being handled by entrepreneurship and management. Both the entities involved in

solving the business conflicts so that the performance of the company is not being
affected.
●● The roles and responsibilities of entrepreneurship and management are to
maintain better relations with internal parties such as the employees and other
m
business partners. Entrepreneurship and management will also have to maintain

good relations with external parties’ suppliers of raw material and government
representatives. Maintaining good relations with internal and external parties will
)A
improve the performance of the business and will also reduce the complications
related to business functioning.
●● Entrepreneurship and management will have the objective of fulfilling personal
objectives such as higher pay scales and more recognition in the business. This
(c
recognition in the business is necessary so that self-motivation can be built.


Notes
e
Entrepreneurship is an ongoing process that starts with the business execution
and ends with the business being in the market. Entrepreneurship is more related to
in
the execution of the business idea in the market by utilizing creative and innovative
aspects of the employees and other related staff in the organization. Entrepreneurship
is concerned with innovation and the creation of business ideas. The business idea
nl
related to business enhancement could be generated from within the organization that
is ideas from employees and could also be generated from outside the organization.
Entrepreneurship is concerned with the identification of the business problems
O
and problems of the customers. Entrepreneurship will convert the customer-related
problems into opportunities bi the development of a product or service that fulfills the
customer demands.
ty
Entrepreneurship will help in achieving the business objectives by allocation
of the duties within the organization. Entrepreneurship will delegate the roles and
responsibilities to the employees according to their qualifications and experience in the
market.
si
Entrepreneurship is concerned with initiating the business idea and leading the
business idea in the market. Entrepreneurship has more experience and knowledge
r
regarding the business demands so the entrepreneur could better guide and initiate the
business idea in the market.
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Entrepreneurship will also be responsible for creating job opportunities in the
market by taking decisions regarding the expansion of the business. Entrepreneurship
will identify the need for employment in the business according to the business
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decisions and will provide equal job opportunities and will also promote the existing
employees to a higher designation.
Entrepreneurship involves the identification of business opportunities and will also

U
include the enhancement of the wealth of the business. Entrepreneurship has the major
objective of creating profit and wealth for the business. By doing so the brand value of
the company will increase in the market and the customers will prefer highly branded
companies other than its competitors.
ity
The role of entrepreneurship is to give tough competition to its competitors in the

market by improving the business strategies regularly. Entrepreneurship is involved in
taking risks in the market for developing the business in the market. The risk factors are
very necessary to get recognition in the market for a business.
m
Entrepreneurs will also make decisions regarding the up-gradation of the

technologies and will ensure that the employees within the company are trained for
operating with advanced technologies. Entrepreneurship is also responsible for making
)A
decisions regarding research and development activities in the business.
Management is the process of developing the business environment within which

the employees could work together in a group for accomplishing the selected objectives
of the company.
(c
Management focuses on efficiency and effectiveness. Efficiency is target-oriented

which means fulfillment of the business objectives and the minimum resources and with

minimum wastage. Effectiveness is process-oriented which means completion of the

Notes
e
task of the business in a given time.
Management is a goal-oriented activity that means a goal has been defined by the
in
business entrepreneur and the management is working towards achieving the business
goal. Without the business goal, the management cannot function properly because
they will not have a set target to achieve.
nl
Management is a purposive activity that means management is required in every
entrepreneurship activity. When a business is being established, daily operations
of the business management are necessary. Management will ensure a systematic
O
arrangement of responsibilities and planning of the business.
Management is a multidimensional activity that means an individual can do

management of work. This will include managing the work of the employees according
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to the market requirements. An individual can also manage the management of people
by delegating the work to the employees and getting the work done effectively. The
management of operations will include the flow of input and technology in the business.
si
Management is not a short period of activity but management is an ongoing activity
that will continue in every business operation. Management cannot be separated
from business functions such as planning, organizing, controlling, and staffing. Every
r
business function will require management so that the manager could perform the
business operations in a better manner.
ve
The major objective of management is the survival of the business in the market.
The business survival will include increasing the revenue of the company by covering
the cost and providing training and development activities to the employees.
ni
Management is not the responsibility of the business owner or the manager of

the company. But management is the responsibility of every individual within the
organization so that the fulfillment of the common organizational goal becomes very
U
easy.
Management is a dynamic function that is management activities and the way

of managing the business will not remain the same. This is because the business is
ity
interacting with the external environment regularly. The external environment will
be constituted of social and economic factors. To achieve success in the market the
company must regularly change its management activities so that achievement of goals
and formation of goals according to the customer demand becomes very easy for the
company.
m
Difference between Entrepreneurship and Management

●● Entrepreneurship is concerned with the creation of a business organization in the
)A
market. Entrepreneurship will involve transforming the business idea into reality.
Entrepreneurship is also known as the person who is the owner of the business.
Entrepreneurs will engage in developing creative ideas for establishing a business
in the market. Management is concerned with doing business activities by a group
of people. Management is responsible for focusing on taking responsibility for
(c
business organization and achieving the business objectives in a defined period.

●● The person that undergoes entrepreneurship activity is known as the owner of the
Notes
e
company and the person that undergoes management activity is known as the
manager of the company.
in
●● The major role of entrepreneurship is to take risks in the market for taking a
major business decision. Entrepreneurship will lead the company by taking risks
in the market. The risk is very necessary for getting a competitive advantage
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in the market. Management is not responsible for taking any risky activities
because management is working according to the guidance of entrepreneurship.
Management can take short-term risks related to delegation of roles and
responsibilities within the group but major risk-taking activities are being performed
O
by entrepreneurship.
●● The reward of entrepreneurship is in the form of profit by undergoing different
business activities. Entrepreneurship activities are being started to generate profit
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and wealth in the market. The reward of management activity is in the form of
salaries because the manager of the business is considered as the employee of
the company.
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●● Entrepreneurship will define the organizational goals and also define the
objectives of the company. Entrepreneurship is concerned with defining business
goals based on taking advice from professional experts. Management is only
r
responsible for implementing the goals of the company and working together as a
team for fulfilling the business objectives. Management can define small goals for
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the team to motivate the team for achieving the organizational goals.
●● Management is more concerned with research and development activities.
Management will not take any decision regarding the business without undergoing
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statistical information. Statistical information is very necessary for business

expansion because management will provide better decisions to the company
based on quantitative information. Entrepreneurship is concerned with making
decisions based on personal preferences and they do not give favor to quantitative
U
information.
●● Management should have various types of skills such as leadership skills;
interpersonal skills and decision-making skills for effective functioning in the
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business organization. Management is responsible for executing the business idea

so these skills will help in better evaluating the challenges and problems in the
business organization. Entrepreneurship will only provide finance and ideas to the
management. It is not necessary that entrepreneurship should always enhance the
skills and should have different types of skills for operating in the business.
m
●● Entrepreneurship is considered as the innovator of the company because the

innovative idea is being developed by the entrepreneur. Entrepreneurship is
)A
responsible for starting a business organization by providing innovative ideas.

Management is considered as the executive of the business idea because
management will ensure that the idea provided by entrepreneurship is successfully
implemented and executed effectively and efficiently.
●● Entrepreneurship will have a personal attachment with the business because
(c
the business is being established by the entrepreneur. This will always motivate

entrepreneurship to provide creative ideas to the management. Management

Notes
e
is only working for a salary and does not have any personal attachment with the
business. Management will only be responsible for the execution of innovative
ideas.
in
●● The major goal of entrepreneurship is the sustainable development of the
company. Sustainable development will include the achievement of the business
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goals and objectives without harming the environment for providing various
benefits to the environment. Management is only responsible for accomplishing
the organizational goals that are being defined by entrepreneurship.
O
●● Entrepreneurship is a centralized process because the decision regarding the
business is centralized to a common goal. Entrepreneurship will always have the
objective of growing the business in the market. Management is a decentralized
process because management delegates responsibilities to different employees
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and does not perform the business activities alone.
●● Management activity could be performed by those individuals that have knowledge
and skills of managing things and achieving the business objectives in minimum
si
time and with minimum resources. Entrepreneurship is the activity that could be
performed by those individuals that have creative ideas and are ready to take risks
in the market.
●● r
Entrepreneurs should have the creative mindset of delivering innovative ideas to
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the management. And the management should have different skill sets to work
upon innovative ideas.
●● Management activity is being done by a team that includes experienced and
professional managers. Entrepreneurship activities are being done by the
ni
entrepreneurs. It could be a single entrepreneur or more than one entrepreneur.

●● The goal of entrepreneurship is to become the best in the market by enhancing
the brand value and increasing its customer base. The goal of management is to
U
only fulfill the business objectives by delivering their best in the form of skills and
knowledge.
There are various dissimilarities between entrepreneurship and management
ity
but both entities are working for business objectives. Management makes optimum
utilization of the available resources and focuses on the timely delivery of products and
services. Entrepreneurship is focusing on capitalizing the new market opportunities
and improving business performance through innovative ideas. An individual can
become a manager by undergoing various training and by gaining experience. But
m
entrepreneurship cannot be taught to anyone; it is the willingness of the individual to

become an entrepreneur.
)A
Check your understanding

1. The innovation theory is given by__________.
2. ______________Theory States the behavior of any individual and the behavior of
the individual is being affected in group level.
(c
3. An individual that is responsible for creating a creative idea is known as__________

4. Common aspect between entrepreneur and manager includes___________.

Notes
e
5. If an entrepreneur is responsible for creating an idea of product development it in
that condition the manager is responsible for______________ of idea.
in
Summary
●● The theoretical perspective of entrepreneurship will include innovation theory,
nl
social change theory, uncertainty bearing theory, entrepreneurial group theory,
economic theory of entrepreneurship, theory of need of achievement, behavior
theory, cultural theory, cultural value theory, and socio cultural value theory.
O
●● The entrepreneurial traits will include that the entrepreneur should be a good
leader and should have confidence of implementing the idea in the market.
●● The entrepreneur is a person who is responsible for creating an idea
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entrepreneurship is the activity that is being undertaken by an entrepreneur and
the enterprise is the development of a company or the business organization that
produces product and services.
si
Activity
1. Provide a detailed description between entrepreneur, Entrepreneurship and
enterprise.
r
2. If you are an entrepreneur what could be the necessary entrepreneurial traits that
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needs to be pursued by an individual.
Question and answer

1. What is the difference between entrepreneurship and management?
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2. What is the relationship between entrepreneurship and management?

3. What is cultural value theory?
U
4. What is uncertainty bearing theory?

5. What are the entrepreneurial traits?
ity
Glossary
1. Accomplishment- fulfilment of the certain requirements.
2. Enthusiastic- passionate towards the work environment and always ready to take
risk for the purpose of getting return.
m
3. Proactive- it refers to all ways getting prepared for the future changes. Proactive
nature will help in determining the challenges and opportunities in the market.
)A
4. Goal-oriented- it refers to always taking necessary measures to create a goal in the

business organization and motivating each and every employee within the company
to work towards the goals of the company.
Further reading
(c
1. Book- Entrepreneurial leap

Author – Gino Wickman

2. Book – the entrepreneur mind

Notes
e
Author- Kevin D. Johnson
in
Answers
1. Joseph A. Schumpeter.
2. Entrepreneurial group theory.
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3. Entrepreneur.
4. Creative mind set.
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5. Implementation of Idea.
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r si
ve
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ity
m
)A
(c

Unit - 1.3: Types

Notes
e
Objective
in
At the end of this unit you will be able to
●● Determine different types of entrepreneurs.
nl
●● Entrepreneurial style.
1.3.1 Entrepreneurship Style
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Entrepreneurship is composed of different types of individuals that make optimum
utilization of their thinking capacity to make something new in the market. Then new
ideas in the market are being generated with the identification of the opportunities in the
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market. The entrepreneurs are responsible for implementing a trend in the market and
are also responsible for identifying the problems of the customers in the society.
Entrepreneurship is a process that includes identifying the needs and wants
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of the customers and converting them into business opportunities. The major role of
an entrepreneur is to identify the market necessities so that the customers can get
satisfaction by consumption of a product and the company can get wealth in return.
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Entrepreneurship is important in the market so that the growth of the country can
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increase. The growth will include economic growth that means an increase in the gross
domestic product of the company and the country. By serving different types of products
and services in the market entrepreneurs ensure that the customers are satisfied and
are generating some wealth for the company
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Entrepreneurship activities are motivated by the government because these

business enterprises are established employment opportunities in the market and
are also responsible for improving the economic value of the country. The generation
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of more business entities in the market will create more competition and there will be
multiple products and services for the customers to choose from.
Customers are very demanding because the lifestyle of the customers is changing
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due to the adoption of international culture. This will change the demand of the
customers and the customers will prefer those products that are being referred to in
the international market. The standard of living of the customers has changed due to
globalization and so the requirements for the product and services have also changed.
The companies are encouraging creative ideas so that the demand of the customers in
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the international market can be met.
The entrepreneur should have skills, knowledge, and experience to identify the
demands in the market. An ordinary individual cannot identify the customer demands
)A
because a critical mind is required for the identification of problems and demands in the
market.
Entrepreneurs should have the capability and the knowledge of converting the idea
into reality. The entrepreneur should have a visionary mind so that long-term vision in
(c
the market could be identified. The business idea generated by the entrepreneur must
identify the market requirements and also identify the demands of the customers.

To convert the business idea into reality the entrepreneur will undergo training
Notes
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and development activities. This will help in generating a creative mind and will also
help in identifying the various challenges that could occur in the future. Successful
entrepreneurs are those that have a creative mindset and are always engaged in
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identifying the market opportunities.
Entrepreneurship styles
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Entrepreneurs are not made overnight; an individual will have to undergo a long
research and development activity to become an entrepreneur in the market. To
become an entrepreneur the individual must also have the capacity of identifying the
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risk and the capacity of bearing the risk in the market. The competition in the market
is becoming very intense so the individual should have the creativity and innovative
mindset to become an entrepreneur. Different styles of entrepreneurship are being
identified based on the nature of the entrepreneurs in the market. This will help in
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differentiating the unique styles of entrepreneurs and the way of functioning of the
entrepreneurs in the market.
●● Wannabe: This type of entrepreneurship style consists of those entrepreneurs
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who have creative ideas and are always engaged in making aspirations to become
someone in the market. They have mostly inspired entrepreneurs that are being
inspired by other individuals in the market. They try to act and look like other
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entrepreneurs in the market. The other entrepreneur could be the rivalry or the
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other entrepreneurs that inspire them. These types of entrepreneurship styles are
being followed when the entrepreneur has creative ideas and they can implement
these business ideas into reality if they are being provided with sufficient finance
and resources. The entrepreneurship style is followed when the entrepreneur
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wants to think beyond the ordinary and wants to get out from the regular work life
and create something big in the market. Innovation is the major characteristic of
this type of entrepreneurship style.
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In this entrepreneurship style, the entrepreneur has the objective of coming out
from the regular work life and has the aspiration of becoming successful and wants to
make his or her own choice to become free in decision making but due to lack of skills
and capabilities, they always remain where they are.
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●● Survivalist: These types of entrepreneurs are the ones that only have the
objective of survival in the market. The survival of the business and the functioning
of the business is the major objective of the entrepreneur. When a company only
has survival as the major objective the focus is on creating short-term objectives
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rather than creating long-term objectives. The survival of the business depends
upon the way the entrepreneur regulates the business organization. If the
company only has survival as an objective then the business cannot grow in
)A
the market; it will remain at the same position in the market. For the growth of
the business, it is necessary to have a business evaluation and creation of new
strategies but the survival only delivers the basic product for a long period without
doing changes in it. Survival will never turn a business into a successful enterprise
in the market. Competition in the market is increasing every day so the company
(c
should always be ready to face it. Only giving priority to survival will not lead the
company to growth and business recognition.

●● Managers
Notes
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Managers are the ones that are engaged in effective and efficient utilization of the
available manpower and other resources in the business to achieve the organization’s
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objective. Entrepreneurs are often considered as good managers in small business
organizations. But in a large business organization management skills are different from
entrepreneurship skills. Management skills will include decision-making and handling a
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team effectively. It is necessary to identify the requirements of the employees and the
team to become an effective manager. Managers and producers are those individuals
that give major importance to the workers of the company and employees of the
company. These entrepreneurs ensure that the satisfaction of the employees is being
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taken care of and the team has adequate resources to achieve the organizational
objective. Manager entrepreneurs give importance to nurturing a good team. This
will make sure that the employees and the manager and entrepreneurs are working
together for the company. Major emphasis is given to the employees and workers of
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the company by the manager entrepreneur. The roles and responsibilities of a manager
entrepreneur are to understand the requirements of the team and work according to
the skills and knowledge of the team members. Managers and entrepreneurs will give
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importance to organizational objectives and will also give importance to the individual
goals and objectives of the employees.
●● Innovators
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In the 21st century, it is always assumed that entrepreneurs should have a
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good innovation mindset so that by implementing innovative ideas in the market the
company could get a competitive advantage and recognition in the market. Innovator
entrepreneurs are those entrepreneurs that identify the different and difficult situations
in the market and convert the business problems into opportunities. A positive attitude
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is very important to become an innovator in the market. The innovator entrepreneurs

have the potential of transforming the business idea into reality and they have extensive
knowledge of the industry. The major emphasis of innovators in the market is to identify
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the requirements and the needs of the customers and build innovative products in the
market. Innovation will give a competitive advantage and will also help in generating
more wealth and customer needs in the market. Innovation is considered as the
unique aspect that differentiates the company in the market from other competitors.
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The innovators in the market are always engaged in the identification of market
requirements.
●● Revolutionaries:-
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Revolution entrepreneurs are those that are involved in creating a revolution and
a change in the market. These types of entrepreneurs have to focus on transforming
the customer requirements and the market requirements by revolutionizing the market.
Revolutionary Entrepreneurs are more engaged in bringing technical transformation in
)A
the market and establishing business according to market changes. The revolutionary
entrepreneurs are generally the market leaders and have a great idea about the
technical and nontechnical requirements in the market. Revolutionaries have the vision
of world-changing objectives and they do not limit their business goals to the generation
(c
of profit only. They have the objective of bringing a major change in the business and
the society by implementing something very creative that could change and bring a
revolution in the society

●● Calculators
Notes
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Calculators are those business entrepreneurs that are always engaged in
calculating the success of the business idea in the market. They take calculated risks
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and invest the calculated amounts in the business. These types of entrepreneurs
do not have the power of taking a high risk and are more engaged in research and
development activities before making major decisions for the company. Calculators give
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importance to profit but will also identify the sources of profit in the market. Calculators
will have the future vision for the company and are involved in making innovative
products and services that could create brand value and the market in the future.
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●● Opportunists
The success of the entrepreneur is based upon the opportunity to identify full
stops. The entrepreneur that has the capacity of identifying the business opportunity
in the market is more successful and wealthy in the business. These entrepreneurs
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have more focus on converting business problems into opportunities. It is very
necessary to identify the business opportunities so that customer satisfaction can be
achieved. The opportunist’s entrepreneurs are those that are focusing on technical
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and business problems. They try to find solutions to these technical and business-
related problems and convert the problem into a product or service. Opportunity
entrepreneurs have a business background and have experience in the market. The
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opportunity entrepreneurs do not have technical knowledge but have an objective
of the development of those products and services that could fulfill the customer
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requirements. These entrepreneurs focus on creating short-term objectives and goals
for the company.
●● 8. Risk-taker
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The risk-taker entrepreneur is that entrepreneur that has a daring nature and
is always ready to take risks against market recognition and reward. Risk-taking
entrepreneurs do not fear expanding their business organization based on research
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and development for stock. These types of entrepreneurs do not blindly undergo risk-
taking activity but they give major importance to research activities and customer
requirements. These types of entrepreneurs give major emphasis on investment
opportunities and try to create a long-term vision for the company. The creation of
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long-term objectives is the major characteristic of risk-taking entrepreneurs. This

type of entrepreneur takes risks based on innovation activities and by identifying the
opportunities in the market. They do not have the objective of Survival and the creation
of short-term business objectives.
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Different entrepreneurship styles are being highlighted because the nature

of the entrepreneur and the product of service and which the entrepreneur deals
with differentiates the entrepreneurship style. It is not always necessary that the
)A
entrepreneurs are always engaged in taking high risks against higher profit or wealth.
Sometimes the entrepreneurs and the small business organizations have the objective
of generating a minimum profit and focus on the survival of the business.
1.3.2 Types of entrepreneurs.

(c
There are different types of entrepreneurs according to the nature and size of the
business and according to the investment done by them. Innovation and creative minds

also differentiate the entrepreneurs. The entrepreneurs are also differentiated based on
Notes
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domestic and international reach.
●● Innovating entrepreneurs
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These types of entrepreneurs are those that discover new ideas and business
opportunities in the market. This engaged in the identification of the problems in the
market and converting them into innovative concepts. They produce new products or
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services, discover a new method of production, or improve the existing business model.
These entrepreneurs also identify the new market and recognize the enterprise in the
market. Innovative entrepreneurs can work only when a certain level of development
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is being achieved in the business and customers expect something creative from the
company. These entrepreneurs have the characteristics that they are high-risk-takers
and deal in an uncertain environment. These types of entrepreneurs are found in
developed countries because the entrepreneurs have more risk-taking capacities and
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are also engaged in high satisfaction of the customers.
●● Drone entrepreneur
These types of entrepreneurs are those that refused to adopt new technologies
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and identify the opportunities in the market. They do not adopt opportunities in the
process of production and are ready to suffer loss. They do not want any changes
in their production methods and want to stick to the traditional method of production.
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These types of entrepreneurs exit the market when the demand for their product is
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lost. This type of entrepreneur resists adopting innovative strategies and does not give
importance to the survival of the business. They give importance to the conventional
methods of production and the product. These types of entrepreneurs do not want any
changes in the production and delivery of the products and services.
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●● Imitative or adoptive entrepreneur

These types of entrepreneurs are ready to adopt the innovation strategies
that are being created by the innovative entrepreneurs. Instead of identifying and
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developing innovative strategies and technologies in the market they usually imitate
the technologies and techniques that are being innovated by others in the market.
These entrepreneurs resist developing the technologies and techniques. These are
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the sources of generating income and creation of wealth for underdeveloped countries.
These types of entrepreneurs are mostly found in underdeveloped countries because
the entrepreneurs do not have sufficient funds to invest in research and development
activities. So they imitate the technologies and techniques from the advanced countries
and other entrepreneurs in the national and international market. These types of
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entrepreneurs take less risk and avoid uncertainty in the business.
●● Fabian entrepreneurs
)A
These types of entrepreneurs are very cautious about the performance in the
market and they take calculated risks while adapting to any change in the business.
They do not have the willingness to introduce new changes in the business or change
the methodologies and techniques of the business. These types of entrepreneurs
hesitate in taking risks and depend upon the religion and traditions of their culture.
(c
Fabian entrepreneurs are mostly seen in underdeveloped countries because these

types of entrepreneurs only follow in the footsteps of their predecessors.

●● Small scale entrepreneurs:-

Notes
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Small business entrepreneurs are those that majorly operate in a small
geographical area. The objective of these types of entrepreneurs is to satisfy the
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demands and needs of the local customers. These types of entrepreneurs do not adopt
innovative strategies and do not give importance to innovative factors. These types of
entrepreneurs take loans from their friends and families. The employees of small-scale
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entrepreneurs are usually family members or relatives.
●● Large scale entrepreneurs

Large-scale entrepreneurs are those that usually operate in different geographical
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areas. These types of entrepreneurs might not have international reach but they
have different business outlets in the country. The major objective of these types of
entrepreneurs is to satisfy the requirements and the demands of the larger customers.
They usually adopt innovative strategies and hire professionals to sustain themselves
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in the market. They try to innovate their product on a timely basis and offer different
varieties of products in the market.
●● Scalable startup entrepreneur
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This type of entrepreneur was starting a business with a unique idea that can
bring a change in the market. Firstly they identify the demand and the requirements
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in the market. They find a solution by launching a new product idea. These startup
businesses receive funding from a venture capitalist that provides funds for innovative
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business ideas. The major objective of the entrepreneur is to expand their reach in the
market and they hire specialized employees that could work according to the market
requirement.
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●● International entrepreneur
International entrepreneurs are those entrepreneurs that operate within National
boundaries and international boundaries. They are usually referred to as multinational
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companies that have other businesses to reach in the international market. International
entrepreneurs will get the benefit of increased sales and revenue when the revenue
and sales are decreasing in the domestic market. The entrepreneurs can supply the
products and services in the international market and increase their market reach.
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●● Social entrepreneur
Social entrepreneurs identify the social problems of the people and develop
services and products that meet society’s requirements. These types of entrepreneurs
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do not have the objective of profit but they focus on solving the social issues and try
to bring a social change in the business. These types of social changes could be
related to sustainable development, providing social benefit to the entrepreneurs, and
engagement in environment-friendly products. The major objective of this product
)A
can be the development of society by providing employment opportunities to rural

employees. Social entrepreneurs are engaged in privatizing a social change in the
environment by ensuring sustainable financial growth. These types of entrepreneurs
usually follow ethical practices and fulfill corporate social responsibilities to achieve
success in the business.
(c

●● High-tech entrepreneur
Notes
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These types of entrepreneurs are engaged in implementing highly modified
technologies. They merge technology and manpower for developing the product or
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building the business in the market. The highly technical entrepreneurs will require
specialized talent and skills in the employees to handle technology. These types
of entrepreneurs take calculated risks that could give profit in the future. These
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entrepreneurs can bring a change in the market through the revolution. These
entrepreneurs focus on implementing technology-based production in the business.
They try to implement it and bring an overall change in the market by bringing a
technological change in the industry.
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●● Agricultural entrepreneur
Agriculture entrepreneurs are the ones that are engaged in producing agricultural-
based products. The major objective of these types of entrepreneurs is to develop
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agricultural tools and techniques. They provide modified technologies and equipment
to the farmers and are also consistently involved in innovation activities. These types
of entrepreneurs undergo research and development activities for analyzing the
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machinery and equipment used in farming in the international market. These types of
entrepreneurs try to develop the machinery and equipment in the country and also try
to adopt new technologies from the international market. Agricultural entrepreneurs are
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dedicated to agricultural equipment and machinery.
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●● Service entrepreneurs
Service entrepreneurs provide different types of services to the customers in the
market. The major objective of service and preparation is to provide services related to
the product or are purely involved in delivering services. These entrepreneurs could be
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advisory organizations and consultancy companies. The major work of these service
organizations is to provide consultants and advisors related to the subject matter.
●● Women entrepreneurs
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The need for women entrepreneurs has increased in the 21st century for women
entrepreneurs to come up with more creative ideas compared to men entrepreneurs.
First of these types of entrepreneurs are motivating other women to join the company
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and contribute towards the development of the product and services. The government
provides special facilities and provides concessions over the loans to women
entrepreneurs. Women entrepreneurs have gained popularity and are giving tough
competition to other companies in the market. Some of the women entrepreneurs have
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the objective of giving employment opportunities to other women in their area.
●● Researcher entrepreneur
These types of entrepreneurs are always engaged in research and development
)A
activities and try to find out market opportunities while launching products after
research. These entrepreneurs believe in collecting the right information regarding
the market and achieving success in the business. They give more importance
to information and data. Before launching the business plan in the market these
entrepreneurs create a detailed report and analyze the outcomes and findings to
(c
minimize failure in the future.

●● Rural entrepreneur
Notes
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Rural entrepreneurs are those that are being developed in the rural market and
only have the objective of fulfilling the requirements of the rural area customers. Rural
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entrepreneurs are being developed in the villages and they provide employment
opportunities to the workers and employees in the rural area. The major objective of
rural entrepreneurs is to earn profit and provide employment opportunities to the
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people.
●● Cyber entrepreneur
Cyber entrepreneurs are those that function and operate in software and
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technologies. These types of entrepreneurs provide products and services to customers
over the internet. Software development companies are the example of a cyber
entrepreneur. The need for the digital world has evolved the cyber entrepreneurs in the
market. These entrepreneurs exist on virtual platforms. Online shopping applications
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and software are examples of cyber entrepreneurs because they do not have a real
presence but they provide products and services to the customer at the doorsteps
by allowing the customers to select from a mobile application. The need for cyber
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entrepreneurs is increasing and the competition amongst these entrepreneurs is also
increasing with the increasing demand. These types of entrepreneurs can either deliver
their product and service on a virtual platform or can also act as an intermediary for
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delivering the products and services of other companies in the market. The major
advantage to this type of entrepreneur is that they do not have to create a physical
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store for products or services.

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1. _______________ Entrepreneurship style institute of the entrepreneurs that have

creative ideas and are always engaged in making aspirations to become someone
in the market.
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2. The entrepreneurs are involved in creating a revolution in the market and are always
ready to bring a positive change in the market is known as______________.
3. These types of entrepreneurs are adaptive and are ready to adopt a new technologies
and identify opportunities in the market are known as______________.
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4. _____________entrepreneurs are very cautious about the performance in the

market and they take calculated risk.
5. This type of entrepreneurs are engaged in producing agricultural waste
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products____________.
Summary
)A
●● Entrepreneurship style constituted of including different types of entrepreneurs

according to the features and characteristics of the entrepreneur.
●● It is not always necessary that the entrepreneurs are engaged in bringing a
change in the market some entrepreneurs are adaptive in nature and are ready to
adapt to the market changes.
(c
●● An entrepreneur can be a manager, innovator, survivalist, revolutionaries and

opportunistic.

●● The entrepreneurs are engaged in in either small-scale entrepreneurship activities

Notes
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on large-scale entrepreneurship activities.
●● The entrepreneurs that deal in cyber based and software are called as cyber
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entrepreneurs.
Activity
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1. If you get a chance to become a entrepreneur what type of entrepreneur will you
become?
2. The service entrepreneurs provide what type of services in the market?
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1. Define innovative entrepreneurs?
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2. What is the role of drone entrepreneur in the economy?
3. How can entrepreneur be considered as a manager?
4. What is opportunistic entrepreneur?
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5. Differentiate between scalable start up entrepreneurs and small scale entrepreneurs?
Glossary
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1. Fabian- Fabian entrepreneurs are the ones that are very cautious about the
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performance in the market and are always engaged in following certain techniques
and methodologies that could help in bringing a positive change.
2. Wannabe- this type entrepreneurship style constitute of those entrepreneurs that
have creative ideas on a always engaged in making aspirations about the market.
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3. Survivalist- it is a entrepreneurship style that have the major objective of surviving in

the market.
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Further reading
1. Book – Entrepreneurship
Author- Poonam Gandhi
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2. Book – Entrepreneurial development

Author- S S Kanka.
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Answer
1. Wannabe
2. Revolutionaries
)A
3. Drone
4. Fabian
5. Agricultural entrepreneurs
(c

1.4 Innovation
Notes
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Objective
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●● Different sources of business idea.
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●● Different methods of generating business idea.
●● Different creative business ideas in the market
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1.4.1 Creativity and Business ideas
The business idea refers to a thought or a course of action that could be converted
into a source of income. Business ideas could be generated from various sources. It
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depends upon the individual’s creative mindset to identify business ideas in the market.
Business ideas could be generated from the needs and demands of the customers
and consumers, research and development activities, modification in products and
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services, various distribution channels, and regulations of the government.
Creativity is the way of identifying the business idea and implementing the
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business idea differently. Creativity is being defined as a different aspect related to a
problem or finding a solution that is different from others in the market.
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Sources of a business idea
●● Consumer
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Consumers and customers are the ones that are ultimately consuming the
product and services of the company. The demands of the customers will increase
every day and could give a company and different business ideas. If the entrepreneur
pays attention to the consumer’s requirements then it could be converted into a
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business opportunity. Even the customers play an important role in modifying the
product and services and bringing a new product line to the market. The expectations
of the consumers will give a business ideal to the company. The requirements of the
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consumers must be taken care of so that the company can identify the requirements
and can convert them into business ideas through which the company can satisfy the
customers and even generate profit and wealth.
●● Distribution channel
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Analysis of the distribution channel can also give a business idea to the company.
People involved in distribution channels are more familiar with the requirements of
the market. They could suggest to the company for making necessary changes in
)A
the existing product or services or can also convey the demands of the consumers to
the company. Distribution channels act as an intermediary for the flow of information
between the customers and the entrepreneur. Distribution channels will give better
information regarding the marketing channels of newly developed products. The
feedback of the customers would be conveyed to the entrepreneur through distribution
(c
channels.

●● Existing products and services:-

Notes
e
When the customers are not satisfied with existing products and services or are
willing to expand their product line in the market, existing products and services will
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help in doing so. The entrepreneur can get business ideas from the existing product
by adopting modifications in the existing product or making changes in the products
and services according to the competitors in the market. Existing products also give
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business ideas to the entrepreneur because the feedback of the customers regarding
the product and services will help in modifying the product according to the requirement
of the customers.
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●● Government
When government rules and regulations change there are various types of
changes that the company has to adopt in daily functioning. These government
rules and regulations could give creative business ideas to the entrepreneur. The
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entrepreneur could come up with a new product idea and can get various suggestions
regarding the marketability of the products. Government rules and regulations do not
always act as a limitation for the business entrepreneur but they could also act as a
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business opportunity for the entrepreneur.
●● Research and development
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Research and development is a very crucial part of business organizations
because the existence of large business organizations depends upon research and
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development activities. The entrepreneur must identify business opportunities while
evaluating research and development. Business research could be dependent upon
the identification of new markets for the identification of new customer segments. This
could act as a new business idea because when a new market is being identified the
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company and the entrepreneur will have to deliver a product in the new market.
Methods of generating new ideas

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●● Brainstorming
Brainstorming is stimulating and changing the perception of the customers
regarding any product or service. It is a method of obtaining greater ideas and solutions
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to a problem. An individual tries to brainstorm and stimulate others by greater creativity

and delivering their personal experiences to the group. Brainstorming will include
personal preferences and will focus on changing the perception of the customers.
The entrepreneur can try this method of generating new ideas because when an
entrepreneur wants to change the demand of the customers in the market the company
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can brainstorm the requirements and minds of the people regarding any business idea.
This will help in changing the demands of the customers according to the company’s
preferences.
)A
●● Focus groups
Focus groups are a group of 8 to 14 participants that try to stimulate the demand
of the customers in the market. They try to create and develop new product ideas by
identifying the requirements of the customers in the market. Focus groups provide
(c
information to the business in a well-structured manner. They identify the business

ideas and evaluate the ideas and concepts. A small group is being evaluated and
perception regarding the whole population is generated by the focus groups.
●● Problem-solving
Notes
e
Problem-solving will help in obtaining a greater idea about the requirements of
the customers in the market. When an entrepreneur solves the business problems or
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personal problems of the customers and tries to convert them into a solution then a new
business idea can be generated. Companies now focus on evaluating the feedback of
the customers and analyzing the problems of the customers so that the entrepreneurs
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could get a better idea about the business solutions.
●● Brainwriting
This type of business idea relates to when the customers are being asked to write
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their special ideas on a card that could be converted into a business idea. Usually, 6
members are allowed to participate and the ideas and requirements of the participants
are being evaluated. Each member has to write at least three ideas in 5 minutes.
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The entrepreneur tries to evaluate the business problems and creatively solve
them. The entrepreneur should have imaginative ideas and should have the capability
of converting them into realities. While converting the business idea into reality the
entrepreneur should implement various methods and strategies to estimate the success
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of the business idea. The level of creativity within an individual can be increased by
adopting different technologies and techniques.
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There could be various ways through which creativity and a generation of new
business ideas could be done.
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●● Brainstorming sessions will act as a force for changing the thinking level of
an individual regarding any aspect. This technique is most widely used for
generating creative problem-solving techniques and establishing them into
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business ideas.
●● The entrepreneur can even use the reverse brainstorming technique if the major
objective is to identify the faults by asking questions. This technique focuses on
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identifying the negative aspects related to product service or any idea. Reverse
brainstorming is used to overcome problems and find a better solution.
●● To develop creativity in any individual checklist method is also applied. In this
method, different options are given to an individual and are allowed to select
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or choose various types of options. The options can be related to the color of
the product or the shape of the product.
●● Creativity within an individual can also be generated while evaluating
the competitors in the market. Evaluation of the competitive strategy will
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motivate an entrepreneur or to develop better strategies than the competitor

and restructure the business ideas according to the requirements of the
customers.
)A
●● If an entrepreneur surrounds himself or herself with a diversity of thinkers

such as different people from different professional backgrounds then this
will help in diversifying the thinking level of the individual. The entrepreneur
will enhance his or her personal knowledge and will also diversify to perform
better in the market.
(c
●● Creativity can be enhanced and improved if the entrepreneurs have the

willingness to do so. Entrepreneurs must enhance their skills regularly so that

it becomes easy for them to face the competition and satisfy the customers in
Notes
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the market. Good business ideas could be generated with a creative mind so
it is necessary to always focus on improving the mindset.
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Different creative business ideas
●● Logo designing
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Different creative business ideas are necessary to face the competition and
deliver relatable to the customer demands. The need for online business is increasing
and small and big businesses are establishing their business websites on the digital
platform. This will require the entrepreneurs to design a logo for their product. Even
O
small businesses will have to design a logo so that brand recognition becomes easy for
the customers on a digital platform. Logo designing is becoming a recent Trend and is
also becoming a necessity in the digital market.
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●● Application designing
Mobile-based application designing is becoming a recent trend with the
requirement of the digital platform. Different small organizations and big organizations
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are designing their personalized logon so that the customers could easily access the
product through mobile applications. Different companies are engaging in application
designing and are giving preference to software designing.
●● Vintage seller r
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To become an entrepreneur it is not always necessary to manufacture the product.
Vintage sellers are those business entrepreneurs that purchase vintage products such
as old paintings and sculptures from different places and resell them in the market. This
type of friend is becoming popular because customers prefer to decorate their house
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with vintage products.
●● Product packaging
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Product packaging includes the purchase of the product from a business and only
packaging the product according to the customer’s requirement and delivering it to the
customer. Product packaging requires low infrastructure capital and the investment in
such a type of business is also very low. This type of business idea is beneficial for
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those entrepreneurs that do not want to invest in huge business ideas.
●● Interior designing
Interior designing is also a form of creative Idea. Various interior designing
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organizations are being set up in the market and are giving employment opportunities
to different interior designers in the market. This is creating employment opportunities
and is also creating trust among the customers because the customers might not trust
a small interior designer from a local area but they will surely trust a big organization in
)A
the market.
●● Reselling business
Reselling business is suitable for those individuals that do not want to take more
risk in the market. These types of entrepreneurs only purchase the product from a
(c
supplier or different suppliers in the market and resell it to the customers at different

levels. The reselling of the products can be done through a physical store or digital
Notes
e
platforms
1.4.2 Innovation and entrepreneurship
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Entrepreneurship is the process of developing a new product in the market for
entering into the business. Entrepreneurship can include the development of the
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existing products or engagement in production activities. Entrepreneurship will involve
risk-taking activities that could give rewards to the entrepreneur in the future.
Entrepreneurship is an economic activity because the major objective of the
O
entrepreneur is to generate profit in the business and employment opportunities in
the market. Entrepreneurship will focus on business activities such as production,
distribution, and marketing of the products. It is not always necessary that the
entrepreneurship activities could only be generated with production and manufacturing
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activities. The entrepreneur can engage in the delivery of services or marketing
activities.
Entrepreneurship is not always about the survival of the business or manufacturing
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the products and services in the business. It is more than manufacturing and survival of
the business because to stay in the competition the entrepreneur will have to renew the
business strategies on time so that the entrepreneurs can get a competitive advantage
in the market. r
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In the 21st century, the entrepreneur must deliver something unique to the
customers every time. The demands of the customers are increasing and the need
for sustainable development of the business is also becoming necessary. And the
entrepreneur should focus on delivering innovative concepts and ideas in the market so
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that the company could get a competitive advantage and could survive in the business
for a long period.
Innovation is implementing creative and innovative ideas in the business or the

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brand so that the company could give a reason to the customers to purchase the
products or services from the business. Innovation has become very necessary for
business organizations to survive in the market. Through innovation, the entrepreneur
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can identify various opportunities and could also help in identifying the recent trends in
the market.
Entrepreneurship and innovation are interrelated. Business organizations cannot

function without innovation in the business. If a business organization does not
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implement innovative ideas or thinking in the business activities then the company
will only survive in the market for a very short period. The survival and growth of the
company are dependent upon the way the entrepreneur and the employees in the
organization identify the business opportunities and the way of implementing creative
)A
ideas in the business. An entrepreneur must try to adopt innovative techniques in the
business.
The entrepreneur can adopt innovative ideas in the form of innovative technology
or the form of an innovative thinking process. The entrepreneur should always try to find
(c
out opportunities from the problems. It is not always necessary that the problems and
challenges that occur in the business will reduce the performance of the business in the

market but the entrepreneur can convert the problems and challenges into opportunities
Notes
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by creating an innovative idea from it.
Innovation in the market will help the business organization face the problems
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effectively and efficiently and increase the performance of the business in the market.
Relationship between innovation and entrepreneurship
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In the 21st century, the terms entrepreneurship and innovation are being used
together. This is because the survival and profit of the enterprise depend upon the way
the entrepreneur develops innovative techniques and implements them in the business.
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Implementation of innovative ideas and technology has become a need for the business
organizations in the market. Large and small business organizations are investing huge
amounts of capital and adopting innovative ideas. The business organizations are
even encouraging the customers and employees to give ideas regarding the product
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or service. This is helping the business in enhancing their way of delivering the product
and service in the market and is creating global access in the market.
●● Innovation and entrepreneurship are positive terms because they both lead to
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a positive change in the business. Innovation and entrepreneurship will help
in finding out business problems and will also help in evaluating the business
solutions. Implementation of innovation activities in the organization will lead
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to a positive change in the business.
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●● The success of the business organization depends upon entrepreneurship
and innovation. The combination of sustainable development is necessary
for the growth of the company. Entrepreneurs must adapt their business
strategies according to the change in the environment. Innovation will help in
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adopting the recent trends in the market and bring profit and growth to the
company.
●● Entrepreneurship is more concerned with identifying innovative opportunities
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in the market. Innovation will help in identifying these business opportunities

that will lead the company to long-term success. Innovation can be
implemented through creative thinking or a business idea.
●● Innovation and entrepreneurship both are proactive approaches. When an
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entrepreneur or an individual develops an idea of establishing a business the

individual will have to make necessary plans and strategies for developing
a business in the market. Innovation is also a proactive approach because
innovation activities and business ideas cannot be implemented without the
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preparation of proper plans and. Both the activities will require preliminary
evaluation and planning so that the chances of failure could be reduced.
●● Entrepreneurship and innovation activities are involved in the research and
)A
development process. Research and development will help the business

organizations estimate the failure and requirements of the customers in the
market. When entrepreneurship activity is being done market research is
being given major emphasis so that the implementation of the idea could
be done in the best way. Innovation activity will also require research and
(c
development regarding implementing innovative technologies on a business

idea. Research and development will help in identifying the customer segment
and the potential customers of the company.

●● Innovation activities in entrepreneurship will help the business organization

Notes
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design and implement marketing strategies according to the market
requirements. Through innovation activities, the entrepreneur can identify the
cultural references of the customers and this will help the entrepreneur and
in
get a competitive advantage in the market by implementing those products
that are being referred by different customer segments.
●● Entrepreneurship and innovation give importance to sustainable development
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in the market. Business entrepreneurs are trying to adopt those technologies
in the market that help in the development of the business and also do not
harm the business environment. It is very necessary to take care of the
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environment and generate those products that are least harmful to the
consumers and the environment. Entrepreneurship and innovation both are
involved in the development of sustainable products and consumption of
sustainable products in the market.
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Characteristics of innovation and entrepreneurship
●● Innovation and entrepreneurship have a major objective of taking risks and
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the market. Without risk the innovative idea cannot be implemented in the
business and entrepreneurship depends upon the risk-taking capacity of the
entrepreneur.
●● r
Innovative activities for innovation have short durability while entrepreneurship
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has longer durability that leads to the identification of different opportunities in
the market.
●● Innovation activities are dependent upon the skills, creative thinking, and
research and development activities of an individual. The individual must have
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adequate experience and knowledge regarding the analysis of innovative

ideas. Entrepreneurship is based upon initiation and an individual with fewer
qualifications and experience can start entrepreneurship.
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●● Entrepreneurship is the result of the identification of the opportunities in the

market and the ability of an individual to take risks in the market. Innovation is
the result of creative thinking.
●● Innovation and entrepreneurship both have the objective of increasing the proper
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performance of the company in the market. In a business innovation activities

are very necessary for the survival and brand recognition in the market.
●● Innovation is a very important concept in the business organization because it
provides various opportunities in the market and helps entrepreneurship grow.
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●● Entrepreneurship and innovation require changes after every interval because

if the business organization sticks to a particular business concept of an
innovative idea then it will become very difficult for the business organization
)A
to survive in the market.

●● To become market leaders and entrepreneurship activities should be
connected with innovation activities. Without innovation, the company cannot
get recognition in the market for a long period. Business organizations must
adopt innovative strategies and innovative technologies to improve their
(c
performance in the market.

Importance of Innovation in the Business

Notes
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●● Innovation is very important in the business organization because it could give the
company the benefit of increased customers and revenue.
in
●● Innovation activities will also help the business organization get a competitive
advantage in the market because when an entrepreneur or a business
organization tries to adopt those business ideas that are demanded by the
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customers and are not being identified by the competitors in the market then the
company can get the advantage of becoming the market leader in a very short
period.
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●● The well-being of the customers and the employees in the organization will
increase by adopting innovation in the market. When a company adopts innovative
technologies and tries to deliver something very creative in the market then
the standard of living of the people will increase and the employees within the
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organization will feel happy to be connected with such an advanced business.
●● Innovation activities will not help the business organization get the benefit in
the domestic market but will also help in getting recognition in the international
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market. When the business organization has the objective of getting international
regulations and innovation could help the business in doing so.
●●
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Innovation will require specialized professionals to undergo this activity. The
company will have to undergo research and development activities before
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implementing innovation activities. The entrepreneur must make decisions based
on research and development results.
●● Adoption of innovation in the business will help the entrepreneurs create
employment opportunities in the market. Because when a new technology or
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a new product is being launched by the company it will create employment

opportunities in the market and will increase the wealth of the company.
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●● Innovation will help in creating a sustainable environment. The entrepreneurs can

adopt sustainable development techniques through innovation and could improve
the business functioning and the standard of living by adopting sustainable
development strategies. The business must focus on those technologies and
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business solutions that benefit the environment in an environmentally friendly

way. This will help in creating wealth for the company and will also not harm the
business environment. Consumers are becoming more health-conscious so the
entrepreneurs can develop those products that could benefit the health of the
customers. Innovation will solve various environmental problems and will also
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benefit the company equally.

)A
Innovation is the development of a creative idea or a product in the market.

Innovation includes those activities that are responsible for bringing a change in the
market. The major objective of an entrepreneur is to be involved in innovation activities
to bring a positive change in the market and achieve long-term success in the market.
(c
By adopting innovative activities in the business the entrepreneur could improve

their potential in the market and deliver creativity in the market.

To stay in the competition, innovation is a very important activity in recent times.

Notes
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Innovation will help the entrepreneur think proactively and frame strategies and
business models according to the requirement of the innovation activities.
in
Characteristics of innovation
●● Innovation gives a relative advantage to the entrepreneur and helps in improving
the current position of the company. This will help in increasing the customers of
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the company and provide better-customized products to the users. Innovation
activities are implemented by the entrepreneurs for empowering the users,
increasing productivity, and providing better services to the customers.
O
●● Innovation activities will increase the compatibility with the users. This will provide
better compatibility to the customers by providing better lifestyle techniques. This
will help the entrepreneurs to increase their way of delivering the products to the
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customers according to their requirements.
●● Innovation will try to provide simplified products and services to the customers and
reduce the complexity related to the product and services. This will help potential
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customers to purchase the product from the company.
●● Innovation activities are proactive and will require observing the nature of an
entrepreneur. This will help the entrepreneur identify the potential opportunities
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in the market according to the requirements of the customers. The entrepreneur
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can also identify the challenges that could occur in the future. This will help the
business organization prepare them and train the employees to deal with future
challenges in the business.
●● Innovation activities also require tracking over a period. The innovation activities
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cannot be implemented without researching the development and proper tracking

of the innovation Idea and the market is very necessary to evaluate the success or
failure of the idea.
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●● Innovative ideas will lead to the implementation of a big development idea

in the market. This will require the implementation of the testimonials before
implementing the real idea and the market. Taking feedback from the customers
through a trial will help the entrepreneur work upon the failures and drawbacks of
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the idea.
Types of innovation
●● Open innovation
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Innovation is a very crucial step for any business organization. The entrepreneur
will have to take the help of other business entrepreneurs in the market so that
innovation activities can be implemented in a better manner. If the company takes
)A
the help of other business entrepreneurs and together develops innovation in the
market then it will be easy from various aspects. A company cannot use its internal
resources and development activities for implementing and innovation activities.
The entrepreneur will have to make sure that large-scale research and development
activities are being done to better evaluate the customer demands and requirements
(c
in the market. Evaluating the requirements and collaborating with other business
organizations will help in generating trust with the customers and will also help in the
better implementation of innovation activities.
●● Closed innovation
Notes
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Before implementing open innovation in the market, the companies will have
to undergo close innovation activities. The close innovations will also make sure that
in
the internal research and development activity and information related to research
are not being delivered in the open market. Undergoing open innovation activities, the
companies must limit their business information internally so that other competitors and
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business organizations cannot utilize the business information. Close innovations focus
on privacy and the companies make sure that the information and details regarding
innovation are not being floated in the market.
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●● Product innovation
Product innovation refers to the development and innovation in the existing product
or developing a new product in the market. Product innovation could include improving
the existing product by making changes in the packaging of the product or the shape
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of the product. Product innovation can also include developing a new product in the
market that is developing those products that are being demanded by the customers
and launching them in the market. While undergoing product innovation activities,
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the company ensures that the business is utilizing advanced technologies in product
innovation. Product innovation could be a very profitable decision because delivering
products to the customers with little changes could increase the revenue and customers
of the company. r
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●● Process innovation
Process innovation refers to an activity of the business when the manufacturer of
the products and services has been changed to by the entrepreneur and is engaging in
bringing a new process for developing the business products first or process innovation
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will increase the productivity of the company and will also reduce the time of product
manufacturing. Process innovation is very necessary for companies that have a long-
term vision and are willing to expand in different locations. By implementing process
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innovation the company will get the benefit of delivering the products in minimum time
and developing a better quality of products every time.
●● Social innovation
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Social innovations are those activities that are being implemented by any business
entrepreneur to bring social change to the market. These types of innovations can be
related to implementing health-conscious products or services. This can also relate
to building a better educational system in society. And these types of innovations are
m
being done by the entrepreneurs to build social value in the market and deliver social
welfare to the customers. Entrepreneurs must focus on society as well. Social welfare
and motivation activities are very necessary so that customers can get better quality of
products and better innovation in the market.
)A
●● Marketing innovation
Marketing innovations are those activities that are being implemented by any
entrepreneur to bring a change in the way of delivering the products in the market
for promoting the business. 1st of these types of innovations are very necessary for
(c
the competitive environment. Because when entrepreneurs implement marketing

innovations it tries to deliver the product differently than the competitors. This will give

a competitive advantage to the companies and will also help in creating a brand value
Notes
e
in the market. Marketing innovations could be related to the adoption of digital platforms
for promotion of the products or adapting and delivering a better quality of the product in
the market.
in
●● Incremental innovation
Incremental innovations are those types of innovations that are being implemented
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in a business to bring a continuous change or a gradual change in the product or
service. Incremental changes are implemented because the company wants a
continuous improvement in the existing products and services. This will include a
O
change in the shape and size of the product or adding a new flavor to the product.
Incremental innovations are very necessary for the market to deliver something creative
and new to the customers in the market. Incremental changes do not create a new
market but adapting continuous changes in the business organizations will help the
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business get the benefit of greater revenue and increased customers. These changes
will help in increasing the performance of the company in the market.
●● Radical innovation
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Radical innovations are the types of innovations that bring a major change in the
industry or evolve a new market. Radical changes bring a revolution in the market and
are considered as the changing factor in the business. These types of innovations are
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rare because investment is required in implementing radical innovations. These types
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of innovation solve the global problem and are majorly focusing on bringing a major
change in the business. These types of innovation could include the development of
new technology in the business for adopting innovative technology in the business
functioning. Radical innovations are responsible for changing the business functioning
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and delivering creative and innovative concepts in the market.
●● Technical innovation
Technical innovations are those types of innovations when a company or an
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individual develops new technology in the market. The business competition is

increasing every day so the entrepreneurs will require different types of technologies
to implement the business function and successfully develop products and services.
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Technical innovations will lead the company towards profit and growth. Technical
innovations are being done by the developed countries because they have enough
resources and financial stability to undergo technical innovations. These types of
innovations will help business organizations create simplicity in product manufacturing
and delivery.
m
●● Business innovation
Business innovations are the activities that are being implemented by the
)A
organization to create a simple flow of products and services in the market. Business
innovation will include those activities and innovations that could create and reduce
the complexity in business methodologies and procedures. The goal of business
innovations is to accomplish the organizational objectives and reduce the challenges
and problems related to the delivery of products and services. These types of
(c
innovations benefit a company internally also because it tries to benefit the employees
within the company. These types of innovations reduce the complexity of the workflow
of the company.
●● Value innovation
Notes
e
Value innovations are implemented to introduce new technology in the market and
create business value. These types of innovations are being implemented to create
in
and differentiate the product in the market. True value innovations: the company tries
to deliver improvements made by any company at a particular time. Through this
type of innovation the company tries to create new technologies and implement new
nl
technologies in the market. Value innovations will help in creating business value for the
company by taking major decisions and implementing new innovative concepts in the
business.
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●● Corporate innovation
Corporate innovations are being implemented in the business organization
and various types of innovations are being followed by the entire business rather
than a particular business segment. These types of innovative techniques are being
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implemented at a large level and benefit the corporate at different levels. Corporate
innovations will include implementing a particular technology in the entire business
related to the delivery of the product and services or innovation techniques that are
si
being utilized for marketing the product and services. These types of innovations are
being implemented in the entire business organization rather than implementing
different innovation techniques for different product lines.
r
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1. Implementing open innovation in the market to consumers will have got
undergo____________ innovation.
2. _____________ Innovation and the ones that are implemented in a business to
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bring a continuous change.

3. _____________ Innovations are implemented to introduce new technology in the
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market and create business.

4. ______________ is considered as a type of entrepreneurship activity that constitutes
of selling old paintings and sculptures.
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Summary
●● The business idea referred to a thought or a course of action that go to be
converted into source of income.
●● Business idea could come from a consumer, distribution channel for bi research
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and development.
●● Entrepreneurship is the activity of generating new idea in the market with the help
of innovation.
)A
●● Entrepreneurship is more concerned with identifying innovative opportunities in the

market.
●● Innovation activities will help the business organisation in getting competitive
advantage in the market.
(c

Activity
Notes
e
1. What could be the importance of innovation in the business?
2. According to you what could be the characteristics of innovation and entrepreneurship?
in
1. What is Innovation and entrepreneurship?
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2. What can be different methods of generating new ideas in the market?
3. What are different types of innovation?
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4. Briefly explain business Innovation.
Glossary
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1. Brainstorming- it is a simulating and changing the perception of the customer
regarding any product or service.
2. Brain writing- it is a type of business idea that relates when the customers are being
si
asked to write certain special ideas.
3. Radical – it is a type of innovation that bring a major change in the industry to involve
a new market.
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4. Incremental- it is a type of innovation that are being implemented in a business to
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bring a continuous change.
Further reading
1. Book- Innovation and entrepreneurship
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Author- Peter Drucker

2. Book- India entrepreneurship
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Author- Jay Mitra.
Answers
1. Closed
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2. Incremental
3. Value.
4. Vintage.
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)A
(c

Unit - 1.5: Importance

Notes
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Objectives
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●● Importance of entrepreneurship.
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●● Growth of entrepreneurship.
●● Indian scenario of entrepreneurs.
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●● Growth of economy
The entrepreneur when the establishment of business does not only benefit the
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company by generating profit and revenue but also boosts the economy. With more
entrepreneurial activities a country and their uses the country will get more economic
wealth. When entrepreneurs start a business they majorly only have the objective of
si
working for the company but it gives profit to the country also. The entrepreneur
will always think that profit is part of the business but economic wealth is being
increased through complete profit falls. The top government encourages producers
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to expand their business and establish a new business in the market so that it is not
ve
only encouraging and developing the company but also encourages and develops
the country. The countries and the economy that give major focus on entrepreneurs’
activities are the economies that have more economic wealth and are developed
economies. So when a country wants to attain growth in the market the country has to
measure early entrepreneurial activity so that the economy can grow.
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●● Employment opportunities
Entrepreneur journal activities benefit the economy by providing various
U
employment opportunities to different segments of the individual. The entrepreneur,

when having the objectives of the establishment of business in the market, is not
only focused on generating profit and wealth for fulfilling his or her personal use but
also gives employment opportunities to various employees. A company will need
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unspecialized and specialized employees to perform its daily functioning. The

entrepreneur and we’ll have to make sure that equal opportunities are being given
to deserving people and a hybrid form of business model is being followed in which
balance between technology and the use of manpower is being maintained. This will
m
encourage the employees to get recognition and create employment opportunities in

the market. When an enterprise is being established it gives employment opportunities
to various individuals.
)A
●● Research and development

Whenever an enterprise is being established in the market, research and
development are being done on a larger scale. This is being done to identify the need
in the market and innovatively develop the product and services. The entrepreneur
(c
can get the advantage of research in development because when a company is being
established after proper research and development the chances of generating revenue
and customer become very easy for the company. This is because the company has

invested enough time and money to work upon the customer’s needs. Research and
Notes
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development will help the entrepreneur identify the recent trends in the market and the
factors that attract customers to a company. Evaluation and proper research are very
necessary because when a company does not undergo proper research and evaluation
in
then the company will waste its time and efforts in business execution. There are
many competitors in the market so when a company analyses the demands and the
needs of the customers in the market through proper research it becomes easy for the
nl
entrepreneur and the company to give competition to its competitors in the market.
●● Improves the standard of living
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When business enterprises are established in a country it brings new culture
and new technology to the market. When a company expands its business in the
international market the cultures and the living behavior of the people are exchanged.
This improves the standard of living because when a multinational company with a
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better quality product is being launched in another country it encourages the customers
of that country to purchase the product and improve their standard of living. The
customers are always willing to achieve a certain standard of living because they want
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social status in the market. By improving the standard of living they even get more
recognition in the market and among their local groups. Quality production and a better
standard of products will be costlier so it will motivate the customers to increase their
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pay scale by engaging and providing better employment opportunities.
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●● Innovation
The entrepreneurs do not have the objective of becoming stable in the market
with the basic product and services delivered by the company. The entrepreneur will
always have to improve the quality of the product and expand the product portfolio of
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the company so that the customers could get better choices. Innovation activities will
encourage the company to enlarge its product portfolio and build a better quality of
the product by using technology. The entrepreneur will have to engage in innovation
U
activities so that the company could get a competitive advantage in the market and
could lead the market. It is necessary to stay in the market where the company and
the entrepreneur have the objective and aim of achieving a larger customer base. This
could be done through innovation activities because major investment in innovation
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activity will give better returns to the company and the future. The innovation activities
are costlier because they will require experiments but when a company undergoes
innovation activities it will ensure that the company will increase its reach and major
modifications in the product in the coming future.
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●● Community development
The entrepreneur encourages community development through entrepreneurship
activities. When a business is established in the market it not only benefits the company
)A
but it benefits the community overall. The community will get the benefit of employment
opportunities and will also get the benefit of improving the standard of living. Small
enterprises benefit the local market and they provide employment opportunities to the
local employees and acquire talent. Small entrepreneurs will get the benefit of acquiring
talent from the local market. Community development is very essential because when
(c
a community gets developed the overall economy will get the benefit from it. The
company, when established in a particular area of the necessities of the people, is

also being taken care of. The company will build better roads and other infrastructure
Notes
e
facilities that will benefit the citizens also. This will lead to more stability and a better
hygienic environment for the community.
in
●● Social change
The development of more companies and entrepreneurs in the market will bring
more social change in the market. When a company establishes itself in a market it
nl
brings various trends and changes to the economy. Some companies will encourage
more utilization of smartphones for educational purposes while some companies will
have a major emphasis on a healthy lifestyle. The company that builds and proves the
O
societal changes in the market are the ones that survive in the market. Social changes
are very common when a new company is established by evaluating the needs of
society. A company will focus on establishing a business by undergoing a research
and development activity of a particular segment but this segment of customers will
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have different demands and needs. It is necessary that a common demand is being
maintained in the market and the social changes will encourage doing so. When a large
segment of the community is encouraging a healthy lifestyle then others in the market
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will also follow the societal change. This will encourage the entrepreneurs to follow the
social changes in the market and build the products in the market accordingly.
●● It helps in improving existing enterprise

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Entrepreneurship will help in improving the existing business in the market. By
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implementing innovation and social development activities and economic development
and enhancing the performance of its business in the market. The entrepreneur can
even focus on improving the existing enterprise by taking feedback from the customer
so that the needs and the demands of the customers could be fulfilled with the major
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objective of any company being to satisfy the customers and grow in the market.
This could only be achieved when customer satisfaction is being taken care of. The
entrepreneur will have to make sure that when the company has the objective of
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expanding in the market and improving its performance in the market it has to first
evaluate the customer demand for improving its existing performance in the market.
●● It helps in delivering new values in the market

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The company can deliver new values in the market through entrepreneurship.
When a company has the objective and the major value of the company is to deliver
healthy products and eco-friendly products then the company will encourage the
customers to purchase such kind of product and from the market. The entrepreneurs
should always try to create such a value in the market that gives benefits to the
m
company and the customers on both sides. The company should always try to provide
more value and deliver innovation in the market. The customers believe that what
the company is delivering in the market is the need of the customers so the company
)A
should deliver something beneficial and valuable to the customers in the form of a
better quality of products and services.
●● Motivates woman entrepreneurs

The entrepreneurship activities even motivate women entrepreneurs and the
(c
market. By launching various government schemes the women are getting the
benefit of entrepreneur angle activities in the market. Women entrepreneurs are
coming up with cost-effective and creative ideas that make them independent and
fulfill the demand of the customers in the market. Women entrepreneurs are very
Notes
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good managers and the need for self-employment is increasing in the market that
is encouraging women entrepreneurs to become market leaders. The women
entrepreneurs are being motivated by the government by providing various schemes
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and different benefits.
●● Prepares the entrepreneurs for the future
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Entrepreneurship will encourage the entrepreneurs to get better information
about the market. It will help them prepare themselves for future customer demands
and the changes in the market. The entrepreneurs can get better information about
O
the business activities in the market and they can prepare themselves for enhanced
entrepreneurship activities in the future. This will encourage getting a competitive
advantage in the market and will also enhance the performance of entrepreneurs
in the market. The company or the entrepreneur that focuses on generating more
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revenue and greater customers for the company in the future will have to ensure that
proper research and development activities are being done and equal employment
opportunities are being given to employees. This will help the entrepreneurs prepare
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themselves and the company for future requirements.
●● Maximum utilization of resources

When a business is being established in the market it will require various types
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of resources for fulfilling the business requirements. The entrepreneur will encourage
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maximum utilization of all the available resources in the market so that the optimum
capacity of the company can be attained. Entrepreneurship is an activity that utilizes
all the available resources in the market, that is the manpower and natural resources
so that the company can achieve its business goals through proper evaluation and
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research, and development. Maximum utilization of the resources will ensure that
the wasteful activities in the company are reduced and a particular resource is being
utilized in different manners. Entrepreneurship will encourage multiple uses of
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resources and will make optimum utilization to manufacture a product or a service. The
resources should be utilized in such a manner that the company does not have to incur
the extra costs of the resources. The entrepreneurs will get the benefit of making better
utilization of manmade and natural resources through entrepreneurship activities.
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These are the importance of entrepreneurship in the market that is necessary for a
successful business. Entrepreneurship is very important in the market to give economic
benefits and social benefits to the economy. Entrepreneurship will also provide equal
employment opportunities and will enhance the standard of living of the people in
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the economy. Entrepreneurship exchange is different cultures in the market that will
improve the standard of living and will also change the customer demands according to
the international market.
)A
1.5.2 Growth of entrepreneurship

The growth of entrepreneurship was very difficult because there were various
challenges that entrepreneurship activities had to face from earlier times. In the early
years, entrepreneurship was considered as trading and merchant. The traders were
(c
considered entrepreneurs because they were involved in trading the products and raw
materials from one place to another. The invention of money has given a major boost to

entrepreneurship activities in the economy. This even gives importance to building the
Notes
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market and encouraging customers to purchase the product and services.
Earlier the exchange of products and services was being done to satisfy the
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demands of each other. This was known as the barter system in which one product
was exchanged with another product with no monetary benefits. But this method
had various limitations and did not remain for a longer period in the market. The
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customers need a value for which the product can be exchanged from the seller.
This value was created in the form of money. The creation of money gives a major
advantage to entrepreneurship activities in the market. It became very easy for the
entrepreneurs to enhance their business idea and purchase raw materials from the
O
market and exchange the products to customers against some monetary exchange.
The entrepreneurs found it difficult to exchange the products against products
because the value of some products may be high as compared to other products
ty
which did not create uniformity in the product’s value.
The growth of entrepreneurship evolved from starting the basic business

organizations in the market. Earlier only the required and necessary industries were set
si
up in the market that were necessary for production activities. This included the clothing
factories, tool-making, and farming and hunting equipment. But when the demand of
the customers increased and entrepreneurs identified the different demands of the
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customers in the market they started producing products according to the demand of
the customer.
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Earlier the entrepreneurs had the motive of fulfilling the demands of the customers
rather than creating the demand of the product in the market. The entrepreneurs are
only involved in producing products and services that are being demanded by the
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customers.
Entrepreneurs came into the market around 20,000 years ago. In New Guinea
around 17000 BCE ago the exchange of products started the entrepreneurship journey.
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The customers exchanged tools, skins of animals, and foods against the volcanic glass.
This type of entrepreneurial activity continued for several years.
The journey of entrepreneurship was very difficult because there were various
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challenges that the entrepreneurs will have to face for evolving their importance in the
market.
Entrepreneurship and agriculture

Earlier the major source of income for every economy was agriculture. First of all,
m
agriculture was considered as the major source of income and was also considered
as the only important activity that needed to be undergone. The agricultural revolution
occurred around 12000 years ago. Earlier agriculture was considered an essential
)A
element and it was only important for fulfilling the basic requirements of the family. But
gradually the people started earning from the domestic plants and animals. Instead of
traveling from one place to another in every season, people analyzed the importance
of stability and remained at a single place and earned money by cultivating a piece of
land. This revolution was a major change for the economy because the need for other
(c
entrepreneurial activities in the market was realized from the agricultural revolution.

The revolution in agriculture even generated the need for agricultural equipment
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in the market. Traditional equipment that was being crafted by a farmer was utilized in
a small farming area but when the need of the customers increased the farmer had to
cut out a larger part of the land. For this, the farmer required specialized techniques and
in
machinery to cultivate land cost-effectively and efficiently. This gave a reason to many
entrepreneurs to enter into the industry and identify the requirements in the market and
produce those products. Agriculture equipment and shelter building equipment became
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necessary for cultivating the land.
Trading agricultural products became an important activity and a source of income

for the farmers. The common specializations and sources of income are fishing, tool-
O
making, hunting, and gathering. By using advanced equipment the farmers could grow
more crops than needed for the family members. The excess crops could be sold in the
market and acted as a source of income for the farmers. When the barter system was
ty
in implementation, the excess crops were used to exchange the required essentials in
the market. If the farmer wants cloth for his or her family he or she would exchange the
crops with a cloth maker in person so that the clothes could be arranged for the family.
si
The traveling of persons from one place to another exchange to the cultures of
individuals and even the needs of the individuals this enhanced the thinking level of the
person and identified various needs in the market. The needs give birth to innovation
r
in the market. This innovation was very necessary for bringing an industrial revolution
and entrepreneurship activity into the economy. Earlier the entrepreneurs worked in the
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industries of pottery, wool making, and carpentry.
The need and demand in the market revolution led to entrepreneurship activities
and the creative thinking of the people helped in gaining more entrepreneur benefits
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in the market. Major entrepreneurship activities were started by analyzing the demand
of the people in the market. The demand was the major factor that impacted the
innovation and development of businesses and corporations in the industry.
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Creation of money and improvement of entrepreneurial activities

When the market was established the need of the customer played a very
important role in producing a product or service. The customers were ready to
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exchange their product with another product but this gave them various difficulties while
exchanging some valuable product with a low-value product. The need for a monetary
value was very necessary for improving entrepreneurship activities. The development of
money in the market facilitated various benefits to the entrepreneurs and even helped
the performance of entrepreneurs in the market.
m
It became very easy for the entrepreneurs to exchange raw materials in exchange
for money and it became easy for the customers to exchange the finished products for
)A
the final product and against money. This even helped in fixing a common value for
the product and services and the customers do not have to pay extra for something
different than the other customers.
Entrepreneurship activities improved after the invention of money and long-

distance trade was possible. When entrepreneurs have the objective of trading with
(c
international traders, the invention of money helped the entrepreneur because the
company could easily trade and supply finished products to international customers in
exchange for money.
Money acted as a medium of exchange through this medium the confusion related
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to the different value of a product or service was reduced and the customers were only
liable to pay a certain amount for a product. This even helps in making better decisions
for the entrepreneurs and the customers who rely on the companies.
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Entrepreneurship grew with the development of the banking sector in the economy.
The entrepreneurs could easily take loans and keep their excess profit in the banks and
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generate revenue from that. It became easy for the entrepreneurs and the small-scale
entrepreneurs to take loans from the bank at minimum interest. The bank acted as a
financial body e that could easily lend them money and the entrepreneurs do not have
to search for a financier for the arrangement of funds.
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The evolution of banks benefited the entrepreneurship activities because
international trade and the exchange of money in the international market could easily
be done through banks. The banks even guided the entrepreneurs related to future
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investments and expansion ideas.
The entrepreneurs were able to purchase the raw materials from the international
market very easily. The raw material was then converted into the finished product and
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the finished product was then treated by the entrepreneurs in the international market.
This enhanced the performance of the entrepreneurs in the international market and
even gave recognition in the foreign market.
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The revenue and the profit of the company increased through expansion and
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mergers with different businesses. The entrepreneurship activities increased in the
market through mergers with other companies.
Entrepreneurship in the 21st century

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Entrepreneurship in the 21st century is more than making a profit for the company
and fulfilling the demands of the customers. The major role of entrepreneurs in the
twenty-first century is to satisfy the customers and deliver some social value to society.
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The need for expanded demand is increasing because the reach of the international
market is expanding as the companies are getting involved in 24/7 production activities
so that the global level demand of the customers could be fulfilled.
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Technological use is becoming a major part of production activity, distribution

activity, and consumption activity. The entrepreneurs are making optimum utilization
of technology and enhancing the quality and quantity of the products through
advanced technologies. The use of technology is increasing in the 21st century
in entrepreneurship because the demand of the customer is increasing and the
m
competition in the market is increasing so the entrepreneurs are involved in delivering

the product to the customers in the minimum time before any competitor reaches the
customer.
)A
The business has changed in the 21st century. The companies believe in providing
equal benefit and value to the customers in the form of products and services. The
role of the entrepreneur is not limited only to delivering the product and services to
the customer but the company even has the role of providing after-sales services and
(c
taking consideration in case the product of the company is defective. The company
even provides proper guidance and after-sale services to the customers to generate
trust and brand value in the market.

The companies in the 21st century believe in developing the demand in the market.
Notes
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Through evaluation and research and development, the company tries to first create
the demand in the market and generate the importance of the product in the market. By
generating the importance the customer feels the importance of purchasing the product
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which is more related to the standard of living.
When a particular group or a social group consumes a product a trend is being
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created in the market because in the 21st century the customers are more aware
and are engaged in analyzing the products and services that are more liked by other
customers in the market. 21st-century entrepreneurship focuses on sustainable
development. The companies not only produce the products and services but also take
O
care of the environment by producing environment-friendly products and delivering
the product in an environment-friendly manner. The 21st-century entrepreneurs are
using solar panels for production activities and solar vehicles and electric vehicles
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for distributing the product and services worldwide. This is not only reducing the
consumption of fuel but is also reducing the pollution in the environment.
The entrepreneurship activities are now even focusing on reducing and recycling
si
activities. And the companies that provide the product in plastics encourage their
customers to recycle the plastic so that it could again be used in the packaging of the
product. This is encouraging the brand value of a company in the market and is also
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helping in delivering a positive approach to a company in the industry.
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1.5.3 Counseling Entrepreneur and Follow-up
Counseling means the various ways through which the entrepreneur can overcome
the challenges in the market and deal with problems innovatively and creatively.
ni
It helps in solving business problems and it also provides various suggestions to the
entrepreneurs. The counselors deal with providing the best feasible and better solutions
to the entrepreneurs. This helps entrepreneurs and solve their long-term business
problems. This will also save the entrepreneurs from major losses in the future. The
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role of the counselor is to find better solutions and optimize the enterprise through
economical and timely results.
Counseling is a method of giving practical advice to entrepreneurs by evaluating

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the business environment. The counselors do not make and give suggestions to the
entrepreneurs based on projections and assumptions. The counselors will evaluate the
situation and will provide true business solutions. The counselors must have adequate
experience in the field so that they could better guide the entrepreneurs.
m
Counseling is a service of providing suggestions and handling business problems.

It is a professional service because not anyone can give counseling advisors to
entrepreneurs. It is necessary to have adequate experience and qualifications to
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become a counselor.
Counseling is a systematic approach that studies different areas of business

development. It is necessary to have an overall view of the problem before giving a
solution. The counselors are engaged in evaluating the business problem on various
(c
concepts so that they could give a better solution to the entrepreneur.
The business results could be optimized by taking advisors from a counselor. The
counselor will deal in bringing the business back to its position from the business loss.
When an entrepreneur is facing major loss in the market and is unable to get out of it,
Notes
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business counselors will help the enterprise to a setback in the market through various
strategies.
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The counselors will advise entrepreneurs related to market expansion or contraction.
The counselors have better knowledge about the market so they are more familiar
with the business challenges and future. This will help the entrepreneur to make major
nl
business decisions regarding the development of a business. Counselors will even fix a
problem of the enterprise and will also arrange for business clients in the future.
The need for the counselor is being evaluated at the time when the business needs
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advice from a specialized person. The professional counselor will give better solutions
and will find appropriate professional advice to the entrepreneurs. The business
entrepreneurs that are facing more business expansion problems will lead to counseling
and advisory services. The counseling services will not limit only to giving advisors but
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will also help in getting more business information regarding the market.
Importance of Counseling in Business
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●● Help in solving a problem
The major reason for hiring a business counselor is that it will help in solving a
business problem. The problem may be related to the expansion of the business
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or making major decisions for the business. The entrepreneur can take the help of
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counseling to solve a major business problem. This will help in making better decisions
for the company and will also help in making greater revenue and profit. There could
be two situations that could be performed by a counselor. Firstly the entrepreneur
could hire a counselor to solve a business problem. The second situation could be
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that the entrepreneur could hire a counselor to minimize the problem. Through this,
the entrepreneur will try to decrease the negative impact of a business problem. The
counselors are very important at the time when the company is not performing well or
when the company wants to engage in business development activities.
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●● Obtaining client’s capabilities

Counseling will help in identifying the client’s capabilities, that is the capabilities of
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the suppliers and other related staff. The employees in the organization do not have
enough experience and qualifications to handle business problems. This makes it
necessary for entrepreneurs to hire counselors. The major advantage of taking advice
from a consultant is that the work of the consultant is only limited to giving the advice
and the consultant does not affect the work of the organization after giving the services.
m
The consultant will identify the capabilities of the organization and will also help
in evaluating the best area of the business. This will help in evaluating the business
problem in a better way, by doing so the entrepreneur will reduce its future problems.
)A
●● Accumulation of information
Consultants are very important in any organization. When the company takes
the help of a consultant they provide greater information regarding the business. The
market is very flexible and the changes in the market affect the business organization.
(c
It becomes very difficult for an entrepreneur to gain better information about the
market. Consultants will provide greater information about the market changes to
the entrepreneurs. They will provide up-to-date information that will help in making
business decisions. Information plays a very important role in business expansion and
Notes
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dealing with business problems. The consultants will provide better information to the
organization so that the entrepreneur can make changes in the business strategies
according to the external market changes. The counselors will even evaluate the
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business information and process it according to the requirements of the business.
●● Expansion of ideas
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The competition in the market is increasing every day so the entrepreneurs will
have to evaluate and understand the need of expanding their business ideas in the
market. Effective counselors are very necessary to evaluate the business ideas in the
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market. The need for market expansion makes it necessary for the company to be
involved in new ideas. When a company has different types of problems and is unable
to find new ideas for business expansion at the time, counselors will provide better
information regarding the business expansion ideas. The need for counseling services
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will be very important to find the recommended solution for business development in the
market through the evolution of new ideas.
●● To get an unbiased opinion
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Counselors are generally hired from the external environment and do not represent
a company. This makes the decision biased. The counselors will provide business
solutions to the entrepreneurs based on unbiased decisions. The recommendations
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and solutions of the counselors are unbiased depending upon their area of interest and
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knowledge. The company must get true and expert solutions from the entrepreneurs
so that the entrepreneurs can make better decisions based on unbiased solutions. The
company generally prefers hiring external councilors for this reason only so that the
counselors do not provide buyers with solutions according to his or her preference.
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●● Organizational change
The main company faces organizational change according to the demand of the
market. The consultant will provide better knowledge and information to the company
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based on his or her personal experiences. The organizational change will affect
the business decisions and the counselor is needed to provide better information
regarding the business ideas. The counselor will help in managing the changes in
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the organization that could help in building a stronger organizational structure. The
counselor will provide information regarding the best organizational structure so that the
flow of information and delegation of the work is being done effectively and efficiently
according to the qualifications and experiences of the employees in the market.
m
●● For educating the employees

The counselor is an expert in the market and has adequate knowledge and
experience regarding business information. The counselor could provide better
)A
information and knowledge to the employees in the organization by organizing training

sessions. Through these training sessions, the employees could get information
regarding the business technologies and methods of production. The employees
in the organization must have professional skills to stay in the market and give a
competitive advantage to the company. The competition is increasing in the market so
(c
the employees should also have adequate business knowledge and external market
knowledge so that the employees could become an asset for the company by providing
advice and feasible solutions at the time of problems.
●● Introduction of new products and methods

Notes
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When a company has the objective of expanding the market through a new product
line for a new method then the company must work with efficiency for achieving the
in
business targets. There are various types of difficulties and challenges that the
company will have to face for the introduction of the new product and methods in the
business. The entrepreneur would hire a counselor to deal with business procedures
nl
and systems so that the company could work efficiently with creative technologies. The
counselors will help in finding out the potential solutions to the problems and work with
efficiency in the market.
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Need for Counseling and Follow up
●● There are various difficulties in the organization and the councilors have
better knowledge about the market. When an organization is unable to meet its
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expenditure target and is always facing the problem of increased expenditure then
the counselors will provide the information regarding the ways of reducing the
expenditure and the business.
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●● When a company has a shortage of cash for a longer period the company may
panic and may even think of shrinking the business. The counselors have greater
knowledge about the external market and can provide better information to the
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entrepreneurs regarding the various ways through which the entrepreneur can get
easy funds for the business. The counselor will guide the entrepreneurs to reduce
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the expenditure and cost of the business and will also provide ways of increasing
profit and revenue.
●● The employees in the organization sometimes feel very low due to a lack of
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motivation from the company. The counselors will always be engaged in providing
training and business development activities so that the employees in the
organization do not face the problem of low morale. It will also guide the company
with the different ways of increasing the motivation among the employees and
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making optimum utilization of the employees.

●● The counselors will also help the entrepreneurs deal with market differences.
The differences in the market would occur due to the shortage of supplies of raw
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materials or the shortage of supplying the finished product in the market. The
counselors will provide ways to deal with delays of supplies of goods.
●● Due to high competition in the market, the company may even face the problem of
loss of market position. There could be various ways through which the company
m
produces its market position in the market. The counselors will provide better ways
to gain the market position through different strategies. The counselors have better
knowledge about the external market and will help them follow up activities from
)A
the customers that will help in business development.

●● Follow-up is very necessary for any business organization because taking proper
feedback from the customers and the other related parties can enhance the
company’s business strategies. The company can even evaluate the problem of
reduced market share by taking the feedback from the customers and suppliers.
(c

●● Follow from the suppliers in the form of feedback is very necessary so that the
Notes
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entrepreneur can restructure its business goals and objectives according to the
requirements of the suppliers and the customers.
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1.5.3 Entrepreneurial culture
Entrepreneurial culture is derived from two words: entrepreneurial and culture.
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Entrepreneurial refers to the entrepreneurial activities that are being performed by any
individual. And culture refers to the set of believers and thoughts that are being affected
by the values and behavior of an individual.
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Entrepreneurial culture refers to the set of beliefs and thoughts of a particular
organizational group. It could be defined as the common behavior of individuals in a
society. These factors affect the social-cultural environment of an organization. It
includes the common standards and practices such as creativity, innovation, and other
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factors that a particular group within the organization or the social practices.
Entrepreneurial culture will include the common interest of a certain group that is
used to increase awareness and identify business opportunities.
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Multiple factors affect the entrepreneurial culture
●●
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The culture within an organization is being affected by the cultural background of
any individual stock the employees within the organization come from different
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cultures that are they perform different sets of actions according to the cultural
events in the society.
●● There is a certain set of beliefs that affect the behavior of any individual. An
employee is working within the organization. The employee must be connected
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with a group that may be the professional group or the friend’s circle. The set
of beliefs and the common factors within the group create a cultural similarity
between them and affect the business decisions.
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●● A group within the organization has similar thoughts and affects the business
decisions. The thought of any individual is being influenced by the professional
background of the experience in the market. Higher qualified employees in the
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organization will have different thought processes as compared to unskilled labor.

This will create cultural differences within the organization.
●● The behavior of every individual is different from the other. In an organization,
behavior plays an important role in implementing cultural similarities. The
m
employees that perform and behave similarly tend to attract each other and are
more comfortable with working with each other.
●● The employees in the organization have different mindsets. Some employees in
)A
the organization are more creative and are always willing to give their creative
ideas for the upliftment of the company. These types of similar attributes will help
in forming a cultural similarity within the organization that will help the organization
to perform better by giving a major role to employees.
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Levels of entrepreneurial culture

There are three levels in the entrepreneurial culture. This includes the invisible
level, semi-visible level, and visible level.
The invisible level will include attributes and values. This semi-visible level will
Notes
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include mindset and the visible level will include the behavior of the employees.
●● Level 1: - invisible level
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The invisible level constitutes two variables that are entrepreneurial attributes
and entrepreneurial values. The entrepreneurial attributes are those factors that
are necessary and are considered as the indicator for future entrepreneurs. The
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evaluation of these attributes will include the study of characteristics of the individuals
that could help in future entrepreneurship activities. The entrepreneurial attributes will
include those factors necessary to become a future entrepreneur. This will include
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the development activities of an individual and the business idea generation from an
individual. It is a willingness of various employees in the organization to become the
future entrepreneurs of the business. But the employee will have to undergo necessary
training and development activities and should also have adequate experience to
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become the entrepreneur of the organization. It is considered an invisible factor
because the attributes of an individual are not visible in the real world or practical life.
The second factor is entrepreneurial values. This includes the implicit and explicit
si
values of an individual employee within the organization. The values are important so
that the difference between the different courts of action could be identified. They are
also important in making business decisions. Through these values, the entrepreneur
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could identify the behavior of the employees within the organization and the way the
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employees behave within a particular situation.
●● Level 2: - semi-variable level

The semi-variable level will include the entrepreneurial mindset within the
organization. Different employees in the organization have different mindsets. The way
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of thinking of the entrepreneurs and the employees in the organization differentiate

their mindsets. The different mindsets have different thinking capacity and it will include
different motivational factors. Human behavior needs to be motivated at every business
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development stage. The mindset of the employees in the organization is necessary

to evaluate so that the entrepreneur could influence the employees personally. The
thinking and the feelings of the employees are necessary to evaluate according to the
experience in the organization.
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The employees that have more experience working in the corporate world will
pursue more maturity and are more creative in their work. The fresh employees have
a creative mindset and innovative mindset but they do not have adequate experience
to prove their creative thoughts. The mindset of experienced employees in the
m
organization will be more structured and will be based upon statistical data. It will make
it easier for the entrepreneur to rely on such data and make better decisions for the
company. If a company does not evaluate the mindset of the employees then it will
)A
become very difficult for the entrepreneur to work with different employees with different
mindsets. Evaluation of mindsets will help in creating segments of similar mindset
employees so that the company could perform better and could also participate in
complicated situations.
(c
●● Level 3: - visible level

The visible level includes entrepreneurial behavior. The behavior of employees in
the organization is visible in the organization according to the way of dealing with the
problems in the organization. The way the employees and the entrepreneur behave in a
Notes
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particular situation may differ according to the business environment. When a company
is facing a problem in that situation the employees and the organization will perform
differently and we’ll have a different behavior because the employees will be dedicated
in
towards the business organization and will engage in solving the business problem.
When the company has the objective of bringing innovation in the organization then the
behavior of the employees within the organization will be thinking creatively and solving
nl
the problems innovatively. The situations in the organization play a very important role
to change the behavior of the employees in the organization.
If the employees in the organization have a positive behavior towards a business
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problem or any situation it will be very easy for the enterprise to deal with the problem.
But when the employees and the enterprise have a negative approach towards dealing
with the problem and behave negatively then the company will not find a feasible
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solution to a problem. The employees in the organization must behave positively so that
the company can grow and the individual growth of the employees could be achieved.
Major factors of entrepreneurial culture
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The entrepreneurial culture will include major three factors that are behavior,
attributes, and skills.
●● r
Behavior: - the behavior of the employees will include factors such as taking
initiative in difficult situations, taking calculated risks according to the market
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environment, and identifying various opportunities in the market. These
factors are included in the behavior of the entrepreneur to better deal with
problems. The other factors will include a judgment regarding the future,
social networking, evaluation of the problems from beginning to end. These
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all factors affect the behavior of an entrepreneur in an entrepreneurial culture.

●● Attributes: - attributes refer to the personal traits that an individual
possesses in difficult situations or while facing problems in the organization.
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This will include factors such as perseverance, action-oriented, hard work,

determination, self-confidence, orientation, commitment towards the work,
and positive behavior. These are the personal attributes that an individual
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employee or an entrepreneur must pursue so that positive thinking within the

entrepreneur and the employees could be built.
●● Skill: - skills affect the entrepreneurial culture and the skills of an individual
could be modified according to the requirement of the organization. This
will include problem-solving skills, social skills, negotiation skills, decision
m
making, and strategic thinking skills, persuading skills, cooperation skills, and
proposing skills. The entrepreneur must have these different kinds of business
skills so that the entrepreneur could work according to different skill sets in the
)A
organization.
Importance of Entrepreneurial Culture

●● The evaluation of the entrepreneurial culture is very important in an organization
because by evaluating this entrepreneur can identify the minds of the people
(c
in the organization. This will help in making better decisions according to the
requirements of the employees in the enterprise in the organization.

●● The employees in the organization will frame better strategies and will work
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according to the requirements of the market when they have a common thought
of working with the different employees in the organization. The evaluation
of entrepreneurial culture will help in identifying those employees that pursue
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thoughts according to their experience and professional qualifications.
●● Entrepreneurship is a proactive approach and it always focuses on future business
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problems and future opportunities in the market. The entrepreneurs and the
employees within the organization have common beliefs and mindsets then it will
become easy to coordinate with the employees and the enterprise for achieving
the future opportunities and future goals of the company.
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●● It will help in collaborating with the employees in the organization and undertake
different business actions according to the requirements of the employees. The
behavior and the cultural background of the employees will play a very important
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role in collaborating with different employees within the organization and achieving
the business objectives.
●● It is very necessary to evaluate the entrepreneurial culture because when the
si
organization identifies the different segments within the organization then it
will become easier for the entrepreneur to satisfy every segment within the
organization.
●● r
By evaluating the entrepreneurial culture the company could organize the thoughts
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of different employees and could satisfy every business segment and motivate the
employees towards the success of the company.
Entrepreneurial culture is very important to evaluate because when an organization
understands the different groups of individuals that have common characteristics based
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on values, beliefs and thoughts then it becomes easy for the entrepreneur to work with
the employee’s segments.
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1.5.4 Indian Scenarios of Entrepreneurs

Entrepreneurs are the ones that undergo the entrepreneurship activities in any
economy and try to improve the economic position of any country in the international
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market. The competition in the market is increasing every day and every economy
is trying to grow in the market by developing different sectors of the economy.
Entrepreneurship is a major activity that is influencing the growth and development of
every economy.
m
Indian scenarios for entrepreneurs are fair just because the Indian government is
giving equal opportunities to every entrepreneur in the market to grow their business.
The government is focusing on small business entrepreneurs to grow their business
in the local market so that the local people could get employment opportunities and a
)A
source of income.
According to a survey, approximately 57% of the males are self-employed, and

around 67% of the females are self-employed in rural areas. 42% of males are self-
employed and 44% of females are self-employed in urban areas. In rural areas, a
(c
major focus of females is to generate another source of income that motivates them in
entrepreneurship activities.

There are different types of opportunities available for entrepreneurs in the market.
Notes
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If the individuals identify this opportunity in the market it could boost the economic
development of India in the coming future. The Indian economy could grow at a much
faster rate with the development of entrepreneurial activities in the market. This will even
in
provide employment opportunities and growth opportunities to the economy in the future.
The Indian economy is a developing economy and the Indian economy has not
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attained international recognition in every sector. There are various challenges which
the entrepreneur faces while developing their business in the market and this even
demotivates the other entrepreneurs to start their business. The entrepreneurs in the
Indian economy face various challenges because there are fewer business expansion
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opportunities in the market and even there are certain restrictions and barriers from the
government. This creates a problem for the entrepreneurs to successfully implement
the business idea.
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Entrepreneurs are coming up with different ideas in the 21st century because the
need of the customers in the market is increasing every day. This need is encouraging
creative concepts and innovative ideas in the market to fulfill customer demands. The
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market is expanding and the local entrepreneurs are even allowed to serve different
customers across the country. This is encouraging the local entrepreneurs to expand
and satisfy the customers at a global level.
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The current scenario of entrepreneurship in the Indian market is approximately an
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average performance where entrepreneurs are coming with their ideas in the market
and are executed for a short period but the big entrepreneurs are developing and
enhancing their business ideas every year and are trying to enlarge their customer base
through creative concepts every year.
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Challenges in Entrepreneurship in the Current Scenario

●● Financial challenges
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Financial challenges are one of the biggest problems that every entrepreneur faces
in the initial stage of product development. When a business is being started and if it
is being started based on credit that is taking a loan from any financial institution or a
financier then the entrepreneur will create liability from the early start of the business.
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This will create a problem for the entrepreneur to firstly clear its financial liabilities and
after years the company will start earning profit. There are various options available
in the market through which the entrepreneur can get finance for the business. This
will include Angel funding, venture capital, loans from financial institutions like banks,
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private equity, and other options. These organizations and sources of finance provide
a certain limit of funds to the company but when a company has a large objective of
introducing the business with highly specialized technologies then these financial
sources will not be enough for the entrepreneur. This will create a major problem
)A
for the entrepreneur because every business activity will require finance and if the
entrepreneur and the company do not have enough capital and funds to execute the
business then the success of the business will not be possible.
●● Regulations of government
(c
When a business is being established in the Indian market there are certain
government rules and regulations that the entrepreneur and the company have to

follow. These norms and regulations are being established by the government to
Notes
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create similarities in business regulations among all the different organizations in
the market. At the early start of the business, the entrepreneur will face difficulty in
following the business regulations. It will become very difficult for the company to deal
in
with the government rules and regulations at every stage of business execution. Firstly
the entrepreneur will have to register the business at different platforms in the state
government and different legal formalities have to be fulfilled. Different paperwork
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is required and a long procedure needs to be fulfilled by the entrepreneur and this will
create a burden on the entrepreneur in the initial stage of the business. The entrepreneur
will have to take permission from different legal officers for establishing a business in the
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market. This will affect the productivity of the entrepreneur and the business in the market
and sometimes the entrepreneur gets exhausted from these legal formalities.
●● Technological challenges
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The technology in the national and international market is evolving every day.
The advancement in technology is also being done regularly. When an entrepreneur
or a company is involved in production activity and distribution activity through highly
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specialized technologies then it will become very difficult for the entrepreneur to adopt
these technologies every time. The entrepreneur will have to undergo multiple changes
in the business organization so that technological up-gradation could be done. The
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entrepreneur will also have to first undergo technological education that means getting
aware of the business technologies in the market. This will create a bigger challenge
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for the entrepreneur to deal with multiple technologies at a time and engage in the
up-gradation of the technologies regularly. The entrepreneur will also have to arrange
training sessions for the employees to make them familiar with the new technologies
and the upgraded technologies in the market. These kinds of processes will become
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very long and the time and cost of the company may get wasted many times. For an
ordinary entrepreneur, up-gradation of technology regularly is a difficult task that could
decrease its performance in the market.
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●● Family challenges
Every entrepreneur in the Indian economy has the challenge of convincing their
family members to undergo a business activity. In the Indian economy, the family
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members believe that the establishment of a business is only for those who have
sufficient finances and are ready to take risks in the market for a long period. The
family members believe that business is only established by those who are rich and
are not for those who belong to a middle class or a poor family. The Indian families
prefer jobs and low-risk income sources for meeting their daily requirements. Family
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members generally resist motivating the idea because of their previous experiences
of the perception regarding society and society in general. The family members, in
general, want to choose this easiest and the safest way of earning for meeting the daily
)A
requirements. The family members do not leave the individual and do not encourage
taking his or her own decisions but are highly involved in the decision making of any
individual regarding the business development that affects the business idea and even
demotivates any individual from starting a business.
(c
●● Social challenges
In comparison with the foreign economy, the Indian economy is more concerned
with comparing the performance with the others. The family members usually compare
the performance of any individual with the other relatives or family friends. They
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generally give examples of well-established relatives or friends that could create
disturbance in the mind of any individual. The family members usually want their
children to become government officers or join government organizations or private
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companies for the source of income. Very few families motivate their children to start
a new business organization or establish a startup. These types of social challenges
create a problem and also d motivates the entrepreneur to start a business in the
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market and fulfill the requirements of the family members.
●● Policy changes
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The government and other regulatory bodies are regularly involved in changing
their policies regarding every aspect. This will allow the entrepreneur to raise capital
and select a source of finance for the business. The entrepreneur even faces the
problem of availing the raw materials for the market because of different restrictions
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and regulations of the government on import-export of raw materials. There are certain
restrictions created by the government and certain norms that the entrepreneur will
have to follow to avail that advanced technology from the international market. The
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entrepreneur will also have to ensure that the company is following the pollution control
measures and is always involved in equal growth of the company and the economy and
does not harm the environment in any cause. When the entrepreneur follows all these
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different types of regulations and policies it will create a challenge for the entrepreneur
to follow every policy.
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Different Opportunities for Entrepreneurs in the Current Scenario
There are different opportunities available for the entrepreneur that will help
in expanding their product portfolio in different sectors. These opportunities in the
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present scenario will motivate the other individuals to become entrepreneurs. The
business activity and the entrepreneur activity are not limited to only the production
and manufacturing of the product and services but there are different types of
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entrepreneurial activities involved in the market.
●● Educational sector
The educational sector is growing every day. The need for an online education
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system has increased in the current scenario of the covid-19 situation. This is
encouraging entrepreneurs and other individuals to join educational institutions
and start their educational institutions on an online platform. Different educational
applications have evolved in the current scenario and are gaining popularity because
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of the online learning system. This is also allowing the learners to learn from different
platforms and does not restrict them from learning only from a selected platform. This is
giving employment opportunities to teachers in the situation of Covid 19.
)A
●● Franchising
Franchising is also a form of entrepreneurship that is gaining popularity in the
current scenario. In franchising, the business outlets are being opened at different
places and uniformity in the product is maintained at all the different outlets. This
encourages the individuals to enter into entrepreneurial activities without the creation
(c
of any business idea and the entrepreneur can generate profit and wealth by only
following a business model. This helps the business to spread its reach in different

locations and international markets by only allowing other entrepreneurs to follow their
Notes
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business model.
●● Healthcare sector
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The healthcare sector is gaining popularity in the present scenario because
the need for a healthy lifestyle is increasing every day. The individuals now prefer
undergoing regular checkups and are also involved in increasing their immunity
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according to the advice of the doctor. This is encouraging the establishment of more
hospitals and healthcare centers in the economy. In the current situation due to
covid-19, the demand for hospitals has increased. Even the private sector is coming up
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with greater healthcare facilities and even attracted foreign customers to the market.
●● Recycling business
There are a lot of waste materials from the production activities and the household
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sector. Many entrepreneurs have identified an opportunity and are earning from the
waste material. The only activity that the entrepreneurs are undergoing is recycling the
waste material into useful products or is even used for reproduction activities in the
business. This is generating employment opportunities and is also reducing the waste
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in the environment and is also a source of income for the entrepreneurs in the market.
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1.5.5 Ten Steps to Becoming an Entrepreneur
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When an individual has the objective of becoming an entrepreneur the individual
has to evaluate various types of requirements before implementing a business idea.
The individual has to forcefully examine the competitors in the market and should
evaluate the market opportunities. The entrepreneur will become successful in the
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market when proper research and development regarding the business execution is
being done by the individual.
The individuals should first evaluate the area of interest in the market. The
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individual can easily work upon that business concept that is related to the passion
and interest of the person. The person could easily undergo research activities and will
enjoy an executive search for a business idea that is related to his or her interest area.
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Business execution and to become an entrepreneur the individual has to first

evaluate the market and then estimate the risk in the market. The entrepreneur should
not always make large investments and execute the business on a larger platform
because if the business idea fails then the entrepreneur will fail in the market and will
have to encourage huge losses.
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In the initial stage, the entrepreneur should also evaluate the customer demands
before implementing the idea. By evaluating the customer demands the entrepreneur
can easily identify those requirements that are necessary for the market but are being
)A
and fulfilled by other entrepreneurs in the market. This will give business opportunity
ideas to the entrepreneur and start a business in the market.
Before implementing any ideas, individuals have to firstly create a plan so that
the business execution activity becomes easy for the employees and the other
(c
related parties. If a structured plan is being developed by the entrepreneur and the
management team then there are fewer chances of failure and the company could be
successful in the long run.
To attract more customers towards the business and deliver success of the
Notes
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organization in the market the entrepreneur has to build a reputation in the market so
that the individual could get more customers for the company and could enhance the
customer portfolio of the company.
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The individual should have a creative mind to become an entrepreneur of a stock
if the individual can identify the problems and challenges in the market and have the
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capability of converting these challenges and opportunities within the individual to
easily become an entrepreneur. The entrepreneurs will have to evaluate the business
requirements in the market before making any major decisions.
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The individual will require a team for business execution first of the individual
cannot alone become the market leader or could convert the business idea into reality.
The individual has to forcefully develop a team of highly specialized and unskilled labor
so that the management and the business execution become easy for the entrepreneur.
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Steps to become an Entrepreneur
●● Conduct market research
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When an individual gets a business idea for a suspect that the individual has to
undergo, it is to evaluate the market. The market research will include the customer
segment that the entrepreneur will serve in the future and the demand of the customers
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in the market. Market research is very necessary because through this the individual
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could know the size of the market, that is how many people will purchase the product
in the future. This will help in generating business expansion strategies for the market
research and will also help in identifying the income range of the customers that will
help in improving the quality and other specifications of the product. Through proper
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market analysis, the entrepreneur can identify the location of the customers and the
reach of the business. Market research also helps the individual to define the pricing
of the product according to the potential of the customers to pay for the product.
Conducting market research is very necessary because through this that individual
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could know the consumer behavior and the saturation point of the company. It will
also help in identifying the competitors in the market and the relative strategies of the
competitors for attracting customers.
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●● Create a business plan

The second step to becoming an entrepreneur is to create a business plan for the
company. The creation of a business plan will act as a roadmap for the company to
grow the business in the market. The business plan will include the structure of the
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company and different ways of financing the business idea. The creation of a business
plan could be done in different ways. The entrepreneur selects the traditional business
plans that are very common and users structure ways of representing the business
)A
information. In a traditional business format, a detailed description of the company and

the market analysis are being done. A business plan will act as a planning structure for
the organization that will help the employees and the other related staff of the company
to work according to the business plan. In the business plan, the prerequisites of
the business have been stated that will help the individual and entrepreneur to work
(c
according to business plans.

●● Evaluate funds for business

Notes
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The requirement of the fund is very necessary before starting any business. First
of all, the individual that wants to start a business has to evaluate the different sources
in
of investment in the market. The entrepreneur can start the business by self-funding
that is utilizing his or her savings for business execution. The individual can even take
money from investors at an interest rate. The individual can even arrange for funds for
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business execution from the financial institutions in the form of loans. The individual
has to first evaluate the business objectives before engaging in investment and funding
of the business. If the company has the objective of high growth opportunities and
wants to expand the business in the market then the company should go for equity
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financing. The entrepreneur should also evaluate the financial due diligence that will
help in evaluating the investor’s performance in the market and the creditworthiness of
the investor. Business execution is not easy for any individual to cause the requirement
of funds to increase every day and the individual should be ready with different sources
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of finance.
●● Select business location
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The selection of the business location is a very critical decision because the tax
and other related regulations differ from location to location. The individual should
evaluate the location before implementing the business idea. The location will play a
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very important role because the tax liabilities and license and permission related to the
business differ from the location. The individuals should select a location that is near
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to the market so that the acquisition of raw material and the delivery of the finished
products in the market is easy for the company. The location should also be cost-
effective and should not be situated in the main city of the state. The location with
fewer restrictions and easy availability should be selected by an entrepreneur so that
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the availability of unskilled and skilled professionals could be easily managed by the
business. Selection of location will require proper analysis and research on different
locations for establishing a business.
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●● Define business structure

After selecting the location of the business the individual has to define the business
structure. The business structure selection will influence the day-to-day activities and
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operations of the company and will also define the risk-taking capacity of an individual.
The selection of the business structure should be done based on a balance between
the legal formalities and legal protections in the market. When an individual wants to
take limited risk in the market and does not want to expand the business and wants
m
sole ownership over the business then sole proprietorship is the best form of business
structure. In this form of business structure, low-risk businesses are being started by
the entrepreneur.
)A
The partnership form of the business structure is one in which two or more partners
come together with the common objective of starting a business and have the common
goal in the market. Through this form of business, the risk and the liabilities can be
distributed among the partners. But this form of business structure will have a limitation
that the profit will also be distributed among the partners according to the investment
(c
done by them. There are other forms of business structures such as corporations,
franchising, and cooperative societies.

●● Choose a business name

Notes
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The individual has to choose a business name that relates to the product and
the service that the under-visual is trying to serve in the market. The business name
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should be selected aftermarket research and the business name should be creative.
When the individual selects a business name it becomes necessary to register the
business name so that no other organization or business entity can copy the business
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name and sell the products with the same business name. The individual can undergo
trademark protection for protecting the business name at a national level. Trademark
will ensure the protection of the business name and will also ensure that if any other
company tries to copy then legal punishment should be given to such the company and
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the entrepreneur of the company.
●● Register the business

Registration of the business will ensure the legal entity of the business in the
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market. The entrepreneur or the individual should register with state agencies or at a
national level. This will give a legal entity to the business in the market and the business
could easily file a case against any illegal authority or supplier that will make it easy for
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the business to make legal formalities in the name of the business. Registration will give
various benefits to the company as the company could get a legal name in the market.
●● Get tax identity number

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Fulfillment of tax liabilities is very important for any entrepreneur. It is the
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responsibility of the individual to take a tax Identity number through which the company
could pay tax to the state and the central government. Fulfillment of the tax liabilities
will also help the customers rely on the company because the customers will believe
that the company is loyal to the government. Acquisition of the tax Identity number will
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also make it easy for the individual to pay tax at regular intervals and get the detailed
information regarding the text liabilities in the future.
●● Apply for license

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Before starting a business in the market the individual should apply for the license
and permission required for business functioning. If the company is dealing in the
chemical industry then different types of licenses will be required by the individual
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before business execution. This license and permissions are necessary so that future
problems related to business execution could be avoided. License and permission
will help in the easy flow of business activities without any hindrance in the business
functioning. If any legal authority tries to file a case against the business about the
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permission and the license then the individual can easily show the permissions taken
from the central and the state government. The entrepreneur will also have to renew the
license and permissions on time once they expire.
)A
●● Business execution
Once all these legal formalities related to business execution such as taking
permission from the central and state government, musicians of different types of
licenses for the business execution are done, the individual can easily implement
the business idea. When an individual implements the business idea the individual
(c
becomes an entrepreneur and can function as a business representative in the market.

The individual has to undergo different types of activities and different requirements

before becoming an entrepreneur. These requirements are necessary so that the

Notes
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individual could identify the market requirements and could easily evaluate the
challenges and problems in the future. The journey of becoming an entrepreneur is not
easy e and after becoming an entrepreneur the individual has to undergo various types
in
of activities to fulfill the demands of the customers to stay in the market for a longer
period. The entrepreneur must be capable of fulfilling the customer demands and in a
creative manner and should solve the customer problems on a timely basis. This will
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ensure the success of the entrepreneur and the enterprise in the market.
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1. ___________ refers to set of beliefs and thoughts of a particular organizational
group.
2. The level that constitutes of two variables that are Entrepreneurial attribute and
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Entrepreneurial value is considered as ______________.
3. ___________ Level includes entrepreneurial behavior.
4. _____________ could include business structure selection that could influence the
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day-to-day activities and operations of the company.
Summary
●● r
Entrepreneurship is providing growth and employment opportunities in the market.
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●● Agricultural activities and the innovations related to the agricultural activity is also
considered as entrepreneurial activity.
●● In the 21st century the role of technology have increased that have further
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increase the productivity of the business.

●● It is very necessary to evaluate the culture when the organization identifies
different segment within the organization.
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●● Different challenges amongst the entrepreneurship activity could include social

challenges and family challenges as a part of major challenge.
Activity
ity
1. Write down 10 steps for becoming an entrepreneur.

2. What could be different opportunities for an entrepreneur in different scenarios?

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1. briefly explain the growth of entrepreneurship in the market

2. What is the importance of entrepreneurship?
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3. What is entrepreneurship culture?

4. Briefly explain the scenario of entrepreneurs in the Indian market.
Glossary
(c
1. Entrepreneurial culture- it refers to the activities that have been performed by any
individual that includes a set of beliefs and thoughts.

2. Attribute- refers to the personal traits that and individual persons and different
Notes
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situations or while facing the problems in the organization.
3. Franchising- it refers to the form of entrepreneurship that is gaining popularity in the
in
current scenario.
4. Business execution- it refers to the legal formalities related to the business execution
such as taking the permission from the central and state government.
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Further reading
1. Book- Industrial entrepreneurship
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Author- K C. Mittal
2. Book- Women entrepreneur in India
Author- Namita Kumari
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Answers
1. Entrepreneurial culture.
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2. Invisible
3. Visible.
4. Define business structure. r
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ity
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Case study
Notes
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MBA chaiwala is the new market sensation in the home country and is expanding
in
its business in the international market very soon. MBA chaiwala was started by Prafull
Billore. He started his business of selling tea in the market after becoming an MBA
dropout. He gave various competitive exams to get admissions in the top government
colleges. But after the struggle of 2 years, he felt that he cannot clear this competitive
nl
exam to get admission to the top colleges.
After his attempts in various competitive exams, he wanted to earn some money
O
for his daily livelihoods. So he decided to work in McDonald’s as a waiter and after a
few months, he was promoted to an accountant. But this was not enough for Prafull
because he wanted to create something of his own. His failure in getting admission to
the top government colleges gives you an idea of starting a business. First, he analyzed
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the market and studied what could be a unique product in the market that could be sold
on a national level. He analyzed that tea is a product that is being demanded by every
customer at different stages of their life. The investment in such a business will be low
and he wanted to start from a tea stall. He decided to start the tea stall in Ahmedabad.
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The idea of starting the business was not very easy because in the early stage he
did not have enough funds to open a big outlet so he started with a small tea stall. He
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wanted to grow in his life on his own and did not want to take help from his family so he
decided to start a small tea stall and gradually convert it into a bigger outlet. His family
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wanted him to do an MBA from a big college and get a respectable job in the corporate
world. Approximately for 6 months, he did not tell his family that he was running a tea
stall and had already given up the MBA idea.
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When he started the tea stall various types of challenges were faced by him. The
first challenge was that he has to do multiple tasks at the same time. In the initial stage
of running the tea stall, only a few customers came to his stall. He analyzed this and
applied all his knowledge and experience in marketing the product. When we observed
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that the customers were not coming to his stall he started going to the customers and
serving them tea with toast and a small motivational card. And the different factor in all
these marketing techniques was that he used to serve his tea to the customers in the
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English language to give an impression in front of the customers. This motivated the
customers and even gave them a curiosity to know the story behind his struggle.
After a few months, he converted the permanent tea stalls into a vehicle tea stall
and with a shade on it because on the first day he did not find any location to park his
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tea stall vehicle. At that time he reacted very patiently and motivated himself to keep
the work going. The best part of the marketing techniques of Prafull was that he used
to serve the tea in a very polite and gentle manner. These give customers a reason to
taste the tea and come back to the tea stall again. The way of communication done by
)A
Prafull acted as a positive factor and a source of income for the tea stall.
Gradually when the business was increasing and the customers were impressed
with the service and the quality of the tea served by Prafull he thought of starting an
outlet for the tea. But this decision took a long time because Prafull did not want to
(c
delegate his responsibility to any other person and wanted to do every type of activity
from serving the customers, taking their feedback, preparing the tea, and becoming an
accountant. But this could not be possible when a new outlet is being established by
any individual. An outlet must have multiple persons to perform their respective jobs. It
Notes
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took a long time to convince myself to hire people according to the requirements of the
outlet. He started his outlet but he did not give a name to add and people started giving
different names to have outlets like Billore, Chai Wala, MBA chai, and many more.
in
He analyzed that the outlet must have a name so that the recognition of the brand
becomes very easy. He analyzed different names that were being given to the outlet by
the customers and came to a conclusion that the best name to the outlet could be MBA
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chaiwala where MBA was not standing for masters in business administration but the
full form of MBA was Mr. Billore Ahmadabad.
The establishment of this enterprise was not easy for Prafull because he did not
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have any support from his family and friends. From having a dream of getting into a
good college to pursuing an MBA to starting a tea stall is a courageous decision.
Currently, his team has 50 members 50 and soon the outlets are expanding in the
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international market. His business is not only limited to selling tea but he guides new
entrepreneurs to start their journey of entrepreneurship. As an entrepreneur, he is
motivating various other youngsters to become entrepreneurs and focus on their
dreams. His journey to entrepreneurship was not easy but through his interpersonal
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skills and communication skills, he easily communicated and conveyed the product
to the customers. He identified the requirements of the customers and he could sell
the product in the market. He started his journey with no long-term visions but he
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just wanted to give his best in whatever he was doing. The major objective of Prafull
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was to only fulfill the customer requirements and the respect and love automatically
got generated from the customers. He is now delivering lectures at top government
colleges where he once wanted to get admission. The current turnover of his company
is 3 to 4 crores and provides employment opportunities to various employees and
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youngsters. All that we had in the initial stage of starting the business was the capacity
of taking risks and confidence in delivering his best in whatever he was doing.
Questions
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1. Establishment of the MBA chaiwala outlets was not an easy task. Prafull had to face
various challenges and how to overcome the challenges to become successful in the
market. What different types of challenges did Prafull faced before establishing a big
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brand in the market?

2. To become an entrepreneur an individual must have various types of qualities. What
different types of steps are required by Prafull to become an entrepreneur in the
market and establish the MBA chaiwala outlet in the market?
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(c

Module -2: Evaluating Entrepreneurial Options and

Notes
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Startup Opportunities
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Structure:
2.1 Project Identification
2.1.1 Understanding the idea and an opportunity.
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2.1.3 Methods for Identifying New Project Ideas
2.1.4 Steps in Project Identification
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2.1.4 Screening of potentially promising project ideas
2.2 Project Formulation Feasibility Study
2.2.1 Stages in Project Formulation
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2.2.2 What is a Feasibility Study
2.2.3 Components of Feasibility Study
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2.3 Project Report
2.3.1 Need for developing a Project Report
2.3.2 Components of a Project Report
2.3.3 r
Project Report Vs Feasibility Report
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2.4 Project Appraisal
2.4.1 What is a Appraisal Process
2.4.2 Technical
2.4.3 Fianancial Analysis
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2.4.5 Profitabiltiy Analysis

2.5 Ownership Structure
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2.5.2 Parnership
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2.6 Startup finance and sources of finance

2.6.1 Startup Capital
2.6.3 Financial Projections
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2.6.4 Sources of Finance

2.6.5 Internal Sources of Finance
2.6.6 External Sources of Finance
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2.6.7 Instruments
2.6.8 Capital Marlet Instruments
2.6.9 Venture Capital
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Case Study
Unit - 2.1: Project Identification

Notes
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Objective
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By the end of the unit you will be able to
●● To understand an idea and an opportunity.
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●● Evaluate different methods of identifying a new project.
●● To evaluate different stages in project identification.
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2.1.1 Understanding the Idea and an Opportunity.
Although aspiring entrepreneurs may brainstorm ideas for the whole day, it’s not
like every concept is a good one. To assess if a concept is worth pursuing, one should
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first evaluate whether it can be turned into a business opportunity. The point at which
recognized customer demands exceed the practicality of delivering the requested
product or service is known as the entrepreneurial opportunity. To get from a concept to
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a prospect in the field of entrepreneurship, various conditions must be completed. It all
starts with cultivating the correct mindset—one in which the individual investor sharpens
their sensitivities to consumer requirements and wants and does research to see if the
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concept has the potential to become a profitable new enterprise.
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If given the opportunity, the entrepreneur knows that some individuals might
prefer to do things differently. The entrepreneur next imagines new products and
services as the facilitator for this new behavior, culminating in the birth of a new
kind of consumption. If a group accurately predicts the potential for this new type of
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purchasing, they must determine whether this opportunity can be capitalized on

by a business, which necessitates an understanding of alternatives to competition
and financial viability, and whether it is an opportunity that they can exploit, which
necessitates an understanding of the skills, expertise, and experience required to
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capitalize.
There are some fundamental questions captured in the five-sided figure

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1. What are the marketing needs?

2. What is a feasible solution?
3. What is the competition?
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4. What is the right term?

5. Is the venture financially sustainable?
)A
1. The possibility of a shift in consumption is what a market needs. This notion

encompasses a wide range of issues, including unmet clinical needs, corporate
concerns, social issues, and young people’s wants for amusement and social
contact.
2. Many business owners make the mistake of starting with a product idea. The
(c
term “feasible solution” is used to retain the entrepreneur’s attention on the

demand. As a result, the entrepreneur will attempt to comprehend what will

be required to provide an appealing solution that will stimulate the necessary

Notes
e
adjustment in demand.
3. The array of options available to a potential consumer is referred to as
in
competition. Entrepreneurs frequently make the mistake of viewing competition
as other businesses (typically other start-ups) with the same product concept
as them. However, the competition must be viewed through the eyes of the
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customer.
4. If a group has a good idea, they can only profit from it if they can execute
successfully in all of the critical areas that make a business successful. This
O
necessitates the appropriate abilities, expertise, and experience, as well as the
necessary desire, motivation, and perseverance.
5. The underlying question is: Will someone pay us enough to allow us to start,
run, and develop our business? The key question is usually: Will our target
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customers be willing to pay enough for our goods or service? However, there
are occasions when other sources of income are available. If the entrepreneur
receives a positive response to this question, he or she might inquire about
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the sources of finance required to develop and establish the business. The
challenge will be if the chances of success are high enough, and the potential
payoff is substantial enough, to entice investors to invest.
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How to Identify the Business Idea?
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Starting a business takes time and work, and coming up with a practical and
profitable business concept usually involves a lot of self-reflection. Better yet, how can
they be confident that a good idea will turn into a profitable company once they have it?
These early stages of planning are critical. Don’t be stingy with the thinking, and put the
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ideas to the test with the following questions. Let’s take a look at how to come up with a
strong company idea before we get into determining whether or not to have one.
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Getting the idea and seeing the possibilities is the easy part for some
entrepreneurs. Market research, on the other hand, isn’t so easy. When someone
describes the magnitude of the market multi-billions of dollars but doesn’t properly
express how the idea would address an unmet demand in the marketplace, that’s a
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significant red flag.
As a result, market research can be quite useful in establishing the viability of the
concept. Industry associations, Web searches, journals, federal and state agencies,
and other sources of information are all good places to start. A trip to the library or a few
m
hours spent online might help to gain a thorough understanding of their target market.
Entrepreneurs’ goal is to get a general idea of the type of customer their product or
service will appeal to, or at the very least be willing to learn during the research
)A
process.” For example, if companies don’t know whether their offering will resonate to
the younger crowd,” the researcher advises, “make sure to include a sample of that
population in their research efforts.”
What is the best way to come up with an excellent business idea?

(c
Let’s take a look at how to come up with a strong company idea before we get into
determining whether or not they have one.

●● What do they specialize in?

Notes
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●● What are the things that people say they are good at?
●● What service do users wish was available but isn’t?
in
1. This could be a great time to develop their expertise or gift into a business if an
individual is a go-to person for certain activities or responsibilities. It’s crucial,
however, to pick something they are passionate about and can envision themselves
nl
doing every day.
2. Perhaps they have a hidden gift that people notice but that they never considered
significant. If this is the case, and anticipate oneself using that expertise in the future,
O
it could be a terrific business concept. See what their relatives and friends have to
say about it.
3. This happens regularly. By searching the app store for something specific, convinced
ty
that it exists, only to discover that it does not. This is their chance to shine. They may
collaborate with an app designer or develop an app that will benefit people all over
the world. Another method to consider is to consider what problem currently exists
that requires a solution. Businesses that provide products or services that address
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problems for others are among the most successful.
Sources that can help to come up with new ideas. Sometimes may require a
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source of inspiration to help them achieve that lightbulb moment. Look for inspiration in
their surroundings. Here are four areas where they can find ideas:
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●● Examine successful business people. If they don’t know where the great
entrepreneurs are before they have gone, it’s difficult to know where they are
heading. Read about successful business titans and learn about their genesis
tales. How did they come up with the concept for their business? What
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recommendations do they provide for aspiring business owners? Before they

go on their adventure, learn everything they can.
●● Make use of their phone. If users know that they want to make an app but
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aren’t sure what they want to make, go to the app store and look around.
Look for categories that interest them. Do they see anything that needs to be
included or how apps in that area may be improved?
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●● Can they use search engines to find similar products or services? When
it comes to finding items and services that they are looking for, the internet
is really useful. But have they ever looked for something for a long time and
couldn’t find it? That should be a sign that the market is about to open up, and
they should take advantage of it.
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●● Take advantage of social media. People on social media are eager to point
out difficulties and problems with present products, places, processes, and
so on, but few take the effort to propose solutions. Reading through other
)A
people’s complaints can provide valuable insight into problems that they may
be able to remedy. The same can be found on online review sites.
The issue isn’t always an inspiration; it’s determining whether or not to have a good
concept. It’s crucial to be critical of their ideas and to get as much input as possible.
(c
Other tactics were discussed by several professionals to help them assess if they have
a viable business idea.


Notes
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The process of identifying the need for, challenge, or potential for a project is
known as project identification. A project is initially recorded objectively defining what
in
was identified after it has been identified. This recognition might occur as a result of a
company’s strategic planning, normal operations, or as a response to an unforeseen
incident or a need. It provides a few suggestions for potential tasks. Project ideas can
nl
be found in a variety of internal and external places. It is concerned with the collecting,
compilation, and analysis of economic data to identify potential investment possibilities.
In reality, project identification entails identifying certain potential projects with a
promising market.
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●● Procedures in Project Identification - The potential entrepreneur must go
through the following steps to identify feasible projects.
●● Developing project ideas - This is the first and most important step in the
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project identification process. Profit is the primary motivation for any business
or enterprise.
●● Choosing the proper line of business - To ensure the success of the
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business, the potential entrepreneur must devote a significant amount of time
and effort to selecting the appropriate line of business.
●● Looking for new opportunities - There are many business opportunities
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available; however, finding the perfect one depends on the entrepreneur’s
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capabilities, strengths, and weaknesses, as well as his preferences.
●● Making critical judgments about the project – The final step in project
identification entails making important decisions about the project to be
undertaken. The process of project identification isn’t complete without
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determining the project’s qualities.
In every firm, there are a few pointers to help them design exceptional project
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objectives:
1. Establish overall project objectives at the start of the project.

One must set their objectives at the start of the project and use them to drive the
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project’s outcomes. As previously stated, your project objectives are an important part
of the project plan, which you should develop at the start of your project.
2. Participate in the goal-setting process with your project team.

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The more buy-in you can get, the more likely your project’s goals will be met. Your
project stakeholders must have a clear knowledge of the project’s goals to approach the
rest of the project plan and the work that occurs during it efficiently.
)A
3. Make project aim statements that are succinct but clear.

You may be tempted to outline every detail if this is your first time creating a project
objective, but try to make it as short as possible. Considering the project aim statement
to be a declaration that would lead to the project’s outcomes; it should be one to two
(c
sentences long. Your project plan will include any additional information, such as your
project budget or stakeholders.

4. Ascertain that your goals are things you can influence.

Notes
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This is where the SMART acronym may help you set project objectives that are
well-defined, realistic, and manageable. This framework has five components:
in
●● Specific. Make sure your project aim statement is specific to the project your
team is working on right now. Avoid writing project objectives that are too
broad and therefore have no direct link to the project’s conclusion.
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●● Measurable. You’ll need a way to look back at the end of any project to see
if it was a success. Make sure the project goals are measurable in some way,
such as a percentage change or a certain amount of assets.
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●● Achievable. Are the project goals something you can realistically expect to
attain during the course of the project? This is linked to your project scope;
if your project scope is unrealistic, so will the project objectives. Your project
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may suffer from scope creep, delays, or overwork if they don’t set attainable
project goals.
●● Realistic. One should have a broad idea of your project resources while
formulating your project objectives. Make sure your goals are attainable in the
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time allotted and with the resources you have at your disposal for this project.
●● Time-bound. The length of your project’s timetable should be factored into
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your project objectives. Make sure you account for the time you have to
devote to your assignment.
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5. Throughout the project’s lifecycle, keep an eye on your project’s goals.
Employees who understand how their work contributes to the success of the
company are twice as driven. Make sure to check in and inform your team of your
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project objectives regularly to keep them aligned and engaged. Include a component
in your project status reports that ties back to your project goals. Tell us if your current
project is on track, in jeopardy, or off track. The project team will be able to re-calibrate
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and move on in a way that best supports the project’s goals if necessary.
The purpose of project identification is to establish an initial plan for the most
effective collection of actions and course of action to achieve a certain development
goal in a specific area or environment while staying within schedule and budget
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restrictions.
What are the steps involved in identifying new project ideas?

1. Creating an idea- A panel is constituted to explore and investigate potential
m
prospects. It entails the completion of the following tasks to generate a creative idea.
a. Using SWOT analysis to identify possibilities that can be profitably exploited

)A
b. Setting operational goals such as cost reduction, productivity improvement,

capacity utilization increase, and contribution margin rise.
c. Creating a positive work atmosphere enables people to be more creative and
stimulates brainstorming, group discussions, and other tactics that lead to the
production of creative and original ideas.
(c
2. Environmental monitoring- To profitably utilize opportunities inherent in the

environment, a company should systematically monitor the environment and assess

its competitive abilities. The following are the major environmental sectors that will be
Notes
e
investigated:
1. Economic sphere
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2. The public sector
3. Sector of technology
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4. Socio-demographic sector
5. Competition sector
6. Sector of suppliers
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3. Corporate appraisal- It entails determining the company’s strengths and
shortcomings. The following are crucial factors to consider:
1. Marketing and distribution
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2. Production and operations
3. Research and development
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4. Corporate resources and personnel
5. Finance and accounting
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4. Looking for project ideas- Various sources to look for a good project idea
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which includes:-
1. Trade fairs and exhibitions

2. Analyzing social and economic trends
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3. Analyzing new technological development

4. Studying government plans and guidelines
5. Investigating local materials and resources
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What are the advantages of project identification?

The aspiring entrepreneur may have several viable project ideas. They can
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come across several different investment opportunities. They must, however, choose
the most practical and promising project after preliminary evolution. A company’s
success is dependent on the right identification and selection of a project. The first
step in establishing a new project is to identify a project, however, this is a challenging
undertaking. It has several advantages, which are listed below:
m
1. Additive opportunities address the use of existing resources without making

any changes. Additive opportunities pose the least risk.
)A
2. Complementary opportunities are those that include the introduction of

fresh ideas that result in a change in the existing structure. Complementary
opportunities carry a high level of risk.
3. Breakthrough opportunities are those that involve significant and fundamental
(c
changes in a company’s current operations. In a breakthrough opportunity,

there is the greatest danger.

2.1.3 Method for Identifying New Project Ideas.

Notes
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The creation of a new product or business involves ingenuity, awareness of
external changes, and a realistic appraisal of the firm’s capabilities. A project is not a
in
purchasable product or commodity. It holds both potential and danger. A concept for
a necessary intervention in a specific region to address a problem is conceived and
developed. This idea is frequently created in a community need based on issues by
nl
specialists and local leaders and then converted into a proposal. The investigation of
the starting circumstance and the formulation and prioritization of project ideas. In most
cases, these processes are carried out in close collaboration with the communities
involved or impacted, their representatives, or their organizations. All data must be
O
double-checked using proper methods.
In practice, there are two processes to project identification: the production of

project ideas and the screening of those ideas to determine priorities. The disparity
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between the desired and actual road lengths in each location provided both the targets
for improvements and the weights for allocating cash in an Industrial project. There
are examples given that illustrate a tendency to apply more rigorous economic-based
si
methods of analysis to primary and secondary highways, whereas tertiary (local) roads
are subjected to simpler, fundamentally social criteria. The purely social argument for
roads in poor nations has yet to gain traction with the world’s main financial institutions.
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A list of project identification methods has been compiled that can also be used
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for project planning, monitoring, and reviews and evaluations. They’re listed in order of
increasing difficulty:
1. Semi-structured interviews: Interviews with a predetermined set of (open)

questions are useful for eliciting causes and outcomes, illuminating context,
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and organizing subject areas. Subjective judgments, wishes, expectations,

and anxieties can all be recorded in this form of an interview. The most crucial
element is that the interview partners are qualified to deliver accurate information
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based on their skills or experience.

2. Focus groups: Interviews can be done in groups as well. Individual interviews
are rarely as lively as these exchanges. Arguments articulated in groups
provide useful insights and enable the collection of a large amount of data in a
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short amount of time. Facilitating group interviews is a difficult task that should
always be done by a team (a division of roles, facilitation, observation, notes).
A focus group can be the initial step toward a new project’s open discourse and
collaborative collaboration.
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3. Roundtable: Roundtables are organized to bring together as many organizations

as possible who are affected by a specific problem or conflict, or who have
an interest in the planning process for whatever reason. They can aid in the
)A
exchange of ideas between specialists and those who are affected. Roundtables
are an effective method for strengthening dispute resolution conversation.
4. Workshop: Workshops are similar to group interviews in certain aspects. They
differ from them in that they entail a collaborative effort to complete certain tasks
(c
such as context analysis, project idea development, and so on. Workshops

can incorporate roundtables. Other strategies commonly utilized in workshops
include brainstorming and SWOT analysis.

●● Brainstorming is a creativity tool that was created to elicit new, fresh

Notes
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ideas. As such, it is ideal for identifying possibilities and finding answers
to issues. It works best in groups of 8 to 20 people who are familiar with
the topic and genuinely care about it.
in
●● The SWOT analysis is a method for analyzing a certain topic. It’s
frequently used for context analysis and project evaluation. Strengths,
Weaknesses, Opportunities, and Threats (SWOT) are acronyms.
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5. Forum: The forum method is more formally structured than roundtables and
consists of a series of meetings. Representatives from various groups involved
in and/or affected by a problem or planning process usually sit at separate
O
tables and share their views or project proposals. Each table represents a
distinct social group or a set of social, economic, or political concerns. When
the proposals of the numerous tables are presented and discussed, it is evident
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where each opinion comes from. The participants then agree on the projects
they want to see realized through a structured process of prioritization and
selection.
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6. Participatory Rural Appraisal (PRA): This method is particularly well suited
to participatory context analysis while developing new project concepts.
Participatory Learning and Action (PLA), as well as other participatory methods
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of study, planning, and monitoring derived from PRA, have become an important
aspect of most development organizations’ work. Participatory methods should
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be used to conduct poverty or beneficiary assessments.
Methods and further procedure for Identifying New Project Ideas

The concept note (or planning platform) and the entry proposal are the documents
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created during project identification. Only when the entrance proposal has been
approved can project planning begin with the creation of a project document and a loan
proposal.
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Relevance for beneficiaries, local ownership, and alignment with relevant national
development goals, as well as consistency with donors’ and implementing agencies’
strategic aims, are all important factors to consider when reviewing new project
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proposals.
The outcome of the evaluation is either approval or rejection of the admission

proposal. Frequently, the approval identifies and recommends crucial issues. It
sometimes establishes conditions for project planning.
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A project identification mission or appraisal may conclude that a certain intervention

would be most relevant and meaningful, especially in a novel or rapidly changing
environment, but too many variables remain unknown for exact project planning with
)A
a time horizon of several years. The team may suggest that a project begins with an
“inception phase,” during which specific – uncontested and trust-building services are
provided and the situation is further investigated.
Careful preparation is essential for success, but for many small businesses,
(c
planning is an unaffordable pre-investment. Participating in requests for projects, even

for larger NGOs with significant resources, is dangerous, especially when researchers
are requested in addition to a project proposal.

Management for Development Results’ underlying strive for success approach

Notes
e
puts pressure on development actors to deliver success tales. Of course, no one wants
to fail because we are investing money from taxpayers and private donors. On the
other side, individuals who avoid risks at all costs risk missing out on the opportunity
in
to make a significant difference in the lives of those who benefit. Development
cooperation is a risky business. As in the commercial sector, not all start-ups succeed,
some development cooperation projects fail or at the very least fail to satisfy high
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expectations. Identifying a project always necessitates a consideration of the risks
versus potential benefits trade-off.
A search for promising project ideas could aid in the achievement of specific
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development goals. With sectoral information and strategies as the major source of
ideas, project identification should be an intrinsic part of the state’s macro-planning
activity.
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Generally, ideas are developed from a variety of sources depending only on the
individuals’ vested interests. Regardless of where they come from, project proposals
should all attempt to alleviate impediments to the national development effort. The key
si
to project success is having good project ideas. As a result, a wide range of sources
should be used to examine them.
2.1.4 Steps in Project Identification r

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Prospective entrepreneurs must go through the following steps to find viable
projects.
Inventing new project concepts

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This is the first and most crucial step in the project identification process. Profit
is the primary motivator for any business or enterprise. As a result, the aspiring
entrepreneur must seek a strong company plan that will allow them to make a decent
U
profit. To do so, they must keep a close eye on the socio-economic, cultural, legal,
and market settings. They give their business idea a practical shape after they have
conceived it.
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The most crucial step in the project planning process is identifying suitable
project ideas. Finding viable project ideas is the first step toward launching a
profitable business. Getting into the right business at the appropriate moment is the
key to success. The goal is to find investment possibilities that are both viable and
promising. The creation of a new product or business involves ingenuity, awareness of
m
external changes, and a realistic appraisal of the firm’s capabilities. A project is not a
purchasable product or commodity. It holds both potential and danger. A concept for
a necessary intervention in a specific region to address a problem is conceived and
)A
developed. This idea is frequently created in a community need based on issues by

specialists and local leaders and then converted into a proposal.
Developing the project is a mental process that requires qualities such as curiosity,
initiative, vision, and courage. One or more of the following sources may inspire the
project.
(c
1. Entrepreneurial success tales from friends, relatives, and others.

2. Increasing demand for particular products in both the domestic and international
Notes
e
markets where a pricing advantage might be gained.
3. Experimenting with manufacturing an alternative for an imported item that has
in
a high demand in the home nation.
4. Attendance at trade shows and exhibits.
5. Demand-supply imbalance research.
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6. Industrial, import-export, and backward-area development policies of the
government.
O
7. Reports, books, magazines, and newspapers are all examples of survey
materials.
8. Changes in the production of a substitute for an imported item with high demand
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in the home country.
9. Product development or the invention of a new product price.
10. The availability of a specific raw material as well as skilled employees.
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11. Potential for supplementary product demand in well-established large
enterprises.
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12. Business advisor, district industrial center consultation
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13. Study of tourism potential to find opportunities for hotels, motels, houseboats,
and sightseeing facilities, among other things.
14. The invention of a new product or technology.
15. Based on which industries can be identified, a survey of local skills can be
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conducted.
16. Import statistics may indicate some things that might be manufactured locally.
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17. Finding solutions to challenges that arise daily.
Choosing the right line of business

The selection of the appropriate business model is the second critical stage in
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project identification. To assure the success of a firm, a potential entrepreneur must

devote a significant amount of time and effort to selecting the appropriate line of
business. They must assess the commercial potential of their ideas while doing so.
They must do the following to do so:
m
1. Examine the product’s and services’ surroundings and marketability.

2. Demand for the product or service intended to be manufactured/ provided,
including its nature, extent, and trend.
)A
3. The demographics and usage patterns of potential customers for the product or
service.
4. The size and scope of competition in the planned industry.
(c
5. Procurement and uninterrupted availability of required raw materials and human

resources.

6. Technical know-how is both accessible and affordable.

Notes
e
7. Obtaining market access
8. Demand growth prospects in the future
in
9. Observance of legal requirements connected to the production of a product or
the provision of services. At the same time, the entrepreneur must determine
where legal liabilities may arise as a result of producing and promoting a specific
nl
product or service.
10. Whether the proposed product falls under the license or de-licensed categories.
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11. Government programs, specific incentives, and concessions for the planned
field of business are all available.
12. Calculates the size of a market.
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13. Characteristics that distinguish a product or service to be created or rendered.
At this point, the entrepreneur can seek advice from experts on a variety of topics
relevant to selecting the correct line of business. After doing a thorough primary
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investigation, if the plan is appealing and the calculated risk offers the entrepreneur
sufficient confidence, he may proceed to produce a formal project proposal, gain
technical know-how, and raise funds, among other things.
Looking for an opportunity

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An entrepreneur is essentially a chance seeker. There may be numerous business
possibilities available; nevertheless, finding the perfect one depends on the entrepreneur’s
capabilities, strengths, and weaknesses, as well as his preferences. Identification of a
ni
suitable business opportunity necessitates the use of specialist knowledge. They must
investigate and study all feasible options before making a final decision. The following
investigations may be effective in locating the finest business opportunity.
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1. Environment exploration- refers to the investigation of various environmental

elements. The study of the demographic environment entails an in-depth
examination of the population growth rate, age composition, sex composition,
occupational pattern, and income composition, among other things.
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Socioeconomic conditions, culture, basic characteristics of resources, and so

on are all investigated.
2. Present business exploration- It refers to the investigation of the current
pattern of business operations, the investigation of the consumption pattern,
m
the investigation of new trends in the pattern of trading and consumption, and
the investigation of demand patterns.
3. Technology exploration- It is the study of new business opportunities brought
)A
about by technological advancements.

4. Exploration of business concepts- Different elements influence business
concepts. It is linked to several concepts.
- Growth-related idea- As the population’s age composition and lifestyles
(c
change, the fashion, mobile, and bike industries, among others, gain
traction.

- Agro-based industry, marine-based industry, and waste-based industry

Notes
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are all examples of resource-related ideas.
- Import and export-related concepts
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- Ideas relating to the service industry
Process of making a decision
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Making crucial judgments on the project to be undertaken is one of the final
processes in project identification. The potential entrepreneur must follow the processes
below when making decisions.
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●● Choosing a broad industrial group – First, the entrepreneur must choose
which industry they want to enter from a variety of options. After that, they
must select whether consumer items or capital goods will be manufactured.
By doing a SWOT analysis, the entrepreneur must consider the current
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industrial climate while selecting a product, as well as future diversification
opportunities.
●● After determining the industrial group- the entrepreneur must determine the
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size of the project, its capital expenditure, and the availability of prospective
financial help. They must look for government policies, rules, and laws that
must be followed to receive the required license. The entrepreneur must
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examine their strengths and limitations at this point. Then they must weigh the
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relative advantages and disadvantages of the proposed idea, paying particular
attention to market potential, return on investment, and technology.
●● Final decision- After determining the project’s commercial viability, the
entrepreneur makes the ultimate decision. The entrepreneur must test
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the project’s market feasibility, technical feasibility, financial feasibility, and

economic feasibility to determine its commercial viability.
2.1.5: Screening of Potentially Promising Project Ideas

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Entrepreneurs must now choose which ideas to pursue and which to eliminate
from the list of prospective new product ideas. Consider their competition, their current
products, their weaknesses, and the wants of the market. Make use of the customer
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needs list they have created as well as the product improvement opportunities they
have identified.
Create a set of criteria to use while evaluating the ideas. Some of their criteria
might be:
m
●● Customers’ wants were the most prominently identified.

●● Product enhancements are urgently required.
)A
●● target market’s advantages

●● The idea’s technical feasibility
●● The required level and extent of research and development.
●● The idea’s financial viability What is the market’s potential appeal? What
(c
would they charge for it? What are the total and per-unit costs of bringing it to
market?

●● The product’s place in the market. Is there a discrepancy? How similar is it

Notes
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two similar products?
●● The amount of money it will take to build it
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●● The idea’s marketing potential
●● The compatibility with their company’s profile and goals.
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What is Preliminary Screening of project ideas that have the potential to be
successful?
The generation and preliminary screening of project management ideas entail a
O
person’s innovative screening concepts. To provide the best services, the employee
must have specific project knowledge and project management experience. This
service offering must meet the demands of users to meet their requirements. The
demand and supply balance must be considered while screening ideas so that market
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demand may be fulfilled with adequate supply.
Students’ project management requirements are the emphasis of finance assignment

editing services. Finance Assignment Editing services strive to provide the highest quality
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work possible to achieve a high grade. The screening idea in the finance project covers
the investment options that must be evaluated. Finance Assignment Editing services
understand that before pursuing an investment opportunity, it is necessary to assess its
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feasibility to properly manage the project. The project’s decision-making is influenced by
idea generation, which has an impact on the project’s deliverables.
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The following are the steps in the generating and preliminary screening process.
Idea generating for projects:

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Project management must evaluate the project’s strengths and shortcomings, as

well as its goals. Assignment on Finance Editing services operates on the project’s
screening concept by examining the strengths and weaknesses of the investors’
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investment opportunities. The concept can be created if the strength is sufficient to

process it.
Monitoring the environment:

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Understanding the environment for better project management necessitates

screening the notion of a competitor’s study. Finance Assignment editing services always
undertake a systematic monitoring procedure to identify profitable opportunities that
should be pursued as well as risky opportunities that can be exploited in the market.
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Corporate appraisal:
Working on the market distribution and options available in the market is an
)A
important part of project management. The screening idea won’t work in a financial
project until they know the state of the equipment and machinery. Finance Assignment
Editing services concentrate on research and development to find a more cost-effective
and resource-efficient site.
(c
Preliminary Screening:
Preliminary screening entails weeding out the screening ideas that aren’t

particularly promising. The following are the steps in the preliminary screening process
Notes
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for project management:
1. Promoter compatibility: Screening ideas must be compatible with the
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promoter’s interests, as well as the interests of stakeholders and entrepreneurs.
To improve project management, finance assignment editing services consider
that resources must be utilized effectively.
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2. Input availability: The availability of inputs has an impact on the decision-
making process. To implement a feasible project management plan, inputs are
required. Finance Assignment editing services ensure that filtering concepts
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adhere to government regulations and national objectives.
3. Market Adequacy: Finance Assignment editing services ensure that the
market is suitable for putting the proposal into action. As a capital return option,
the market must have sufficient sale opportunities.
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4. Cost Reasonability: Finance Assignment editing services make sure that the
money spent on the assignment pays off with at least a little profit margin.
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5. Risk Acceptability: This final screening idea assures that the project’s goal
has been evaluated after all risks have been assessed.
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Screening potentially promising project ideas
The first step after submitting a list of project ideas is to choose one or more of
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them as possibly promising. This necessitates a speedy preliminary examination by
knowledgeable individuals who can also make changes to some of the suggestions.
The screening criteria are broad and rough at this point, but they will become more
explicit and polished as project planning progresses. During the preliminary screening,
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one must look at the following elements to reject ideas that are not promising.
1. Compatibility with the promoter is important.

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The concept must be suitable for the entrepreneur’s interests, personality, and
resources. It must fit the entrepreneur’s personality, be accessible to him, and provide
him with the opportunity for growth and a significant return on his investment capital.
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2. Following the government’s priorities

Given the national goals and the government’s regulatory framework, the project
proposal must be realistic. In this context, the following questions should be raised:
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Is the project in line with the country’s aims and priorities?
Is there any environmental impact that goes against official regulations?

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Is it possible to meet the project’s foreign exchange requirements without difficulty?
Is it likely that the project’s license will be difficult to obtain?
3. Inputs are readily available:

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The project’s required resources and inputs must be fairly ensured. The following
questions must be answered to assess this.

Are the project’s capital requirements within reasonable limits?

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Is it possible to gain the technical know-how required for the project?
Is it possible to get the fresh materials needed for the project at a fair price in the
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United States? Will there be issues if the materials must be imported?
Is the project’s power supply reasonable to obtain from external and captive power
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sources?
4. The market’s adequacy:
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The current market’s size must provide the promise of sufficient sales volume.
There should also be room for expansion and a good return on investment. The
following variables must be reviewed to determine the market’s adequacy:
●● The current domestic market in its entirety
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●● Competitors and their market shares are shown below.
●● Markets for export
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●● System of distribution and sales
●● Consumption is expected to rise.
●● Barriers to new units entering the market
●● r
Trends in the economy, society, and demographics support higher
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consumption.
●● Patent protection is a sort of intellectual property protection that protects ideas
and inventions.
5. Costs are reasonable:

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The planned project’s cost structure must allow it to achieve an acceptable profit
with pricing. In this regard, the following should be considered:
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●● Material input costs

●● Costs of labor
●● overheads in the factory
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●● Costs of general administration

●● Costs of marketing and distribution
●● The price of the service
●● Large-scale economies of scale
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6. Risk level acceptability:

The desirability of a project is highly dependent on the risk profile, and the following
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elements should be considered when assessing risk:
●● Cycles of business
●● Changes in technology
●● Substituent competition
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●● Imports pose a threat.

●● Price and distribution are under government control.

As a result, the analyst should remove project suggestions that aren’t feasible
Notes
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during the early selection process.
●● Technically unsound and potentially dangerous
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●● There isn’t a market for the product.
●● Have an insufficient supply of inputs; are extremely expensive in comparison
to the benefits; and
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●● Assume highly ambitious sales and profitability.
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1. Economics sphere and competition sectors included in ____________.
2. Corporate resource and appraisal and marketing aspects are included in_______.
3. When interviewer ask predetermined set of questions it is termed as_______
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interview.
4. Report, books, magazines and newspapers are a part of _________step in project
identification.
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5. The initial stage of making a decision will include_____________.
Summary
●●
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Starting a business will include time and working on multiple factors that will help
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in determining the best idea and walking according to the planning of the business.
●● Project identification will include identifying the challenges and potential of the
project in the market.
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●● The objectives of the business organisation should be specific, measurable,

achievable, and realistic and time bound.
●● Preliminary screening is considered as one of the important aspects for a project
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idea.
●● Screening related to the market and availability of the customer is being done that
will for their help in identifying the requirement of the raw material and financial
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aspects for a business.
Activity
1. If you were an entrepreneur what could be the preliminary activities that need to be
undertaken.
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2. What could be different methods of identifying new project ideas in the market?

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1. What are the different ways of identifying the business idea in the market?
2. What is the purpose and need of identifying the project?
3. What are different methods of identifying new project ideas in the market?
(c
4. What are the different steps involved in the project identification.

5. How can screening of the ideas be done?

Glossary
Notes
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1. Measurable- measurable includes the measurement of the project in the terms of
financial aspects.
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2. Achievable- it includes the scope of the objective of the project and identifying that
whether the project is achievable in future or not.
3. Focus group- it includes arrangement of the individuals and groups that help in
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identifying the skills of an individual in a group.
4. Forum – it is a method that is formally structured and constitutes of series of meetings.
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Further readings
1. Book - project management
Author- Joseph wright
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Answer
1. Environmental monitoring
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2. Corporate appraisal
3. Semi structured interview
4. Inventing new project concept r
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5. Choosing a broad industrial group.
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Unit - 2.2: Project Formulation Feasibility Study

Notes
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Objective
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By the end of the unit you will be able to:
●● Evaluation of project formulation.
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●● To understand feasibility study
●● To standard components of feasibility study.
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2.2.1 Stages of Project Formulation
Project formulation is nothing but follows the correct process and acquires the right
resources to execute the required project. Project formulation includes providing or
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recruiting the right qualified employees that mean a qualified project team, and the use
of secure key materials, equipment, facilities, and technologies. And project formulation
is a highly required factor in project management. Why it is so important in a project
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management means enables the decision-makers to decide to accept or reject the
particular project. Apart from that, project formulation examines the project idea from
the point of project objective, social impacts, financial and technical viability, or ability
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to get success. The project formulation task defines the parameters of the proposed
projects and develops the objectives and output of the projects in high terms. Project
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formulation aims at gaining preliminary formal commitment to the project and that
project idea to justify the further work on it. Project formulation is the basis of project
planning.
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Why is project formulation so important?

Let’s clear the formulation with an example of why project formulation is so
important in the project.
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E.g.: A public bus terminal was built in a remote area. And the bus terminal after
completion was not put to use for many years due to its distant location from the main
city.
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In this case, we can see why a project formulation is essential in project making. So,
by understanding various prospects of project planning, we can do project formulation.
Secondly, project formulation can be done with a view of allowing project authorities to
decide as to whether it’s going to be useful for the organization to conduct a detailed
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study or not. Thirdly, the project may lead to a loss in terms of money, time, or desired
output; in this case project formulation is the first step before starting a project.
All the projects have to undergo a different process of preparation from the initial
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stage to the completion stage.
They are:
1. Pre-investment planning
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Pre-investment planning is nothing but matching the financial goals and objectives
with financial resources. It also includes identification of the project and preparation of
the project. Identification of the project in the sense “a right business idea”. To identify
the need, opportunity, or problem of a project, pre-investment planning is necessary.

Notes
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Project selection is the process of evaluating and choosing projects that both align with
an organization’s objective and maximize its performance.
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2. Estimation/Evaluation/Appraisal.
Here, evaluate the project in terms of economic, social, and financial viability. It’s
a decision-making stage, whether to accept or reject a project. It’s a basic tool to check
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project proposals. And there are different methods to reevaluate the project like case
studies, systematic reviews, and qualitative research, economic studies, case-control
studies, self-evaluation of the project, understanding the scope of work, collecting and
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analyzing the data.
3. Controlling and Monitoring
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This stage includes regularly reviewing the status and progress of the given
project.it helps out to evaluate potential obstacles for the project and allows the
implementation of necessary changes when required. Controlling and monitoring are so
important where it looks into that all the ideas related to the projects should be proper
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and within the scope of the budget, time, and quality to avoid the high risk on the given
project. Controlling and monitoring is an essential tool to avoid high risk on the projects.
4. Operation and Maintenance r

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The main aim of the operation and maintenance is to ensure the efficiency,
effectiveness, and sustainability of the project.
And operations are the activities to perform to reach the business objectives.
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5. Evaluation and Feedback for Correction

Project evaluation is the systematic evaluation or assessment of a completed
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project evaluation that makes sure that the project achieved its objective and
effectiveness. Feedback is the given idea from the concerned authority to think,
analyze, and give a highly appreciated output to the authorities or higher management
teams. For that, organize a feedback meeting as soon as possible. And feedback
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should be in the form of appreciation, coaching, and evaluation.
Stages in project formulation
Scope of project formulation:

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Project formulation scope involves determining and documenting a list of specific

project goals, deliverables, features, functions, tasks, deadlines, and ultimately cost. In
other words, delivering projects is mainly based upon what we need to achieve and the
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work. Here are the stages for project formulation
1) Feasibility analysis
2) Technical analysis
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3) Economic analysis
4) Project planning and design

5) Network analysis
Notes
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6) Input analysis
7) Financial analysis
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8) Cost-benefit analysis
9) Pre-investment analysis
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10) Project report.
1) Feasibility analysis
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This is the first stage in the project formulation. This is the process to examine
whether to go in for a detailed investment proposal or not. That means to determine
whether the project idea is worth proceeding with or not. Feasibility can be measured by
analyzing the following steps.
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a. Preliminary analysis:
It is the pre-screening of the required project before going forward.
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b. Scope of the project
We should be clear about the scope of the project. It includes defining the
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project goals, tasks, phases, costs, deliverables, and deadlines.it also includes
identifying stakeholders, as well as external clients and customers.
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c. Market research
Market research means getting information about the market value or other
aspects before committing to a project. The market research gives an insight
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into the current competitive landscape and helps identify factors like geographic
influence on the market, the market’s overall value, and demographics.
d. Financial assessments
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We should analyze the financial cost and risk involved in the project. Cost in
the sense of labor, equipment, software, hardwired facilities, and third-party
services. A financial assessment gives a clear-cut image of our project whether
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it’s on the bottom failure line or upper failure line.

e. Obstacles and alternative methods.
This is the evaluation of problems and circumstances that could lead to project
delay or even failure. This method is to understand how to overcome or cut
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off those difficulties while implementing a project. And getting some alternative
methods to overcome such situations to avoid failure of projects.
f. Reassessment.
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In this step, we should seek a reassessment of the entire feasibility study from
top to bottom by a project manager, a manager, or some other higher priority or
someone else in that organization. So, the second way of reading or a valuable
opinion from those will help to ensure that we don’t miss any key elements or
(c
any valuable steps that may adversely affect the project.

g. Decision making

When everything is all perfect, said well, and done, the study will point out one
Notes
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decision: is that project approved to move forward or not?
2) Technical analysis
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Technical analysis represents a study of the project to evaluate technical and
engineering aspects when a project is being examined and formulated. It is a choice
of technology, plan, and design, etc. Also includes specification and standards of the
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project. The technical analysis primarily consists of:
a) Material input and utility.
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b) Manufacturing of technology processes.
c) Capacity.
d) Machinery and equipment.
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e) Structures.
f) Drafts and layouts.
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g) Project charts.
h) Work schedule.
3) Economic analysis r
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It is a measure of the costs and benefits of a project to society. It gives the
overall benefits and provides a platform for the preparation of detailed project design.
Economic analysis can be done based on experimentations, observations, and
statistical methods.
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4) Project planning and design.

Project planning is the heart of the project.it defines the sequence of events of the
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project. Time and resources are allocated for each activity. It is presented in the form of
drawings or charts.it helps to identify project inputs, finance needed, and cost benefits
profile of the project. Simply we can say that project planning is a method for showing
how to complete a project within a certain timeframe. Project planning includes
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a) Project initiation.
b) Project planning.
c) Project execution.
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d) Project monitoring and controlling.

e) Project closing.
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5) Network analysis
It is a system of planning projects where big assignments are divided into many
to get an efficient output. In network analysis, complex projects are broken down into
smaller activities or tasks, which are then organized into a sequence. That means
(c
scheduling the projects in different tasks or activities or sub-divisions. By doing this, we

can easily monitor the growth of the project by each section.

6) Input analysis
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Input analysis is nothing but the requirements for the implementation and operation
of a project. Input includes materials equipment, machines, software, human resources,
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etc. Input analysis is helping in assessing the project cost.
7) Financial analysis
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Financial analysis involves the estimation of project cost, operating cost, and other
fund requirements.it helps in comparing various project proposals on a common scale.
It evaluates business projects, budgets, and another finance-related transaction is to
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determine the performance of the project. Investment decisions involve a commitment
of resources in the future.
8) Cost-benefit analysis
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This is the overall worth of the project. Cost benefits analysis is the process of
comparing the projected or estimated costs and opportunities associated with the
project decision. Mainly cost-benefits analysis can be done through a tool called CBA
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(COST BENEFITS ANALYSIS). An effective CBA evaluates the following cost and
benefits
a) Direct cost
b) Indirect cost
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c) Intangible cost
d) Opportunity cost
e) Direct benefits
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f) Indirect benefits
g) Net benefits
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h) Total benefits.
The project design forms the basis of evaluation. The total benefits and cost there
to BENEFITS>COSTS
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9) Pre-investment analysis
The results obtained in the previous stage are consolidated to arrive at a clear
conclusion. This helps the project sponsors, project implementers, or consultancies
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to reject or accept the project/proposals. This is a detailed study of the pre-planning

stages. And the pre-investment analysis study includes:
a) Location study.
)A
b) Selection of technology.
c) Project case study.
d) Estimation of the plan cost.
(c
e) Preparation of detailed project report.

10) Project report

Notes
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Project report preparation is very important in a proposed project. And it is useful
information all about the project from start to end. Based on the project report, higher
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authorities can take any decision. It includes the aim of the business project.it also
includes the total written budget of the project. The detailed project report must include
the following details about the given project.
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a) Brief information about the project
b) Experience and skills of the people who are involved in the project.
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c) Details and practical results of the industrial concerns of the promoters of the
project.
d) Project finance
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e) Approval from the government authorities.
f) Raw material required for the project
g) Details about management teams
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h) Details about equipment, machinery, and other tools.
Shortly we can say that project report involves the following matter
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1. Economic aspects: present market, the scope for growth.
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2. Technical aspects: technology, equipment, machinery needed.
3. Financial aspects: total investment needed, cost of capital, and return on capital
4. Production aspects: product details
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5. Managerial aspects: qualification and experience of people needed for a project

management post.
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Conclusion:
Project formulation is nothing but follows the correct process and acquires the
right resources to execute the required project. And all the project’s ideas, objective,
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social, financial, and technical working aspects are run based on project formulation
examination. All these are formulated in a ‘project report’.
2.2.2 What is the Feasibility Study

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A feasibility study is a key element for a successful project. Feasibility study is

a practical assessment of a proposed plan or project. A feasibility study analyzes
the possibility of a project to determine whether the project or venture is likely to be
)A
succeeded. The module of project management has been changing day by day along
with the new trends. And the growth and objectives of project management are going
to be in another dimension every year and it could be expected in coming years too.
And with the arrival of project management, the feasibility study is more important.
Before any executive gives the green signal to a project that could cost thousands
(c
(or millions) of dollars, it is necessary to conduct a feasibility study about the required
project. It determines the situation of the project whether the project can succeed

at its first attempt. A feasibility study is the first initial step in every project, after that
Notes
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only remaining will comes even planning too. So it is the most important factor in
determining whether the project can move forward or not. A feasibility study gives an
idea about various areas related to the project. Such as it identifies the project market,
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highlights the project’s key goals, offers alternative solutions, gives an idea about time,
budget, legal, and manpower requirements for the given project whether the project is
advantageous to the company. An initial design stage is very important in any project
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so that a feasibility study can be run to get the initial design of the given project. It is
conducted to objectively uncover the strengths and weaknesses of a proposed project
or an existing business. A feasibility study is to help to identify the opportunities and
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high risks present in the physical environment, human resources that are required for
project development, and the prospects for the project’s success. The feasibility study
can give solutions for the below questions:
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a) Does the company possess the required resources and technology?
b) Does the company get a high return investment after project completion?
A feasibility study involves the following steps:
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1. Conduct preliminary analyses
A feasibility study takes a lot of time and resources. That is why a feasibility study
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is a key element in every success of the project. And conducting preliminary analysis
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is so important. The preliminary analyses analyze the idea about the project planning,
whether it is worth it or not. The primary purpose of the preliminary analysis is to screen
project ideas before extensive time, effort, and money is invested. Here we follow a few
steps for conducting preliminary analysis.
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1. Begin by outlining your plan.

If you have a project documentation scope, you need to be making a proper outline
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plan. And make sure that the provided idea is worth starting a project before starting
doing it practically. Thereby, you will be loaded with too many questions in your mind.
And to get answers to those entire questions, you need to perform a feasibility study
action.
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a) Why is the plan so important in your business?

It helps to achieve long and short term goals in the business
b) Has this plan been done before?
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Remember to ask this question about not only your competitors but also whether
or not your company has previously tried it.
c) What alternative method will you take to ensure that your plan will work
)A
efficiently?
Be clear about what you want. And make an outcome with a higher and best
quality than your competitors
d) Are there any risks to delivering this project?
(c
Calculate and identify the risks in the given proposed project and do accordingly.

2. Prepare a Projected Income Statement.

Notes
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Does this give details about the possible way of revenue generated by the given
project?
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This step requires you to work backward. First should have an idea about how
much income can be expected from the given project and how much can be invested
to achieve that goal. Accordingly, you can adjust the cost required for the services to
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achieve the goal. So an income statement is important to achieve a future goal.
3. Conduct a Market Survey or do market analysis
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Performing a market survey is the key to the feasibility study’s success. And if
an organization doesn’t have enough resources to perform a particular project, then
it is better to hire an outside firm to perform the required project. This is a type of
outsourcing. By doing so, there is a small variation in profit as a second party is already
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involved in performing the project. In such cases, we do perform some market survey
strategies to understand the current market situation. By doing market research, you
can get a clear-cut idea about people, customers’ interest, the value of the product, the
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value of the market, top competitors at present, new trends, and get more exposure to
market share where you expect to earn more.
a) Digital platform
b) Create online surveys through social media.
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c) Conduct a phone conversation or interviews with industry experts.
d) Gather demographic information from the public platform.
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You can mix and match the above methods or come up with your Questions like
Does the project create a good or service that is in demand in the market? Finally, you
will reach up with better thoughts. How many customers can be afforded to get the
goods? Create a repeated survey in market value, so that you will come up with better
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solutions which would be more helpful to get ideas about remaining feasible questions.
Answer the core feasibility questions

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Now you have a clear picture of what they require and understand the current
market trends. And it’s the right time to put the feasibility of the plan. And the following
question can be shared for your convenience.
What’s operational feasibility?

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What’s the financial feasibility right now?
What’s the economic feasibility?

)A
What’s the technical feasibility?
What’s the technical feasibility?
And the way doing so is legal and it’s very difficult to get proper rules and
regulations for the above case before starting it. And if you are not aware of the
(c
answers, just share those answers with your higher concerned authorities and get

back their feedback. So that you can guide yourself by using the ideas from the given
Notes
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feedback.
4. Plan Business Organization and Operations
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After completing the above fundamental steps of a feasibility study, it’s ready to set
up the organization and operations of the given business. And it mainly deals with initial
cost, investments cost, operational cost, and other related business costs. And these
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costs are those which are used for tools, machinery, human resources, supply chain,
and other related costs. Overall cost calculation should include project completion
cost, fixed investment cost for hardware, new office, new land, new hires, and another
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operational cost.
Finally, we think of some questions after our calculations?
Where will the project’s budget come from?
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Can we afford to fail?
What variable cost should I be concerned about?
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What requirements are required in order-making profit?
How much capital should we require to complete the overall project?
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5. Prepare an Opening Day Balance Sheet
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Every business has some liabilities, even if it is a small-scale or large-scale
business firm. So that all related information should be as thorough and accurate as
possible. To arrange that information, we need to create a list of what causes a liability.
E.g.: purchase (for land, office space, machines, tools, furniture,), investments in
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land. The balance sheet is used to file the company’s various aspects of the project
such as assets, liabilities, and owners’ equity. The balance sheet can be prepared by
including the following factors like providing the reporting date and schedule, identifying
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the assets and liabilities, calculate the shareholder’s proprietorship, and sum up the
liabilities and proprietorship in comparison with assets.
6. Review and Analyze All Data

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Review and analysis are the final steps in a feasibility study. The entire project is
based on review and analysis. That’s the final stage and nothing needs to change. It’s
the final result to start the project. After that, we can’t make any necessary changes
to that report. That’s why review and analysis is a key factor to start the proposed
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business or project. And this is the final stage and make sure that everything is correct
to start the planning. To improve data analysis skills, we need to follow some steps. a)
define the questions b) set clear measurement priorities c) collect data d)analyze data
e) interpret results.
)A
7. Make a Go/No-Go Decision

This is the decision-making moment.
Now, this is the stage where you have made a better decision about the project
(c
whether it is ready to start or not. And the decision-making moment is based upon
all the previous feasible study examinations. And make sure that the decision taken

is worth the money, nature, time, effort, and its matches with the organizations’ goal
Notes
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and strategy. And that decision may lead to future goals also. The study of feasibility
shows that the ideas taken by all these methods are to ensure that the project is legally
and technically worthwhile as well as economically stable. For that, we require some
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feasibility study.
1. Technical feasibility.
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This means the availability of technical resources in the organization. It helps to
determine whether the organization meets the required facility and available resources
are leading the employers to make a working human properly. And make sure that the
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technical employees can change their ideas into working systems with the available
resources. Technical feasibility includes items like hardware components, software
components, and other related technical components in the given organization.
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2. Economic Feasibility
This mainly involves economical characters. Economic feasibility in the sense of
capital analyses of a project, to help the viability of the organization. And get a clear-
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cut idea about the cost and benefits associated with the project before stepping into
resource allocation.
3. Legal Feasibility r
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This involves legal aspects. This shows whether the given proposal is a cop-up
with the laws and regulations of concerned authorities. They should follow proper legal
laws such as social laws, environmental laws, and protection laws.
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4. Operational Feasibility
Operation feasibility involves how an organization needs to meet by completing the
project after the determination and analysis of the project report. Simply we can say
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that the cost of production of a product can be low without compromising its quality or
products.
Scheduling Feasibility
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Scheduling is an important factor in project planning. A project must be completed

at a given time. Otherwise, there is a chance of failure in all senses. Time estimation
for project completion is necessary for a proposed project. And they should report to
concerned parties how much time it will take to complete the particular project. After
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completing those examination studies, feasibility analysis gives some points to our
mind, which are faced by our proposed project.
Internal project restrictions: Technical, Technology, Budget, Resource, etc.

)A
Internal Corporate restrictions: Financial, Marketing, Export, etc.
External restriction: Rules and regulations, etc.
Best Practices for a Feasibility Study:

(c
●● Use a software tool for a feasibility study like a project manager to organize
your data and work efficiently and effectively.

●● Use proper technology.

Notes
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●● Involve experienced stakeholders or other management teams to get their
feedback.
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●● Go with the research market to further collect the data.
●● Make proper homework and ask too many questions whether the collected
data is solid or not. And make sure, the collected data is solid for the next
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process. Then everything is feasible, the real work begins. The project
manager helps you plan more efficiently.
Conclusion:
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A feasibility study is a design to determine if the given project is feasible to move
forward or not for various key factors. It shows the positive and negative aspects of the
given projects.
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2.2.3 Components of the Feasibility Study
The feasibility study is a key element for a successful project. Feasibility study
si
is a practical assessment of a proposed plan or project. A feasibility study analyzes
the possibility of a project to determine whether the project or venture is likely to be
succeeded. Over the past few years, the total growth and recognition of the project
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management have changed tremendously and we are expecting this scenario in
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coming years. And with the arrival of project management, the feasibility study is more
important. Before any executive gives the green signal to a project that could cost
thousands (or millions) of dollars, it is necessary to conduct a feasibility study about
the required project. It decides whether the given project module will succeed in the top
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place. A feasibility study is the first initial step in every project, after that only remaining
will comes even planning too. So it is the most important factor in determining whether
the project can move forward or not. A feasibility study gives an idea about various
areas related to the project. Such as it identifies the project market, highlights the
U
project’s key goals, offers alternative solutions, gives an idea about time, budget, legal,
and manpower requirements for the given project whether the project is advantageous
to the company. A feasibility study is an initial step of any project/plan. It is conducted to
expose the main strengths and weaknesses of the given project or an existing business
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proposal. It helps to identify the opportunities and threats in the present and allocated
resources for the project and the possibilities for success.
A feasibility study is a method of documentation of the results of the analysis,

research, and evaluation of a proposed project. And it determines whether this project is
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technically possible, cost-effective, and profitable in all ways.
Components of feasibility study:

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There are many components used for the feasibility study.
1) Design summary
2) Economic
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3) Geopolitical
4) Environmental

5) Historical
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6) Social
Feasibility studies are performed in many industries with high effects. Industries
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like oil and gas, petroleum industries, renewable industries, manufacturing industries,
and some other highly prominent industries. In these industries, feasibility studies are
performed when a huge amount of capital is invested by the company or executive
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board. Apart from the above industries, feasibility studies are more likely to be
performed in engineering industries or firms that have multi-disciplinary expertise on
all the major project issues like design issues, economic value, environmental issues,
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logistics.
A project feasibility study involves a detailed understanding of a project design and

reaching a level that can justify a final project decision.
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The main components of the feasibility study are explained below one by one.
1. Design Summary:
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A feasibility study must perform a project design so that it allows the executive
members to make a final decision about the project to proceed. The estimation of
project cost must be done in the sense of, to take a final decision about the project,
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whether to proceed or not. Let’s say a simple example for a design summary. If we
are planning to perform a solar production, the number and size of the solar units must
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be finalized via a design summary through the feasibility study. And the manpower
and project schedule are analyzed, and the transportation and logistics are planned
out. And everything should be done in the right way to avoid failure or risk in project
success. Even if the project design is often completed as part of the feasibility study, the
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design details are not the main focus of the report; they are usually not included in their
entirety. After all, the design of the project can be shortened within the feasibility study
to give the readers context. After the feasibility decision phase, the final designs which
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are summarized will be approved.
2. Economics:
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Economics is the most important part of the feasibility study. And cost benefits are
the major reason for all the projects undertaken. In other words, if the project does not
generate a return on investment none of the other feasibility criteria matters. Economic
feasibility can be determined in the following ways.
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a. Cost Project Estimation:

Once the project design is completed, we will check each item (by cost) compared
to the previous cost estimation. These project costs are collected into an overall project
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estimate to determine the overall capital cost of the project.
b. Revenue Estimation:
The revenue generated from the project is usually a lot less certain than the
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capital cost of the plant. Because of that reason, feasibility studies usually examine
several different scenarios. If there is an underlying commodity price, like the price of
petroleum, a discount from the current price is usually applied to account for potential

price fluctuation. So risk analysis is an important component of this step. As there are
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usually many risk events that could affect the project’s revenue stream.
c. Estimation of operations and maintenance cost:
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Cost for operation and maintenance is the fair costs of operating, maintaining,
monitoring, and repairing the business system. And that includes employee salaries,
wages, costs of office materials and product supplies, company insurance, and
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internal audits, but excluding loss of value, debt service, tax equivalents, and capital
expenditures.
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d. Capital budgeting techniques
The process involves the examination of a project’s cash inflows and outflows to
determine whether the expected capital return meets a set standard. Discounted cash
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flow, payback, and throughput analyses are the major techniques of capital methods.
There are 3 techniques used in capital budgeting;
●● Payback method:
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The payback method is calculated by taking the duration of time it takes to recover
the initial investment.
Let’s see an example. r

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An engineering company plans to buy a solar plant for $300,000 and that plant is
predicted to generate a cash flow of around $30,000 per year. This capital budgeting
situation shows that the purchase can be settled in 10 years. $30,000 cash flows over
10 years total the $300,000 total purchase price. The faster the payback period is,
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the faster the company can take back the cost of the new piece of equipment for the
company.
●● Net Present Value Method

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The Net Present Value (NPV) method is the same as the payback method;
except for one major detail. Over time, the value of money is changing day by day.
The difference between the asset cost and discounted cash flows from the asset is
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calculated by this technique.
●● Internal Rate of Return Method

The Internal Rate of Return Method is the rate of return percentage generated by
the proposed project, which is corresponding to a stock market return value.
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3. Geopolitical
Geopolitical views are an important factor in the feasibility of many projects. Even
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though it is uncommon that government regulations cause a project to be neglected

outright, it is common that they cause project changes that increase the project
proposal or affect the completion date. Additionally, the geopolitical landscape can
change very fast and should be taken up to change for projects that require more than
(c
a year of planning. In many industries, the change is a constant like oil, gas, mining, or
other engineering firms. And we cannot assume that change can occur in one direction,
a new government can wipe out new projects that are going to be a strike in a new

trend. So feasibility study shouldn’t limit within the approval of concerned authority but
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also should keep an eye on new trends where the authorities look into that also.
4. Environmental
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In this present context or scenario, environmental regulations are integral to project
feasibility. There could be many environmental actions that could hinder a project
if a manager who handles the respective project is not familiar with their project’s
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environmental track. In most jurisdictions, environmental reviews must be finished
for any construction work that involves interrupting a site. These reviews require
monitoring and establishing a baseline for a variety of ecosystem components, which
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include wildlife, cultural resources, water quality, wetlands, etc.
5. Historical
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There are many projects which are delayed or unsuccessful due to improper
implementation. And sometimes we don’t have any idea about how long the project can
go or whether it is a success or not or get delayed and so on. If some things come in
straight away like that, significantly we need to reduce the project cost as well as need
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to reschedule the project at any cost. This is the most common short area in project
feasibility as there is always somebody who has done something or something close to it
or in an early stage which leads to huge insight into the project. Most of the engineering
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firms like coal or petroleum industries perform a vast investigation into digging history
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into the site, and from records and files from the government or concerned authorities.
A historical investigation is a major feasibility study in project planning and gives an extra
idea about deciding on the approval of the project. The historical examination is priceless
information about the site or resource, which helps in feasibility studies.
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6. Social
Social impact is an essential part or component of project feasibility. Social
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feasibility is a method of study of communication of human resources within the

organization. Social impact analysis is projected to identify and analyze the impact
caused by social activities in a way to understand or examine social impacts on the
particular projects.
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While doing or producing or launching a new product into the market, you should
do a feasibility analysis regarding the new product. And this is known as a new product
feasibility study. When you are planning to launch a new product into the market,
you should ask so many questions to yourself to get a clear vision of the market and
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customers.
Who all are my targets, demographic? What kind of people should I target? Who
all are my competitors? What is the new technology in the current market? How much
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should be the selling price? Through what platforms and all should I promote my
products? So, while doing this kind of feasibility study, you will get the answers to the
entire question and will get an idea about how to start a new business without high risk.
Apart from that, market research gives more exposure to our business. Feasibility
(c
study in market research gives huge ideas in the following areas.
1. Analysis in demographic

2. Analysis in pricing.
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3. Stakeholders meeting.
4. Online platform surveys.
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5. Competitive evaluation.
Conclusion:
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While starting a business, it is essential to do certain things before a person
invests his time and money into a project. The main thing needed to know how to run
a new project successfully is to understand what the economic and market factors will
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affect the new project. For a successful running of a project, one must be aware of the
market research and its components.
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A feasibility report is a report that gives a clear-cut targeted solution and examines
whether it is possible in given restrictions. Feasibility reports help to examine and
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evaluate the proposed business project. Based on the feasibility report, we can get a
clear idea about the different stages of the project and get a conclusion regarding the
proposed project, whether it is possible at given constraints. Mainly feasibility reports
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can be prepared from the feasibility study analysis. So, once the feasibility study
analysis is conducted, the report should be ready to start the proposed business.
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Feasibility reports are mainly derived from the following study analysis.
1. The first report is based on the preliminary analysis of the feasibility study. by creating
an outline of your plan; you can get a rough idea of the proposed system, what all
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requirements are needed.

2. Secondly, the report is based on income statement preparation. During the feasibility
study, you should be aware of your income, and prepare a calculated income
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statement. Based on this, a feasibility report can be generated.

3. The next report is based on the market research analysis. By performing market
research analysis or by conducting market surveys, you can get a clear vision of the
technology and infrastructures. And this study would help you in accurately preparing
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a feasibility report.
4. Another detail required for the feasibility report is operational resources. So, by
knowing a rough idea about how many staffs are required, what are the required
resources for the proposed business, you can make a better feasibility report.
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5. After reviewing and analyzing the collected data through feasibility studies, you can
generate potential feasibility reports on the proposed business.
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6. Lastly, and the most important is decision making. Decision-making moment from
feasibility study analysis is a process of tasting the decision about the proposed
businesses whether to move forwards or not. Based on this decision, a feasibility
report can be generated.
(c
Feasibility reports help to decide the possibility of a project or venture by identifying

the various factors that can lead to its success. And it also helps to identify the potential
risk to the success of the venture.

Why is it so important to have a feasible study report? The reports contain the legal
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and technical evidence of the project’s feasibility, cost-effectiveness, vibrancy, and life.
And the reporting process helps the higher management or concerned authorities to get
the correct information required to make decisions on budget and investment planning.
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A worthwhile feasible study report gives or develops a solution for the following things:
●● Project analysis: because feasibility studies report helps to hookup project
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productivity to budgeted costs.
●● Risk reduction: because the report gives an idea about how to plan and
reduce the high risk.
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●● Training for the staff: Because the report gives details about staff requirements
and related training to necessary teams /staffs.
A feasibility report simply collects the research information that covers a specific
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project or problem.
Irrespective of project scope, size, and type, there are several other steps to write
such an important document or report. Let’s see in detail.
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A feasibility report consists of the following steps or tips.
●● Understanding
●● Introduction r
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●● Background Information
●● Requirements
●● Evaluation
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●● Conclusions
●● Final Opinion
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1. Understanding:
Understanding is nothing but just having an idea about what is required. Make
sure that you are aware of all the questions or problems first. Learn and understand the
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details and direction of the topic if it is not familiar to you. For each problem, there is an
efficient level of research, and examination is required whether it is complex or not.
2. Introduction:
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During the introduction, someone can carry out an analysis and give possible
solutions to the current problems. An introduction gives a successful point to write a
report. For example, a solar manufacturing plant wants to relocate to a new site. For
that, he can point out the increasing cost of manufacturing units and give a better
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solution of moving the company’s plant to a new location.
3. Background Information:
This is the basic information about the company’s background. This is to give an
(c
introduction about your company. What’s your company’s objective, what business is
regulating? In what domain is it working? What is the purpose of your company? This is
the important part of the report to inform the customer whether they know the topic that
you are going to provide or present. For example: suppose your company is mobile app
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development based, and you need to increase your application sales through digital
marketing. And promote your products through an online platform. So, the background
information is like “we are mobile app developers and this project is to promote our
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products (apps) through a digital platform to get a high lead targeted sales by visiting
our website”.
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4. Requirements:
Requirements are nothing but what all things should be concentrated on while
shifting a business into a new location. By shifting a business into a new location, it may
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affect many factors for its smooth running. Factors like environmental factors, physical
factors, human resources, tax value, and other important impacts. So it’s necessary
to evaluate what all requirements are required while shifting into a new location
concerning those factors.
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5. Evaluation:
And in this stage, you need to evaluate your data and get a possible conclusion
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on the entire topic. The data evaluation created by you is proof of your research. So
that you can support your theory concerning your evidence. In other words, we can
say that evaluation is a comparison between current and proposed solutions. In the
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above case of re-locating the site, the current solution to cut off the increasing the cost
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of manufacturing units, the shifting should be blocked. And the proposed solution is
to move the manufacturing unit to another location. So based on the comparison, you
should evaluate the proposal and get an idea about the cost required for both proposals
and the various impacts on each solution.
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6. Conclusions:
This is the sum-up of the proposed solution. Make sure that you have gone through
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the whole report several times to avoid spelling mistakes, grammar mistakes, and other
mistakes. By doing so will help others to read reports easily and easily to understand. In
Conclusion, you can mention the advantages and disadvantages of the solution of the
given topic.
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7. Final Opinion:
This is the recommendation stage based on our solution whether it is feasible or not.
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Format of writing feasibility reports:

Feasibility reports can also write by using the following format:
●● Product
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In this feasibility report, you should describe the product and give an idea about
what is the purpose of the product, and mention where the proposed system will link
with the business requirements of the company.
●● Technical feasibility
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This gives information about the proposed systems working under the given
specification. This is the report related to the technical working of the proposed system.

●● Social feasibility
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This report gives how the newly proposed system affected the people in their
working tuition.it describes the effects while introducing a new proposed system. You
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have to check whether there is any training required for the workforce. And examine
any transfer or move out required for the workforce. The report also should say about
the performance of the staff with their new task due to the new proposed system.
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●● Economic feasibility
In this report, you should mention the cost of the proposed system. Saying about
the cost indicates that the company faced by implementing the new system. Gives
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information about the advantages of implementing a new system like cost reductions
etc. And also consider the internal benefits like customer devices, help desk, etc.
●● Market research
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This report includes all the gathered information done through market research.
And document all the sources of information. Provide a detailed study about the product
concerning market trends. Provide detailed information regarding how you are going to
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compete with competitors who have similar products.
●● Alternate solution
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This report involves an alternative solution for the proposed project. And describe
the new proposed system will have value in all ways and provide a reason why you
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didn’t go with an alternative solution.
With this, the project planning is completed. If the feasibility study shows the
project has all the possibilities of succeeding under the pressure and difficulties, then
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you can start analysis and move forward with your project.
Body format of feasibility report:

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There are many types of formats available for formatting the body of the feasible
report, like style, body, and other requirements. And it is very not very easy to get a
body format for a feasibility report for your research. So it is necessary to check with the
mate or an instructor on the best format to use for your research to make the feasibility
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report. At the moment, the following format is enough to prepare a feasibility report
based on your research.
●● Firstly, you should have a rough idea about what to write about your research
like headings, subheadings, etc.
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●● The page should contain a header with the title that is in its short form. All
pages should maintain the same format.
●● The page should contain the writers’ name .date and page number should
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indicate either top or bottom of the page.

●● Headings, Meta descriptions, subheadings must be placed in a well-mannered
structure. And the headings and subheadings must be highlighted to get
attention to the reader’s point of view.
(c
●● And use a proper word format and the size of the fonts should be appropriate
neither too large nor too short. It should be a minimum of 10.
●● Use the unique style of passage.
Shortly we can say that your reports should include the following sections
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●● A report must showcase the problems described in the report, the objective of
the report, and the importance of the research.
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●● A report must describe the background information which contains much
information about the feasibility study, about who did the study, and whether it
is implemented in any other place.
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●● A report must show alternative solutions for the proposals and give a note
about how to compare the main proposal.
●● A report must include various feasibility studies regarding technical, economic,
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social for the proposal and must provide details about the evaluation of the
proposal based on cost-benefit effectiveness.
●● A report must have a conclusion about the study and completed the work.
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Follow-up and recommendations should be given in the conclusion.
Conclusion:
If the feasibility study shows the project has all the possibilities of succeeding under
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the pressure and difficulties, then you can start analysis and move forward with your
project. A feasibility report has to be completed and accurate to decide to launch a new
business. And the feasibility report is purely based on the feasibility study.
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1. __________ Stage of project formulation will include identifying the financial goals
and objectives of the project.
2. Identify the various cost of the various elements and resources being included in the
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project is termed as_____________.

3. _______________ Analysis will help in determining the cost and the benefit of a
project to the society. It further evaluate the experimentation and the observation of
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the different aspects.

4. The time duration of a project can be determined by___________ feasibility.
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5. The method that helps in in calculating the initial investment with the help of the
duration of time is known as_____________.
Summary
●● Project formulation is following are correct process and acquiring the right sources
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for executing the project.

●● Project formulation will include feasibility study as one of the major important
aspect.
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●● Feasibility study will include identifying the key elements that are important for a
successful implementation of the project in the market.
●● A feasibility study will include design summary, economic, geopolitical,
environmental, historical and social.
(c

●● There are various methods and techniques involved in determining the capital
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budgeting that includes payback method, net present value method and internal
rate of return method.
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Activity
1. What could be different equipments used in technical analysis.
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2. If you are an entrepreneur then what could be different methods being used by an
individual for determining the capital budgeting of the project.
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1. Explain the components of feasibility study in detail.
2. What are the stages of project formulation?
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3. How can screening of project ideas be done?
4. What are the steps of project identification?
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Glossary
1. Advisor- advisor is an individual who is responsible for providing individuals i have
a greater knowledge about a subject matter and again provide better information
regarding a concept. r
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2. Prospect- prospect are the future customers of the company.
3. Screening- screening refers to evaluating multiple factors that affect a project.
4. Corporate appraisal- it refers to undergoing research and development activity e for
evaluating the financial aspects related to a project.
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Further readings
1. Book – feasibility study
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Author- Jackson G.Majura.
Answer
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1. Pre investment planning

2. Financial assessment
3. Economic.
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4. Scheduling.
5. Payback
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Unit - 2.3: Project Report

Notes
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Objective
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●● To identify the need of developing a project report.
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●● Evaluate various components of a project report.
2.3.1 Need for Developing a Project Report
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A written statement that is proposed by an entrepreneur to take up, is referred
to as a business plan or project report. It shows the actions that are desired by the
entrepreneur to achieve its business plan and the ways to achieve it.
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A dream without a plan will remain ‘a dream’ only. That is why it is important to
prepare a project report. Following are the important reasons to describe the need for
developing a project report:
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i. It works as the pillar while setting up an enterprise and converting an idea
into reality.
ii.
iii.
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It is an important tool for analyzing the status of any investment in a project.
It plays an important role in the registration or approval procedure of the
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proposed project. Different government authorities whether the district, state,
or central requires the project report to study and analyse before approval.
iv. It provides a road map for the project. The direction in which the entrepreneur
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is going, the goals of the project, how they are going to be achieved.
v. It helps in tracking the ongoing activities of the project. It helps the stakeholders
and the team members to keep an eye on the progress of the project on a
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time to time basis or any deviations arising from the original plan.
vi. It provides clarity to the entrepreneur that he is going ahead in the right
direction.
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vii. They are prepared to provide better visibility about the project to the
stakeholders and the project team. It is a valuable tool for them.
viii. The progress of the current work of the project can be compared with its
original plan with the help of these reports.
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ix. It helps in identifying the risks that will arise during the completion and
accordingly corrective measures can be taken by the team.
x. It also helps in foreseeing the expenditure that will arise in the future of the
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project and accordingly the budget can be adjusted by the team.

xi. It gives clear visibility in all aspects which are related to the project along with
the team performance.
xii. With the help of these reports and greater visibility, the person managing the
(c
project can have better control over the progress of the project, teamwork,
quality of work, regression, and stagnation also.

xiii. An exact idea of the inputs that are required initially will be provided by the
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report.
xiv. It helps in attracting investors or lenders and providing detailed analysis of
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the project assists while deciding for investment by them.
xv. Project reports are a source through which its user learns in detail about the
current project.
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xvi. It shows the feasibility of the project from different angles like financial,
social, economic, commercial, etc., along with the probability of achieving
the desired profits.
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xvii. It is not only the source of information for the entrepreneur and persons
involved but also for the external parties.
xviii. Persons involved in the project have a better understanding while reviewing
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the project and can decide what is required and what is not required.
xix. It is referred to as a blueprint of the project which is to be started, which is
prepared by experts who have thorough and detailed knowledge about the
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project.
xx. It gives full insight into the project and gives clear descriptions and eliminates
confusion relating to any matter involved in the project.
xxi.
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It gives a general idea regarding the requirements related to raw material,
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manpower, fuel, infrastructure, finance, etc.
xxii. It is a business plan of action which transforms a business idea into a
productive venture and also provides clear objectives and goals.
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xxiii. It spots the risk factor at different levels or stages while completing the
project.
xxiv. It provides standard costs for every operation and helps in finding out
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any deviations in the costs incurred. It provides total estimated costs and
profitability that arise due to them.
xxv. It helps in obtaining suitable investors as per the requirements of the project
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and investors can invest if they think so after going through the detailed
report.
xxvi. The report helps in eliminating any kind of hurdles that will arise in the project
and completes the work within the required time frame.
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xxvii. It provides transparency regarding the work and the budget to the persons
who are involved in the project.
xxviii. It plays an important role when it comes to having financial aid like a loan
)A
from banks or financial institutions, it gives detailed business plan, technical

analysis, financial of project, its viability, etc., and helps in availing the loan.
Banks or Financial institutions can judge the project and the entrepreneur
based on the report.
(c
xxix. It helps in taking the right decisions at the right time, proper utilization of
resources, proper coordination, reduction of wastages and costs, and
applying better strategies.

xxx. It helps the entrepreneur in foreseeing the future and taking corrective
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actions when required.
xxxi. It helps in making crucial decisions that are required to be taken at various
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stages of production such as, how much quantity to be produced to achieve
break-even-level, or how to settle the repayment schedule, these crucial
decisions can be taken if the project report is prepared well in advance.
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xxxii. The survival of an enterprise depends upon the marketability of the project.
The project report helps in understanding the demand-supply position,
competitors’ position, pricing decisions, etc., and hence, ensures the survival
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of the company.
xxxiii. It works out the working capital requirement, operational costs to be incurred
along the expected profitability from the project.
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xxxiv. It makes the objectives measurable, verifiable, tangible, and attainable. It
quantifies the objectives.
xxxv. It is also important for Government Authorities while providing subsidies,
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exemptions related to taxation, any incentives, deductions, or clearance from
the pollution control board.
xxxvi. It helps the entrepreneur in taking decisions regarding the expansion of the
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project or starting a new line of production.
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xxxvii. It gives clarity to the entrepreneur at the initial stage whether the project
is sound concerning all aspects such as financial, economic, technical, or
commercial.
xxxviii. It guides the entrepreneur regarding all the business operations, and while
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taking all financial decisions related to the project.

xxxix. The management can have an eye on the team related to the work they are
doing and the work which is not still done and can instigate, investigate or
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take the proper course of actions regarding the same.

xl. It provides a 360-degree overview of the project and helps in determining the
steps which are to be taken.
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xli. It helps in determining whether the team is working on the track to deliver
the project within the target decided or how far they are from achieving the
target.
xlii. It helps in determining whether something has been done to take corrective
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measures.
xliii. It also provides the schedule of every team member and helps in taking
working decisions as it becomes easy to identify who is already occupied
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with work and who can be assigned with new charges.

xliv. It shows how much work is attributed to the members or how much work
they have on their plates to distribute the work evenly so that faster results,
higher efficiency can be achieved and project burnouts within the team can
be prevented.
(c
xlv. It visualizes the obstacles and the potential project constraints that are
holding or will hold back the project.
xlvi. It helps in prioritizing the work so that the going concern standard of the
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project will not get affected.
xlvii. It helps in analyzing that the work which is done or is in the process of being
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done is the kind of work that is required in achieving the project target or the
team is just spending the time without keeping in mind the project milestones,
target, objectives or deliverables.
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xlviii. It is quite common to get deviated from the target of the project which leads to
failure of the project, this risk can be eliminated by preparing project reports.
xlix. It helps in timely tracking the progress of the project and helps in compensating
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in case of deviations that arise in the time required.
l. It provides the big picture of the project to the stakeholders and the
management and helps in taking important decisions.
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li. The presentation of the report with the help of charts, bar graphs, and images
wherever required, explains the implications of the data more efficiently.
lii. It provides clarity to the audience to get all the information that they require
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without getting bogged down or left in the dark with incomplete information.
2.3.2 Contents or Components of a Project Report

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Preparing a project report is a balancing act. It provides a projected picture of
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the proposed business. The proper balance of information should be there, too much
information makes it too long and too little information makes it incomplete. It should
deliver all the necessary information in a summary form. It provides projected details
of the upcoming project and explains the feasibility of the new project in which the
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entrepreneur or the stakeholders are going to invest. The report contains detailed
information about the capital structure, capital contribution, source of funds, plant and
machinery or land and building required, requirements of raw materials, water, power,
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fuel, manpower, marketing costs, operational costs, cost of production. It contains

information regarding economic, financial, technical, and social aspects of the business.
It provides clarity to the entrepreneur about the resources and inputs and provides aid
in obtaining a loan from financial institutions or banks.
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Some of the following points should be considered while preparing the project
report:
i. Title
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The first page states the title or the topic on which the project is made. It should
also contain the name of the person who has prepared the report and also the name of
the supervisor under whose guidance the report has been prepared.
)A
ii. Acknowledgment
This component is considered to provide thanking gestures to the individuals or
the groups which have given their valuable ideas, time, and opinions or suggestions for
helping the author to complete the report.
(c

iii. Content Index or Table of Contents

Notes
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It is an optional component, it depends on the length of the project also, if the
project is short then it can be skipped but if the project is lengthy it may have this
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component. It will provide ease to the reader by providing the head of the topics along
with page numbers. It must have segregated main chapters and subchapters or topics
of the project report.
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iv. Introduction
It should provide general information about the industry to which the project
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belongs. Brief information about the past experiences, present problems, and future
planning of the company. In the case of the manufacturing unit, it must contain
information about the project that is prepared to be launched, its demand in the market,
locally to globally. In case the project is made to overcome the business problems, it
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must have an alternative to the current plan or can say a backup plan along with the
one which is explained in the report.
v. Brief Overview or Summary
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The first section of the report should have a summary of the topic which is covered
in the project. It should provide all necessary elements to give the reader brief detailing
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about the project without going through the project. The proportionate length of the
summary is 10-15% of the whole project, most of them can be in 1-2 paragraphs giving
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the information contained in the order it is presented in the full report. It should be
concise and show how the conclusion has arrived. It should only contain the information
that is already given in the detailed report, it should not introduce any new point.
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vi. Description of the project

The project for which the report is made must be described here. It must provide
information about (a) the location where the site is situated, (b) requirements of raw
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materials, (c) skilled and unskilled laborers, (d) target that is required to be achieved,
(e) technology that will be used for this project, (f) areas required for the work shed,
factory, office building, (g) power, fuel or water requirement, (h) process of production,
(i) projected calculation regarding production cost, units, other direct indirect expenses,
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etc. If the project is service-oriented, explain the type of services that are going to be
rendered to the customers and how they will help them.
vii. Marketing Strategies

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The project should explain the demand that is expected for the product or services
in the local, national, or global market. The price at which the product will be sold and
the criteria for after-sale services, if any, should also be stated. It must provide the
)A
channel for the distribution of the products to the retailers or the customers. It also
provides (a) target customers, (b) nature of market, (c) market conditions, (d) varieties
of customers, (e) future aspects of the market, (f) demand for the product, (g) marketing
cost, (h) market share of the proposed product or service, (i) objectives of sale, (j)
potential user of the product or service, etc.
(c

viii. Budget
Notes
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It must elaborate the estimated total cost and current cost for the project, by
splitting it into different components as required. The total project budget will be the total
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or estimated and current cost of the project. The amount which is already spent, and
estimated cost that is remaining to be incurred, with explaining the need to do such
expenses. It can also provide details of earnings that are going to be there due to these
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expenses.
ix. Capital Structure
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The report must state or elaborate on the total capital required for the completion
of the project. It must state the source of finance, the owner’s fund, and the borrowed
capital. The requirement for working capital should also be stated along with the
source of supply in the project. It should state the estimated operating cost that will be
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incurred while completing the project such as cost for plants and machinery, preliminary
costs, land, and building. The total cost must be segregated among various costs. The
proposed financial structure must state the expected sources and terms and conditions
regarding equity and debt financing.
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x. Management Plans
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The project report must elaborate on the plans that management has prepared
for the completion of the project. It should also state a brief description about the
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promoters along with their business experiences, description about the management
team members and their experiences, responsibilities, and duties that are assigned to
the team members, current needs regarding the hiring of skilled or unskilled laborers,
or training personnel, criteria for managing the business, policies adopted by the
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management for business management.
xi. Potential Risks

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Every industry, business, projects have a potential number of risks in their fields,
everyone has to cope-up with them. The project should explain the amount of risk that
is involved in the project and should also explain the method to deal with it or to cope-
up with such risks. It must explain the effect of those risks on the project in quantitative
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as well as qualitative form and the measures to control or eliminate them.
xii. Hurdles
During the new beginning, many hurdles come in the way, whether it is for
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business or industry or an individual. One should analyze them and prepare their plans
accordingly. The project should also focus on the issues or hurdles that will come in the
way of the journey of the project for achieving its target. It can be a financial, technical,
)A
social, or legal hurdle. The report should state the measures or methods that are
recommended to overcome these hurdles.
xiii. Financial viewpoint

The report should provide projected financial statements, namely the balance sheet
(c
and profit and loss account of the project. Along with other projected statements, cash
flow, or fund flow statements for the near future or at least 5 years. The report must

evaluate the feasibility of the project in the long run, how the earnings will be generated
Notes
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and how they will increase. According to the projections, the project must be financially
viable for the stakeholders.
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xiv. Legal Aspect
The report must state all the aspects which are required to be fulfilled during
the completion of the project. The summary of the contracts which are signed by the
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company and the important conditions that they consist of. Legal aspects regarding the
government laws, rules, or regulations must be summarized in the report along with the
measures taken to take care of them along with the details of the team or the person
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responsible for such aspects of the company or the project.
xv. Technicality
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The report should give information about the technologies that are being selected
for the production of goods or rendering of the services or various other aspects of the
project.
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xvi. Implementation
The report should state the time frame or the timetable according to which the
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various activities of the project will be completed and the project will be implemented for
establishing the enterprise.
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xvii. Resources
The report should elaborate on the amount and variety of resources that are
required for the completion of the project and what resources are available with the
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management and what else is required to be purchased. It must give a summary of the
allocation of the resources to various activities of the project.
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xviii. Completion Criteria

The report must elaborate on the criteria that are decided by which anyone can
determine the completion of the project. The criteria for every stage should be given
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in the report to determine the proper completion of that stage. It reduces the chance of
missing something very important for the project which can create a hurdle in the proper
completion of the project. It could be a simple checklist or standard of protocols that are
required to be followed.
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xix. Social responsibilities

Every company, enterprise, industry, or individual has some responsibilities
towards the society in which they earn, grow, or reside, and it should be fulfilled by them
)A
for the betterment of society. The report should state the facts that how this project is
going to fulfill its social responsibilities because it will receive inputs from the society for
its completion or success or growth, hence, it has to give in return to the society by way
of employment, source of income, or better infrastructure and of course by taking care
of the pollution measures of the company.
(c

xx. Conclusion
Notes
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The project must conclude by providing detail about the actions, decisions,
benefits, risks, feasibility, and all other factors that are in the project. It should conclude
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with a clear interpretation of the objectives of the report.
xxi. Bibliography
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This component contains the list of documents or books or articles or manuals
that are used by the author while preparing this project report. It should provide the
information about the source by the aid of which the report is prepared. The name
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of the books along with the author and the publisher, proper citation of the articles,
manuals, or documents should be mentioned in the report.
xxii. Contact details
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This is an optional component but it will help the stakeholders or the readers of the
project report in case they have any doubts further. The report may have contact details
about the person who had prepared the report or working on the project to clarify their
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doubts.
2.3.3 Project Report Vs Feasibility Report

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Under the construction of the innovative project, keyholder requires endurance in
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analyzing the components of the project positioning or its issues. The status of a project
being successful concerns in-depth analysis of the portion of the business proposal.
One requires the summarized version or an authentic short checklist that comprises all
central structural-based components. During such time, the facet of the entrepreneurial
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society introduces the value of the project report. The composition of the project report
allows the reader or analyst to evaluate the components of the business proposal
through the placement of the project report. However, another record that holds
the analytical estimation about a specified problem in the regulation channelizes
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by feasibility report. Such analysis ensures the value of the proceeding steps for the
company to deal with the issue. Both project record and feasibility records hold different
variations and interpretative forms in diverse horizons.
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Project Report
The formulation of the project report constructs the overall essential representation of
a business proposal. Its purposive value holds explainable positioning from the side of the
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business holder or proposal. The project report introduces the educative and innovative
knowledge-oriented skill set that encompasses the business proposal value. The valuable
transitional framework of the knowledge along with the skillshare or standard processes
develops the summary analysis. It allows concerned authorities to absorb the quality of
)A
the productivity reliance. For instance, setting up a business requires layout, planning,
segmentation of the targets, distribution channels, public relations, and marketing that
requires a pathway or channel of specific knowledge to such and such work.
In a shorter analysis, the project report presents a layout that summarizes the
(c
knowledgeable channels for such processes like before estimates and after-math. It
includes a detailed version of the explanation that ensures the capabilities and liability
of the viable business to start or proceed. The construction of goals with high-end

supplies-chains or raw-material-variation everything instills through the variation of the

Notes
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project report. Like every other orientation, the channelization of the project orientation
carries the layout of the characteristics and attributes of specification for a better and
potential outlook-based response. It displays the quality and quantity assurances for the
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examiner for adopting the suggestion.
Characteristics-based components of project report
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Every project report involves a variety of the characteristics supported in the
following order. Like the first, as the presence of customary introduction. Every
layout of the record contains the summarized conjecture of the starting till end
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prospective. It leads to the section of glance through the comprehensive notes of
the central convention or the position. It encompasses the positioning of the tile,
acknowledgment, content-based pages, and abstract-based structure. The second
administrative aspect- Despite the overall picture, the creation of the report follows
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the layout of the administrative records. It encompasses the assistance of the formal
documentation that explains the features of the specific recommendations and
possibilities. The presence of the executive orientation proceeds with the technical
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supply of the information with the inclusion of the socio-economic impact, financial
processes, management-based inclusion, and possible contingencies or risk-based
circumstances. The third covers a precise picture of the organizational structure. It
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states the prospect of ownership in means of sole value or partnership basis. It ensures
factual information about the financial soundness the proposal encompasses along
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with its shareholder conviction. It also includes the personal experience or qualified
association of the business planners or holders. The fourth aspect description of the
project’s utilities. It comprises the practical assurance of information that carries the
scope of essential needs for workability. For instance, the material requirement, location
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of the central branch, targeted productivity rate, marketing planning, and energy
sources (like power, water, fuel, or technology), employment orders, and other project-
based rules. It focuses upon the capacities of the service varieties of delivery. The fifth
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side is the management planning and financial setup. Further, the project includes
the capital or operational state-based cost information. It comprises the program and
policies of the management authorizes or training personnel. It estimates project costs,
including the fixed or miscellaneous expenses.
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The project report witnesses the state of the written documentation about the
configuration of technical assistance. Its valuation occurs in informed conjecture
assisted through the reporting tool-based devices that guarantee the identification
of every tinier or more broad suggestion. For the participation of the practical project,
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the report relies on project upskilling. The practicality of the record of the project
depends on the critical estimation of components. Like, the precision of objective
values, occupancy of factual data, formal layout, and reliability. Thus, the display of
)A
every record holds the characteristics and components as per the business need. For
example, if the business is from social management-based development, then the
allocation of its features becomes variants as per the theme. The presence of general
guidelines only pushes the layout of the work as per the authentication. It does not
direct to the practice of the strict or rigid based arrangement.
(c
The convention of the project management uproots the skillshare of the technique-
based assistance. It builds an environment for the unique and innovative potential

prospect that directs to the orientation of the activity’s management phases. The
Notes
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cycle of record-based or report-based generation originates from the position of the
management state. It holds the capabilities of turning a document’s potential idea
into the actual practical model. The conventional role of the administration life cycle
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proceeds through the layout of five stages. The first step refers to idea-based initiation,
then second as planning, consequently moves to planned execution with practical
circumstances, monitoring the progress, and providing closure. However, the placement
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of the project report entails all such features of the solid building through the paperwork
based on the planning stage. The project report’s goal remains to fulfill a shorter
consecutive planning structure with all exterior or interior provisions.
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Feasibility Report
The placement of the feasibility report enhances through the connection of
the analysis of management solutions in documented mode. The construction of the
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feasibility report manages through the layout of the proposed solution for the specified
issue. It directs to the particular incident with the possible orientation that can solve
the construction of the problem orientation. The preparation of such a report allows
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the management task of the company or any organization to work accordingly with
the success rate of advantage-based order. It provides the placement of the logical
and critical analysis about the exterior or interior prospect and allows the possible
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implication as to the solution of the construction placement.
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In quick rephrase, a presentation of the feasibility report allows the display of the
solutions based on specified problems. It takes the positioning of the issues faced by
the workability of the management company and works through the critical points that
generate such difficulty in the management area. It performs the processing of obstacle
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analysis functions as the essential criteria for the practical answers to the challenges.
The allocation of the feasibility report does not mean the simple straight away answer
is yes, no, or maybe scope. Instead, it involves the strict examination of the conditions
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with the legal-technical perspective. By understanding all possible positions, the

channelization as per specific situation feasible release moves with the utmost narrow-
based solution with the viable plans.
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Characteristics-based components of feasibility Report

All feasible studies hold a well-defined scope of the components with subjective
inquiry or issue. While on another side, the report does not follow a standard provision
as per its broader range of adaptation. However, it does carry the technique of similar
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intentions as characteristics variants as:
1. Inclusion of preliminary research- Every assessment moves with the follow-

up to the formation of the project theme. Within this sphere, the investigator
)A
observes the circumstantial evidence for the complex roots and background
affairs. And one tries to evaluate the condition to explore its nature for estimating
its suitable alternatives.
2. The composure of requirement- The inclusion of the statement notices the
need that fulfills the criteria of the issue. For instance, a company is facing
(c
a critical scenario H. Then attributes that directly apply to the problem like
supply-demand or competitive shares become the portion of the requirement.

Such requiring stands allow one to think about the corresponding chances of
Notes
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alternatives that can replace the H scenario with a similar supply-demand value.
3. Assurance of evaluation- The presence of tryouts becomes vital for insight
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into the condition. The conditioning of evaluation assists in the comparison of
the current critical scenario with other situations. It implies segments of the
issue or deviation-based factors that reside on comparable patterns. At the
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evaluation stage, the investigator works upon all feasible positions that can
restore the prior dilemma.
4. Implications of conclusion- The format of the conclusive stand delivers the
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proposed situation. It implants accession of all probable aspects that allows
the feasible outcome revealing socio-economic factors and risk placement.
It depicts the solely attentive channels stating the benefits or flaws of the
opportunity.
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5. Settling the part of recommendation- The arrangement of the feasible
report grasps the potential configuration of all factual accounts. However, at
moments the investigator or evaluators possess the scope of innovative or
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out-the-box based ideas. In the proposal, one can allow the personal opinion
or configuration about the innovation-based reasons. For the inclination of the
such-and-such solution, one needs to provide the value of why-how-based
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questions. Its clarification carries the accountability of feasibility or does not
need to be mentioned through recommendation.
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Difference between project report and feasibility report
The connection of the feasibility report differs from the aspect of the project
report in its sole purpose. One directs the possible suggestion and estimation, the
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other provides the solution of the specified context of the problematic influence. The
occurrence of both reports hold the separate application and differentiating criteria in
the following order:
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1. Distinct objectives- The project report channelizes the orientation of the complete
business prospect, which enhances details of all sections in a precise manner for
review analysis. However, the feasibility report directs to the placing of the solution-
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based possibilities of a specific problem. It does not cover the other aspect or broader
non-connected elements.
2. The separate output of information from reports- The feasibility report solely
circulates the defective product or service and its possible alternative. However, the
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usage of the project report entails all minute-or-extended prospects of the proposal
value.
3. Dissimilar questioning value- The value of the feasible report conveys the
)A
prospect of why or how the project or issue should be witnessed or solved. Yet, the
project report requests permission or implies questions in the mode of progress with
a regular plan.
4. Varies in the research type- The accumulation of both reports works through the
diverse variation. Through the feasibility report figures, the specified layout with
(c
the requirement, evaluation, and conclusion for estimating the value of the critical
conflict-based value. However, the project record analyzes the every-possible space

of the plan. For instance, it presents executive, administrative, social, financial,

Notes
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management, operational, and technical assistance.
5. The contrast in summing up comments- The project report is a guidance outlook
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for an entrepreneur with a precise, complete, and suggestive stand of the approaches.
However, the feasible record refers to the gains or deceptions of the solution for the
conflicting plan.
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1. ___________ is considered to provide thanking gestures to the individual or the
group which have given their valuable ideas to the project.
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2. The brief content regarding the project is being written in___________.
3. When a project report is being implemented in a particular time frame or the time
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table it is termed as successful ____________.
4. ________ construct the overall essential representation of the business proposal.
Summary
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●● A written statement that is proposed by entrepreneur to take up is referred to as a
project report.
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A project report will include the capital structure of the business organization that
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could state the sources of supply in the project.
●● Project feasibility is evaluating multiple factors and analyzing the specific project
and different conditions.
●● A project report will include a complete business objective whereas a feasibility
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report will provide a solution based possibility of a specific problem.
Activity
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1. If you are an entrepreneur then what could be the different essentials of a project
report.
2. Why there is a need of developing a project report.
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1. The introduction and brief overview of the project will include what different factors?
2. Why it is important to include the marketing strategies of the project in the project
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report?
3. What is the difference between project report and feasibility report?
)A
4. What are the characteristic based components of feasibility report?
Glossary
1. Management plan- it refers to the planning and procedures being followed by the
management of the project that could include assignment of the task according to
(c
the experience and knowledge.

2. Hurdles- it is very important to identify the problems related to the project. The
Notes
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problems that could occur and future is termed as hurdles.
3. Administrative aspects- it in ignore the following are the board layout and assessment
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of the bridge over before the documentation detention explaining the features and
recommendations of the project.
4. Conflicting plans- these are the types of plan that could create a conflict or a problem
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in future.
Further readings
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1. Book – Project report
Author- K. Nagarajan
Answers
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1. Acknowledgement
2. Description
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3. Implementation
4. Project report
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(c

Unit - 2.4: Project Appraisal

Notes
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Objective
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●● To evaluate the concept of project appraisal.
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●● Understand technical analysis.
●● To understand financial analysis.
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2.4.1 What is the Appraisal Process
The appraisal process has been utilized as a central consideration for professional
advancement, and as a rule, the advancements and pay raises are straightforwardly
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reliant upon it. If a representative figures out how to earn higher appraisals, it
demonstrates better execution by the worker and accordingly better development of
the association. If a representative gets lower appraisals, the association would then
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be able to assist him with working on his exhibition by offering him preparation to
further develop his abilities and information. An ever-increasing number of associations
are inclining for directing a performance appraisal process measure since it will assist
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them with achieving the business objectives at a quicker speed. The appraisal process
ought to be determined throughout some time so that both the business and worker can
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have a superior thought regarding his presentation on a yearly premise. The appraisal
process is a proper connection between a representative and his administrator that
appears as an organized meeting to analyze and talk about qualities and shortcomings.
This is embraced to work on current abilities and information and proposition further
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freedoms for development, improvement, and growth.
A representative presentation appraisal is a cycle—frequently consolidating both

composed and oral components—whereby the board assesses and gives criticism on
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worker work execution, including steps to improve or divert exercises depending on the
situation. Recording execution gives a premise to pay increments and advancements.
Appraisals are likewise imperative to assist with staffing individuals’ work on their
presentation and as a road by which they can be remunerated or perceived for a job
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done the right way. Furthermore, they can serve a large group of different capacities,
giving a starting point from which organizations can explain and shape liabilities as
per business patterns, clear lines of the executive’s worker correspondence, and
spike reconsiderations of possibly aged strategic policies. In numerous associations,
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execution examinations possibly happen when the board is building a case to end
somebody. It’s no big surprise that the outcome is a common fear of the presentation
assessment meeting—something to stay away from, assuming there is any chance
)A
of this happening. This is no real way to oversee and propel individuals. Execution
evaluation should be a formative encounter for the representative and a ‘showing
second’ for the administrator.
Appraisal and Development

(c
While the term appraisal has significance for most entrepreneurs, it very well may
be useful to think about the objectives of an evaluation framework. They are as per the
following:
●● To work on the organization’s efficiency.

Notes
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●● To settle on educated workforce choices concerning advancement, work
changes, and end
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●● To distinguish what is needed to play out a task (objectives and obligations of
the work)
●● To evaluate a worker’s exhibition against these objectives
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These objectives can be all the more handily acknowledged whether the business
puts forth an attempt to build up the presentation evaluation measure as an exchange
in which a definitive design is an advancement, everything being equal. To make and
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keep up with this structure, businesses need to illuminate laborers regarding their
worth, acclaim them for their achievements, build up a history of reasonable and fair
input, be predictable in their treatment, all things considered, and solicit laborers for
their own experiences into the organization’s cycles and activities.
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An independent company with not many representatives or one that is simply
beginning to assess its staff might decide to utilize a prepackaged evaluation
framework, comprising either printed structures or programming. Programming bundles
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can be modified either by utilizing an association’s current appraisal techniques
or by choosing components from a rundown of properties that portray a fruitful
representative’s work propensities like compelling correspondence, idealness, and
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capacity to perform work mentioned. In the long run, in any case, many organizations
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decide to foster their evaluation structure and framework to precisely mirror a worker’s
exhibition considering the business’ own novel objectives and culture. In fostering an
appraisal framework for an independent company, a business person needs to think
about the accompanying:
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●● Size of staff
●● Representatives on an elective plan for getting work done
●● Objectives of the organization and wanted worker practices to help
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accomplish objectives
●● Estimating execution/work
●● Boosts in salary and advancements
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●● Correspondence of examination framework and individual execution

●● Execution arranging
Step by step instructions to coordinate a presentation appraisal process:

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Directing an exhibition survey with a representative requires expertise and

preparation concerning the appraiser. The negative insight that is regularly connected
with the presentation appraisal is expected to some degree to a sensation of being
)A
scrutinized during the cycle.

An appraisal is intended to be the direct inverse. Regularly, the offender is standing
out and the appraisal is directed using the utilization of language.
How the sender of a message utilizes language decides how the other individual
deciphers the message once got. This can incorporate manner of speaking, selection of
(c
words, or even non-verbal communication.

Since a performance appraisal is intended to give productive criticism, it is pivotal

Notes
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that proper language and conduct are utilized all the while.
(HR) are the emotionally supportive network for administrators and chiefs to be
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prepared in carefully taking care of the examination interaction.
The performance appraisal process
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The evaluation interaction is typically worked with by Human Resources, who help
directors and administrators in leading the singular examinations inside their specialties.
An evaluation strategy ought to be set up.
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Required capabilities and occupation assumptions should be drafted for every
worker.
Individual appraisals on worker execution are led.
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A one-on-one meeting is planned between the administrator and worker to talk
about the audit.
Future objectives ought to be talked about among workers and administrators.
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A closed-down form of the exhibition survey is chronicled.
Appraisal data is used by HR for proper hierarchical purposes, like revealing,
advancements, rewards, or progression arranging. r
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The motivation behind an appraisal process is as per the following-
●● Recognizing the strength and shortcomings of a representative.
●● Opening correspondences among representatives and directors.
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●● Reinforcing the relationship of a representative with his boss.

●● Offering clearness as far as assumptions and hierarchical objectives.
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●● Empowering prevalent execution.

●● To evaluate the potential for development and advancement in a representative.
●● Recognize whether the workers need further preparation.
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●● Empowering workers to participate in instructing.

●● To offer productive input to the workers.
●● Advising normal and helpless entertainers.
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●● Distinguish execution holes assuming any.

●● To acquire the vital data that will help the organization in dispensing hierarchical
prizes, remuneration bundles, compensation raises, and pay structure.
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●● Supporting labor arranging.

●● Working on the general presentation of an association.
●● Lessening the complaints of a worker.
(c
The advantages of the appraisal process are as the following-

●● It becomes simpler to keep a record of individual execution throughout some time,

and this assists the organization with making legitimate assessments.

Notes
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●● The exhibition evaluation measure incorporates near appraisals, and this assists
the organization with compensating its better laborers.
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●● It assists the administration with choosing about significant issues like exchanges,
raises, and advancements.
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The disadvantages of the appraisal process are as the following-
●● The project appraisal process is tedious as the assessment cycle is a continuous
one.
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●● If not directed in a fitting way it can demonstrate a negative encounter for the
representative.
●● As the interaction is reliant upon human evaluation, it is exposed to predisposition
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and blunders and along these lines needs dependability.
●● It demonstrates distressing if the outcomes are not in support of yourself.
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Stages in the Appraisal Process: -
The appraisal process comprises six stages.
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Stage 1: Establish execution guidelines
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Execution guidelines are set to guarantee the accomplishment of departmental
objectives and targets and the association’s general technique and destinations. Norms
depend on the position, instead of a person. To be unmistakably perceived and seen
as even-handed, guidelines ought to stick to the very principles that apply to objective
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setting; that is, they ought to be “Brilliant:” explicit, quantifiable, feasible, pertinent, and
timebound. Execution norms incorporate both noticeable practices—the how—and the
normal outcomes that involve good work execution.
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Stage 2: Communicate execution norms

To be powerful, execution guidelines should be unmistakably conveyed and
perceived to be assumptions. Execution principles accept that an individual is skillful,
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so starting and remedial preparation ought to be considered in the presentation of

the executive’s interaction. In case there is a particular preparation period after which
a representative is thought to be skillful and performing to norms, that ought to be
imparted also.
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Stage 3: Measure execution

Execution that is communicated in numeric terms—for instance, cost, amount,
quality, idleness—is generally simple to quantify. Execution in the space of delicate
)A
abilities—for instance, correspondence, client assistance, and authority—is harder

to assess. Many organizations suggest utilizing an assortment of wellsprings of data
including individual perception, oral reports, and composing reports. They note,
nonetheless, that what is estimated is most likely more basic than how a viewpoint is
estimated. The emphasis ought to be on estimating what makes a difference instead of
(c
estimating what’s not difficult to quantify.

Stage 4: Compare real execution to execution norms

Notes
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In this progression of the examination cycle, real execution is contrasted with the
exhibition principles. Documentation should feature activities and results. These are the
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accompanying attributes of powerful documentation:
●● Precise
●● Explicit
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●● Reliable (covering the whole audit time frame)
●● Genuine (not founded on guess)
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●● Adjusted, including occurrences of both positive and unsuitable execution
●● Recorded as a hard copy
Stage 5: Discuss the appraisal with the workers
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This is by and large the progression in the process that is the hardest for
administrators and workers the same and it tends to be a test to oversee feelings
and assumptions. In any event, when execution is solid, there can be contrasts of
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assessment on the following activity. A huge contrast of assessment concerning
execution can make an inwardly charged circumstance. On the off chance that the
administrator is giving criticism and training consistently, this shouldn’t be the situation.
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A related point: If a representative has reliably horrible showing, the issue ought to
be tended to—restorative activity has taken—without really wasting any time and not
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conceded to a yearly survey. To recognize and get ready for contrasts of assessment,
the executives can request that representatives finish and present a self-assessment
preceding the evaluation meeting. A central issue to remember is that the supervisor’s
capacity to keep quiet and common will altogether affect the worker’s certainty,
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inspiration, and future execution.
Stage 6: Implement faculty activity

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The last advance in the appraisal process is the conversation and additionally
execution of any subsequent stages: a compensation or something to that effect—a
raise, advancement or desired improvement opportunity—or remedial activity—a
presentation plan or end. Note, however, that restorative activity that may assist a
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representative with accomplishing assumptions shouldn’t be postponed until the

following conventional examination. As execution holes are recognized, chiefs and
supervisors should set aside the effort to distinguish why execution isn’t meeting
assumptions and decide if the representative can meet assumptions with extra
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preparation as well as training. As referenced above, in the case of execution, with the
end goal that the end is justified, that move ought to be made without really wasting any
time also.
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2.4.2 Technical Analysis

Technical Analysis looks to decide if the requirements for fruitful charging of the
venture have been thought of and sensibly great options have been made as for area,
size and so on it is conveyed out to gauge whether the venture is solid and reasonable.
(c
Specialized investigation of an item is very fundamental to guarantee that important

actual office needed for creation will be adequate and the best conceivable option is

chosen to acquire them. A specialized investigation should audit the procedures to be

Notes
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applied, what’s more, ought to consolidate:
1. A portrayal of the item, including detail identifying with its physical, mechanical,
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and substance properties, just as the employments of the item.
2. A portrayal of the chosen to fabricate measure, showing nitty-gritty stream
graphs and introducing elective cycles which might have been thought of and
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the defense for the reception of the chosen measure.
3. An assurance of the plant size and creation plan.
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4. Determination of apparatus and hardware.
5. Recognizable proof of plants area and as an appraisal of its attractiveness as
far as its separation from crude material sources and markets.
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6. A plan of the plant design and a gauge of the expense of the erection of the
proposed structures and land enhancements.
7. An investigation of the accessibility of crude materials and utilities including a
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portrayal of physical and compound properties amounts required, current and
imminent expenses, terms of installment, area of wellsprings of supply, and
progression of supply.
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8. A gauge of work prerequisites, including a nitty-gritty separation of immediate
and aberrant work prerequisites, and the oversight needed for the assembling
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of the item.
9. An assurance of the kind and amount of waste to be discarded, along with a
portrayal of the squander technique, its expenses, and the fundamental leeway
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from legitimate approvals.

10. A gauge of the creation cost of the item.
The accomplishment of an endeavor relies on the business person making the best
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choice at the perfect opportunity. Beginning another endeavor is an extremely difficult

and remunerating task. A finance manager needs to make various choices, directly
from the origination of business thought, upon the beginning of creation. Henceforth,
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the distinguishing proof of the task to be attempted requires an examination of the

undertaking top to bottom. In this manner, a specialized and monetary investigation of
the task must be attempted.
1. The extent of a venture project

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●● Corporate target and methodologies

●● Promoting ideas and accessible data sources
2. Plan of the utilitarian and actual design

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●● All exercises to convey data sources and yields

●● Characterize relating speculation use
●● Cost during functional stage Plant site
(c
Analysis of specialized and designing viewpoints is done persistently when a task

is being inspected and figured. Different kinds of investigations are reliant and firmly

entwined with the specialized examination. Specialized examination is concerned

Notes
e
principally with:
Materials and data sources
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A significant part of the specialized evaluation is worried about characterizing the
materials and information sources required, indicating their properties in some detail,
and setting up their stockpile program. There is a personal connection between the
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investigation of materials and inputs and different parts of venture detailing, especially
those worried about area, innovation, and hardware.
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Materials and information sources might be grouped into four general classes:
(I) Raw materials — Raw materials (handled and/or semi-processed) might be

arranged into four sorts: (I) rural items, (ii) mineral items, (iii) animals and timberland
items, and (iv) marine items.
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(ii) Processed mechanical materials and parts — Processed modern materials
and parts (base metals, semi-handled materials, made parts, parts, and sub-gathering
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address a significant contribution for various enterprises. In concentrating on them the
accompanying inquiries should be replied: For the situation of mechanical materials,
what are their properties? What is the absolute prerequisite of the task? What amount
would be accessible from homegrown sources? What amount would be accessible
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from unfamiliar sources? How reliable are the provisions? What has been the previous
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pattern in costs? What is the probable future conduct of costs?
(iii) Auxiliary materials and production line supplies — Notwithstanding the

essential crude materials and handled modern materials and parts, and assembling
project requires different assistant materials and plant supplies, similar to synthetic
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substances, added substances, bundling materials, paints, stains, oils, oil, cleaning
materials, and so on the necessities of such assistant materials and supplies ought to
be considered in the achievability study.
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(iv) Utilities — An expansive appraisal of uses (power, water, steam, fuel, and so
on) might be made at the hour of info concentrate however a point-by-point evaluation
can be made solely after planning the undertaking regarding the area, innovation,
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and plant determination. Since the effective activity of a task relies upon sufficient
accessibility of utilities the accompanying focus ought to be raised wild directing the
information study: What amounts are required? What are the causes of supply? What
might be the possible accessibility? What are the probable deficiencies/bottlenecks?
What measures might be taken to expand supplies?
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Creation Technology
For assembling an item/administration regularly at least two elective advances are
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accessible. For instance:
●● Steel can be made either by the Bessemer interaction or the open-hearth

measure.
●● Concrete can be made either by the dry interaction or the wet cycle.
(c
●● Soft drinks can be made by the electrolysis technique or the synthetic strategy.
●● Paper, utilizing bagasse as the crude material, can be fabricated by the kraft

interaction or the soft drink measure, or the Simon cursi measure.

Notes
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●● Vinyl chloride can be fabricated by utilizing one of the accompanying
responses: acetylene on hydrochloric corrosive or ethylene or chlorine.
in
Decision of innovation
The decision of innovation is impacted by an assortment of contemplations:
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●● Chief data sources—The decision of innovation relies upon the chief
information sources accessible for the venture. Sometimes, the crude
materials accessible impact the innovation picked. For instance, the nature
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of limestones decides if the wet or dry interaction ought to be utilized for a
concrete plant. It could be underlined that an innovation dependent on native
sources of info might be desirable over one dependent on imported data
sources as a result of vulnerabilities describing imports, especially in a nation
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like India.
●● Speculation expense and creation cost—The impact of elective innovations
of venture expense and creation cost throughout some period ought to be
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painstakingly evaluated.
●● Use by different units—The innovation taken on should be demonstrated by
fruitful use by different units, ideally in India.
●● r
Item blend—The innovation picked should be decided as far as the absolute
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item blend produced by it, including saleable side-effects.
●● Most recent turns of events—The innovation embraced should be founded
on most recent advancements to guarantee that the probability of mechanical
out-of-date quality sooner rather than later, at any rate, is limited.
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●● The simplicity of retention—The straightforwardness with which a specific

innovation can be consumed can impact the decision of innovation. Now and
then an undeniable level of innovation might be past the absorptive limit of
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a non-industrial nation which might need prepared faculty to deal with that
innovation.
Item Mix
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The decision of item blend is directed essentially by market prerequisites. In the

creation of the greater part of the things varieties in size and quality are pointed to the
creation of a large portion of the things, varieties in size and quality are pointed toward
fulfilling a wide scope of clients. For instance, the creation of shoes for various clients.
m
It might very well be noticed that occasionally slight varieties in quality can empower an
organization to grow its market and appreciate higher benefits. For instance, a latrine
cleaner producing unit may by minor variety in crude material, bundling, and deals
advancement offer a high net revenue cleanser to customers in upper levels of pay.
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While arranging the creation offices of the firm, some adaptability regarding the item
blend should be looked for. Such adaptability empowers the firm to modify its item blend
in light of changing economic situations and improves the force of the firm to endure
and develop under various circumstances. The level of adaptability picked might be
(c
founded on a cautious examination of the extra speculation necessities for various

levels of adaptability.

Plant limit
Notes
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Plant limit (likewise alluded to as creation as limit) alludes to the volume or number
of units that can be produced during a given period. A few elements have a direction on
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the limit choice.
●● Possible ordinary limit (FNC): - Capacity achievable under typical working

condition
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●● Ostensible most extreme limit (NMC): - limit which achievable ensured by
plant provide
1. Innovative prerequisite — For some modern undertakings, especially in
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measure-type ventures, there is a sure, least monetary size controlled by the
mechanical factor. For instance, a concrete plant ought to have a limit of no less
than 300 tons each day to utilize the revolving furnace strategy; else, it needs to
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utilize the upward shaft technique which is appropriate for the lower limit.
2. Information limitations — In an agricultural nation like India, there might be
requirements on the accessibility of specific data sources. Force supply might
be restricted; fundamental crude materials might be scant; unfamiliar trade
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accessible for imports might be lacking. Imperatives of these sorts ought to be
borne as a top priority while picking the plant limit.
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3. Venture cost — When genuine information imperatives don’t get, the
connection between limit and speculation cost is a significant thought. Normally,
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the venture cost per unit of limit diminishes as the plant limit increments.
4. Economic situations — The expected market for the item/administration has
a significant bearing on the plant limit. On the off chance that the market for the
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item is probably going to be exceptionally solid, a plant of higher limit is best. On

the off chance that the market is probably going to be questionable, it very well
may be beneficial, to begin with, a more modest limit. On the off chance that
the market, beginning from a little base, is relied upon to develop quickly, the
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underlying limit might be higher than the underlying degree of interest further
augmentations to limit might be influenced by the development of the market.
5. Assets of the firm — The assets, both administrative and monetary, accessible
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to a firm characterize a breaking point on its ability choice. A firm can’t pick a
size of tasks past its monetary assets and administrative capacity.
6. Administrative strategy — The limit level might be compelled by legislative
arrangements. Given the level of extra ability to be made in the industry, inside
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the permitting system of the public authority might choose to circulate the extra
limit among a few firms.
Area and site

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The decision of area and site follows an evaluation of interest, size, and info
prerequisite. However, regularly utilized interchangeably, the terms ‘area’ and ‘site’
ought to be recognized. Area alludes to a genuinely wide region like a city, a modern
zone, or a waterfront region; site alludes to a particular land parcel where the venture
(c
would be set up.

●● The decision of area is affected by an assortment of contemplations:

Notes
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●● closeness to crude materials and markets
●● accessibility of foundation
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●● work circumstance
●● legislative arrangements, and different elements.
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2.4.3 Financial Analysis
Financial Analysis is characterized as the most common way of finding financial
realities about an undertaking and additionally a task based on a translation of
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monetary information. Financial Analysis likewise tries to check out the capital expense,
activities cost, and working income. The analysis conclusively sets up a connection
between the different variables of a venture and helps in moving the undertaker’s
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exercises. It additionally fills in as a typical proportion of significant worth for acquiring
an obvious comprehension of the task according to the financial perspective.
An analysis of a few financial devices gives a significant premise to esteeming
si
protections and evaluating administrative projects. Financial analysis is imperative
in the understanding of budget summaries. It can give knowledge into two significant
spaces of the executives—profit from speculation and adequacy of the organization’s
financial position.
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Inside administration accounts give data that is important to the reason for
control. The data is made accessible through bookkeeping information, which might
be shown as monetary and bookkeeping proclamations. A financial analysis uncovers
where the organization remains for productivity, liquidity, influence, and effective
utilization of its resources. Financial reports give the system inside which business
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arranging happens. They are the key through which a compelling control of a business
undertaking is worked out. It is the method involved with deciding the huge financial
qualities of a firm. It might very well be outside or inward. Loan bosses, investors, and
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venture investigation play out the outer examination. The inner analysis is performed by
different branches of a firm.
Financial Analysis is the method involved with assessing organizations, activities,

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financial plans, and other money-related exchanges to decide their presentation and
reasonableness. Regularly, the monetary examination is utilized to break down whether
a substance is steady, dissolvable, fluid, or adequately beneficial to warrant a financial
venture. Financial Analysis is utilized to assess monetary patterns, set monetary
approaches, fabricate long-haul plans for business activities, and recognize activities
m
or organizations for the venture. This is done through the blend of monetary numbers
and information. A monetary investigator will completely look at an organization’s fiscal
summaries—the pay proclamation, asset report, and income articulation. Monetary
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investigation can be led in both corporate money and speculation finance settings.
Quite possibly the most well-known approach to break down financial data is to
ascertain proportions from the information in the budget reports to think about against
those of different organizations or the organization’s authentic presentation.
(c

Meaning of Financial Analysis:

Notes
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Financial Analysis essentially manages the translation of the information joined
in the proforma fiscal reports of a task and the introduction of the information in a
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structure in which it very well may be used for a relative evaluation of the undertakings.
It is, in actuality, worried about the advancement of the financial profile of the task. Its
motivation is to see if the venture is sufficiently appealing to get reserves required for
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its different constituent exercises and whenever having gotten the assets, regardless
of whether the task will want to create sufficient financial qualities to accomplish the
targets for which it is looked to be executed. It bargains not just with the monetary parts
of a task yet in addition with its functional viewpoints. In that capacity, it is important to
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attempt such an examination on account of modern activities as well as on account of
non-mechanical tasks.
Analysis of budget reports has become exceptionally critical because of the
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far and wide premium of different gatherings in the monetary consequences of an
organization. As of late, the responsibility for most open organizations has become
wide-based. Various gatherings and bodies, including lenders, possible providers,
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debenture-holders, credit organizations like banks, mechanical money companies,
expected financial backers, workers, worker’s guilds, significant clients, financial
experts, speculation examiners, tax assessment specialists, and government have a
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stake in the monetary aftereffects of an organization. Different individuals take a gander
at the financial reports from different points. Various methods have been created to
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embrace analysis of budget reports to arrive at decisions about the financial wellbeing,
benefit, and productivity of an endeavor and to contrast a venture and other comparable
endeavors. The procedure of proportion examination is the main instrument of financial
analysis. It helps in contrasting the presentation of different organizations and judging
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their financial adequacy.
How Is Financial Analysis Done?

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Financial Analysis can be led in both corporate money and venture finance
settings. A financial analyst will completely look at an organization’s budget
summaries—the pay proclamation, accounting report, and income explanation. Quite
possibly the most well-known approach to break down financial data is to compute
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proportions from the information in the budget summaries to think about against those
of different organizations or the organization’s own recorded presentation. A critical
space of corporate monetary investigation includes extrapolating an organization’s
previous presentation, for example, net income or overall revenue, into a gauge of the
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organization’s future exhibition.
Utility of monetary and bookkeeping explanations:

)A
Financial reports assume an imperative part in the interior monetary control of an

endeavor. These oughts to, in this manner, the appropriately developed, dissected, and
deciphered by leaders, brokers, leasers, and financial backers.
The whole fate of an organization relies on the administrator’s capacity to choose

significant financial information with the end goal of preparation benefit capacity moves.
(c
Figuring out how to peruse budget reports is the principal fundamental component
in any money manager’s endeavor to gain financial administration abilities. The

adjustment of the elitism of stock possession to wide open proprietorship has required
Notes
e
an attending change in the whole course of announcing corporate financial outcomes.
The job of the executives in the question of planning of fiscal reports is to add
comprehension to these assertions, the decency of which is to be seen through the eye
in
of the client, while that of the bookkeeper is to close the correspondence hole and of
the evaluator to add validity to them. For advancing a decent monetary data framework,
bookkeeping advancements are of incredible financial data framework. Without these,
nl
correspondence with the financial local area would be troublesome, the premium
of present and future potential financial backers would not be served, the capacity
of the organization to raise extra capital would be disabled and the public authority’s
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administrative measures and arrangements would not serve the wellbeing of society.
However, a budget report uncovers short of what it hides, it gives the pointers of the
endeavor’s presentation during the year.
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Financial Analysis tries to highlight the huge realities and connections concerning
administrative execution, corporate proficiency, financial qualities and shortcomings,
and reliability of the venture.
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Make an undertaking gauge
When the undertaking has been considered suitable through the money-saving
advantage examination measure, a gauge should be done toward the beginning of the
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project and should be possible by utilizing the accompanying appraisal models:
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●● Time and materials. This kind of gauge is helpful when it is hard to appraise
the total extent of the task, thus the emphasis is set on time spent and
materials utilized
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●● Fixed cost estimate. This is an all-out fixed cost for the venture, paying little
mind to the measure of exertion applied to the task
●● Save analysis. This is the place where some financial plan is saved for
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unanticipated overwhelms or dangers.

●● Cost of quality. This is the measure of cash it will take to guarantee the task
is done well; checking for bugs or blunders during the venture, and adjusting
them, far beyond the time and materials costs
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Screen the task progress

The task administrator needs to distinguish when costs stray from the spending
plan and deal with those deviations, by consistently contrasting the cash spent
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and the planned sum, and announcing this back to key stakeholders. Establishing a
comprehension of how this advancement will be estimated and detailed is significant.
●● Procured esteem investigation. A broadly utilized technique by project

)A
chiefs, EV takes into consideration the periodical examination of the planned

expenses with the real expenses during the venture. It joins the planned
exercises of the undertaking with point-by-point quotes for every movement
and makes arrangements for the halfway consummation of an action, where a
portion of the related expenses have been paid, and others not.
(c
●● Spending plan timeline. Costs are connected to extend achievements, with

every movement having a beginning and end date. Subsequently, it is feasible

to decide how much cash will be spent by a specific date during the venture.
Notes
e
This takes into account project funding to be stored in essential stretches all
through the task with the goal for funds to be made accessible, and oversaw,
against the exercises plan.
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●● Timetable difference. The task chief has to know whether the venture is inside
the financial plan against the time plan. The contrast between the arranged
timetable and genuine advancement is the SV. The SV is the contrast
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between the EV and the arranged worth (PV), displayed as SV = EV − PV. If
EV is beneath what was planned, the SV will be negative, which implies the
venture is running delayed.
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The post-project investigation
When the venture is finished, a post-project financial analysis should happen
to decide how productive it was. Net revenue estimates the benefit of an undertaking
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comparative with its income, and has three principle overall revenue metrics:
●● Net revenue. This is complete income less the task costs, similar to time and
materials.
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●● Working net revenue. These actions income fewer undertaking costs with
working costs.
●● r
Net overall revenue. This is income less all costs, including interest and
charges.
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When contrasting the genuine benefit or loss of the venture against the underlying
assessment that was done toward the start of the task, differences might become
obvious. A change examination is the examination of the distinction between what
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occurred rather than what was arranged and concentrates on why these differences
occurred.
If the venture was considered a monetary disappointment with a negative overall

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revenue, it is simple for project directors to fall into either of these fallacies:
The ‘sunk expense false notion’. This is when project directors or partners accept
that, if more cash is put into a bombed project, it will recuperate. Notwithstanding, this
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commonly prompts monetarily calamitous outcomes.
The ‘responsibility paradox’. This is the place where individuals are so dedicated
to a venture that they won’t concede out, to the purpose of harming their accounts,
notoriety, and friends.
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Effective undertaking supervisors realize when to concede that a task is a

monetary misfortune, and gain from the disappointments and slip-ups. Many task
supervisors direct an ‘examples learned’ audit toward the finish of each undertaking for
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this very explanation. The information and experience acquired from past activities will
demonstrate exceptional importance to the accomplishment of tasks to come.
Realizing how to do a financial investigation previously, during, and after an

undertaking is a key range of abilities that project supervisors in each area of business
(c
need if they wish to settle on strong task suitability choices, and guarantee the venture
is completed on schedule, inside scope, and inside spending plan.

1.4.4 Profitability Analysis

Notes
e
The fundamental point of a business is to acquire benefits. In this manner, an
organization needs to draw in and hold those clients who are beneficial. This is known
in
as profitability analysis or client benefit analysis. In Simple terms – An analysis of
the cost and income of the firm which decides if the firm is benefitting is known as
profitability analysis.
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At the point when an organization is incepted, one of the sole motivations behind
it is to make benefits. Fundamentally, to acquire more than you spend is the thing that
each entrepreneur needs for his organization. In this way, to survey the development of
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your business, cautious review on benefits is significant, and that is quite self-evident.
Nonetheless, the subtleties that furtively lie under different budget summaries, will give
you a genuine image of your organization’s benefits.
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Breaking down the benefits, which is fundamentally the cash staying from the
capital in the wake of taking away every one of the overhead expenses, will assist you
with monitoring your business’ presentation. Benefit investigation permits organizations
to augment their benefit. In this way, bringing about augmenting the chances that
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business can exploit, to keep filling in an incredibly unique, serious, and energetic
market. Productivity investigation assists organizations with distinguishing development
openings, quick/sluggish stock things, market patterns, and so forth, at last, aiding
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chiefs, see a more substantial image of the organization in general.
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Each financial backer needs a higher pace of profit from their speculations
notwithstanding financial backers, even the workers are expecting higher wages, and
leaders need to get their advances and interest. Today in the business climate, the
benefit is the spine of each industry for directing the business activities
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The 20-80 promoting rule says that 80% of the benefits show up from 20% of
clients. This standard as of late got a change from Mr. Sherdan who is a known
promoting expert. As indicated by Sheridan, the rule can be altered as 20-80-30,
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wherein 80% of the benefits come from 20% of the clients and 30% of this benefit is
spent in dealing with the unbeneficial clients!! A frightening disclosure.
Moreover, it isn’t required that the top 20% will contribute 80% benefits. This is
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because they also have an expensive thought. A great deal of the benefits is spent
in offering administration to the top 20%. Besides, the top 20% likewise get the most
limits. The more modest clients then again don’t need an excess of administration, they
don’t get a lot of limits and they fork over the required funds. Along these lines when
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we analyze productivity versus cost versus income, we discover that both the recurrent
clients and once clients are similarly significant. This is the explanation that soaked
ventures commonly follow new client procurement rather than focusing on existing
clients. What’s more, this is additionally the justification for why mechanical items
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producers by and large stick with their little client bunch instead of going all out for new
client obtaining.
In this manner, the inquiry is, what makes a productive client? A beneficial client
is an individual, family, or organization that after some time yields an income stream
(c
that surpasses by a satisfactory sum the organization’s expense stream of drawing in,
selling, and adjusting that client.

Even though consumer loyalty is estimated in many organizations, estimating

Notes
e
individual client profitability is not a known practice. For instance – Several banks
believe that estimating client benefit is an exceptionally dreary cycle.
in
Profitability Analysis fundamentally has an emphasis on three standards:
●● Client Profitability Analysis – Which computes income coming from clients less
all expenses
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●● Client item Profitability Analysis – This condition computes the benefit per item
and client.
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●● Expanding organization Profitability – which builds the upper hand of an
organization.
●● Carrying out Total Quality Management – which expands the absolute quality.
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1. Client Profitability Analysis:
The client profitability analysis is based on action-based costing and helps in
ascertaining the income coming from clients while simultaneously eliminating all
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expenses from it in this manner computing the genuine benefit per client. The CPA is a
vital device for profitability analysis and is as often as possible utilized.
2. Client item Profitability Analysis:

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Firms like HUL and P&G have a wide assortment of item portfolios. So, what might
be their advantage per client per item? To compute this, the profitability analysis can be
utilized. To peruse more with regards to it click here. This profitability analysis technique
can be utilized to discover both – beneficial clients just as productive items.
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3. Expanding organization Profitability:

Organizations don’t have to create items with high worth themselves, yet
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additionally, items which are serious in the market as a result of their estimating. As
remarked by Michael watchman – Cost administration is one of the main practical upper
hands a firm can have. In this way, an organization needs to deal with its expense
which will accordingly bring its benefit. Besides, any benefit the firm has, ought to be
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viewed as a client advantage. Creating client benefits will bring about expanding the
general organization’s profitability.
4. Carrying out Total Quality Management:

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The profitability of the firm additionally relies upon its capacity to ceaselessly work
on its items and cycles. Total Quality Management includes everybody and the idea
accepts that with an association of the top administration, the labor force, providers and
even clients, the general yield of the firm can be expanded, and accordingly the firm will
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consistently meet clients’ assumptions consequently completely fulfilling them and, in

this way, expanding the general profitability of the firm.
Accordingly, profitability analysis prompts the firm to find the regions where it
is beneficial and where it isn’t. It can assist the firm with choosing where it can bring
(c
down the expense and where it can expand esteem. Hence eventually, we get to the
heart of the matter referenced toward the beginning of the article. The thought process

of a business is to procure benefits and profitability analysis assists the firm with
Notes
e
accomplishing a similar point.
Importance of Profitability Analysis:
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While benefit examination gives entrepreneurs a 360° perspective on your
organization’s benefits, various proportions that determine productivity proportions play
various parts to play. How about we investigate the significance of these proportions:
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●● Net revenue:
It is a proportion of the benefit acquired on deals which means the benefit is a
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piece of the complete income procured, after deducting the expenses of products sold.
This report is critical as it covers the administrator and office costs and incorporates
the profits which are to be dispersed to individual investors of the organization. Higher
the net benefit, the organization will be more beneficial. Net overall revenue is likewise
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used to evaluate the proficiency of cost the executives. In this way, on the off chance
that the proportion is low, the entrepreneur can distinguish these problem areas and
further develop buying and creation as far as economy and viability.
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●● Net overall revenue:
It is the last proportion that approves the general exhibition of an organization.
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Any unsettling influences in different proportions will affect the net overall revenue, at
last, subsequently, this report is considered as perhaps the main ratio. A low speedy
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proportion would imply that deals have been low in a specific period, ultimately affecting
the net revenue. This examination will assist financial backers with recognizing
the breaks in the manner they work and make opportune choices to work on the
organization’s exhibition.
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●● Benefits on value:
Benefits on value are the level of the income, which investors receive as a trade-off
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for the ventures made towards the organization. The higher the ROE, the higher will be
the profits investors will get. This triggers more financial backers for your organization
eventually supporting staying with your above water on the lookout.
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●● Benefits on capital utilized and return on resources:

These profits measure the proficiency of an organization using its resources. By
assessing Benefits on capital utilized, the administration can make choices that will
assist them with limiting the failures. Higher the Benefits on capital utilized, higher will
be the proficiency in the creation cycle of the organization.
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Return on resources is a proportion of each penny of pay acquired on each penny

of the resource possessed by the organization. Like Benefits on capital utilized, return
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on resources likewise assists the administration with dealing with the use of resources,
perseveringly.
Productivity proportion examination:

Analysts and financial backers use benefit proportions to quantify and assess
(c
an organization’s capacity to create pay (profit) comparative with income, accounting

report resources, working expenses, and investors’ value during a particular time frame.

They show how well an organization uses its resources to produce benefits and worth
Notes
e
to investors.
A higher proportion builds up that the organization is on the beneficial side and is
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producing sufficient income, benefit, and income. This proportion examination proves to
be useful while doing a relative investigation with your rivals on the lookout or even with
past periods, to comprehend the current monetary situation of your firm.
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How about we plunge further into getting what these categorizations mean:
●● Margin Ratios:
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To comprehend your organization’s monetary status during a particular period,
comprehend your organization’s capacity to change over deals into benefits. That is
the thing that edge proportion addresses at different levels of estimation. A portion of
the models are net revenue, working overall revenue, net revenue, income edge, EBIT,
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EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), NOPAT (Net
Operating Profit After Tax), working cost proportion, and overhead proportion.
●● Return Ratios:
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As the name proposes, in return proportionally only the organization’s capacity
to create gets back to its investors. Models remember to return for resources, return
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on value, cash return on resources, return on obligation, return on held income, return
on income, hazard changed return, return on contributed capital, and return on capital
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utilized.
Benefits of Profitability Analysis:

The one significant goal of a business is to procure an acceptable profit from
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contributed funds. Profit being a flat-out figure neglects to show the ampleness of
pay or changes in efficiency resulting from the monetary and functional presentation
of the business. To examine the benefit position intends to break down the general
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productivity of the business. The benefit of the firm can be estimated by its productivity
proportions.
Benefit proportions can be separated into two sort’s edges and returns, the
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proportion that shows edges address the company’s capacity to interpret deals
into benefits at different phases of estimation. And returns address an organization
by and large capacity and proficiency in producing returns for its shareholders.
The examination of budget summaries is to get a superior comprehension of the
uncompromising stances and execution. Monetary investigation can be embraced
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by the board of the firm, or by parts outside the firm. Fiscal summaries furnish
entrepreneurs with the essential apparatuses for determining how well their activities
perform consistently. These assertions are concise reports intended to sum up
)A
monetary exercises for explicit periods.

Socio-economic appraisal, henceforth alluded to just as ‘appraisal’, is tied in with
(c
getting a decent arrangement from public use. It is a critical device for accomplishing
an incentive for cash and fulfilling public responsibility necessities. It is an orderly cycle

for looking at elective employment of assets, zeroing in on appraisal of requirements,

Notes
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goals, choices, costs, benefits, chances, subsidizing, reasonableness, and different
elements applicable to choices. Appraisal is:
in
●● Intended to help with characterizing issues and discovering arrangements that
offer the best incentive for cash.
●● A perspective uses proposition through, directly from the rise of the
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requirement for an arrangement, program, or task, until its execution.
●● The set-up vehicle for arranging and supporting public use approaches,
projects, and tasks.
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The extent of appraisal is exceptionally wide. This implies it ought to:
●● Cover every one of the expenses and advantages affecting NI occupants

●● Survey not just the expenses and advantages tumbling to the public area,
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yet in addition, those influencing different areas in NI like the private and
intentional areas.
●● Assess the full scope of effects, including for instance financial, social,
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ecological, and distributional impacts.
Great appraisals prompt better choices and value for money. It works with the
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great venture of the board and task assessment. Evaluation isn’t discretionary; it is a
fundamental piece of good financial administration, and dynamic and responsibility.
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Its standards should be applied, with proportionate exertion, to all spending choices,
including little consumption.
When is a socio-economic appraisal required:

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The standards of appraisals apply to all choices and propositions including

consumption or assets. They apply similarly to approaches, projects, and ventures.
Do requires the standards of economic appraisals to be applied, with suitable and
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proportionate exertion, to all choices and propositions for going through or setting aside
open cash, including EU reserves, and some other choices or recommendations that
include changes in the utilization of public assets.
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For instance, an examination should be applied regardless of whether the pertinent

public consumption or assets:
●● include capital or current spending, or both.

●● are big or little.
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●● are above or beneath appointed cut-off points.
Instances of choices that require evaluation:

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●● strategy and program improvement; choices fair and square and sort of
administrations or different activities to be given, or on the degree of guideline.
●● new or substitution capital undertakings; choices to embrace a venture, its
quality, scale, area, and timing, and the level of private area association.
(c
●● use or removal of existing resources; choices to sell land, or different

resources, or migrate offices or activities, regardless of whether to contract out
or market test administrations.
●● determination of guidelines; choices on the principles for wellbeing and

Notes
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security, ecological quality, manageability, or to adjust the expenses and
advantages of administrative norms and how they can be carried out.
in
●● acquisition choices; choices to buy the conveyance of administrations, works,
or merchandise, ordinarily from private providers.
Start applying for appraisals from the get-go in the incubation of any suggestion
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that has use or asset suggestions. The avocation for causing any consumption
whatsoever ought to be thought of. Examination ought to be applied from the rise of
a need directly through to the suggestion of a specific game-plan. It should keep on
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being applied, where pertinent, in the ensuing appraisal of offers from the private area
acquired through an offering cycle, until an agreement is granted.
Review appraisals, that is, making an insincere effort of evaluation after
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choices have been taken or used submitted, is terrible administration practice and is
inadmissible. Examination ought not to be utilized just as the resources to refine the
subtleties of a foreordained alternative. It should not be utilized to give present hoc
defines on choices that have effectively been taken, use that has as of now been
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submitted, or projects that have as of now initiated.
Endorsements on a fundamental level ought not to be without a doubt, nor
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should responsibilities to financing be given (for instance, through a letter of the deal),
preceding the fruition of a good examination and business case. Evaluation reports
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contain data on the general benefits of various likely speculations. Divisions should
utilize the aftereffects of examinations as a contribution to the prioritization of their
spending plans.
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Proper and proportionate exertion:

Appraisals themselves go through assets. The work that ought to delve into
it and the detail to be considered is a matter for made-to-order judgment, yet the
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overall rule is that the assets to be dedicated to evaluation ought to be concerning

the scale or significance of the targets and asset results in see. Choices on little uses
need moderately little evaluation, while those with significant spending suggestions
require huge assets to be given to appraisal. Comparable standards apply to ex post-
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assessment.
Judgment of proportionate exertion should think about the entirety of the assets
engaged with a proposition. In any case, specific weight ought to be given to the
absolute open assets required, since these public bodies need to be responsible to the
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citizens. In this unique situation, public assets incorporate:
all consumptions by offices and their supported bodies, including direct spending
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and all types of monetary help
●● European Union (EU) subsidizing

●● Worldwide Fund for Ireland (IFI) subsidizing
●● Lottery Fund monies
(c
●● region chamber spending

It is likewise significant that the examination is proper as the right technique is

Notes
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utilized and custom-fitted to suit the case close by because there are varieties in how
the means of evaluation apply in various spending regions. Passing judgment on this
involves insight and departmental financial experts ought to be counseled where there
in
is any uncertainty.
Independent of the measure of exertion applied, examinations ought to ordinarily
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look to assess every one of the expenses and advantages emerging from a proposition,
regardless of whether they tumble to the public area or different areas of the economy.
This is because the overall point is to utilize every one of the assets in the economy. Be
that as it may, a few examinations are more limited in scope.
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The appraisal is a perspective that is vital in any event, when managing limited
quantities of consumption or assets. It is consistently proper to build up the requirement
for a proposed use or change of asset use, think about elective choices, and weigh up
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the expenses and advantages of the other options. In any case, limited scope choices
don’t need as much examination or assessment as bigger scope choices. The segment
on examination and assessment of little consumptions gives down-to-earth counsel on
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the best way to choose the proportionate evaluation exertion when managing little uses,
including the utilization of ace formats.
Economic Appraisal and financial assessment are various names given to

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investigate and concentrate many that gauge the expenses of an activity against the
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advantages that it gives. The contrast between them is that examination is done before
a move is made, to help in choosing what can anyone do by assessing the impacts
it is probably going to have; and assessment is done after the move is made, to
screen what impacts it had. Be that as it may, this differentiation is regularly neglected
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and these marks are utilized reciprocally. As of late, the articulation ‘assessment’ has
become predominant in the writing on wellbeing financial aspects, however, ‘evaluation’
is utilized here because it better depicts the sort of examination principally utilized in
wellbeing financial matters.
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In financial aspects all the more, by and large, this sort of examination is
called money-saving advantage investigation. Be that as it may, as will be clarified
underneath, in wellbeing financial aspects this term is frequently held for a specific
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procedure identified with the estimation of social proficiency. It is an organized way to

deal with assistance chiefs pick between elective methods of utilizing assets. Its point
is to quantify proficiency in regions where there is a public association and there are no
market-based measures accessible to pass judgment on issues of effectiveness. On a
basic level, value ought to be a similarly significant part of each monetary evaluation,
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however, there are fewer proper methods accessible to examine this.
Planning an appraisal:
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An appraisal can be considered as a cycle with five phases: characterizing the

issue to be dissected; indicating elective methods of managing the issue; surveying
the expenses and advantages of the other options; summing up the outcomes; and
choosing.
(c
The issue is consistently the beginning stage of an examination and should be

characterized obviously. This point might appear glaringly evident, yet it isn’t the
unexpected situation that the motivation behind why examinations are done is that there
is an answer accessible for an issue. That arrangement is then wrongly seen as the
Notes
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beginning stage. For instance, evaluating the expense viability of another medication
ought to be reformulated as an examination of is the savviest approach to managing the
issue that the new medication is authorized for. This might affect the subsequent stage,
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characterizing choices, which implies various methods of managing the issue. The most
pertinent option ought to be picked, whatever it is, for instance, another medication, one
more kind of treatment, routine consideration without explicit treatment or sit idle.
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Evaluating expenses and advantages has three phases: separating expenses and
advantages, which means drawing up an unmistakable rundown of the expenses and
advantages that are to be remembered for the examination; estimation, which means
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acquiring information that depicts the degrees of expenses and advantages for the
various other options; and valuation which means changing over this information into
values. For instance, asset use information ought to be changed over into costs by
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applying to that information the worth of the assets.
Summing up the outcomes implies joining the information on expenses and

advantages into the outcomes that will be introduced to whoever will settle on the
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issue that has been assessed. Precisely what structure this will take relies upon the
sort of evaluation that is completed - see segment 5.3 - and how vulnerability over the
outcomes is managed - see segment 5.6.
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The last stage is the point at which a choice is taken dependent on the examination
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by somebody who must make it, which ought not to be the appraiser. Appraisers
regularly suggest a choice dependent on their examination or infer such a proposal,
which is authentic if choice principles are known. For instance, assume that there is an
acknowledged choice standard that on the off chance that the financial advantages of
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a wellbeing intercession surpass its money-related expense, it ought to be given to the

populace. A finding, for a specific intercession, that its advantages are assessed to be
more noteworthy than its expenses would legitimize a proposal that it ought to be given.
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A significant part of the connection between examination and choice is that the
extent of the evaluation ought to be reasonable, incorporating whose perspective is
to be taken. Various entertainers in the wellbeing framework, for instance, patients,
wellbeing experts, and government may have various interests and concerns, so what
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is proficient according to one entertainer’s perspective may not be so from another. This
decides key components of an evaluation, for example, which kind of examination is
to be utilized, what comprises an advantage and an expense, and how these are to be
esteemed. Most examinations will take the perspective of the wellbeing administration
since that epitomizes the majority of those entertainers who are authentic chiefs
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concerning which medical care is to be given. Notwithstanding, examinations may

likewise accept the perspective of society in general, since that incorporates both the
beneficiaries of medical services and the funders of it. Whatever perspective is taken
)A
on, those detailing an examination ought to be express with regards to which it

1. The initial stage of appraisal is is______________.
(c
2. ____________ Analysis will help in determining the requirements for the fruitful
changes of the venture that have been made by the business.

3. _____________ is considered as a modern undertaking that helps in measure type

Notes
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ventures and includes least monetary size controlled by the mechanical factor.
4. A strategy that have been adopted by legislative arrangements giving the level of
in
extra ability to be made in the industry is known as___________.
5. A profitability analysis that compute the income coming from clients less all expenses
is known as______________.
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Summary
●● The present process has been utilised as a central consideration for professional
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advancement.
●● The appraisal process will help in recognising the strength and shortcomings of a
representative.
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●● The appraisal process will support the labour arrangement and will offer productive
input to the workers.
●● It legal analysis will help in determining radius of hardware and assurance of plant
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size.
●● Financial analysis will help in determining the financial relatives and undertaking of
the project.
●●
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The profitability analysis helps in determining the income and cost of the form that
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helps in evaluating the profit of the business.
Activity
1. What could be the different analysis that are very important in a project?
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2. According to you what is Project appraisal?

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1. What is profitability analysis and explain different profitability analysis?

2. What are the importance of profitability analysis?
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3. What should be necessary specialised investigation of technical analysis include?

4. What is item mix and plant limit in technical analysis?
5. What is social economic appraisal and why is social economic appraisal required?
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Glossary
1. Auxiliary – auxiliary materials will include essentials such as oil, cleaning materials
and other necessary assistant materials.
)A
2. Utilities- these are all the essential appraisal of uses that could include water, power
and fuel.
3. Possible ordinary limit- it refers to the capacity achievable under typical working
conditions.
(c
4. Ostensible most extreme limit- it is the limit which helps in achieving and insured
plant provide.

5. Performa- it is a format that helps in determining the financial requirements of the

Notes
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project.
Further readings
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1. Book- project appraisal and financing.
Author- Ambarish Gupta
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Answer
1. Established execution guideline.
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2. Technical
3. Innovative prerequisites.
4. Administrative strategy
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5. Client
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Unit - 2.5: Ownership Structure

Notes
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Objective
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●● To value different types of ownership structure.
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●● To identify different sources of financing.
●● To determine capital market instruments
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A proprietorship is a business run by a single person. In the past, most businesses
used to be run as a proprietorship. Nowadays, most businesses in smaller towns
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and cities are run as Proprietorship. There is a certain qualification required to start a
proprietorship. Anyone can start a sole proprietorship in India. To start a Proprietorship
business in India, he must be at least 18 years old and should be an Indian citizen.
si
There is no minimum investment required to start this business, and it can be started
even with Rs.1 as the initial investment. Sole Proprietorship is a single-man business
organization, who fully owns and manages the entire business under its supervision.
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And in a sole proprietorship, business and person are the same and there is no
legal entity in that. A sole proprietorship is a simple form of a business without any
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legal registration and it’s a suitable choice to run a small or medium scale business
or industry. In a proprietorship, the personal income tax is paid from the profit of his
business by a single owner. It is the easiest method to start or establish a small-scale
business as it doesn’t involve many government rules and regulations. This type of
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business is very common in the sectors like consultants, medical clinics/pharmacies,

self-contracting firms, freelancers, other self-employed individuals, etc. And many
individuals do their business under their name and it doesn’t require any unique name
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or anything. It’s a less regulated business from the government/legal side.
And government involvement is very less in this type of business. Therefore

the government security is a bit less as they are not registered anywhere. So, full
responsibility is for the one who manages the entire business. Those who are running
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their own business must fill-up the schedule C form when filing their annual return tax.
Later small sole proprietorship changed into another complex business structure such
as LLC, PSC, corporation, etc. And if the business grows gradually, they will start to hire
employees to their company and make a successful business firm. Simply we can say
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that sole proprietorship is single ownership. There is no sharing of losses and profits.
It’s a one-man capital. A sole proprietorship has unlimited liability and fewer legal
formalities. And the whole business is under the control of a single person. The sole
)A
proprietorship has minimum compliance requirements. Therefore their agreements are

confined to yearly filings for sales, services, taxes. Sole ownership business is so easy
to begin and set up a business module within 15-20 days with the help of the pan card.
And one needs to have GST registration in place. A sole proprietorship is economical as
it requires minimum compliance with no requirement of any auditor.
(c
Apart from simplicity, sole proprietorship has some advantages and disadvantages:

Advantages:
Notes
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1. Cheap and easy:
in
A sole proprietorship is so cheap and easy. It is so simple and less expensive to
start a business. And the process of starting a new sole proprietorship is varying from
country to country, state to state, medium to medium. In all ways, it requires zero capital
to start and minimum paper formalities. And it requires the minimum cost to maintain
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and repair. The only work is to get permission or a license to start your business. It may
depend upon the individual country or state.
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2. Limited government rules and regulations.
A sole proprietorship consists of very little regulation from government authorities.
Simply we can say that a sole proprietorship can be started without any registration
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under any government authorities but adhere must be a required license.
3. Personal income:
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The income from your business is calculated as your income. Nothing will go out
for any other work apart from the maintenance of your business. All income generated
belongs to the proprietor himself.
4. GST relaxation: r
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In a sole proprietorship, a person gets an exclusion from GST. And GST is
mandatory only for a business that has turned over greater than 20 lakhs.
5. Easy to close/stop.
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Single proprietorship can be closed at any time, whenever you require. You don’t
need any permission from anyone or require any legal paper formalities to close your
business.
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6. Direct incentives/encouragement.
Sole proprietorship provides direct incentives as there is a direct relationship
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between efforts and rewards. So, incentives are based upon the owners’ interest and
hard work. If the hard work or efforts are high, there is more income or rewards in his
business. Therefore there is a high profit in his business. Hard work in a single-owned
business is directly proportional to the profit of that business.
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7. Easy modification:
All the modifications can be done in sole proprietorship based on owners’ decisions
only. No one else can take part in it. All the decisions from top to bottom can be taken
)A
by the owner only. No need to consult any others for any opinion. Therefore, there is
no wastage of time. And quick decisions and immediate action can be generated. It
provides easy changes in business concerning the environmental changes. Simply we
can say that sole proprietorship is more flexible to carry out.
(c

8. Direct contact/individuality.
Notes
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All the actions are done personally. He is the only one who deals with the customer
at every time. There is no second or third party in between. There is no sales team to
in
meet sales. All can be done by the owner itself. He is the one who contacts customers
directly with customers.
9. Privacy:
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Privacy is much carried out in sole proprietorship. And there are no legal formalities
to provide accounts statements or any other paper. Everything should be under privacy
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and secrecy. All the decisions are carried out by the proprietor, so that can maintain
secrecy in his business. You can check all your financial accounts by yourself.
10. Controlling:
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All the actions and decisions are controlled by proprietors only. He has complete
freedom of action.
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11. Tax advantages:
Only personal income tax can be paid from the profit governed by the business
entity. The business itself doesn’t want to pay any tax. And he can be free from paying
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an unemployment tax for himself.
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12. Suitable for small business:
A sole proprietorship is most suitable for starting a small-scale business as requires
only less capital and personal attention.
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Disadvantages:
There are lots of disadvantages related to a sole proprietorship:
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1. Unlimited personal liability

Liability is one of the major limitations of a sole proprietorship. The owner or
proprietor himself is responsible for all the losses on his business. And he is responsible
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to make up for his liabilities. If he doesn’t have enough capital from his own business,
he will go for personal loans or other methods to extend his business in a large volume.
If he is facing the same situation and has a huge loss, he is willing to pledge his home,
car, or any personal land to cover his debts.
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2. Less protection
As you are not registered under any government or state, you will not get any
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security or consideration from the state or government. When it is registered under

any state, it has some security. when it is not registered, you have no support from the
stateside when it comes to liability.
3. Limited resources
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The sole proprietorship has limited resources. So due to these limited resources,
he can only arrange a limited capital which is not suitable for large-scale business.

4. Limited skills
Notes
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Sole proprietors have very limited skills. He cannot perform the entire task. He may
fail in multi-task. He cannot perform a task as an experienced employee. Maybe he is
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good at purchasing, but if he doesn’t have any selling skills, it may lead to loss. So in a
sole proprietorship, all the activities are performed by the sole proprietor.
5. Less growth
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As sole proprietorship has low capital and resources, the chance of business
expansion is a bit difficult. As he is the one who does all the activities may not get
enough time to market his business. The only platform that he can expand his business
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is through digital marketing or online platforms. And physical or direct marketing is
limited in a sole proprietorship.
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6. Limited business life
As the proprietor and owner are the same, there is a chance of shutting down the
firm permanently. That means if something happened to the owner or any death, due to
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huge debt, or due to bankruptcy, a business may come to an end. That is why it has a
short span of life in all senses.
7. Fundraising difficulty
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As it is single ownership, it is very difficult to raise the fund. And sole proprietorship
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doesn’t have any guarantee, it may end at any time, and there is no link with any other
entities, it is very difficult to get funds from secondary or third parties.
Registration of sole proprietorship:

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There are a few procedures to follow for registering a sole proprietorship.
1. Pan Card: There must be a par card associated with the proprietor. If not, just
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apply for a pan card and get it as soon as possible.

2. Provide a unique name for your business.
3. Apply for a bank account in the name business. So that all the business-related
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transactions can be done through to your business account.

4. There is not no registration required to start a sole proprietorship. But some
common registrations are required.
5. Businesses need to get a registration certificate under the hops and
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establishment acts of the state.

6. Business must be registered under GST if the annual turnover exceeds greater
than 20 lakh.
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Documents Required:
The following documents are essential for the registration of a sole proprietorship.
1. ID Proof
(c
2. Pan Card

3. Registered Office Proof

Notes
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4. Bank Account Details
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Compliants Required:
●● Must file an annual income tax return.
●● Must file a GST return, if registered under GST.
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●● Must File TDS, if liable for a tax audit.
Time to taken for registration:
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Once we submit the bank details, registration certification under the shop and
establishment act of respective states, and GST registration, it will take 10 days of
processing depending on the authority in respective sections or departments.
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How to convert sole proprietorship into LLC:
To convert sole proprietorship into LLC, we need to follow the following procedures.
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●● File the documents related to the business to the state secretary.
●● Refile the company name as (doing business as”) to maintain your company
name.
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Obtain the company’s employee identification number (EIN) from the IRS
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(Indian Revenue Service)
Conclusion:
The sole proprietorship is a single-owned running business start with a zero capital
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investment. The sole proprietorship has many features with its pros and cons. They are:
it’s a single ownership establishment, individual risk-bearing, no need of legal entity,
there is much freedom to operate in anyways, unlimited liability, one-man control and
it’s small in size, lack of business continuity. So proprietorship has its own merits as well
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as demerits.
2.5.2 Partnership
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A partnership is a formal agreement between two or more parties or business

individuals, to manage and operate a business and share the profits from that business.
In this partnership method of business, all the liabilities and shares are equally divided
between them whereas, in another type, liability is limited between them. A partnership
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firm is either authorized by a legal platform or without any legal business entity. A
partnership business or firm is started with a mutual interest and mutual understanding
between the parties. So, whatever is happening in the firm internally or externally, both
parties have equal rights in it.
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Types of Partners:
1. Active partner:
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An active partner runs the daily activities of the entire business. This type of partner
contributes capital to the business. They have an equal share in profit and loss. If the
active partner wants to resign/retire, he must provide prior notice. He is responsible for

the liabilities of the business even after his resignation/retirement unless he provides
Notes
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public notice.
2. Sleeping partner:
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The sleeping partner is not involved in any type of daily managerial activities. He
will be having huge investments in business, but not active in daily business activities. If
he wants to retire, then there is no need to give prior notice.
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3. Secret partner:
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The secret partner is the one whose partnership is unknown to the public. He never
participates in daily activities and business meetings. He is involved in providing capital
and also shares profit and loss of business and also has unlimited liability.
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4. Nominal partner:
The nominal partner will only be having a name in partnership. He does not provide
any capital, thus profit and loss need not be shared with him. But he will be liable to
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outside people and others for what his partners have done.
5. Partner by Estoppel:
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Partner by estoppel is nothing but just claiming the partnership by a word, which is
he will not be an actual partner but will be acting like one.
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6. Partner in Profits Only:
Only profit is shared and will not be responsible for any liabilities. He will only deal
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with all acts of profit.
7. Minor Partner:
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A minor partner is the one who is admitted to the advantage of a partner if other
partners give permission. He will be sharing the profits but his loss will be limited to his
share in the business.
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Types of business partnership:

There are four types of business partnerships.
1. General partnership
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2. Limited partnership
3. Limited liability partnership
4. Limited liability limited partnership.
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A partnership has multiple owners without any legal business entity and no need
to register with the state. You can say that you are in a partnership where you come
up with a mutual understanding with one or two parties or individuals without filing
any state paperwork. But in some cases, a legal filing with the state is required. In
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partnership business, the profit and loss are running over through owners personal
income for tax purposes. Similarly, debts and liabilities are also running over through

the owner’s income. Partnerships generally result in low taxation compared to other
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high-class business firms.
1. General partnership:
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It is a basic form of partnership. And the formation of a business entity with a
state doesn’t require a general partnership.in many cases, partners in their business
sign an agreement between them. That agreement is the bond of their business
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partnership. Both the ownership and profits are equally divided between them. Both the
partners have Indi dual power to confine the business to contracts and loans. All the
partners have equal responsibility for the business’s liability and debt and other legal
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obligations. Let’s give an example, there are two partners, and one partner takes a loan
and that business failed to repay the loan. In this case, both the individuals have the
responsibility in that loan liability. A general partnership is easy to start and stop. And it
automatically disappears if one dies or is bankrupt.
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Advantages of general partnership:
●● Easy to form.
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●● It is simple and less expensive to establish.
●● It is cheaper and requires fewer paper works.
●● r
Low taxation procedures.
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●● Easy to stop.
Disadvantages:
●● Unlimited liability.
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●● All are equally responsible for any debt or legal obligations.
How to start to form a general partnership?

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1. Pre-planning about the business going to do.

Both the partners have an idea about what business they are going to establish
in the market. They should perform a well-versed planning idea about the particular
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business.
2. Provide a unique name for the business:

Choosing a name for your partnership business is crucial. As the name should be
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unique and should resemble the business idea. If A and B are going to start a business
of organic foodstuffs, then they are planning to put a name as AB store, it would not
work properly, because nobody understands what kind of business you are doing in the
market. To provide an appropriate name like “AB organic food products” makes sense
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and file a Doing Business As name with state authorities. Make sure that your business
name is unique. This is the one important thing you should keep in your mind. Once
your business name is approved, you can go for the remaining procedures.
3. Agreement.
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The next step is to create an agreement between the partners for their business.
Even though it doesn’t require any legal formalities, it has value among the partners
concerning their mutual interest and understanding. an agreement is a statement that

Notes
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holds some kind of valuable information regarding partnerships and profit-sharing
which may help in the future if any fight occurs between them or any misunderstanding
between the partners. And the agreements consist of the following information
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●● Name of the business.
●● Nature of the business.
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●● Percentage of ownership and profit-sharing.
●● Partner investment.
●● Profit-sharing details.
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●● How they divide loss, debt, and other liabilities.
●● Partner’s duty.
●● Ownership change.
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●● After the solution of individual death.
●● How to divide assets after stopping the business.
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4. Get an employer identification number.
To hire employees into your firm, you need to require an employer identification
number.
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5. Open a bank account:
For any business transaction, a bank account is compulsory. So by submitting your
EIN to the bank, you can open a business account, so that all your transactions should
pass through this account only.
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6. Get license and permission:

Once all u got done with the above matters, the next step is to get a license
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and work permits from the concerned authorities. For that, you need to submit all
the required dates without any fail. Make it as soon a possible to avoid fines or other
penalties.
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7. Maintain proper tax files and other related papers accurately.

Renew license and work permits at the right time.
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This is a state-authorized partnership. In this partnership, there is one general

partner who has full responsibility for the entire business and has one or more limited
partners who don’t have active participation in managing the business. take outboard
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install scale inland partners and they invest/provide money.
Limited partners are only involved in capital investment and they don’t have any
responsibility for business debts and liability. And they can also share the profits but
they can’t bear any loss more than what they have invested. Once they started to
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perform management activities properly and in an inactive manner, they became a

general partner.


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In this limited liability partnership, all the partners are managing the business
actively. And there is a limit in liabilities concerning others’ actions.in case of any error
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or exclusion from one partner, other partners will not be responsible for it. But the
partners will be having strict responsibility for any debt or legal liabilities of business
activities. This limited liability partnership is not encouraged or not allowed in certain
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countries. And it is also restricted to some professional fields.
4. Limited liability limited partnership
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It is a new type of partnership that is similar to a liability partnership. In a liability
partnership, the general partner has more liabilities than other partners, whereas, in a
limited liability limited partnership, all partners have equal liability protection.
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Features of partnership:
Formation:
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It means the number of people involved in a business. A minimum of two persons
is required for partnership. An agreement is established between those two partners. An
agreement can be either talk or write.
Liability: r
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All the partners are responsible for the liabilities of their business. If the company’s
assets are not enough to make up its business liabilities, private/personal properties are
pledged to cover the liabilities. And the liabilities can be solved with help of any one of
the partners who have enough financial background.
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Risk bearing:
Partners should face all the types of risks affected in their business. They are
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equally responsible for any loss. They should share the same loss of life profit.
Decision making:
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Decision-making is made by creating an agreement between the partners to

avoid any issues between them. And they can initiate a representative for any decision
making.
Continuity:
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A constant partnership cannot be carried out because death, debt, or retirement

will cause a discontinuity in their business. And remaining partners can run the business
with a new agreement. But the father’s share cannot go to his son. The only solution is
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they can add him as a new partner if others are permitted along with a new agreement.
Members:
According to the new companies act, 2013 says about the number of members in
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a partnership and should not be more than 100. But the previous companies act shows
that the maximum number of partnerships should be limited to 10 or 20 concerning firm
structure.
Mutual agency:
Notes
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This is a legal tie-up between the partners in a partnership business.
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How to form a partnership legally?
1. Select a structure:
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To form a partnership business, they must be aware of their goals and vision. Try to
do a detailed study regarding the business structure and check whether it is acceptable
in your state or required any legal formalities.
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2. Agreement:
A formal agreement is compulsory apart from verbal communication or bond.
The agreement involves the working nature of your business, Loss, profit-sharing
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formalities, and continuity of business even after the death of any one of the partners.
3. Business name:
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Provide a unique business for your business. And check it is available on the state
government website.
4. Registration.
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If you are planning to form a limited partnership, limited liability partnership, limited
liability limited partnership, u need to register it with the state government. For that,
you need to furnish the following matters. Provide the state name where you start your
business, apply for a correct license for your business, and apply. Once you apply along
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with the necessary documents, you can check the status of your application online.
5. Submit yearly reports:

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Submit all your reports to the concerned authorities of the state.

A joint-stock company is a company in which all its business is owned and run
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jointly by all its shareholders. The company’s capital is divided into smaller parts called
“shares”. Many of the large companies are joint-stock companies. And while doing a
business on a large scale, we need to prefer mostly joint-stock company formation.
Simply we can say that joint-stock companies are owned jointly by investors. The
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shareholder owns a portion of the company and they can even sell or buy the shares
or can transfer between each other. The percentage of ownership depends upon the
number of individual shares owned by them in an organization.
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Joint-stock companies are generally formed to empower the company’s success.

The company’s success and funding mainly depend on the number of shareholders.
If the company has a large number of shareholders, they can get enough funds by
holding hands together which makes the company grow vigorously. This is a give and
takes process between the shareholders. Historically, a joint-stock market company
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was not integrated, for that reason; the shareholders must bear its liabilities for a debt
owed by the company. That means, their personal properties are pledged to pay off the

debts of the company. The shares of joint-stock market companies are transferable. If
Notes
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the joint-stock company is public, it is registered in the stock exchange for trading the
share. Whereas in private, stock shares are transferable between the parties but it’s
limited by agreement.
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Features of Joint Stock Company:
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1. Artificial Person:
An artificial legal person can hold property in their name.it is created by the law.
It is independent of its members. Individuals can’t do anything. Here, companions can
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borrow, transfer, buy/purchase, or can enter into the contracts. A company can do
anything. A company can charge or be charged.
2. Separate Legal Entity:
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It has a separate legal entity apart from the persons involved. Here assets,
properties, liabilities are separated from their own. No one can take it as their personal
property as the company has its legal parameters. So it is separated from its members.
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A separate legal existence means the company has its property, bank account and can
even enter a contract with members, etc. The company will not depend on its company
members for any business activities.
3. Formation:
r
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Formation of the company is a time-consuming process. It will take more time to
get formed. It is also a bit more complex than other systems. Many legal papers and
other rules and regulations are involved in it. Moreover, it is much more expensive than
other forms of business.
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4. Perpetual Succession:
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A Joint Stock Company is formed by law. Whatever happens in the company, it is

under the law only. The company has continuity in its working. Even if someone new
joins or leaves due to death, it will not affect the functioning of the company directly. All
changes are under the law. Formation and closure of the company are under the law.
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5. Control:
The company’s management and control are undertaken by board members
elected by shareholders.
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6. Liability:
The liability of the shareholders is limited. How much they contributed to the
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business, only that much liability will affect them. No one could pay or pledge their
assets to pay the debt liabilities of a firm. That means the liability of members is limited
to the maximum of capital contributed by them.
7. Members:
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As per the companies act, it’s saying that at least a minimum of two members are
required to form a joint-stock company and the maximum is 50 members. Whereas in
public, a minimum number of members is 7, and the maximum is not yet specified.
8. Transferability of shares:
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Joint-stock company shares can be transferred easily without any restriction
between individuals. No need for any kind of involvement from the company while
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transferring the share. It is purely from person to person. But he should inform the
company about the transfer, and then the only buyer can get any announcements or
information in the case. In a partnership firm, shares can’t transfer without the approval
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of another partner.
9. Separation of ownership from management.
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The companies are not managed by all owners. Those who are elected are
responsible for managing the company. For that, they will conduct an election to find
an outboard small-scale inland of directors by shareholders. And the selected board of
members is managing the entire activities in the company.
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10. Common seal:
A common seal is like a company’s official signature. All the agreement approvals
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are carried out through this common seal only. And all the certificates, agreements,
files, and other value-added papers issued by a company must be validated or attested
by a company seal.
11. Registration.
r
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The company must register under the companies’ act 2013 or under any previous law.
12. Risk bearing:

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Any loss must be managed by all the shareholders. All the shareholders have
equal responsibility in case of any risk caused to the company.
Types of Joint Stock Company

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1. Chartered company
2. Statutory company
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3. Registered company.
Chartered company:
Chartered company is integrated with the state head by giving rights for trade and
exploration.
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E.g.: East India Company

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Statutory company:
Statutory companies are formed by an act of parliament. Here all the actions,
responsibilities, rights are described by the parliament act.
Registered company
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A registered company is formed by registering under a law.
E.g.: Jindal steel and power limited

State bank of India

Notes
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Grasim industries limited
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Merits of joint sector companies:
1. a large amount of capital:
Joint Stock Companies can collect a large amount of capital by issuing their shares
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to the public. By getting loans from the financial institute, they can also collect a large
amount of capital. They can also collect money by issuing bonds or vouchers and other
securities.
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2. Limited liability:
The liability of the shareholders in a joint-stock company is limited. How much
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they contributed to the business, only that much liability will affect them. No one could
pay or pledge their assets to pay the debt liabilities of a firm. That means the liability of
members is limited to the maximum of capital contributed by them. Creditors can claim
over their personal properties due to loss.
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3. Continuity:
The company is independent of its members. company will run even after the
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death, bankruptcy, inability of a member. A Joint Stock Company is formed by law.
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Whatever happens in the company, it is under the law only. The company has continuity
in its working. Even if someone new joins or leaves due to death, it will not affect the
functioning of the company directly. All changes are under the law. Formation and
closure of the company are under the law.
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4. Efficient management:
The management has huge funds. So, they can afford to hire highly qualified staff
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or specialists to perform managerial business activities.
5. Growth and expansion:

Joint-stock companies are highly allocated resources. They have high profits. So
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they can use those profits for the company’s growth and expansion.
6. Transfer of interest:
Shares can be sold in the market and shares can easily convert into money, which
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gives an investment. That means, if the owner needs money, he can sell his shares and
earn money. He can also buy the shares at any time.
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7. High public confidence

Companies are providing their annual reports, account statements, and plans and
programs to the public. It’s a trustworthy activity to a public audience. so the public has
more trust in the company.
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8. Social responsibilities:
The majority of joint-stock companies are running with high profits. And they
are also involved in social commitments like donating funds for social development
Notes
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activities. Such as building hospitals, schools, the welfare of citizens, etc.
Demerits of the joint-stock company:
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1. Complexity information
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other forms of business. A large number of legal requirements and procedures are
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involved.
2. Lack of secrecy:
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All the documents are open to the public. The company needs to provide or submit
the required papers to the public as well as the company registrar.
3. Lack of motivation:
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The company’s activities are managed by managers, not by owners. Whatever
efforts are done by managers; they will get a fixed salary. There is no hike in salary
based on their efforts. The company’s profit is high but the salary is the same.in this
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case, managers do not perform their best for the company.
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4. Decision is the delay
Important decisions are carried out through board meetings only. Once a decision
is taken, then it will circulate to all individuals of the business. Decision implementations
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can take place after approval from all the members of the business.
5. Too much control by the government:

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A Joint Stock Company is formed by law. So every stage of business activities is

passing through the legal formalities only. Like annual reports, audit reports, taxation
files, file returns, etc. are involved in it. If anything fails to submit or fails to maintain
properly, the company has to face a penalty. This reduces freedom of operations and
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puts off time, effort, and money.
6. Oligarchic management:
Oligarchic management means the control of management activities is limited in
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few hands. All the management higher activities are managed by a board of members.
And the decision is also taken by them. So they only take the decision which is
favorable to them, they look into their benefits only not into shareholders’ side.
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7. Conflict in interest:
There might be conflict in decision-making. All the members have a different
opinion. E.g. Employees need hikes, consumers need a good quality of items,
shareholders want higher returns for their investments. So it is a bit difficult to satisfy all
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these opinions to move forward.

Formation of the joint-stock company:

Notes
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Formation of the company can be defined as the organizing and undertaking a
business by promoting, sharing the capital, etc.
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Different phases information is as follows:
1. Promotion:
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Promotion is nothing but just deciding what all machines, tasks, and materials are
required to start a company. The one who plays a role in doing all these operations is
called a promoter. The promoter has to show his ability in various areas like naming
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the company, what type of business is to be done, detailed studying about the scope of
business, taking appointments of various people involved in business, etc.
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2. Incorporation:
Incorporation is the second phase of information of Joint Stock Company. It
involves registering a company which comes in ‘The Companies Act 1956’.
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Various steps involved in incorporation are documentation filling, fee payment and
registering, etc.
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3. Capital subscription stage:
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This stage involves collecting and finalizing the capital for the launch of a new
company. It involves SEBI approval, minimum subscription, and prospectus, stock
exchange applications, etc.
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4. Commencement of business:
This is the final phase information of a joint-stock company. When the
documentation process is done, the registrar will issue a certificate of commencement
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of business. Only then the company can start its work.

1. When a business is designed by single individual it is known as___________.
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2. In Hindu undivided family business the head of the family or head of the business is
known as________________.
3. A_____________ business structure is either authorized by a legal platform for
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without any legal business entity.

4. The____________ partner with only be having a name in the partnership and does
not provide any capital to the business.
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5. In a__________ the business is being owned and run jointly by all of its shareholders.
Summary
1. There are different forms of ownership structure that could include sole proprietorship,
partnership and corporate.
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2. Partnership is a formal agreement between two or more parties or business entities

to manage and operate a business and share the profit from the business
3. The joint stock company are generally formed to empower the company’s success.
Notes
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4. The joint stock company e is a legal artificial entity that can hold property in its name.
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Activity
1. If you get a chance to undergo ownership structure which type of ownership structure
will you select and why?
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2. Briefly explain the role of different partners in the partnership?
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1. What is sole proprietorship and what are the advantages and disadvantages of sole
proprietorship?
2. What are different types of partners?
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3. What are the features of a joint stock company?
4. How can a joint stock company be formed?
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Glossary
1. Authorized- authorized refers to that the business organization is being registered
under certain law.
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2. Chartered company- it is a company that is integrated with the state head by giving
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rights for trade and exploration.
3. Continuity- continuity in joint stock company terms refers to that the company is
independent of its members and will run and is not affected by the debt and
bankruptcy of the business.
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Further readings
1. Book - business and forms of business.
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Author- Dr. Shradha Sharma
Answers
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1. Sole proprietorship.
2. Karta.
3. Partnership.
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4. Nominal.
5. Joint stock company
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Unit - 2.6: Startup Finance and Sources of Finance

Notes
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Objective
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●● To determine start up finance and sources of finance.
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●● To understand the concept of venture capitalist.
●● Understand the different methods of venture capital financing.
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2.6.1 Startup Capital:
Startup capital is the fund raised by the business person to perform business
activities until it begins to turn a profit. It is the initial cost required to meet the starting
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activities of a new company until it starts to provide profit. Raising a startup fund is the
important phase in a business to start a new business. A business person who wants
to raise an initial fund or startup capital must have a business idea about what he is
si
going to do. He must plan well before raising an initial capital for a startup. Venture
capitalists, angel investors, banks, financial institutes are the major fund providers to
startup companies or emerging companies.
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And those alternative fund providers raise a huge amount of funds which is enough
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to start the initial process of an emerging company such as, documentation, furniture,
interiors, space allocation, license, buying resources, employee payment, hiring
process, and product development. Many businesspersons normally choose venture
capitalists because they do not expect repayment of the raised fund until and unless
the company starts to generate its profits. According to the recent survey, the majority
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of the company dissolved due to a lack of funds. Money is the main pillar of any type
of business. Without the proper funds, we can’t even run a company without fail. So
lack of funds is the main reason behind the failure of success. Success and money are
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directly proportional in a business.
How does a startup fund work?

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When establishing a new business or company, money is the priority. So, a

businessman needs some money to start his company’s initial procedures until the
enterprise starts to generate income/profits. Therefore funding capital is essential to
operate an establishment. There are different sources of funds, as some fund providers,
owners own funds, financial institutes, etc. if he is going for a loan or something like
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that, the repay is expected within the time given period even if the company fails to
generate profits.
)A
Let’s see an example: an emerging online learning app company might receive
funds from fund providers. They use that fund for office space rent, app product
development, hiring process, and marketing. And the company provides a commitment
to a stake in the business. When the company starts to generate income, both the
fundraiser and businessman start to focus on future growth and development of the
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company and look into more profits.

Types of startup capital:

Notes
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●● Personal funds:
Personal funds are nothing but the owner’s funds. It is very difficult in some cases
in
to get a capital fund from investors for some kind of business. In that case, self-funding
is the best option. Invest from your savings or close relatives or friends. And is a very
easy method of sourcing funds as it doesn’t have many complicated formalities. And
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self-funds are mainly applicable for small or medium types of business structures.
That means the business doesn’t require any type of huge investments like product
development, hiring of new staff, rental issues, and the only required amount for sales
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and marketing. In such cases the owner’s fund is applicable. If the business person
doesn’t have personal savings, just go for an installment property loan for some
personal loans. Installment property loan or second mortgage loan is simple and secure
to funding for the business. And nobody is going to ask what the purpose of the money
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is and you can invest the amount freely into the business if you go for an installment
loan. Whereas in the personal loan, you have to produce documents and reveal the
purpose of the loan to the bankers
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●● Crowdfunding:
Crowdfunding is a method of funding in a way that it will not go for any equity, loan,
or interest. And the risk is very low in this type of funding.
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Funding from friends and relatives
When you are planning for your funds, seek help from your close friends or family
who are financially well settled. And provide full details and ideas about your business
which you are going to do. Keep trust in yourself. Borrowing money from your friends
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or relatives is easy and secure but also it has some demerits. Suppose if the business
does not reach up to the level and has a huge loss, and you are not in a situation to
refund the money, there will be a crack in your relationship with that guy. However,
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most of the cases are successful in their business and that strengthens the relationship
between them.
●● Business loan
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Getting a business loan from a bank or other source is another form of fund source.
While taking a business loan, you should keep some points in your mind like, about the
purpose of the loan? , about the duration of the loan, and what all assets can be used
as security for the loan? ,.
m
●● Venture capital
If someone wants to start a new business, they need investments. The money or
fund they receive from rich, wealthy people is called venture capital, and the people
)A
who provide funds are called venture capitalists. Venture capitalists or angel investors
are the main fundraisers to a startup company.
Government programs
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For new entrepreneurs, there are several government fund-providing programs.

Various programs like-

●● ‘SAMRIDH’-The Indian government launched this scheme to help startups

Notes
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with necessary funds, on August 25, 2021.
●● ‘Startup India seed Fund’-Prime Minister Narendra Modi announced the
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launch of this scheme to help startups and support ideas from aspiring
entrepreneurs (worth INR 1,000 crores), on January 16, 2021.
Advantages and Disadvantages of Startup Capital:
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Advantages:
1. It helps the company to expand eventually without any bank loans or any financial
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burden.
2. Startup capital is very helpful for beginners with high opening costs and little working
experience.
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3. No need to pay monthly.
4. No need for security.
5. Fundraisers will get high profit, once the company succeeds in all ways.
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Disadvantages:
1. Overall funding is sometimes very high and expensive.
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2. Providing startup capital is a bit risky in the case of newly established companies.
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3. Funds are released gradually based on the performance and target reached.
4. Those who cannot achieve their target will tend to lose it.
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How to obtain startup capital

To build or launch a successful business, you must have a striking idea in your
mind about the type of business. And you have a calculated budget. Once you set up
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a business model and budget, you can think of startup capital. If you decide to start
the business, open a bank account for funds. You can also go for small business loans
as well. And you should prove to the bank that you are suitable to receive the financial
credits. The bank will check the businessman’s background for whether he is capable of
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paying back. You can contact angel investors also for funds. In some cases, you need
to sign an agreement over some equity in your enterprise in exchange for this fund, like
a give and take process.
Tips for getting startup capital for new entrepreneurs:

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It is too risky and challenging to get startup capital for a new young business. So,
we should keep some points while starting a new business.
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1. Try to gain knowledge and experience. Before entering into a new business, gain
some practical knowledge about the business and work at least one year as an
employee to learn all the areas of a business. This brings you more confidence in
doing a business.
2. Must create a business plan. Nowadays, lots of digital platforms are available to help
(c
you to create a good business plan.

3. Get valuable advice from successful businessmen at any cost.

4. Maintain a strong relationship with banks and financial institutes; they may help you
Notes
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when you are in trouble at the stage of the business.
5. Give enough time to start a business. Study and plan well about the business.
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6. Pay attention to the business. Focus on your goals and conquer the business world.
7. Be careful while taking loans. Study well before taking any loans.
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Conclusion:
Starting capital is the initial cost required to meet the starting activities of a new
company until it starts to provide profit. It is the main pillar of the young business.
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A business model is a type of planning in which a company plans about how to
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make profits or earn money. Providing solutions to the customers is the biggest
challenge in a business. Marketing and selling our products to the target customers
is also a challenge. These two are the major challenges you will face when you are
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starting a new business. Launching your product that suits the current market is just
a starting point in your business. Lots of other ways need to understand or need to
research how you are going to earn money. Here the business model plays a vital role
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in your business. Making money with an appropriate plan is the thread of a business
model. Apart from that, a business model provides a business solution in the following
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matters: how do you deliver your products to the customer with an appropriate market
value, sales plan, marketing plan, audience target, identifying the competitor, and who
are your target customers or require any additional cost.
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The business model allows businessmen to experiment and bring ideas differently,
to structure the expense in terms of cost and revenue. For a young startup business,
the business model gives an overall idea about how to determine if your business
strategies are applicable, management strategies, and ideas about attracting investors.
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For a highly established business, the business model is used to determine financial
predictions and setting business goals.
Components of a business model:

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Business models are not constant; they may vary in form and function. All models
are suited to all kinds of business. But they all consist of the same basic components.
●● Value proposition:
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It is a service that draws customer attention. Our product should attract the
customer. The value proposition is one of the key components in a business model. It
not only shows the product resources and services but also shows how the company
)A
competes with its competitor in the business market. A value proposition consists
of visible and invisible benefits where a company provides to its customer. Value
proposition shows value-added information to the customer. It provides details about
the product brand to the customer by giving them what the company stands for, how it
works, and why it suits their business. Communication with a customer should be direct
(c
either through a website, digital platform or through some advertising or marketing

methods. The value proposition should follow a different format by keeping the

company products unique, branded, and specific. The main aim of a value proposition
Notes
e
is their product should be brand and unique that no other competitors have and how the
services fulfill the need of a customer that any other company is unable to do.
in
●● Target market:
Targeting the right market is another component of the business model. Delivering
your products (value proposition) to the right customer requires an appropriate
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marketing platform. Choose the right market whether it’s nationally or internationally.
Choose the right marketing strategies. Choose the right platform for advertising to reach
the targeted audience.
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●● Competition:
Make the product unique and brand. So that, no other competitors can compete
on it. The product must have some unique features and operating functionalities. This
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makes you stand higher while comparing to other competitors in the market.
●● Cost structure:
It is one of the important factors of a business model. This shows how the
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companies spend their resources to make high demand for their products and
services. Both the cost structure and profits make company operations more flexible.
And the cost structure includes the cost of products, manufacturing cost, labors cost,
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commission cost for materials, and other costs related to infrastructure and employees.
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●● Key metrics:
It’s a measurable act with the help of some metrics to recognize or identify the
growth of the company’s goal. It is a key performance indicator. It indicates whether
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the company has achieved its goal within the prescribed period. This helps you to track
and evaluate each phase of your business goals. A key metrics could be daily visitors
to your website, the number of emails clicked and opened by the recipients, monthly
targeted sales, percentage of exit rate of the visitors, percentage of bounce rate, and
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real-time visitors to your website.
●● Resources:
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Resources are nothing but the product that serves your customer. If you are
running a vegetable shop, where vegetables are the key resources to the customers.
Resources also include employees, manufacturing units, office space, other tools
and equipment required for business activities. Shortly, we can say that financial,
educational, human, emotional, and physical resources are the main key resources for
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a business.
●● Revenue model:
)A
The revenue model is used to generate income for businesses. Revenue models
are used to describe how a company generates its financial income. The major way
to earn an income is by placing ads in a high-traffic blog. The majority have used this
technique to generate high financial income. We are targeting the high-traffic audience
by placing ads on their screens. A digital marketing platform is one of the best ways to
(c
earn a high financial income. Revenue business models include the following stages:
offering of a product, revenue-generating methods, sources of revenue, and the target
audience of the offered products.
●● Profit margin:
Notes
e
Profit margin refers to the amount of money left with you after all the business
expenses. This is the percentage measurement of how profitable your company is.
in
Profits can be achieved through proper cost-effectiveness methods. It means proper
usage of resources without any wastage, efficient way of labors usage to produce high-
quality products. Profit margin can be calculated by formula. There are three types of
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profit margin; gross, operating, and net. By using the below formula, you can get a profit
margin.
Profit margin= (revenue-cost)/revenue.
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A gross profit margin ratio of 65% is considered good.
Types of business models
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1. Subscription model:
It is a method of paying a fixed amount for the subscription of the company’s
product or to access the company’s features.
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E.g.: if you want to see a film on amazon prime, you need to pay some amount to
subscribe to prime view. And the company sends a link to the respective customer for
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subscription or they can use the company app to pay the amount.
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2. package or bundling model:
The company’s several products are combined as single or combo packs. So that
customers can purchase many products in a single combo offer. For example, some of
the food services companies are using the bundling model of strategy so that they can
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move or sell their products quickly. These types of companies produce a large volume
of sales and make high-profit income.
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3. Freemium or free version business model:

In this model, Customers are freely using some free versions of particular
products. Making charges when they are going for the premium version of products to
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get more features of that product. E.g.: a company that provides design software. And
the customer can access its few features for free of cost. Once they want to use all
the premium features of that software, they must go for a paid option. That makes the
company generate income.
m
4. Manufacturer model:
This is the most traditional way of business model. Here, manufacturers convert
all the raw materials into quality products. Many electronic companies are considered
)A
manufacturing model businesses. They assemble all the electronic items into a high-
quality product.
5. Retailer model:
(c
Retailers are the last phase in a business. They purchase goods from
manufacturers or distributors and they sell the products to customers which includes all
the expenses faced on that product and profit.

6. Distribution model:
Notes
e
Here, the company acts as a distributor; they distribute the manufactured products
to the market.
in
7. Franchise model:
This means the owner of the business is permitted to a third party to run and
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operate the business. Third-party uses the owner’s brand business name (franchisor
name) and in exchange for that, they sell the products and services of the franchisor.
The owner works with them to maintain and to help in finance, management, marketing
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business operations to make sure whether it is running like before. In return, the
franchisee pays a percentage of profit to the original owner.
2.6.3 Source of Finance
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Finance is the lifeblood of any business. The business will run smoothly if they
have enough funds. Every business requires a high source of funds whether it is an
established one or a new start-up enterprise for running various activities like project
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management, project implementation, expansion and growth of the business, etc. there
are different sources of finance are available .and the selecting of finance source for
raising fund is based on the requirement for which fund is needed by the company.
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Finance is the pillar of every business; they can’t even work or run their business, not
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even a single day without finance. So it is necessary to know the source from where
funds can be collected. The selection of finance sources depends on how much the
fund is required, business nature, etc. And the source selection is also based on the
purpose for which funds are required. There are many sources of funds available based
on different requirements.
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Classification of a source of funds:

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Based on period:
1. Long term period
a. Equity shares
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b. Retained earnings
c. Preference share
d. Debentures
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e. The loan from financial institutions
2. Medium-term period
)A
a. Loan from banks

b. Public deposits
c. The loan from financial institutions
3. Short term period

(c
a. Trade credits
b. Factoring
c. Commercial paper
Notes
e
Based on ownership
in
1. Owners fund
a. Equity shares
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2. Borrowed funds
a. Debentures
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b. Loan from bank
c. Public deposits
d. The loan from a financial institution
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Based on the source of generation
1. Internal source
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a. Equity shares
2. External source r
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a. Financial institution
b. Banks
c. Public deposits
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d. Debentures
e. Trade credits
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●● Long term period

These types of sources satisfy the requirements of the firm for the long term. And
the period is exceeding 5 to ten years. It is required by a firm during the establishment,
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development, Innovations, and research. Long-term funds are used for long-term
investment projects. The fund can be refunded back during the lifetime of a firm. This
fund is used for the acquisition of fixed properties like machinery, equipment, etc.
●● Equity shares:
m
Equity shares are nothing but ordinary shares.it is the owners’ fund in the business.
And the shareholders are the real owners of the firm. They have full control of the
business. The share depends on the company’s profit. They may be getting a higher
)A
share if the profit of the company is high. Sometimes they don’t get anything when the
company is at a loss. Or not having enough profit. Ordinary shares are non-refundable
in nature. Investors have the right to claim the property of the company, the right to
vote, and the right to share profits. Eg: rights share, bonus share, issued share capital,
subscribed share capital, etc.
(c
●● Retained earnings:
Retained earnings are nothing but the total amount of income left over for business
after all the profits are shared with shareholders. The company management will
Notes
e
decide whether the left amount should be retained back or distributed between the
shareholders. Growth required the company didn’t pay retained earnings or pay a
very little amount to the shareholder as retained money is used for financial expansion
in
activities of the firm.
Retained earnings calculation formula: RE= BP NET INCOME (or LOSS)-C-S
nl
Where,
RE denotes retained earnings, BP denotes a beginning period of RE, C denotes

cash dividend, S denotes stock dividends.
O
Advantages of retained earnings:
●● The Source of the fund is permanent.
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●● No clearance cost is involved in the form of interest.
●● Flexibility and freedom to operate
●● Chance of surge in the market price of company’s equity shares
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Disadvantages of retained earnings:
●● Large profit withholds
●●
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Fluctuation of sharers
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●● Imbalanced growth
●● no distribution of leftover fund
Preference share:
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Preference shares are shares having preferential right over equity shares in
terms of dividend and return of the fund. These shares have a fixed rate of dividend
and should be paid at the fullest before any payment of dividend on equity shares. At
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the time of clearance, all preference capital must be paid to shareholders before any
payment on equity shares. Simply we can say that preference shares have some
preference over other types of shares. In preference shares, there is a guaranteed
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dividend to shareholders.
Debentures:
Indian companies act says that debentures include debentures stock, bond, other
forms of securities of the firm whether it accounts for a charge on the assets of the firm
m
or not. The ones who hold debentures are creditors of the firm. And a fixed interest
rate is paid on debentures. Interest rates on debentures are a charge on the profit and
loss account of the company. They should pay some charges over the assets of the
)A
company. Eg: Treasury bonds, treasury bills.
Advantages of debentures:
●● low cost
(c
●● No voting rights
●● Suitable to investors who require an income at low risk.

Disadvantages of debentures:
Notes
e
●● Fixed interest rate
●● Holders have no voting rights
in
Types of debentures:
1. Secured and unsecured debentures
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2. Registered and bearer debentures
3. Convertible and non-convertible debentures
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4. First and second debentures
A loan from a financial institution:

A loan from a financial institution is a long-term loan. That means the amount
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which is borrowed by the company can be refundable or repayable in not less than one
year or not more than 5 to 10 years. Commercial banks, investment banks, insurance
companies are some examples of financial institutions. And they provide services
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to clients in terms of loans, deposits, investments, etc. loan is given only for project
purposes or other major business activities. There may be a kind of charge on the
assets on which the loan is passed for the first time. The rate of interest is a varying
project to project. r
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Advantages of loans from financial institutions:
●● Getting long term funds
●● Getting management, financial and technical advice to the company.
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●● Company’s goodwill increases in the market.

●● Easy installment payment options are available.
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Disadvantages of loans from financial institutions:

●● Lots of paper works and criteria to pass loans
●● Lengthy process
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●● Legal formalities high

●● Restrictions on the company in certain cases are applicable
Short term period:

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The fund is an essential thing in every business. Expansion of business, project

development, operation of day-to-day activities, all require a source of finance. Like the
long-term period, the short-term period has a vital role in sourcing. It is not exceeding
)A
one year.
Trade credits:
Trade credits are nothing but credit expansion from one trader to another to
purchase goods and services. The credit period starts from the beginning of purchase
(c
goods and lasts until the payment is made fully. And the period of repayment depends
on the industry. Some industries are of a minimum of 60 days, or 90 days, 180 days

from the time of receipt of goods.it is an internal bond between buyer and seller. And no
Notes
e
more complicated legal formalities are required. It is a self-making source of finance
Advantages of trade credits:
in
●● A continuous source of fund
●● Easy to generate
nl
●● No need for any legal agreement
●● Reduce both individuals capital
●● No need for an extra charge on assets.
O
Disadvantages of trade credits:
●● It is expensive, if not repaid at the correct time.
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●● Trade credits apply only to those who have good trade history and repaying
history.
●● If I fail to repay at the right time, there is a chance of getting a bad credit
si
score. It will affect the loan next time.
Factoring:
r
In this type of financial source, there is a third party that acts as a factor who
gives various services like discounting bills, collecting debts of clients. Factors have a
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responsibility to collect debts from debtors. The company already permits factors to do
so. Through factors, the source can collect large information about the company’s trade
history and repay history.
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Two types of factoring:

Recourse factoring: factors will not take any responsibility for any credit risks.
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Non-recourse factoring: factors will take responsibility for any credit risk
concerning debtors’ mistakes.
Advantages of factoring:
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●● The cheapest form of source

●● It is flexible to operate
●● No need to charge on assets
m
●● Factoring is a continuous process, no need for any credit department.
Disadvantages of factoring:
)A
●● It is expensive in the case of large invoices.

●● Less comfort when dealing with factors.
Commercial papers:
It is a short-term source of finance where a promissory note is issued by the
(c
company. And that statement is unsecured too. it helps for their short-term fund and can
be issued at any time between 7 days to 1 year.

Advantage of commercial paper:

Notes
e
●● Free to transfer
●● More funds
in
●● No restriction for selling
The disadvantage of commercial paper:
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●● Young firms can’t get funds using commercial paper.
●● Maturity can’t be extendable.
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Medium-term period:
Funds are provided for a medium period of one to five years.
Public deposits
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Here funds are raised from the public institutions or authorities. It can be a period
of up to 3 years.
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Advantage of public deposits:
●● Low rate of interest compared to banks
●● Easy source of funding r
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●● No charges on assets
Disadvantages of public deposits:

●● Not applicable for new young companies.
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●● Higher government dependency makes the source more unreliable.

●● Not suitable for large deposits.
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A loan from banks:

Taking loans from the bank for funds is a short-term source. Bank provides
minimum limits of credit for the customer, so the customer can withdraw the particular
limited amount from the bank. And the credit can be increased concerning company
ity
size, growth, financial history, payback history, credit score, etc. interest should pay for
the actual amount received. Bank sources are of different forms like a line of credit,
overdraft, secured loan, discounting of bills, letter of credits, etc.
m
Based on ownership:
Owners’ funds:
Funds are raised from the owners of the firm. And the funds are collected from
)A
equity shares, preference shares, and retained earnings.
Borrowed funds:
Borrowed funds are funds raised from borrowed from others or loans for a given
(c
period.

Based on generation:
Notes
e
Internal source:
Funds are raised from within an organization by selling the assets or some other
in
way. Eg: equity shares, retained earnings.
External source:
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Funds are raised from outside of the firm. For example bank loans, debentures,
financial instructions, trade credits, public deposits, etc.
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Conclusion:
Funds are an essential commodity in a business for the smooth running and
operation of all types of business. And raising funds is an essential behavior of all
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businesses.
2.6.4 Internal Source of Finance:
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An internal source of finance is nothing but using your own money for business
activities. Here in this type of source fund, there is no need to depend on any banks or
other financial institutes for credits, loans. The businessmen can run the business by
raising funds themselves. r
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That means, raising funds within an organization. The internal funds are the profits
obtained from sales or reserved funds. So raising funds in this way is a bit complex
as it purely depends on your company’s financial growth. If there is a higher rate of
business profit, then it is easy to obtain funds internally. For example, the huge profit of
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the business is deposited in the bank and the interest of that fund is enough to produce
internal funds. Internal source of funding is only applicable for high profit-generating
businesses. And this internal source of funds is generally used for the company’s day-
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to-day operational activities. Internal sources are classified into the following:
Internal source of finance:
1. Owners’ capital or equity share.

ity
2. Retained Earnings
3. Sale of stock
4. Sale of assets
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5. Reducing working capital

6. Debt collection
7. Discount selling
)A
8. Delay in payment
Equity share(or) owners capital:

This source consists of the amount of money invested by the owner in the
(c
business. This fund can be used as an initial fund for a young business. Later they
can be used for the company’s growth. This money is the personal savings of a

businessman or owner. Hence there is no need to pay any kind of interest. Equity
Notes
e
shares are nothing but ordinary shares.it is the owners’ fund in the business. And the
shareholders are the real owners of the firm. They have full control of the business.
The share depends on the company’s profit. They may be getting a higher share if the
in
profit of the company is high. Sometimes they don’t get anything when the company
is at a loss or not having enough profit. Ordinary shares are non-refundable in nature.
Investors have the right to claim the property of the company, the right to vote, and the
nl
right to share profits. e.g.: rights share, bonus share, issued share capital, subscribed
share capital, etc.
O
Retained Earnings:
When a business is in profit-making, it leaves some funds. Later these funds are
used for investing in the expansion of the company. And the shareholders didn’t require
dividends for such a source of funds, that fund can be used for the company’s growth.
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And there is no rate of interest for such funds. And while using the retained earning
sources of funds, the company need not worry about any legal complications and
debt obligations. Advantages of having such sources are it is flexible and no need to
si
worry about repayment. Retained earnings are nothing but the total amount of income
left over for business after all the profits are shared with shareholders. The company
management will decide whether the left amount should be retained back or distributed
r
between the shareholders. Growth required the company didn’t pay retained earnings
or pay a very little amount to the shareholder as retained money is used for financial
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expansion activities of the firm.
Let’s see an example of why retained earnings are so important?
Let’s say a company “X-LLC”, has not been generating any kind of profits in the
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last two three years. And the owner doesn’t want to go for any debt liability so that they
use all their resources to earn profits. Unfortunately, it didn’t go up to that success and
didn’t generate any profits. Suddenly another company “Y-LLC” noticed their efficient
U
work and thought of taking a team from X-LLC to work on a project. But X-LLC has to
invest some money for a project with Y-LLC. In this situation what would X-LLC do?
Can they go for a loan? Can they sell all their assets? NO. They should use or go for
retained earnings if they have.
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Retained earnings calculation formula: RE= BP NET INCOME (or LOSS)-C-S

Where,
m
RE denotes retained earnings, BP denotes a beginning period of RE, C denotes

cash dividend, S denotes stock dividends.
Advantages of retained earnings:

)A
●● The Source of the fund is permanent.

●● No clearance cost is involved in the form of interest.
●● Flexibility and freedom to operate
(c
●● Chance of surge in the market price of company’s equity shares

Disadvantages of retained earnings:

Notes
e
●● Large profit withholds
●● Fluctuation of sharers
in
●● Imbalanced growth
●● No distribution of leftover fund
nl
Sale of stocks:
The sale of stocks means reducing the inventory level. If you are putting a huge
amount of funds to keep a large amount of stock in a business, it stops spending money
O
in other areas of the business development. Concentrating on generating inventory may
adversely affect the growth of other areas of business. Make a sufficient amount of stock
with a limited fund. The remaining capital can be used for other profitable activities of the
enterprises. But make sure that a sufficient level of stock is available for future sale too.
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Sale of assets:
The sale of assets is nothing but, selling of a company’s assets to raise the
si
financial fund. This could happen in an emergency financial situation.it includes selling
machinery, equipment, furniture, and other company-owned products. If the company
has unused machinery, they can sell that to find a fund. And, this is not a suitable option
for young startups. r
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Reducing working capital:
Reducing working capital is nothing but utilizing or managing the available money
in the firm more efficiently and accurately. A business can reduce working capital
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through consultation for short-term billing processes with clients and longer payment
periods with suppliers. This is applicable only if you have a good relationship with
stakeholders. There is a chance of bank debt in this source of finance. By speeding up
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the account receivables and lengthening account payables are two important ways of
capital reduction.
Debt collection:
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Collecting debt from the customer is another source of internal finance. If a

customer is not paying money on time, a situation can occur called debt collection
where all the debts are collected to reduce the cash flow and can use those funds as a
source of internal finance. Debtors are those who play with cash on the business.
m
Discount selling:
The firm can find a source of finance by selling unwanted products like furniture,
)A
machines, equipment at a discount rate. These funds can be used for future purposes
or in any emergency case.
Delay in payment:
Making a delayed payment to the suppliers is a form of fund source. Those funds
(c
can be used for some early generating profits or in case of any emergency. If you had
a good relationship with suppliers, they might extend the credit payment periods on the
recommendation.
Factors influencing source of finance:

Notes
e
Cost of finance:
Source of finance mostly holds two types of cost. Cost of procurement and cost of
in
utilization. Examine properly the purpose of the cost and decide which source is required.
Purpose:
nl
What is the purpose of finance? For what purposes and all it is used?
Time:
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Study about how long the finance id required? There should be some calculation
about the time.
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Amount:
How much amount is required? Based on this you can choose the type of source of
finance.
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Structure of an organization:
The raising of funds from a source is purely y depends on the type and nature of an
organization. r
ve
Ease of availability of finance:
Flexibility and ease associated with the firm can obtain finance easily. If the
business has any legal documentation, more investigation, and any restriction may
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adversely affect the source of the fund.
Conclusion:
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Internal funds are funds from within an organization. These types of funds are very
useful for the short-term and limited needs of an organization. It is a debt-free way of
making finances for an organization. In this type of source fund, there is no need to
depend on any banks or other financial institutes for credits, loans. So finance is an
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essential element in every business whether it is a start-up or well-established firm. And

choosing the right source of finance is also important.
2.6.6 External Source of Finance

m
An external source of finance is nothing but the finance received from the outside
of a business. Finance is the pillar of every business; they can’t even work or run their
business, not even a single day without finance. The business will run smoothly if they
)A
have enough funds. Every business requires a high source of funds whether it is an
established one or a new start-up enterprise for running various activities like project
management, project implementation, expansion and growth of the business, etc. There
are different sources of finance available. Among those one of the sources is external
finance. There are many ways of external funds like family and friends, bank loans, etc.
(c
External sources of funds are classified as follows.

External source
Notes
e
●● Financial institution
●● Banks
in
●● Public deposits
●● Debentures
nl
●● Trade credits
●● Family and friends
●● Leasing
O
●● Installment purchase
●● Government help
●● Venture capitalist
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Financial institutions:
si
r
ve
project to project.
Advantages of loans from financial institutions:

ni
●● Getting long term funds

●● Getting management, financial and technical advice to the company.
●● Company’s goodwill increases in the market.
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●● Easy installment payment options are available.
Disadvantages of loans from financial institutions:

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●● Lots of paper works and criteria to pass loans

●● Lengthy process
●● Legal formalities high
●● Restrictions on the company in certain cases are applicable
m
Banks:
Banks are another source of funds. A bank loan is the amount of money given by
)A
a bank to an individual for running an enterprise along with a paid-off interest. Bank
loans are mainly over some time up to several years. To grant a bank loan, an individual
must provide a copy of identity proof as well as income proof. Banks grant loans to
their clients against some personal assets of clients. So that if the clients fail to repay
the loan amount, banks can recover the loan amount from that asset. The securities
(c
given for loan sanction may be physical or non-physical commodities like goodwill,
home assets, furniture, equipment, or any valuable documents, etc. Taking loans from

the bank for funds is a short-term source. Bank provides minimum limits of credit for the
Notes
e
customer, so the customer can withdraw the particular limited amount from the bank.
And the credit can be increased concerning company size, growth, financial history,
payback history, credit score, etc. interest should pay for the actual amount received.
in
Bank sources are of different forms like a line of credit, overdraft, secured loan,
discounting of bills, letter of credits, etc.
nl
Some advantages of bank loan are:
●● Low rate of interest. Clients can get loans at a low rate of interest from various
banks.
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●● There is no need for too many legal procedures or legal papers to sanction a
loan.
●● Simple and easy procedures to pass loans.
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●● A bank-client relationship is good.
●● Loan sanction will take less time. Nowadays everything is online and using
modern online technologies.
si
●● Door-to-door facilities are available.
Some disadvantages of bank loan are:

●● r
Need to face a penalty and legal action in case I fail to repay the loan.
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●● High-interest rate needs to be paid if the client makes any delay to pay the
loan back in a given period.
●● Asset or other securities will affect in case of delaying loan repayment.
ni
Public deposits:
Here funds are raised from the public institutions or authorities. It can be a period
of up to 3 years.
U
Advantage of public deposits:

●● The interest rate is too low compared to banks
ity
●● Easy source of funding

●● No charges on assets
Disadvantages of public deposits:

m
●● Not applicable for new young companies.

●● Higher government dependency makes the source more unreliable.
●● Not suitable for large deposits.
)A
Debentures:
(c

Notes
e
company. Eg: Treasury bonds, treasury bills.
Advantages of debentures:
in
●● low cost
●● No voting rights
nl
●● Suitable to investors who require an income at low risk.
Disadvantages of debentures:
O
●● Fixed interest rate
●● Holders have no voting rights
Types of debentures:
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5. Secured and unsecured debentures
6. Registered and bearer debentures
si
7. Convertible and non-convertible debentures
8. First and second debentures
Trade credits:
r
Trade credits are nothing but credit expansion from one trader to another to
ve
purchase goods and services. The credit period starts from the beginning of purchase
goods and lasts until the payment is made fully. And the period of repayment depends
on the industry. Some industries are of a minimum of 60 days, or 90 days, 180 days
from the time of receipt of goods.it is an internal bond between buyer and seller. And no
ni
more complicated legal formalities are required. It is a self-making source of finance
Advantages of trade credits:

U
●● A continuous source of fund

●● Easy to generate
●● No need for any legal agreement
ity
●● Reduce both individuals capital

●● No need for an extra charge on assets.
Disadvantages of trade credits:

m
●● It is expensive, if not repaid at the correct time.

●● Trade credits apply only to those who have good trade history and repaying history.
●● If I fail to repay at the right time, there is a chance of getting a bad credit
)A
score. It will affect the loan next time.
Family and friends

Let’s seek help from your close friends or family who are financially well settled.
And provide full details and ideas about your business which you are going to do. Keep
(c
trust in yourself. Borrowing money from your friends or relatives is easy and secure but
also it has some demerits. Suppose if the business does not reach up to the level and
has a huge loss, and you are not in a situation to refund the money, there will be a
crack in your relationship with that guy. However, most of the cases are successful in
Notes
e
their business and that strengthens the relationship between them. No need to pay high
interest rates for your friends or family.
in
Leasing:
Leasing means giving the asset for rent that requires business. Business is only
responsible for monthly rent payments. The maintenance and services of that asset are
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the leasing company’s responsibility.
Installment purchase:
O
This is the purchasing of a commodity in installment. So that company can pay
the money installment-wise. E.g.: A company requires equipment urgently and doesn’t
have enough funds to pay, they can go for an installment. They can only pay a fixed
deposit the first time. And the rest of the money they can pay every month. So there is
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no burden for the company.
Government help:
si
The government is providing some amount in the name of rewards to certain
companies for their social activities. If the company is planning to hire employees from
remote areas, or they are giving jobs to unemployed individuals, they are doing social
r
activities like helping the poor in education, hospital cases, etc. In all these situations,
ve
the government grants some reared amount for their helpful activities.
Venture capitalist
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fund they receive from rich, wealthy people are called venture capital and the people
are the main fundraisers to a startup company.
U
Conclusion:
Choosing a type of source of finance depends on the amount of money required.
If the funds generated through internal funds are not enough, companies will opt for an
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external source of finance. External sources of funds are normally used for building up
a business or to expand the current business activities.
2.6.7 Instruments:
m
Financial instruments are a money-related mechanism or a contract between

two parties. A financial instrument is a traded property that includes cheques, stocks,
shares, bonds, and other money-related contracts. Financial instruments can be traded,
)A
settled, modified, and created according to other parties’ requirements. Any assets that
have financial values and can be traded in the market are called financial instruments.
Wherever the financial transaction means, buying or selling financial services, financial
instruments exist there. A financial instrument may be a formal legal instrument that
represents a legal value or a legal agreement involved in any quiet financial value or
(c
transaction. Financial instruments are mainly classified into three.
●● Money market or cash market instrument

●● Derivative or capital market instruments

Notes
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●● Hybrid instruments.
●● Foreign exchange instruments
in
Let’s see each of the following in detail;
1. Money market instruments:
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Money markets or cash instruments are financial instruments with values directly
determined by the situations of the market. Money markets are again classified into two.
O
●● Organized
●● Unorganized.
Organized money market
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The financial instruments are short-term investments and regulated by RBI. It
includes
si
●● T-BILLS
●● Call money
●● Certificate of deposits
●● Commercial bills r
ve
●● Commercial papers
●● Cash management bills
Unorganized money markets

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Unorganized money instruments are not controlled under by RBI
●● Local banks
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●● Moneylenders
Treasury bill (T-bill)

Treasury bills are money market instruments issued by the central government
ity
of India. It is a surety statement with a guaranteed repayment at a later date. This is

used to meet the short-term requirements of the business. There are different types of
treasury bills
14-Days Treasury bill

m
91- Days Treasury bill
182- Days Treasury bills

)A
364-Days Treasury bills
A short-term T-bill helps to meet current obligations by raising funds and reduce the
insufficiency in funds and controls the cash circulation at a given point in time. Interests
in T- bills are determined by market forces.
(c

Call money:
Notes
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Call money is nothing but a financial loan that must be paid back immediately,
based on the bank’s demand. This is mainly useful for a brokerage firm to raise short-
in
term fund needs. And the period of call money is for one day. If the asset and liability
are in imbalanced states, individuals will go for the call money option, to meet the
sudden need for money. Commercial banks and cooperative banks are participating in
nl
call money actions. Call money are three types
●● Call money: Its duration for 1 day.

●● Notice money: Its duration for 2-14 days.
O
●● Term money: Its duration for 15 days +more.
Certificate of deposit:
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A certificate of deposit is an agreement between depositors and the bank. It is
the deposit of a fixed amount for a given time and interest is paid for that by banks or
financial institutes. You can withdraw the amount after attaining the maturity period.
si
Commercial bills:
A commercial bill is nothing but an exchange of bills that is drawn by a seller for
the amount due to him. The maturity of the commercial bill is 3 to 6 months at a time.
r
Commercial bills are generated during a trade business. A commercial bill includes
ve
documentary, supply, accommodation bills.
Commercial papers:
It is a short period debt liability instrument, generated by the companies to raise
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the funds for a period of up to one year. This is an unsecured option between the
company and others. Corporate parties, All India Finance Institutions are eligible to
issue commercial papers. The commercial paper includes drafts, cheques, notes, and
U
certificates of deposits. The maturity period is from 7 days to 1 year. All individuals,
banking companies, NRI, foreign institutional investors, etc. can invest in commercial
papers.
ity
Cash management bills:

It is the latest concept in money marketing instruments, which was issued on May
12, 2010. And bill purposes are used by the government to make up its temporary cash
flow mismatches. The bills are issued by the Reserve Bank of India and the maturity
m
period is less than 90 days.
Unorganized sectors
)A
Private/local banks:
Private Banks or individuals are those who engage in money lending activities.
They don’t have any license for doing financial activities.
(c
Moneylenders:
Moneylenders are those who provide funds from their sources.

2. Capital market instruments or Derivative instruments:

Notes
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These are the financial securities.it may be an equity share or debt share. It is
regulated by SEBI. It is a long-term investment. It consists of two types
in
●● Non-Securities
●● Securities
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Non-Securities types of instruments include
●● Mutual Funds
●● Fixed Deposits
O
●● Bank Deposits
Securities type of instrument includes
●● Equity Shares
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●● Preference Shares
●● Debentures
si
●● Derivatives
Mutual funds:
r
Mutual funds are securities in which the money is taken from the investors and invest
that money in securities. E.g. bonds, short-term debts, stocks, etc. commodity market
ve
means investing the commodities like gold or silver in big companies. In simple words, we
can say that investors invest money, and the fund manager pools their money to invest in
big companies as securities and generates an income and return to the investors.
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Fixed deposits:
It is the deposit of a fixed amount for a given time and interest is paid for that by
banks or financial institutes. You can withdraw the amount after attaining the maturity
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period
Bank deposits
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Bank deposit is nothing but depositing some amount of money in banks. There are
different types of bank deposits like current accounts, recurring deposits, fixed deposits,
savings accounts.
Equity share:
m
This is the amount paid to individuals only if the profits are generated and debt
amounts are paid off. Stock market or partnership share is an example of equity share
in the business.
)A
Preference share:
(c

Notes
e
in
Debentures:
nl
O
company.
Derivatives:
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Derivatives instruments are financial instruments that have value decided from the
securities such as currency, bonds, stock, etc.
A synthetic agreement, forwards, futures, options, and swaps are the example of
si
derivatives instruments.
Hybrid Instruments:
r
Hybrid instruments are a combination of some features of equity shares with some
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features of debt securities.
E.g.: warrants, convertible documents, exchangeable debts, etc.
Foreign exchange instruments:

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Foreign exchange instruments are related to foreign markets associated with

currency agreements like spot, outright forwards, currency swaps.
U
Advantages of financial instruments:

●● Ready cash availability is greatly useful to the companies as they can do any
payment quickly or can help during any financial crisis of a company.
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●● Shareholders feel more secure in an organization that can lead to more

money in their liquid assets.
●● A financial instrument provides more support in funding physical assets.
●● Companies can yield high renewal when they start investing in real assets.
m
●● Equity share is one of the financial instruments that lead to a permanent

source of funds in a business or organization.
)A
Disadvantages of financial instruments:

●● Savings account balance and other bank deposits are limited when it comes
to returning investment. This is high because there are no restrictions on the
withdrawal of such liquid assets.
●● Cash deposits or money market accounts are not allowed the firm to withdraw
(c
the amount for months or years or whatever is mentioned in the agreement.

●● If the company wants to withdraw the deposits earlier than the specified
Notes
e
maturity period in agreement, they must face a penalty or low value of the
return.
in
●● Transactional cost is high
●● A financial instrument like equity capital brings a permanent burden for a
company. Equity capital cannot be refunded even though the company has
nl
enough funds. But they can opt for an option like buying back option of their
share under certain terms and conditions as per the latest legal rule.
Conclusion:
O
Financial instruments are nothing but a document agreement on financial assets
to a firm and it is a liability for another organization. They include financial guarantees,
loans, bonds, bank deposits, call money, equity shares, debentures, preference shares,
ty
swaps, futures and forwards, etc.
2.6.8 Capital Market Instrument
si
Financial instruments are nothing but a document agreement on financial assets to
a firm and it is a liability for another organization. A financial instrument may be a formal
legal instrument that represents a legal value or a legal agreement involved in any
r
quiet financial value or transaction. Financial instruments are of three types.1.money
market instruments 2. Capital market instruments 3. Hybrid instruments. Capital
ve
market instruments are financial securities.it may be an equity share or debt share. It is
regulated by SEBI. It is a long-term investment. Stock market and bond market are the
capital instruments, which consist of commercial banks, development banks, and stock
exchanges.
ni
Bonds: Bonds are debt securities that are traded in the capital market. Companies
provide the bonds to raise the fund. Issuing bonds helps to raise funds for the
U
development expansion of the company growth at a cheaper rate than the banks and
other financial institutes. Not only private but also the government also issues bonds to
raise funds for government projects.
Stocks: Stocks are the instruments that are traded in stock exchanges where both
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the parties’ sellers and buyers meet and decide the price. Shareholders are the ones
who buy shares and investors are the ones who sell and buy shares over the stock
exchange platform. Stock exchange platforms are either physical or virtual. In physical,
the transaction occurs on trading platforms. In the virtual world, trading is carried out
m
electronically.
Capital markets are the main component of economic growth. If an individual has
excess funds or is looking for a higher return on investment, they will opt for the capital
)A
market. The capital market will allow such a type of fund transfer. Investments and
savings are promoted mainly by the capital market. Capital markets help to maintain
uniform economic growth. Capital marketing is classified into two.
1. Primary or non-securities
(c
2. Secondary or securities

Primary capital instruments:

Notes
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Primary capital instruments are those to make ease of a funds transfer to a
businessman, who is looking to start a new business or looking for business expansion
in
of the current firm, through the securities issued on the first time. Primary capital
instruments are those deals with new securities which are issued for the first time. E.g.
Primary instrument investors are banks, financial institutions, insurance companies, and
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mutual funds.
Banks
O
Bank deposit is nothing but depositing some amount of money in banks. There are
different types of bank deposits like current accounts, recurring deposits, fixed deposits,
savings accounts.
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Financial institutions
si
r
ve
project to project.
Insurance companies
Insurance companies play a vital role in maintaining stability for the financial
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system. They are large investors in financial markets. Commercial banks, brokerage
firms, insurance companies are some of the companies that operate in financial
markets. They assure a good sort of business and household risks, thereby facilitating
U
economic and financial activity. By pooling individual risks, the insurer is in a position
to scale back the quantity of liquidity that the economy must maintain to soak up these
losses.
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Mutual funds
Mutual funds are securities in which the money is taken from the investors and
invest that money in securities. E.g. bonds, short-term debts, stocks, etc. commodity
market means investing the commodities like gold or silver in big companies. In simple
m
words, we can say that investors invest money, and the fund manager pools their
money to invest in big companies as securities and generates an income and return to
the investors
)A
Secondary capital instruments:

Secondary capital markets are nothing but it allows fresh investors to enter into
the market. Existing securities can be sold or purchased on capital markets. Secondary
capital markets help investors to sell existing securities.
(c

Equity:
Notes
e
This is the amount paid to individuals only if the profits are generated and debt
amounts are paid off. Equity capital is raised by issuing shares within the company,
in
publicly or privately, and is employed to fund the expansion of the business. Stock
market or partnership share is an example of equity share in the business. Equity is
nothing but a part of the shares of shareholders in a company. An equity holder doesn’t
nl
get the payment regularly. They can get profit only once the goods are sold. When the
company has liabilities, then equity holders can share only the interest that is left after
debt holders have been paid. Companies can also pay a dividend to shareholders when
they start to generate or earn profit from their business activities.
O
Preference share:
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si
Cumulative preferred stock: r

ve
This is the unpaid dividend of preference shares which are generally called
supplementary, which are carried forward to upcoming years. That means all the unpaid
dividends or profits are collected together until it is paid.
ni
Non-Cumulative preferred stock:

Non-cumulative preferred stocks are nothing but the dividend or particular share
that must be paid to an individual in that particular year. If they fail to pay that dividend,
U
it will not carry to next year and will not pay along with next year’s dividend.
Convertible preferred stocks:

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It is a kind of preferred stock that runs over an option where preferred stocks can
be converted into a fixed number of common shares at any time.
Debt securities
Debt instruments are an agreement that allows the issuing party to raise the
m
required fund by ensuring to repay on a given period concerning the term of the
contract. It provides a high rate of interest and returns when compared to bank
deposits.
)A
Debentures:
(c

Notes
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company.
Bonds:
in
Bonds are fixed-income capital instruments approved by government bodies.
Bonds are debt securities that are traded in the capital market. Companies provide
the bonds to raise the fund. Issuing bonds helps to raise funds for the development
nl
expansion of the company growth at a cheaper rate than the banks and other financial
institutes. Not only private but also the government also issues bonds to raise funds for
government projects.
O
Derivatives:
Derivatives instruments are financial instruments that have value decided from the
ty
securities such as currency, bonds, stock, etc.
A synthetic agreement, forwards, futures, options, and swaps are the example of
derivatives instruments.
si
Synthetic agreement:
This is an agreement that guarantees a specified rate of exchange during an
agreed period of your time. r
ve
Forward:
A forward may be a contract between two parties during which the exchange
occurs at the top of the contract at a specific price.
ni
Futures:
It is the exchange of derivative securities like bonds, currency, or stocks on a
U
specified future date at a predetermined exchange rate.
Option:
This is an agreement between two parties’ seller and buyer, where the buyer has
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full right to purchase or sell a specific number of derivatives at a particular price for a
specific period.
Swaps:
m
It is an agreement between two parties where they interchange interest rates and
agree to pay each other’s interest on their loan in different currencies, options, and swaps.
)A
Exchange-traded funds:
Exchange-traded funds are a bunch of financial resources of many investors which
are used to buy different capital market instruments like bonds, shares, and derivatives.
They have the same features similar to bonds or stock or mutual funds. Exchange-
traded funds are traded a full day at prices that change concerning supply and demand.
(c
Exchange-traded funds are registered with SEBI. Exchange-traded funds are placed in

stock exchanges and can be sold or purchased during the equity trading time as per the
Notes
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requirements.
Foreign exchange instruments:
in
Foreign exchange instruments are related to foreign markets associated with
currency agreements like spot, outright forwards, currency swaps.
nl
Advantages of capital market instrument:
●● Improves transactional efficiency.
O
●● Helps to increase the value of an investment.
●● Helps to develop liquidity.
●● Allows ownership rights on particular shares under the capital market.
ty
●● Provides more interest rates than banks to investors.
●● More dividend shares.
Disadvantages of capital market instrument:
si
●● It is risky and volatile.
●● It is fluctuating concerning price.
●● r
A wide range of investment platforms may confuse investors.
ve
●● The cost of a transaction is high while purchasing or selling capital market
securities.
2.6.9 Venture capital

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Venture capital is a private source of finance that provides the required amount of
funds to the startup business entity or company that requires potential growth in their
business activities. Startup companies or some emerging companies are planning to
U
develop their business structure, they require some funds. For that, they depend on
some external source of finance. The amount given to the startup is called venture
capital and those who are giving amounts to start up are called venture capitalists.
Investment banks, financial institutions, and finance holders are some venture
ity
capitalists. Venture capitalists make money through management fees and from interest
or share profits. Capital investment is a risky process where it involves too much
process. If the invested company doesn’t work properly, it will generate any profit to
return to the virtual capitalist.
m
Process:
If a business is looking for venture capital, it must provide a business plan to
)A
investors. The investors will study the plan or proposal, if they are interested in the plan,
they will research the company’s background. The detailed research includes business
activities, business models, products and business operations, and other activities.
As the investor is investing a huge amount in startups or small businesses, this
background investigation is an essential part. All the investigations are done by venture
(c
capitalist professionals. Venture capitalist professionals are experts in investigation and

they concentrate on a particular industry. A venture capitalist is specializing in dental

clinic sectors; already has prior experience as a dental sector specialist or analyst. The
Notes
e
firm will pledge an investment of capital in exchange for value after the completion of
the investigation in the company. Fund providing is based on this investigation only.
Venture capital is provided step by step. The investor will play an active role in the
in
invested company and manage the operational and all daily activities and monitor the
company’s progress and development to provide additional funds. And the investor
leaves the company after one year after the initial investment by initiating an acquisition.
nl
Venture capitalists play a minor role in investing in basic innovation. A study
generates that, venture capitalist invests 6o billion dollars in 1997, but only 6 % is
invested in startup companies. And less than 1 billion dollars invested in research and
O
development sectors. The majority of funds went to projects developed by high funds
of governments and corporations. And it is 63 billion dollars and 133 billion dollars
respectively.
ty
Venture capital plays another important role when a company’s innovation starts
to make profits. More than 80% of venture capital goes to build infrastructures that are
required for company growth which includes manufacturing, sales, marketing, assets,
si
and working capital.
Venture capital fills the blank space between the source of funds for growth and
innovation of business and concern of lower-cost source of capital availability. Filling
r
that space successfully requires the industry to provide enough return on capital to
ve
attract private equity funds, sufficient returns to participants, and provide sufficient
potential to businessmen to attract high-level ideas that will give or generate a huge
return.
Venture capital fund investors are mostly large institutions like financial institutions
ni
or insurance companies. All these organizations will put a small part of their fund into
high-risk investments. And the organization is expecting 30%-35% of return per year
over the lifetime of the investments. Because these investments represent a small part
U
of their investment, venture capitalists have more scope.
Venture capitalists are ready to invest in startups. But such investments are risky
because they are illiquid. But have the capability to provide high returns when they
ity
invest in the right venture. And the return is highly dependent on the growth working
conditions of the organization. They have full control over the company as they invest in
the company as a stake.
Why venture capital is so important

m
Innovation and entrepreneurship are the central part of the capitalist economy. New
business is a highly risky and cost-effective venture. So, external capitals are required
to make up for the risk of failure. For this high-risk investment, investors in new startup
)A
companies are ready to obtain equity and voting rights. Therefore, startup capital allows
young energetic startup companies to fulfill their vision.
Venture capital investment risk

(c
It is a risky process for venture capital investments. New companies don’t go for it.
Because previous investments can lose all the money that they put into it. Generally
out of 10 new startups, 4 to 5 will fail without generating any profits. Some of them

will lose some money but somehow they return their original investment. Very few will
Notes
e
create success in their path and they produce high returns.
How much venture capitalist takes as a return?
in
The percentage taken by a capitalist depends on the growth and structure of
a company, based on its prospects, how much is being deposited or invested and
depends on good relationships between the investor and the owner of the business.
nl
Normally 25-50percaetage of ownership can be taken by venture capitalists.
How does venture capital distinguish an angel investor?
O
Both the investors are fund providers to young startup new energetic companies.
A venture capitalist invests in startups and they are professional capital investors.
They guide and control the entire phase of the business cycle as they are the investors
ty
and they control the growth of the business in all ways to yield high profits. Once
they start to generate high profits, then only, investors will get a high return. Whereas
angel investors are those who are not professional investors. They are healthy finance
investors and invest as a part of a hobby or a side business and they are not involved in
si
any project guiding. Later they followed the venture capital’s methodology.
Types of virtual capitalists:

●●
r
The early stage of financing
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●● Expansion financing
●● Buyout financing
The early stage of financing

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Early-stage financing is nothing but raising or taking funds from a startups

company to start a project after spending all the money that is left with them. And also
the funds are given for the developments of the products and services.
U
Expansion financing
Expansion financing is nothing but the funds are provided to start the expansion of
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business activities.
Buyout financing
It is the final stage of the process, where funds are provided to obtain particular
m
products or services of another company by a management team.
Seed capital, start capital, early-stage capital, expansion capital, late-stage capital,
bridge financing are the venture capital funding.
)A
Features of virtual capital:

●● High risk
●● It is a long term process
(c
●● Lack of liquidity
●● It is a capital gain process

●● Active participation in management by capitalist

Notes
e
●● Funded in innovative projects
Advantages of venture capital:
in
Business skills: Apart from capital investment, capitalists have control over
business activities. They provide guidelines and that helps to take various important
decisions on financial and resource management.
nl
Active support: Virtual capitalist provides help and support in all fields like tax,
audit, and all other personal and business matters. All these factors are interrelated in
O
business growth.
Links or communication: Virtual capitalists are high professional investors and

have large connections with the business community. And these help start-ups in many
ways and provide many benefits.
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Disadvantages:
Ownership status is reduced: As the stake increases, capitalist control also
si
increases. In that case, you could lose control of your business and sometimes
ownership can be reduced
r
The additional fund requires: whenever the company wants to expand, they
require funds if they are generating any profits yet.
ve
High expensive: High expensive means it involves lots of risks.
Performance-based funding: Funds are released based on the company’s

performance only.
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Conclusion:
The fund is the central element for all businesses whether it’s startups or well
U
established. For that reason, all business depends on venture capital. Venture capital
is a private source of finance that provides the required amount of funds to the startup
business entity or company that requires potential growth in their business activities.
So, it is essential for the growth and expansion of business activities to succeed and
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yield high profits. Investment banks, financial institutions, and finance holders are some
venture capitalists.

m
)A
Investment banks, financial institutions, and finance holders are some venture
(c
capitalists. Venture capitalists make money through management fees and from interest
or share profits. Capital investment is a risky process where it involves too much
process. If the invested company doesn’t work properly, it will generate any profit to

return to the venture capitalist. Venture capital consists of many features, advantages,
Notes
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and disadvantages.
Features of Venture Capital
in
1. Finance for new ventures:
Venture capital is one of the methods to raise finance for a startup or young
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energetic companies or early-stage businesses. Newly started businesses or startups
are facing very difficulty in raising funds in the early stages of business operation from
the capital market. Businesses having high innovative ideas and high business growth
O
are easy to get capital from ventures. If their business is highly innovative with new
technologies and ideas they easily attract the eyes of an investor. So investors are
ready to invest their finances into a new start-up and earn a high rate of returns. So new
ventures or businesses have required enough money to go with their project innovation
ty
and to build high financial and operational growth in their business.
2. High Risk:
si
Investing in a startup business is a risky process. This type of capital investment
is a bit risky in all ways. It is risky in the sense, venture capital investments consist of
investing an amount to a firm who are at the early stage of development and facing
r
trouble and a lot of challenges of succeeding in their business goals and objectives.
ve
And this investment needs return value. The return investment is depending on the
growth and development of the entire business firm. Therefore it all depends upon
selecting the right and appropriate and innovative ideas firm for investing to earn
the expected high rate of the return value. If the investor invests in any of the new
ni
businesses, it may be a wrong decision as there is a chance of failure in business

operations.
In another way, it is a risky process for venture capital investments. New
U
companies don’t go for it. Because previous investments can lose all the money that
they put into it. Generally out of 10 new startups, 4 to 5 will fail without generating
any profits. Some of them will lose some money but somehow they return their original
investment. Very few will create success in their path and they produce high returns.
ity
3. Lack of Liquidity:
Venture capital investment is a long-term process. That is the venture capitalists’
investment is said to be illiquid in nature. Investment cannot get back within a short
m
period. These are lengthy period investments in the form of a loan or other mode of
convertible securities. The investor gets benefits from the investment only once the
company starts to generate profit. That means all the benefits regarding investors are
)A
dependent upon the growth and development of the company business.
4. Equity participation:
This means funds are raised through equity participation. Venture capitalists are
made an investment in new startup companies by buying their equity capital. The
(c
investors have only one aim to earn high capital gain by selling all the shares with them
once they become profitable. Equity participation is nothing but ownership shares in the
company. That means the purchase of a company share through an option or providing
a part of ownership in exchange for finance. If the equity participation is high, the share
Notes
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percentage owned by shareholders will also increase accordingly. Venture capital only
deals with equity. And the earnings particularly depend on company size too.
in
5. Long term horizon:
The venture capital investments are applicable for a long-term phase that supports
the new companies in the expansion, growth, and development of their early-stage
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business projects or activities. And this process is done by buying equity capital from
the organization which benefits a return in the long term. And it is not the right place for
the individual who is looking for an investment return within a short period.
O
6. Participation in management:
Venture investment capitalists who invest in the equity capital of the company will
ty
also be active in the management of the business. They are not only providing financial
setup to the startup company but also active in their business activities as well. All other
investors or parties like the stock market or bank lender, only provide capital and don’t
take part in management activities. A venture capitalist invests in startups and they are
si
professional capital investors. They guide and control the entire phase of the business
cycle as they are the investors and they control the growth of the business in all ways to
yield high profits. Once they start to generate high profits, then only, investors will get a
r
high return. Virtual capitalist provides help and support in all fields like tax, audit, and all
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other personal and business matters. All these factors are interrelated in business growth.
7. Suitable for the small and medium type of industries:

Venture capital is more suitable for small and medium startup companies. For
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the large establishment, it is a bit not applicable because the risk is high in the large
establishment when compared to small or medium establishments.
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8. Investment of venture capital:

An individual or institution or government body is investing the capital on a high-risk
project. Because of these projects, there is a wide range of development possibilities.
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9. Various Roles:
Venture capitalists play a different role in an organization after the investment is
done. They act as co-promoter, entrepreneur, organizer, management role, and equity
participation in various stages of the project.
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10. Not payable on demand:

Like paying off loans or other securities, venture capital can’t pay on demand. It
)A
has certain rules and procedures. Moreover, it requires huge investigation about the
organization or business which requires venture capital.
11. Investment in innovative projects:

(c
The investments done by the venture capitalist are on innovative projects.

Innovative projects have a wide range of high-risk developments. Once they succeed,
they generate high profits which benefit venture capitalists.

Advantages of venture capital

Notes
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Business skills: Apart from capital investment, capitalists have control over
business activities. They provide guidelines and that helps to take various important
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decisions on financial and resource management.
Active support: Virtual capitalist provides help and support in all fields like tax,
audit, and all other personal and business matters. All these factors are interrelated in
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business growth.
Links or communication: Virtual capitalists are high professional investors and

have large connections with the business community. And these help start-ups in many
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ways and provide many benefits.
Disadvantages of venture capital:
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Ownership status is reduced: As the stake increases, capitalist control also
increases. In that case, you could lose control of your business and sometimes
ownership can be reduced
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The additional fund requires: whenever the company wants to expand, they
require funds if they are generating any profits yet.
High expensive: High expensive means it involves lots of risks.

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Performance-based funding: Funds are released based on the company’s
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performance only.
Conclusion:
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fund they receive from rich, wealthy people is called venture capital, and the people
are the main fundraisers to a startup company. Venture capitals are to invest in startups
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companies. But such investments are risky because they are illiquid. Venture capital
plays another important role when a company’s innovation starts to make profits. More
than 80% of venture capital goes to build infrastructures that are required for company
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growth which includes manufacturing, sales, marketing, assets, and working capital.

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)A
The overall process in short:

If a business is looking for venture capital, it must provide a business plan to
(c
investors. The investors will study the plan or proposal, if they are interested in the plan,
they will research the company’s background. The detailed research includes business
activities, business models, products and business operations, and other activities.
As the investor is investing a huge amount in startups or small businesses, this

Notes
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background investigation is an essential part. All the investigations are done by venture
capitalist professionals. Venture capitalist professionals are experts in investigation and
they concentrate on a particular industry. A venture capitalist is specializing in dental
in
clinic sectors; already has prior experience as a dental sector specialist or analyst. The
firm will pledge an investment of capital in exchange for value after the completion of
the investigation in the company. Fund providing is based on this investigation only.
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Venture capital is provided step by step. The investor will play an active role in the
invested company and manage the operational and all daily activities and monitor the
company’s progress and development to provide additional funds. And the investor
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leaves the company after one year after the initial investment by initiating an acquisition.
The venture capital process involves the following steps:

When a company decides to start venture capital on your business, it is very
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essential to know various processes and procedures to raise the funds.
●● Business Plan
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●● Identification
●● Meeting The Investor
●● Due Diligence
●● Signing r
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●● Execution.
Business plan:
A business plan is nothing but a prepared plan for your business. After finalizing
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the business plan, then only the investors start to invest in the business. Creating a
business plan is your initial step in the venture capital process. So a well-furnished
business plan is required for the approval of venture capital. Generally, investors invest
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in an innovative business because that has the potential to grow in the future. Before
looking for a capitalist, you must have a well-drawn and planned business plan in your
hand about your firm. A business plan consists of the following:
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●● An executive summary of the business proposal

●● Should include details about market size and opportunity
●● Brief about management teams of the firm
●● Review about current and expected competitive scenarios and solutions
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●● Financial projection details
On the other hand, after submitting the plan, the investor will learn and study
about the plan. After that, they start to do research and investigate the company’s
)A
background. And if they are satisfied with your business plan, then they will think of
doing investment.
Identification:
(c
Identification is nothing but, identify the right venture investment capitalist for your
company. So, once your plan is ready, the next step is to identify or search for a suitable
venture capitalist for funding. The selection of a venture capitalist is purely based on

their experience in the industry and handling capacity of the firm. So you must select
Notes
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an experienced investor in that particular industry. E.g.: if your business is related to
the dental equipment sector, then you must choose an investor who has experience in
the dental clinic sector. Similarly vice versa. All the capital investors are professional
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experts and they concentrate on their experienced industry as they are specialists in
that field. So choose your investors wisely.
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Meeting the investor
Once the study of the plan and identifying appropriate investors is completed, the
next step will follow. Meeting the investor for further procedures is the next process.
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If the investor is interested in the given business proposal, venture capitalists and
businessmen plan a meeting to discuss the project in detail. After the discussion, the
venture capitalist decides whether to go forward or not to the next step of due diligence.
Convincing the venture capitalist regarding the project proposal and plans and ideas on
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the project is an important stage in the venture capital process. The meeting will decide
whether you are eligible for venture capital funds.
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Due diligence
Due diligence differs from one business project to another concerning the nature of
that project. This is the crucial stage in this process phase. It is the process of providing
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solutions or asking questions about various information regarding the business. It’s an
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investigation into the inner workings of an organization. Venture capitalists evaluate,
analyze, and collect the data about the company before they initiate a transaction
or make a decision about that. It will give answers to all the queries related to legal
aspects of the opportunity, management, and administrative related information and
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other business activities. . It will take 3 – 4 weeks to complete the due diligence by
the capital ventures. Apart from that, the due diligence process should select potential
active individuals, identify the risk associated with that particular investment, legal
obligation related to that transaction and create a risk-reducing relation with company
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management as a part of the investment. Once the investigation is completed, venture

capitalists analyze and study the output of the investigation report to finalize the
decision process and complete the investment.
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Signing:
Signing the term sheet is the next step in the venture capital process. It is a
sheet that contains terms and conditions related to the investment agreement.
This agreement is negotiable and must be agreed on by all the parties. Terms and
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conditions associated with the fund and transaction structure are the most important
mentioned matter in the term sheet. The due diligence is satisfied by the venture
capitalist, who generates a term sheet. After that, they go for the legal documentation
)A
process. Once they complete all the legal document formalities, funds are available to
invest. Signing the term sheet is a legal formality by both parties.
Execution:
Execution is the final stage in the venture capital process. Once the term
(c
sheet procedure is completed and signed by two parties, venture capitalists begin
involvement in company activities. They look into all the activity performance of the

company like management activities, administrational activities, and operational

Notes
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activities. Venture capitalists do not make the full payment on a single transaction. They
deposit the amount step by step stage. Once the company completes the first cycle
of projects successfully, the venture capitalist invests the next part of the amount. The
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process will continue until the project completes successfully. The venture capitalist is
also taking part in guiding the company individuals during the project cycle. Once the
project succeeds, then only the venture capitalist will get the benefits of the investment.
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Stages of venture capital funding:
Venture capitals are divided into four stages with respect processing stages of the
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capital
Early-stage of financing
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Early-stage financing is nothing but raising or taking funds from a startups
company to start a project after spending all the money that is left with them. And also
the funds are given for the developments of the products and services.
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Expansion financing
Expansion financing is nothing but the funds are provided to start the expansion of
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Buyout financing
It is the final stage of the process, where funds are provided to obtain particular
products or services of another company by a management team.
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Conclusion:
Investments are essential elements for a startup company to grow potentially. And
those investments are known as venture capital. This venture capital is not invested
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directly in a business. It follows some kind of steps and procedures. By appropriately

following those steps, then it is easy to get an investment or venture capital from
a venture capitalist. For all these, it requires a well-planned and detailed business
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plan. The percentage taken by a capitalist depends on the growth and structure
of a company, based on its prospects, how much is being deposited. Normally
25-50percaetage of ownership can be taken by venture capitalists.

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)A
(c
Stages of venture capital financing:

Venture capital finance consists of the following stages

●● Seed or Early stage

Notes
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●● Growth Stage
●● Start-up Stage
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●● Late-stage
●● Buy-out stage
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Seed or early stage:
Seeding is the first stage in any kind of business. Venture capitalists are ready to
give (seed) a small amount of finance to turn on a business. Some kind of research
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and development activities are needed to be done while launching a new product of
the business. For the research and developments, some external source of money is
required. The research stage requires a little amount of money when it comes to the
development stage, there is a need for an excess amount compared to the research
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stage. Before launching the product in the market, testing should be done at any cost.
Venture capitalists are more interested in investing the amount in high-risk projects and
research and development sectors as it yields high return value.
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Seeding financing: A small amount that is governed by a businessman to start a
business or get a start-up loan.
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Startup financing: This amount is given to the companies to complete the
development stage of a product.
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First stage financing: There is no money left over with the company. The
company spends all the given money and they require additional money for starting the
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Startup stage:
The company which said it is in the startup stage means they don’t have any
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previous operational activities. They are a newly started company. And the venture
capitalist or angel investor provides funds for the company’s development. Angel
investors like friends, close relatives, or other individuals who invest their funds in the
business. Angels are the first source of funds for a startup business for their technical
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business developments. Angel investors invest only in the local company which they
know before or some whom they know personally.
Second round financing:

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Once the product is launched in the market and has not generated any kind of
profit to attract new investors. at this stage, the company requires additional funds.
Venture capitalists provide a huge amount of funds which is much more than compared
to the first stage. The fund given in the stage is a form of debt. The investment period is
)A
about 3-5 years.
Expansion stage:
It consists of the following ways
(c
Second stage financing: The amount is given to begin the process of expansion
of business.

Bridge financing: Additional working capital is required for the expansion of

Notes
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business activities. The period of investment is about 1-3 years. Bridge financing is
short-term financing. It is provided to the company until long-term finance is obtained.
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Third stage financing: The amount is required for the company to expand
business activities to a major extent.
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Later stage financing:
This is the project establishing stage and thinking about further expansion of
business growth. The project establishment requires another set of finance. But they
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are unable to raise the funds through a public approach for capital development,
buyout, and or turnarounds.
Development capital:
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If a firm has overcome a high risky stage of project and finance and has a huge
amount of profit. But that can’t go open to the public. Thus they need additional financial
support to further expansion. Those funds are for purchasing new machinery, for
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marketing and sales expansion, or launching a new product in different regions, etc.
The period of investment is of about 1-3 years.
Buyouts:
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Buyouts mean the control of the management is transferred to a separate business
by separating it’s from the original existing owners. It consists of two types:
Management buy-outs and management buy-ins

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Management buy-outs:
In this, funds are provided to current operating management to acquire the existing
business.
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Management buy-ins:
In this, funds are provided to outside management to buy an existing company.
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Management buy-ins are riskier than management buyouts as new management

will face more difficulties in controlling that newly owned company. Management buy-in
mostly targets weak performance companies.
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Turnaround:
It mainly focuses on low-performance companies. This is a situation where a
company starts to recover from its failure. It involves buying the control of a poorly
)A
developed company that requires essential growth and performance skills.it includes
changing the management, rescheduling all the company’s liabilities, or even changing
the company owner
Venture capital financing process:

(c
The venture capital financing process includes the following:
●● Deal Origination

●● Screening
Notes
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●● Evaluation
●● Deal negotiation
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●● Post investment activity
●● Exit plan
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Deal origination:
Deal origination is the key step in venture capital financing. So a deal is necessary
to make an investment and a stream of a deal is compulsory. Deal origination sources
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are of different ways. One source of a deal is from the referral system. In this; deals
are referred to a venture capitalist by their business partners, parent organization, or
friends, etc. Deal can also be originated through active search through networks or
seminars etc. It also generated some mediators who can act as a bridge between the
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venture capitalist and entrepreneurs.
Screening:
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This is the stage where screening of all projects will occur in which venture
capitalists are going to invest. They screen all the levels of a particular project which
includes, geo-location, scope, technology, product, size of the investment, etc. to
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screen all those factors, a venture capitalist is asked by the entrepreneurs to submit
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brief project details. Or they invite for a face-to-face interview for any clarifications.
Evaluation:
After screening the detailed study about the project, the next step is evaluation.
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In this study of the track record of the businessmen or entrepreneurs, project profile,
market potential value, future turnover, profitability test can be done. Not only to evaluate
project capacity but also to evaluate the capacity of the businessmen to meet such
claims. Evaluation can also be done in other areas like the quality of an entrepreneur
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such as managerial skills, technical competency, marketing and manufacturing abilities,

and experience. And the viability of the project concerning the product, technology, and
market is also evaluated. After considering all these factors and evaluation, it will go
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through a risk management stage. After all, it leads to deal negotiation.
Deal negotiation.
Once the venture capitalist is satisfied with the project benefits and they move
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into deal negotiation. It is nothing but a deal agreement that consists of the terms and
conditions of the deal by mutual understanding and is mutually beneficial to them. Both
of the parties put forward their demands and sort them out by mutual discussions.
Deal negotiation can be done in the following areas like the amount of investigation,
)A
percentage of profits to both parties, rights of the venture capitalist and entrepreneur.
Post investment activity:

Once the deals are finalized, post-investment activity will start. Venture capitalist
(c
takes part in a venture and takes up some rights and duties. But the capitalist does
not take part in the day-to-day activities of the firm. When there is a financial risk,
they become active in that. They become represented in the board of directors and

participate as a representative of the board of directors and make sure that the firm is
Notes
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working as per the plan.
Exit plan:
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This is the last stage in venture capital financing. This is to realize the maximum
profit and minimum loss. Venture capitalists should make an exit plan to determine the
exit time that depends on different factors including nature of the venture, extent or
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type of financial stake, market conditions, etc. The venture capitalist may exit through
acquisition by another company, purchase of venture capitalist shares by outsiders,
purchasing of their shares by promoters, or through IPO,s.
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Conclusion:
The venture capital financing process is a method of analyzing the various stages
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of a project of an enterprise to make financial funding by venture capitalists. So funding
and investment are required to satisfy all the above-mentioned stages and processes.
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1. ____________ is the fund raised by the business person to perform the business
activity until it begins to turn into profit.
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2. ____________ is a type of planning in which a company plans about how to make
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profit or earn money.
3. Method of paying a fixed amount to the company’s product or to the access the
company’s feature is known as_______________.
4. A credit expansion from one trader to another to purchase the goods and services is
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known as_____________.
5. ______________ is a financial source in which the third party act as a factor that
gives various services like the bill discounting and collecting of the bills from the
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clients.
6. ______________ is a instrument it that have value decided from the security such
as currency and bonds.
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Summary
●● Start-up business can get funds from personal funding, crowd funding, business
loans and families and relatives.
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●● Equity source of finance is best suitable for the business organisation that are
ready to share the ownership of the business with their shareholders.
●● There are various short term and long term sources of finance available for a
)A
business.
●● Mutual funds are the securities in which the money is taken from the investor and
it is being invested in different securities.
●● Hybrid instruments are the ones that are a combination of equity shares and debt
(c
instruments.

Activity
Notes
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1. What could be the advantages and disadvantages of raising funds through equity
sources of finance?
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2. What according to you are the different features of financial instrument?
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1. Briefly explain the advantages and disadvantages of start-up capital?
2. Briefly explain the types of business models?
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3. What are the advantages and disadvantages of trade credits?
4. What are primary and secondary securities in the market?
5. Briefly explain the term swaps?
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Glossary
1. Crowd funding- it is a technique of funding in a way that it will not go for any equity and
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it will include encouraging the crowd to provide fund for the new start-up business.
2. Key metrics- it is a measurable act with the help of some mattresses to recognize or
identify the growth of the company is goals.
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3. Retained earnings- it is the total amount of income left over by the business after all
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the profits being shared among the shareholders.
4. Swaps- it is an agreement between two parties where they interchange the interest
rate and agree to pay each other’s interest on their loan in different currencies and
options.
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5. Option- it is an agreement between the parties where the buyer has full right to
purchase or sell a specific number of derivatives to a particular price for a specific
period.
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Further readings
1. Book- venture capital finance in in India
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Author- JC Verma.
2. Book- capital market in India.
Author- Rakesh Chakrabarti
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Answer
1. Start-up capital
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2. Business models.
3. Subscription.
4. Trade credit.
5. Factoring.
(c
6. Derivatives

Case study
Notes
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Ritesh Agarwal is a young successful entrepreneur and he is the founder and CEO
in
of OYO Rooms. In 2012 he started as a budget-friendly accommodation site, named
“Oravel stays” for booking budget hotels and later it was renamed as OYO in 2013.
OYO room is the oldest startup started by 18-year-old Ritesh Agarwal. OYO doesn’t
own any hotel or rooms but is linked with certain hotels and has some rooms reserved
nl
for those who want OYO service. It is mainly focused on non-branded hospitality
sectors.
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Life before Entrepreneur:
Ritesh Agarwal was a college dropout student whom today stands out among the
most successful startups. His journey started as normal. He was born in a business
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class family in Orissa and attended a local school there. He was having unconventional
ways of fun from those other kids. His fun elements include repairing computers, and
continuously making mistakes so that he could learn something new. By doing so,
he got an interest in software. So he used to borrow his brother’s book for learning
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computer programming. During the preparation for the IIT entrance exam, he used to
sneak out to Delhi to get a connection with other entrepreneurs. He even stays in a
budget hotel and attends the customer call himself and utilizes the maximum possible
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ways to know about the expectations and views of customers regarding the budget
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hotel. This was the very basic way of learning, which helped him to reach from Oravel
to OYO.
The journey from Oravel to OYO

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Ritesh Agarwal started his business journey at the age of 17. He dropped out of his
studies and initiated his startup firm called “Oravel Stays Pvt Ltd”. In2012, he designed
the same venture with another name called “Oravel”. Oravel is a platform for booking
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budget accommodation. Being a keen traveler, he realized that predictability has been
lacking in the budget hospitality sector.
So he changed Oravel to OYO room, and with a key idea of providing affordable
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and standard accommodation to customers in 2013. And the company got support from
investors like Greenoaks Capital, Softbank Group, etc. And become one of the leading
startups in the hotel industry. Ritesh Agarwal has got recognition for his credits. It was
not easy for him to succeed in his journey. At the beginning of the startup, he faced a lot
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of hurdles in bringing out his unique idea to life.
To achieve his dream of becoming a businessman, he joined the Indian school

of business and finance, Delhi. Unfortunately, he dropped out of college as he was so
)A
passionate about starting his own business. He was very much conscious of what he
wanted to do and was very brave enough to make decisions to bring his ideas to life.
As a part of this, he had traveled all over the country and he understood about
budget hotels and their problems. By constantly studying and researching, he launched
(c
Oravel Travel which was later renamed OYO rooms.

Funding:
Notes
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●● The initial investment was given by venture nursery, a capital of Rs 30 lakhs.
In March 2015, OYO completed the first round of funding which ended up
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being a successful venture. 24 million dollars was raised from four investors
Lightspeed Venture Partners, Sequoia Capital, Green oaks Capital, and DSG
Consumer Partners.
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●● In August 2015, OYO ran another round of funding and raised 100 million
dollars from Softbank group.
●● In 2016, Innoven Capital and previous investors showed their confidence in
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OYO by raising 90 million dollars. And the OYO’s valuation at that point was
400 million dollars.
●● In September 2018, after raising 800 dollars from Softbank, it got listed in
unicorn companies.
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●● In 2019, from Ritesh Agarwal led RA hospitality holding and Softbank, OYO
raised a total of 807 million dollars.
●● In 2021, Hindustan Media Ventures invested 540 million rupees.
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Growth:
Oyo was a small startup business at its early stages. And it was started in five cities
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in India. Currently, it has grown in international service and has partnered with 8500
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hotels in 230 cities. The growth of OYO has very soon and its business thrives out of
countries like Nepal, Malaysia, Indonesia, and china. Currently, OYO partnered with
20000 + hotels in 337 cities.
From 20 rooms and a single hotel, its business journey reached more than 3 lakh
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rooms over around 12000 hotels in India, China, and the UK.
Future:
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OYO hotels and rooms are ready to blast in the future and raise enough funds
to expand its business and to be India’s next future. The future strategies they have
planned are successful even though some disputes are already defaming the OYO,
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which is leading them to lose their funds and deals and the situation becomes more
complicated, and they are not sure about how far in the future their goals will be fulfilled.
OYO plans to overtake Marriott by adding more than a million rooms by 2023.
Struggles faced
m
Oyo rooms have faced many challenges during their journey and still, it is going
because of this pandemic and all. One of the major challenges was that the growth of
)A
OYO rooms was not ethical. According to the company executives and employees, OYO
rooms provided rooms from hotels that have stopped working and are not available.
This was done to promote the number of rooms on the OYO site. Many of the rooms
were from illegal hotels and not licensed ones. To avoid the trouble of getting caught by
authorities over unlicensed rooms, they used to provide free accommodation to officials.
(c
Another major problem was the unpaid dues in hotels. Some hotel managers and
workers have a complaint that OYO charged an extra amount on hotels along with room

expenses. And they refuse to pay this amount to the hotel.

Notes
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Many hotel owners protested against OYO stating that the accounting auditory
process is full of errors and faults. And penalties associated with these errors are so
in
expensive that the hotel owners themselves have to give money to OYO at the end of
the month.
The company’s business was adversely affected by the Covid pandemic. The
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revenue and occupancy dropped down by over 50%-60% in April 2020. The global
partners also faced a loss of 75% that led to a pay cut of 25% to their employees.
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Suggestions from Ritesh Agarwal:
OYO CEO Ritesh Agarwal provides much advice for young startups. Once he
tweeted about self-reelection, which is the critical process in tough times. And he added
that to ask difficult questions to oneself and others around. The time you spend for
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yourself affects other’s time. First structure your thoughts before going to rest of the
daily activities”.
He also said, “if you are building a startup, focus on all levels of business like
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having a microscope and telescope in your hands for detailed studies”.
Awards and Recognition

●●
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Ritesh Agarwal, a 26-year-old, successful entrepreneur has achieved some
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awards and recognition from various corners of the business.
●● In 2013, The 20 under 20 –“Thiel fellowship” was received by Ritesh
Agarwal. And he received 100,000 dollars. He received mentorship from tech
entrepreneurs, investors, and scientists.
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●● In the consumer tech sector’s, he got recognition in Forbes “30 under 30”
●● Listed in top 50 entrepreneurs in 2013 by TATA First Dot
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●● TiE-Lumis Entrepreneurial Excellence award was received by him in 2014.

●● He got the Business World young entrepreneur award
●● He published a book “A complete Encyclopedia of top 100 engineering
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colleges” at his younger age and got recognition for a best seller.
●● At the age of 16, he got a chance to participate in an Asian camp held at
the Tata Institute of Fundamental Research and had an appreciation for the
youngest speaker in that panel.
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●● In 2014, OYO raised Rs 4 Cr from Lightspeed Venture Partners (LSVP) and

DSG Consumer Partners. And now the company’s gross booking reached
more than 1 Cr per month.
)A
●● The business budget expands with 20,000+ hotels with more than 1 million
rooms in 337 cities like Goa, Delhi, Mumbai, Pune, Hyderabad, etc.
●● OYO mobile app has been developed and has been downloaded more than
10 million times. And currently, it reached 5 million bookings. It achieved app
ranking and was listed in one of the top three apps in the “travel and Local”
(c
category.

●● OYO raised another 25 million dollars from Lightspeed, Sequoia and others.
Notes
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●● Oyo founder Ritesh Agarwal has purchased 2 billion dollars in shares from
venture capital firms.
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Questions:
1. What are the challenges faced by Ritesh Agarwal during his journey from Oravel
to OYO?
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2. Elucidate the funding and investments in OYO?
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)A
(c

Module -3: Understanding Startup Finances, Capital

Notes
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& Other Requirements & Developing Team and
Presenting Business Plan
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Structure:
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3.1 Financial Projections
3.1.1 Understanding Financial Projections and forecasting ?
3.1.2 Elements of financial projection
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3.1.3 Steps to making financial projections for your new business
3.1.4 Forecasting expenses and revenue
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3.1.5 marketing and operational plan
3.2 Business Plan
3.2.1 Importance of a business plan
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3.2.2 Elements of a business plan
3.2.3 Tailoring the Business Plan to Specific Audiences
3.2.4 How to Write the Perfect Business Plan r
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3.2.5 Why Some BP Fail – Common Pitfalls to be Avoided
3.2.6 Examining sample business plans
3.2.7 Understanding the investor’s perspective and presenting the business
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plan.
3.2.8 Valuation of business plan and the elevator pitch.
3.2.9 Evaluation of Business plan-Introduction
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3.2.10 Faith in Entrepreneur and Entrepreneurial Team

3.2.11 Markets, Competition and Growth Strategies
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3.2.12 Risks, Returns and Rewards

3.3 Role of Government Institutions
3.3.1 Role of Government in promoting Entrepreneurship
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3.3.2 Institutions rendering support for promting entrepreneurship

3.3.3 Institutions set up by Central and State Government
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3.4 The importance of team

3.4.1 Importance of team work in a startup
3.4.2 When teamwork fails
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3.4.3 Forming and Building Teams

Case Study

Unit - 3.1 Financial Projections

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Objective
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●● To understand the concept of business plan.
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●● To evaluate financial projections and forecasting
3.1.1 Understanding Financial Projections and Forecasting
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Financial projections refer to the forecasting of the expenses and revenues of the
company. It refers to a prediction regarding the future revenue of a company based on
historical data and internal analysis. A company will evaluate the financial data and will
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forecast the short-term and long-term financial projections.
Financial projections and forecasting will help in estimating the future requirements
of the company and will help the business organization prepare the business strategies
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according to the future requirements. Evaluation of the historical data of a company will
help the entrepreneur make necessary decisions and apply and utilize these financial
data as in capital budgeting.
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Detailed analysis on the past two data is being done by an entrepreneur to
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evaluate the future opportunities in the market. By evaluating and forecasting the
historical data the entrepreneur could analyze past and present trends that will help in
making future decisions.
Financial forecasting means making assumptions regarding the future course of

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action followed by an entrepreneur. Projection refers to giving hypothetical statements

and the future course of action that the business will follow.
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Benefits of financial projections and forecasting:-

1. Financial projections and forecasting help the business organization determine
the success of the company by framing long-term strategies of the business.
The entrepreneur can evaluate the long-term business activities of the company.
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2. Financial forecasting will help in preparing the financial budgets of the company
and will also help in evaluating the future forecast of the company.
3. Entrepreneurs can easily estimate the risk that the business organization could
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face in the future and prepare strategies according to the future risk in the
market.
4. Financial forecasting and projections will help the business organization prepare
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its financial reports and make necessary changes in future business strategies.
5. Financial projections and forecasting will help the business organization work
according to the business standards and work according to the performance of
the company.
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6. It will also help the business organization prepare a blueprint for the future
expenses and gains of the company that will help the business organization

make decisions regarding expansion or any other major decisions regarding

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the business growth.
7. The future requirements of the funds can be easily estimated through
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forecasting and this will help the entrepreneur make necessary arrangements
for finance and will also help in evaluating those financial options that are easily
available for the business and are less expensive in comparison with different
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alternatives.
8. If the entrepreneur is engaged in financial forecasting then the company will not
face the problem of surplus cash or deficit of funds for meeting the long-term
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objectives.
9. It will also help the business organization make decisions regarding the
arrangement of funds through banks or other financial institutions.
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10. Financial forecasting will act as a guideline for the investors and lenders to
evaluate the performance of the company and make decisions regarding the
borrowing of funds and supplying of funds in the business.
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11. The entrepreneur can make better decisions based on future forecasting and
will help the business entrepreneur make decisions for the future expansion
and growth of the company.
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12. It will also ensure that the financial resources of the company are used in the
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best manner so that the sales and growth of the company are being generated.
Types of financial projections:-

Based on the duration of the forecast, there are two types of financial projections.
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1. Short term projections: -

These types of projections are done for one year. Short-term projections will be
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subdivided into per month forecasting that is every month financial projections are being
done by the entrepreneur.
2. Midterm projections:-
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These types of projections are usually done for three years. These forecastings
include strategies for the upcoming three years. Forecasting and projections are done
at the end of every year.
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Methods of financial forecasting and projections:-

There are different methods of doing financial forecasts and projections that
help the business and identify the strengths and weaknesses of the business. This
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forecasting will help in defining the future goals and needs of the business. Forecasting
methods are being classified into two broad categories that are qualitative forecasting
methods and quantitative forecasting methods.
1. Quantitative forecasting methods:-

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Quantitative forecasting methods are related to the facts and figures of the
company. By applying this forecasting technique the entrepreneur forecasts the

financial data of the company. These types of forecasting methods are beneficial when
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applying the sales techniques and growth of the company. These types of financial and
statistical data guide the business organization in making future decisions. These types
of techniques require professional and experienced persons that could handle large
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statistical data and could forecast based on financial information.
A) Straight line:-
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This is one of the easiest and reliable sources of qualitative technique. In this type
of method, predictions are made based on the past performance of the company. It is
generally assumed that if the revenue of the company has increased in the previous
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years then it is estimated that the revenue will increase in the future years also. These
types of productions will help the business organization make major decisions for the
company and forecast the future requirements of the company. It is not always possible
that the method could give correct financial information but it will help the business
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organization from its financial goals and budgets and create plans for the company.
B) Moving average:-
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This method estimates the average performance of the business organization. In
this method, evaluation is done based on monthly timeframes rather than evaluating
the business plan on yearly basis. Through this method, the company can evaluate
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the sales, growth of the company, and stock prices of the business organization.
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This method estimates the financial performance and will give better decisions to the
company. If the sales of the company fluctuate very frequently then the company can
evaluate the growth of the business based on the 3-month moving average for 5 month
moving average techniques.
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C) Time series:-
This method is used to identify the pattern in the historical data and make
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predictions regarding the future forecast. There are certain points in the business where
the sales and growth of the company are highest. The time series method will help in
evaluating these types of the period within which the forecasted sales of the company
are maximum this will help the company evaluate the performance in the upcoming
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months.
D) Day sales method:-

This type of method is one of the most traditional techniques to evaluate financial
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performance and help in forecasting the business organization’s performance. In this

method, the forecasting related to sales is being done based on dividing the sales by
the number of days. This method helps in evaluating the requirement of funds in the
business organization.
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E) Percentage of sales method:-

This method is used to estimate the financial requirement of any business
organization by estimating the percentage of the sales. This will help in analyzing and
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forecasting the percentage change in sales in the different periods and the impact of
changes in sales on the liabilities and assets of the company.

2. Quantitative forecasting methods:-

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Qualitative forecasting techniques deal with qualitative information regarding the
customers. Qualitative information includes the changes in the market conditions due
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to recent trends for the preferences of the customers. Qualitative forecasting techniques
are not purely based upon statistical data but will include data related to increase or
decrease in the sales of the company. The reason for changes in business performance
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is based upon predictions and other short-term situations.
A) Market research:-
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Market research is a qualitative methodology for evaluating the demand of the
customer and identifies the potential sources of revenue in the market. Market research
will help the business organization make decisions regarding the upcoming locations
of the company and evaluating the marketing techniques of the business. Market
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research will not help in generating statistical data but it will give variables that help the
customers lead to purchase in the products of the company that are good for the help
in increasing the revenue of the business. These types of data and variables will help
the business organization make forecasts and projections regarding future business
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strategies. That could further help the business organization make investments into
variables that are more liked by the customers.
B) Delphi method:- r
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This method is similar to the market research method that uses experts that could
give better information regarding the market techniques. This method will help the
business organization make decisions based on expert knowledge of export people
in the business. Financial decisions will be based upon the market research done by
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market experts. This will help the business organization make long-term forecasting
decisions and evaluate and help the business organization grow in the future.
Qualitative and quantitative methods of forecasting both have the objective of

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making better decisions for the business organization by providing approximate results
to the entrepreneur. The entrepreneur will make better decisions by getting fair value of
sales and forecasting values in the future. This will help the business organization grow
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based on financial projections and forecasting. Forecasting is not always correct but
the entrepreneur can rely on forecasted statistical data because these data are being
evaluated after implementing various methodologies and knowledge of a business
expert.
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Financial forecasting and projections help make long-term and short-term decisions
for the business organization and evaluate the performance based on forecast data.
If the business organization has the objectives of growth in the market then the future
sales prospective and growth perspective of the company can be evaluated through
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these techniques and it will help the entrepreneur make better decisions based on
statistical information.
3.1.2 Elements of Financial Projections

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The financial projection of forecasting will include different types of elements

that are necessary to evaluate the financial position of a company and make future
decisions based on forecasted data. These elements will give more reliable information
because a business entrepreneur will properly evaluate the statistical data to get a
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greater idea about the financial position.
Three main components are included in the financial projections which are being
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discussed below:-
1. Balance sheet
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The balance sheet is a summary of the financial information of a company. The
balance sheet is being prepared on a particular date usually at the end of the year to
estimate the liabilities and assets of the company. A balance sheet gives statistical data
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regarding the liabilities, assets, and capital of the business organization. The net profit
or loss of the company is being adjusted in the capital of the business organization. If
the difference between the assets and liabilities of the business organization is positive
that means the company has incurred profit in the financial year. And if the difference
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between the assets and liabilities of the business organization is negative that means
that the company has incurred loss in the financial year. The balance sheet will help the
entrepreneur evaluate the financial condition of the business organization and will also
help in making decisions regarding future business strategies.
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Components of the balance sheet:-
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Assets: - assets are the elements that add value to the business
organization. The assets of the company could be tangible or intangible.
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Tangible assets will include land, building, machinery, and other equipment.
The business equipment could further be classified into the necessary
equipment such as furniture and computers that the business organization
has. The intangible assets include patents and Goodwill that cannot be
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touched or seen but have a business value and are responsible for increasing
the business value and future. The business assets are very necessary for
business functioning and are included in the balance sheet of the company.
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The prepaid expenses, inventory, cash, and cash equivalents, and bills
receivable are some of the examples of the assets.
●● Liabilities: - liabilities are the financial debts of the company towards which
the business owes. Liabilities in the business organization create a financial
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burden on the entrepreneur to pay a certain amount to the creditors or fulfill

the financial requirements of the creditors. The liabilities of the business
organizations are being created when the company raises funds through
bonds or takes a loan from the banks. This creates a liability for the company
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and pays a certain amount to the creditor of the company. Current liabilities,
short-term debt, bills payable, long term debts are some of the examples of
liabilities.
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●● Capital: - capital is included in the balance sheet of the company because

without the capital of the company the business organization cannot run.
The shareholder’s equity is being included in the capital of the business
organization. The shareholder’s wealth is being included in the capital of the
company.
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2. Profit and loss account:-

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Before the preparation of the profit and loss account, the companies have to
prepare a trading account that is related to the manufacturing expenses and revenues.
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By preparing the trading account the entrepreneur will get the gross profit or loss. The
opening stock of the company is being mentioned in the trading account. The expenses
related to purchasing of the raw material enter direct expenses such as wages of the
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workers, packaging cost, and other related expenses are being mentioned in the trading
account. The credit side of the trading account will include the closing stock of the
company and the sales of the business. A trading account is necessary to evaluate before
preparation of the profit and loss account because the gross profit and loss will be helpful
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in the preparation of the profit and loss account and without evaluating the process profit
and loss of the organization the profit and loss account cannot be prepared.
A profit and loss account is a financial statement that helps get gross profit and net
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profit for an accounting period. The entrepreneur can easily evaluate the expenses and
incomes that are directly related to the business organization and are also responsible
for increasing the performance of the company. As the name suggests a profit and loss
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statement estimates the expenses and income earned by and earned by any business
organization that leads the company towards profit or loss. The purpose of preparing
the profit and loss account is to evaluate the financial performance and sources of
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generating revenue for a business. This method will help the entrepreneur evaluate the
expenses incurred for generating revenue.
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Components of profit and loss account:-
●● Debit side:-
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The debit side of the profit and loss account constitutes all the expenses that
are necessary for the business function. it will include the cost of goods sold which is
the cost incurred for selling a product in the market. The expenses will include those
that are not directly connected with the business organization but are necessary for
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the business. These expenses will include insurance, legal charges, advertisement
expenses, free samples given by the company, selling and distribution expenses, salary
of the office staff, commission, and other expenses. The above-mentioned expenses
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are not necessary for business functioning but are necessary for the successful
administration of the business. They are also known as abnormal losses.
●● Credit side:-
The credit side of the profit and loss account will include the revenues of the
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business organization. This will include revenue such as commission received, discount
received from the suppliers, interest received, dividend received, and other sources
of income. These sources of income are not generated from the main activity of the
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business but are purely based upon certain incidents. They are also considered as
abnormal revenue.
3. Cash flow statement:-

A cash flow statement is being prepared to estimate and anticipate the incomes
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and cash of the business organization. These statements are prepared so that the
sources of cash and the cash outflow can be evaluated. The cash flow statement is

dependent upon the inflow and outflow of the cash and all activities are dependent upon
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the net cash flow.
Components of cash flow statement:-
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●● Investing activities:-
Investing activities are those activities that include the acquisition of long-term
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assets of the company. These types of activities are included at the time of business
establishment. These activities are not related to the cash equivalents of the company.
While making decisions regarding the business organization, investment activities are
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necessary for financial projections and forecasting. These investment activities include
cash payments done by the entrepreneur at the time of acquiring the fixed assets.
The revenue is generated by the selling of fixed assets. Cash payment is done by the
entrepreneur for acquiring shares and other business instruments.
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●● Operating activities:-
Operating activities are the ones that are not related to investment activities and
financial activities. These types of activities are necessary for our business operations.
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The revenue generated from the daily business operations is being included in the
operating activities. The net profit and loss of the company is being dependent upon the
operating activities. The components of operating activities are the cash generated by
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the selling goods and services rendered by the business organization. Payment made
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to employees for the services rendered by them. Cash receipts from revenue, royalties,
and commission of the business. Cash payment is done by the company for the tax
liabilities.
●● Financing activities:-
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Financing activities are related to the financial instruments of the business

organization. The cash received generated from financial investment and the payment
for the expenses incurred on financial decisions of the company are included in the
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financial activities. Financial activities related to the owner’s capital and the borrowings
of the company. Financial activities don’t need to be related to equity capital but they
could be related to the funds generated from borrowings. The cash generated from
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issuing debentures, bonds, and other short-term borrowings is included in financial

activities. It further includes cash generated through shares and similar instruments of
the company. The expenses related to the owner’s equity and borrowed funds both are
included in financial activities.
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Other financial projections elements:-

The above mentioned are the three major types of financial projection elements
that are broadly used by an entrepreneur to make decisions for financial forecasting.
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The other type of financial projections will include:-
1. Sales forecasting:-
This is one of the best ways of evaluating the financial projection of any business
organization. Evaluating the sales of the company for a particular period based on the
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previous financial year’s decisions regarding future sales forecasting will become very
easy. An entrepreneur evaluates the sales every month, quarter, and year. This will

help in classifying the changes in sales on a monthly basis and on a near basis. Sales
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forecasting will help the business organization improve their techniques to improve the
sales in the business. Sales forecasting is a very common technique for evaluating the
growth and performance of the business in the market.
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2. Expenses evaluation:-
Evaluation of the expenses will help the business entrepreneur make changes
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regarding the ways of reducing the operating expenses of the company. There are
various types of expenses that the business organization has to encourage on a daily
basis such as payment of rent, payment of daily wages to the workers, and salaries
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to the employees. These expenses also include advertisement expenses, marketing
and promotion expenses. Certain expenses could be controlled to a certain limit. By
forecasting the future demand of the product the company can reduce the expenses
and make strategies regarding reduction in the overall expenses of the company.
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Expected future expenses such as tax liabilities of the company and increased daily
wage workers could be forecasted by the business entrepreneur through evaluating the
expense.
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3. Evaluating the Income statement:-
The income statement will include the expected revenue and expenses of the
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company for the next year or the next financial year. The income statement will help
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the business entrepreneur evaluate the sales budget of the company and also frame
the cash budget of the business organization. The income statement will include the
investment decisions that could generate income for the company in the future. The
various sources of generating income are listed in the income statement that is related
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to the expected revenue and expenses of the business organization.
The elements of financial projections will help in forecasting the sources of finance
and revenue in the market. When an entrepreneur evaluates the various elements of
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financial projections and forecasting then it becomes easy for the entrepreneur to make
investment decisions in the market. Evaluation of various financial elements will also
help in identifying the risk factors in the market and will also provide various techniques
for reducing these risks in the business.
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3.1.3 Steps to Making Financial Projections for Your New Business

The financial projection is based upon the analysis and forecasting based on
the balance sheet, income statement, and cash flow statement. The business will
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evaluate these financial reports to get a better idea about the future requirements of the
business. Financial projections will give various benefits to the business organization as
they will help in forecasting the future requirements of the business and will also help in
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reducing the risk factors in the future.
It will also help in optimizing the pricing strategy of the products. Financial
projections will further help the business organization identify the growth opportunities
in the market and invest the money in better investment options.
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In the initial stage of business development, an individual will have to evaluate and
predict the financial requirements of the business organization. It will help in evaluating

the sales and growth opportunities of the business and future. Below mentioned are the
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steps required for making financial projections for a newly set up business.
1. Sales forecasting:-
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The initial stage of financial projection is forecasting the sales of the business
organization. While developing a business organization the entrepreneur should list all
the expenditures that will be incurred in developing the business in the market. This will
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help in identifying the direct and indirect expenses for establishing a company in the
market. It will include the salaries of the employees, wages of the daily wage workers,
rent, and cost of raw material, maintenance cost, and insurance of the business
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building or the goods. It is necessary to identify these expenses so that the company
can prepare the financial budget according to the requirement of the expenses in the
future. The business organization should also forecast the sales of the company. The
sales should be forecasted monthly sales and yearly sales. Forecasting sales is a very
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important tool while making financial projections. It will help in identifying the sources
of income and also the ways of increasing the sales revenue in the market. If the
business organization undergoes research and development then the entrepreneur can
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identify the potential market in which the product could be delivered and the sales of the
company can be increased.
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Benefits of sales forecasting:-
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●● Sales forecasting will help the business organization identify and estimate
the cost and revenue factors of the business. This will help in improving the
performance of the company in the long run.
●● Sales forecasting will help in preparing the budget of the company and
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formulation of plans according to future growth opportunities.

●● Sales forecasting will also help the business to allocate the resources to
manage the cash flow of the business.
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●● The entrepreneur can make better decisions regarding business expansion

and contraction if the business organization is involved in sales forecasting.
2. Create financial projections:-

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The next step is to create a financial projection. In this step, the inflows and
outflows of cash is being estimated for the first 12 months. Financial projections will
help the business organizations to take into account the revenue and cost for the future.
The software can be used to prepare financial projections of the business. This will help
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in assuming the sales of the business and the expenses of the business. The creation
of financial projection is based upon the experiences of the team members because the
sales forecasting and evaluation of expenses are being done by the market experts.
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The financial projection will help in preparing the annual profit and loss statement and
balance sheet.
Benefits of creating financial projections:-

●● Creation of financial projections to help in evaluating the expenses of the
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business and will also help in estimating the revenue based upon the sales
forecasting.

●● Financial projections for help in the creation of goals of the business and will
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motivate the team members to achieve the business goals.
●● It will give an unbiased prediction regarding sales forecasting and the revenue
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of the company because financial projections are purely based upon historical
data.
●● Financial projections for help in monitoring the cash flow of the business and
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evaluating the cash requirements of the business.
3. Determine financial requirements:-

The third step is financial projections to determine the financial needs of the
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business. There are various types of financial requirements in the initial stage of the
business. This will include the initial cost of the business, expenses on the raw material,
expenses on the research and development, and other costs. Identification of these
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financial requirements will help in evaluating the unrealistic cost of the business. The
entrepreneur can easily eliminate those costs that are not necessary for the business
establishment. This will help in increasing the revenue of the business and controlling
the cost of the business. There are various sources through which the financial
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needs of the business could be fulfilled. This will include raising funds through loans,
debentures, and other sources. Determination of the financial needs will help the
business organization reduce its expenses and focus on the sources of revenue. If
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the business organization identifies the financial needs that will become easy for the
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business to evaluate various sources of finance available in the market. The business
entrepreneur will focus on identifying and selecting those sources of finance that fulfill
the financial needs of the business at a minimum cost. This will help in increasing the
revenue of the business and will also increase the sales of the business. Determination
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of the financial needs will help their business organization to focus on the business
opportunities and goals.
4. Utilization of projections for planning:-

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Planning is very necessary while framing the financial projections of the business.
The financial projection will help the business organization make better decisions. The
results generated from financial projections can be used in planning activities. Financial
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projections help in analyzing the future requirements of the business and will also help
in evaluating the impact of different strategies on the new business. While framing the
business policies it is necessary that the financial requirements of the business be the
sources of funds, expenses on different sources of funds, and other financial analysis.
The entrepreneur evaluates the financial projections and the results generated that are
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the financial and statistical data generated for financial projection will help in business
planning. The entrepreneur will evaluate various situations and will help in analyzing the
business from different aspects. This will help in the better formulation of budgets and
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planning of various opportunities in the market.
Planning is looking forward and making a roadmap for achieving the future goals of
the business. When the business organization is utilizing their financial projection data
this will help in the better formulation of plans of the business based on the statistical
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data. This will also help in relying on the business plans framed based on financial
projections.

5. Plan for contingencies:-

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Contingencies are the unusual occurrence of some event that was not stated in the
planning of the business. A business organization should prepare a contingency plan
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so that if any unexpected event occurs it could be better handled through contingency
plans. There could be various unusual events that could occur such as changes in
the government policies or the changes in the rules and regulations of the business.
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These types of changes will create the occurrence of unusual events such as the
changes in demand of the customers and other barriers to production activities. If the
business organization has prepared a contingency plan it will help in reducing the
chances of failure of the business. Financial projections will also have to face various
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types of challenges and sometimes the planning of the business might even fail while
preparing the financial projections. Contingency plans will act as a secondary plan for
the business and will help in planning at the correct time. If the business organization
is prepared to deal with different challenges then it will become easy for the startup
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business organizations to prepare financial projections.
The major advantage of planning for contingency is that the uncertainty and
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the risk factors in the business could be reduced. This will further help the business
organization to frame the financial projections in a better manner and forecast the
requirements of the funds in the business. Contingency planning will help in reducing
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and minimizing the expenses of the business by identifying the future growth
opportunities in the market.
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6. Monitor:-
The final step in financial projection is the monitoring of the actual results.
Monitoring of the actual results will help in identifying the deviations of the actual results
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of the business and will also help in making necessary changes. The entrepreneur must
evaluate the financial projections with the plans of the business and help in evaluating
the difference is and loopholes in the performance. Monitoring the financial projections
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will help the entrepreneur learn about the cash flow of the business and will also help in
identifying the sources of business that generate more cash for the company. Financial
projections will also help in evaluating the cost factors of the business that are those
factors that increase the expense of the company. Monitoring is a very important tool to
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cause by evaluating the performance the future business plans and financial projections
can better be implemented. Financial projections and forecasting will give better results
when the business organizations are working upon the reduced performance factors.
The steps for making a financial projection for a new business start with forecasting
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other expenses and the sales of the business. This will help the business organization
evaluate the potential sales and previous year sales and expenses that will help
in making better expansion decisions. A new business should follow the financial
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projections because this will act as a roadmap for the business organization to prepare
future strategies. Following every step of the financial projections will help in better
evaluating the sales forecasting and expenses of the company and will also help in
framing the plans for the business. It is not always necessary that the planning of the
business is successful but the entrepreneur could prepare contingency plans that are
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more useful at times of uncertainty.

Evaluation and preparation of the financial projections benefit the business

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organization by preparing a better and a profitable budget for the company. It will also
benefit the new business organization by forecasting the expenses of the business and
the ways of reducing the unrealistic and relevant expenses of the business. It will guide
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the business entrepreneur towards increased revenue and increased sales and it will
further help in keeping track of the sales and performance of the business.
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Financial projections will help new startup businesses to handle the business in a
better manner. It will help in applying for different sources of finance and suggest loans
from the banks because the company will have the plans for the next two years and
will also have its current financial statements to present in the bank. It will attract more
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investors to invest in the business based on financial projections and forecasting.
3.1.4 Forecasting Revenue and Expenses
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An entrepreneur when establishing a business organization has the major role
of forecasting expenses and revenues. The forecasting of business revenues and
expenses is a common activity that is done by every entrepreneur. Financial forecasting
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that is the forecasting revenue and expenses will help the business organization plan
for its operational and functional activities.
●● Forecasting expenses:
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Expenses of the business are related to the cost incurred on the arrangement of
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various factors of production. Startup business and a well-established business will
have to include various types of expenses in cost for the proper functioning of the
business in the market.
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●● Startup expenses:
Startup expenses are those types of expenses that are being encouraged by a
new lease set up by a business organization to avail the factors of production and other
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types of facilities in the business. This will include the purchase of raw material, the
purchase of assets, and the arrangement of factors of production.
●● Fixed cost:
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These types of costs are the ones that remain fixed irrespective of the level of
production. If the business increases its level of production there will be no impact
on the fixed cost. These types of costs will include rent of the building, salaries of the
employees, legal charges, licensing fees, and communication costs, acquisition of
technology, and advertisement and marketing of the product. These types of expenses
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will remain fixed and the business organizations will have to encourage these types of
expenses and cannot avoid them at any level of production.
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●● Variable cost:
Variable cost is the one that will change with the level of production. These types of
costs will not remain the same at different levels of production and will vary according
to the requirements of the business. These types of costs will include direct sales, cost
of goods sold, cost of availing the raw materials, packaging cost, transportation cost,
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warehousing cost, and another variable cost.

Ways to forecast the business expenses:-

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1. Entrepreneurship doubles the advertisement and marketing expenses because
these types of expenses are going to increase shortly. These types of expenses
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will increase because advertising and marketing costs incurred to create awareness
about the product in the market will stop. It is better to double the marketing expenses
to create a proper budget.
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2. Forecasting of the legal expenses should be done based on legal formalities that the
business will fulfill in the future. If the company is engaged in availing more business
licenses in the future then it is better to evaluate the legal expenses on an increased
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margin so that it becomes easy to forecast the requirements of legal expenses. it will
also include the expenses of insurance and the legal and insurance expenses will
always increase due to the requirements of the business.
3. In the initial stage of the business development sales are the customer services
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expenses will be low but when the business organization increases its sales and
customer service then the company will have to increase income or expenses.
Forecasting of sales and customer service expenses should be done based on the
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objective that the sales of the company will increase in the future and this will help in
creating a better financial statement of a company.
4. If the business organization will expand its business in the future and have the
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objective of establishing a new business outlet, it is better to forecast the expenses
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on the availability of raw material so that the entrepreneur can properly evaluate the
expenses incurred for availing the raw materials.
5. Business organization expands its business and the business has already framed
the objectives of business expansion then the company will require more manpower
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to fulfill the business requirement so it is better to increase the budget of salary while
forecasting the expenses of the company.
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Forecasting revenue:-
The following are the ways of forecasting the revenue:-
1. Focus on expenses:-
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The best way of forecasting the revenues is to focus on the expenses. The
individual should start with expenses that should focus on forecasting the fixed cost and
variable cost of the company. This will help in evaluating those factors that increase
the expenses of the company and are responsible for producing the revenue of
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the business. The entrepreneur can reduce these types of expenses to improve and
increase the revenue of the business. The entrepreneur should double or triple the
estimates of the expenses so that the legal expenses and all the related expenses
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of the business could be covered in the forecasted expenses. This will increase the
revenue of the company and will also keep a track of the sources of revenue.
2. Forecast based on reality:-

It is better to forecast the revenue opportunities in the market based on the reality
(c
of the business. Instead of forecasting based on production and gas work, it is better
to forecast based on reality and statistical data. This type of forecasting will help get a

better idea about the market demand and the sources of revenue in the market. It will
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help in the better formulation of strategies based on creative thinking and the creation
of aggressive growth strategies for the business. Revenue forecasting is based upon
the future growth opportunities of the business rather than forecasting based on the
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aspirations of the business.
3. Evaluating the ratios of the business:-
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Evaluation of the ratios such as the gross margin ratio will help in evaluating the
ratio based on direct cost and total revenue of the business. Another ratio that could
be evaluated is the operating profit margin ratio that will help in evaluating the total
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revenue by the total operating cost of the business during a particular year or a quarter.
These types of ratios help forecast the future requirements of the business and the
key considerations of the business. These types of ratios are necessary for making
strategies regarding the ways of increasing the revenue in the future. Forecasting of
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revenue could be possible by evaluating the revenue opportunities in the market in
three different ratios.
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Techniques of forecasting revenue:-
1. Straight-line method:-
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This method is one of the simplest and the easiest ways of forecasting the revenue
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of the business. First of all, in this method the sales growth is being evaluated in a
particular period. For forecasting, the future revenue of the business the previous year’s
figures are being used is multiplied by the growth rate of the business. Forecasting is
mostly done by retail businesses that assume growth in the business every year.
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2. Moving average:-
These types of techniques are being used to evaluate the performance and
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forecast the revenue based on the set of data to establish future values. In the 3
month moving average the revenue of 3 months is being taken and an average of the
three months is calculated. This process is being continued for the consecutive three
months in the table. These types of values will give a forecasted value of revenue
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after 3 months. The same method is applied for the 5 months moving average in this
the revenue of 5 months is being taken and the average of the 5 months is being
calculated.
3. Simple linear regression:-

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Regression analysis is being used to identify the relationships between the

variables for making predictions based on the variables. Regression analysis is used
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in finding relationships between the dependent variables and independent variables.

This type of technology helps in estimating the relation between the revenue and
other dependent variables. There are various dependent variables such as advertising
marketing and other factors that are being dependent upon the revenue. If these
factors in the business increase the revenue of the business will also increase. In this
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technique, only one factor is being evaluated with the revenue of the business.

4. Multiple linear regressions:-

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Multiple linear regressions is a technique in which revenue is being dependent
upon various types of factors. Revenue is the dependent variable that is being
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evaluated on various independent factors. The revenue of the business is not
only dependent on one factor but multiple factors are responsible for increasing or
decreasing the revenue of the business this will include advertisement, promotion, and
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marketing techniques. These types of factors are responsible for increasing the revenue
in the market. The relation between the independent and dependent variables that is
the promotion cost, marketing cost is being evaluated and how they impact increasing
the revenue of the business.
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Benefits of forecasting revenue and expenses:-
1. Forecasting of revenue and expenses will attract more investors to rely on the
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financial projections and forecasting of the business. It will give investors reason to
invest in the business because the detailed and well-structured financial projection
will provide more statistical and reliable data to the investors.
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2. Forecasting the expenses and revenues of the business will help in evaluating the
unnecessary expenses of the business and will also help in the preparation of the
budget. It will help in keeping track of the business goals and objectives and provide
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a reliable source of information for preparing the budget of the company.
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3. Forecasting of expenses and revenue of the company will also help in evaluating the
potential of the business in the future. The potential of incurring expenses related
to the hiring of new employees in the business is being done based on the forecast
expenses and revenue. The business organization should have expected revenue
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to incur on the expected manpower that will increase in the future. If the business
organization does not have sufficient expected revenue in the future then decisions
of employing new employees in the business should be taken very wisely.
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4. The strategic planning of the business is done easily by forecasting the revenue and
expenses of the business. It will help in formulating business plans based upon the
expected revenue potential of the business in the market.
5. Revenue forecasting will help the business organization in improving the production
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schedule by reducing unnecessary activities in production. This will further increase

the sales of the business in the market. Forecasting of revenue helps in effectively
planning for the production activities.
6. Revenue forecasting and expenses forecasting will help the business organization
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manage the cash flow of the business and reduce the unnecessary expenses in the
business. The influence outflow of the business can easily be evaluated through
forecasting the revenue and this will help in effectively planning the business
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requirements. The cash payments and the credit requirement of the company in the
future can be evaluated through revenue forecasting.
7. This will also help the business organization by analyzing the sales and per month
revenue of the business. Sales and revenue are interconnected because when the
sales of the company increase the revenue of the company also increases. So it
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helps in keeping track of the sales of the business and reducing the expenses related
to distribution and selling of the products in the market.

3.1.5 Marketing and Operational Plan

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Marketing plan:-
A marketing plan is a roadmap for guiding the business organization related to
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the marketing strategies of the business. Marketing plans will include promotional
strategies, advertisement strategies, and strategies related to creating awareness
about the product or service in the market. Marketing plans are very necessary for the
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generation of leads in the market.
Marketing plans will help in identifying those key performance indicators that bring
maximum revenue and more customers to the business. Marketing plans are being
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established by the business organization based on the objectives of the business.
The marketing strategies should match with the overall business goals so that the set
business objectives could be achieved.
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The marketing objectives of the business should be achievable for the business
organization. The marketing plans of the business must result in increased revenue
and a decrease in the overall expenses of the company. The marketing plan should
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have the objective of undergoing marketing research activity that means identifying the
market trends, requirements of the customers, the sales volume of the company, and
ways of increasing customer satisfaction.
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Financial projections and forecasting are related to the marketing plans of the
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business. The development of a well-structured marketing plan is one of the key roles
of financial projections. The business organization should create financial budgets for
marketing activities. It is necessary that the business organization forecast the future
requirements of funds for the promotion of the business in the market. It will also
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include the development of the marketing strategies and the hiring of market experts
that could better guide the business organization about future marketing strategies.
The major goal of the business organization is to increase the revenue in the
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market. Marketing strategies will play a very important role in increasing the market
share of the business and facing the competition in a better manner. The entrepreneur
will have to frame the strategies for the same and will also require marketing budgets
to accomplish the goals. Financial projections and forecasting will help in the future
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allocation of resources for the completion of the marketing activities.
Marketing plans in the business field help in forecasting dose marketing strategies
that are best for the business and can generate more customers and deliver customer
satisfaction. These types of indicators will help the business organization work upon the
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factors that majorly influence the performance of the business. Financial projections
and forecasting will help in creating and investing in those marketing factors that not
only increase the revenue of the company but also creates a brand in the market. A
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business organization must create awareness about the product or service in the
market and this could only be possible by implementing correct marketing strategies.
These types of marketing strategies will require funds to attract customers and
financial projections and forecasting will help the business organization analyze the
requirements of finance for better implementing the future marketing goals of the
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business.
Purpose of marketing plan in financial projections and forecasting:-

1. The marketing plans will help in better guide the business organization related to
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the potential customers in the market. For forecasting the potential customers in the
market the entrepreneur will have to undergo research and development activities
and that will require financial support. The business organization can evaluate the
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requirements of funds in the market and identify the potential customers in the
market.
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2. Marketing plans will help the business organization reduce the wastage of resources
and will help in making optimum utilization of the financial resources of the company.
The budget of the business will help in better guiding the business organization
related to the marketing strategies of the business.
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3. Marketing plans analyze the business environment that is the political environment,
social environment, cultural environment, technological environment, and other
external factors. Analysis of different business environments will require financial
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projections and forecasting so that the analysis of the changes in the external
environment can better be evaluated in the future.
4. Development of a well-structured marketing strategy will help in increasing the sales
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volume of the business and create consistency and delivering the products and
services to the customers.
5. The entrepreneur will have to undergo various types of analysis such as competitor
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analysis, market research, SWOT analysis, and other different types of internal and
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external analysis for each of these types of business analysis will require financial
support to the business so that the requirements of funds for the business could
easily be evaluated and the results generated through the analysis can be easily
implemented in the marketing plans of the business.
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6. There are various types of activities performed in the marketing planning of the
business. This will include the creation of promotion activities, distribution activities,
and advertisement activities. Business organizations will require various types of
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resources such as natural resources and human resources to frame better strategies
for the business related to the marketing plans. Implementation of natural resources
and human resources will require financial forecasting because the requirements of
natural resources and human resources will increase in the future if the business
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organization has the objectives of expanding its customer base in the market. It will
require better analysis so that future requirements of the business could easily be
analyzed.
7. Marketing plans will include strategies related to product, price, place, and promotion.
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The entrepreneur will have to evaluate the requirements of funds in the future
related to the above-mentioned activities of the business. Forecasting of financial
requirements of the business will help in making better decisions regarding the
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marketing plans of the business. This will also help in identifying the best place for a
product launch that could attract maximum customers for the business.
8. Formulation of business strategies and analysis of the customer requirements is
based upon the research and development activities and marketing planning in
the business requires forecasting. Financial forecasting and projections are very
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necessary to analyze the future requirements of funds related to business strategies

and marketing plans of the business

Operational plans:-
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Operational plans are the ones that are related to the specific plans of the business
and are responsible for making optimum utilization of the resources.
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Operational plans of a business are a detailed plan of a business that relates to
how the manpower and all the resources of the organization will be effectively managed
so that the objectives of the organization are being achieved. It is long-term business
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plans that relate to achieving the technical and operational objectives of the business.
Operational plans define the strategic goals of the business that are those of the
business that are related to business strategies. Operational plans are very complex
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and require a highly specialized team to prepare the operational plans of the business.
The requirement of the operational plans will include long-term business objectives and
goals and this will require a financial budget of the company.
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The key components of the operational plan majorly focus on maintaining the
quality standard of the products and services and identifying the key performance
indicators of the business. The operational activities of the business will require
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effective management of the human resource and natural resources of the business
and optimum utilization of every resource in the organization by making them available
through the budgets of the company. The budget will play a very important role in
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acquiring the natural resources that are necessary for product completion. Financial
forecasting and projections will include preparation of budgets for operational plans that
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are for acquiring the human resource and other resources for the business.
Maintaining quality standards in the business is very important so that consistency

in the product and services is being maintained in the market. Meeting the quality
standard will require a financial budget and forecasting of the financial requirements of
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the customers so that the same quality of products is being delivered to the customers
every time. Financial forecasting and projections will include the implementation of a
monitoring process that is related to monitoring the business performance about quality
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of product and business operations. Financial forecasting and projections will also
include the implementation of business strategies that focus on the long-term success
of the company. Forecasting in operational planning is very necessary so that those
goals of the business can be defined that lead the company towards greater revenue
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and more customers.
Operational plans are framed so that they act as a roadmap for the strategic plans
of the business. Planning will require various types of activities because the business
plans are being developed after research and development. Proper research and
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analysis are required to identify the customer requirements and the market changes.
These types of business analysis and research activities will require a huge amount
of funds when the business organization is operating in different markets. Financial
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forecasting and projections will help in evaluating the fund requirement for the business
to identify the customer needs and the recent trends in the market.
Purpose of operational plans in financial projections and forecasting:-

(c
1. Operational plans are related to the long-term objectives of the business organization
and long-term business forecasting will require proper analysis of the market. The
entrepreneur will have to evaluate the various aspects related to long-term business

growth. Business analysis and defining the business plans will require financial
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support to better analyze the market. Financial projections and forecasting will help
in evaluating the future requirements of the funds for meeting the operational plans
in the market.
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2. Operational plans will help in making better decisions for the business. Financial
forecasting and projections will help in evaluating the future requirements of the
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business organization and will also help in making better decisions for the business.
The entrepreneur can evaluate the future requirements of the business organization
and identify the various challenges in the market and implement better decisions in
the market.
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3. Operational plans will help in making better utilization of the human resource and
other resources in the business. The financial forecasting and projections will help in
better allocation of resources in the business and will also help in optimum utilization
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of the resources.
4. Operational plans deal with the day-to-day management of the business and the
daily functioning of the business. It will help the business organization forecast the
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daily requirements of the business and implement better strategies that fulfill the
requirements of the business.
5. Financial forecasting and projections will require the implementation of those
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business objectives and plans that deal with the future growth perspectives of the
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business. Operational plans will help the business organizations forecast the future
requirements and through financial forecasting, the entrepreneur can even identify
the revenue opportunities in the market in the future.
6. Financial forecasting and projections in the operational plans will help in implementing
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those business strategies that are better sources of information for the business.
Operational plans will help in taking feedback from the customers and future
strategies and business forecasting can easily be done through operational plans.
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These types of plans are not only a source of a roadmap but the plan also guides the
business by taking feedback from the customers.
7. The operational plans of the business will help in the delegation of the responsibilities
of the human resource in the business. The entrepreneur can easily identify the
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future requirement of human resources in the business through operational plans.

The operational plans will guide the entrepreneur for empowering and employing a
specialized workforce in the business and the future requirements of the manpower
can be identified through operational plans.
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1. ________ refers to forecasting of the expenses and revenues of the company.
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2. The financial projections that are done for three years is termed as________
projections.
3. It is one of the easiest and reliable sources of qualitative technique that is based on
past performance of the company is known as_________.
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4. ___________ Activities are the ones that are not related to investment activity and
financial activity this type of activities include the net profit and loss of the company.

5. The ____________ plants are related with the financial projection and forecasting of
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the business.
Summary
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●● Financial projections will help in easy estimation of the risk of business and
preparation of the future strategies according to the future is the market.
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●● The financial projection can be short term projections and medium term
projections.
●● The financial forecasting could include quantitative forecasting methods and
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qualitative forecasting methods.
●● The cash flow statement of the company will include operating activities, investing
activities and financing activities.
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●● The marketing plan is a roadmap for guiding the business organisation related to
the marketing strategies of the business.
Activity
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1. What are the different components included in the asset and liability side of the
balance sheet?
2. What are fixed and variable cost? r
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1. What are the different types of activities included in the cash flow statement explain
in brief?
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2. What are the benefits of creating a financial projection?

3. What are the different benefits of forecasting revenue and sales in the business?
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4. What are different techniques of forecasting revenue?
Glossary
1. Delphi- it is a quantitative forecasting method that helps in giving better information
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regarding the market techniques to make decisions based on expert knowledge.

2. Forecasting- it refers to evaluation of the multiple factors that could include evaluation
of the cost and revenue that can be generated from a project and future.
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Further readings
1. Book- financial forecasting analysis and modelling.
Author- Michael samonas.
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Answer
1. Financial projection 2. Midterm
3. Straight line 4. Operating
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5. Marketing.

Unit - 3.2: Business Plan

Notes
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Objective
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●● To understand the concept of business plan.
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●● To evaluate different elements of business plan.
●● To provide the difference between risk, reward and return.
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3.2.1 Importance of Business Plan
Business plans act as a guiding tool for the entrepreneur and the entire business.
It will provide various types of solutions to the business organization and will help in
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achieving the business objectives in a better manner. Business plans will help the
entrepreneur or make critical decisions in the business by evaluating various situations
in the market.
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Various types of importance business plans offer to the business are mentioned
below:-
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1. It helps in making critical decisions:-
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Business plans help in making better decisions for the business organization.
They guide the business entrepreneur to make profitable decisions. Entrepreneurs
will have to perform various types of activities and have to evaluate different types
of problems and challenges. A business plan will act as a decision-making tool and
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help the business entrepreneur evaluate various types of challenges in the market.
An entrepreneur can easily handle various crises in a business organization through
business planning. A business plan will help in the proper allocation of the resources
through which decision-making in the business becomes very easy. Various critical
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decisions such as a business expansion and identification of business opportunities

in the market will easily be identified through a business plan. Business organization
implements the business plan. It will help the business organization think deeply about
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business strategies and will guide the entrepreneur towards critical decisions.
2. It will help in avoiding mistakes:-

Business plans guide the business enterprise towards the success of the business
and avoiding mistakes in the business. Common mistakes of a business entrepreneur
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will include lack of research in the market, dependent upon only one source of finance,
and inadequate team members. These types of major mistakes in the business could
be avoided through a business plan. A business plan will act as a guiding tool for the
)A
entrepreneur and will help in identifying various sources of finance available on the
market. It will also guide the business enterprise in selecting the source of finance that
is best suitable for the business organization. It will also help and guide the business
entrepreneur in selecting the highly specialized manpower in the business and will
also help in providing training to the existing employees in the business organization. A
(c
business plan will guide the entrepreneur related to the price of the product and will also
help in avoiding the mistakes that will lead to incorrect pricing of the product. This will

include proper research and development regarding the cost of the product and then
Notes
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fixing the most suitable price of the product.
3. It helps in working towards the vision and mission of the business:-
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A business plan will be developed according to the vision and mission of the
objective. The business plans and the business objective should be linked towards
achieving the business goals. The vision and mission of the business should be kept
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in mind while preparing the business planA business plan will help in establishing and
motivating the business employees towards achieving the overall objectives of the
company. Business plans will guide the team towards the vision and mission of the
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business and will always ensure that the employees within the organization are working
for the benefit of the company.
4. It helps in proving the success of the business:-
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Business plans will help the organization prove the success of the business.
Business organizations must always work towards becoming better in the market.
Business plans will guide the business entrepreneurs in accomplishing the market
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research activities and frame strategies according to the requirement of the market. The
success of the business depends upon the way the company deals with its competitors
and delivers the best in the market. Business plans will help in making better strategies
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in comparison with its competitors in the market and deliver success in the market. It
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will help in guiding the business entrepreneurs in making marketing and advertising
strategies and identify the best market for the business. Business plans will help in
evaluating the financial requirements of the business and also help in evaluating those
factors that bring more revenue and reduce the overall cost of the company. The
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success of the business organization is dependent upon the way the company utilizes
its resources and generates revenue through it. Optimum utilization of resources is very
necessary to achieve success in the market so that wasteful activity could be reduced
and the profit of the company can be increased. Business plans will help in evaluating
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the best way of making optimum utilization of the resources in the business.
5. Business plan helps in setting better objectives and goals of the business:-
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Business plans will help in defining the objectives of the business and will also
help in evaluating and defining the benchmarks of the business organization. The
business benchmarks are related to the maximum future objectives of the business
towards which the company is working. It will also include the set business objectives
that are being defined by the entrepreneur towards which the company is working. It
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is necessary to define the benchmarks and objectives of the business so that the
employees and the team members are always motivated towards achieving a certain
objective after some time. Business plans will help in the creation of benchmarks and
)A
objectives of the business organization and will also help in evaluating and formulation
of business strategies. Defining the benchmarks and objectives of the business will
guide the entrepreneurs towards long-term visions and strategies of the business.
Objectives and benchmarks will also help in creating accountability in the business.
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6. Business plan will help in communicating the objective and benchmarks:-

Business plans are not only responsible for guiding the employees in the

organization but they also help in communicating the objectives and benchmarks to
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the employees. When the business organization is very large in that case it becomes
very difficult for the entrepreneur to deliver the objectives and the benchmarks to every
employee. Business plans will act as a guiding tool and will also help in communicating
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the business objectives and benchmarks to the employees. The confusion and the
misunderstandings related to the business objects could be cleared through business
plans. The business plans will answer various types of questions of the employees and
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will act as communication tools for the employees.
7. Business plans will help in reducing the risk:-
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There are various types of risks that a business enterprise has to face in the
market. This risk could be related to market risk, competitive risk, and other types of
risk. A business plan will help in guiding the entrepreneur in managing the funds
in the business organization and reduce the risk in the business. It will also help the
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business organization reduce expenses in the market and increase the sources of
revenue. Business organizations will have to evaluate the business opportunities and
challenges in the market. To reduce the risk in the business the entrepreneur should
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have the ability to identify the challenges in the market. A well-structured business plan
will guide the business entrepreneur towards market changes and future challenges
in the market. This will help in reducing the risk and will also help in making better
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decisions in the business. Identification of business problems will help the business
entrepreneur make necessary measures to reduce the risk in the future. Precautionary
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measures will help in reducing risk and will also help in identifying various opportunities
and reduce wasteful activities in the business organization. The business organization
when evaluating the prospects of growth it also defines the ways of achieving the
future objective. Various types of risk can be generated when the objectives of the
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business organization are long-term and are related to the growth of the business. A
well-structured business plan will help in reducing the risk factors in the business and
achieve growth in the market.
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8. Business plan will help in understanding the broader concept of the business:-
Business plans are futuristic and are related to the future goals of the business.
The objectives and the concepts related to business plans are broader in terms that
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mean the business plan always has the objective of achieving some big business goals
and the market. Every business wants to expand its business services in the market in
the future. Business plans will guide the business entrepreneurs to identify the broader
opportunities in the market and implement them into the business function and. It will
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help in identifying those business opportunities that are more likely to give revenue and
are related to the recent trends in the market. It will also help in identifying the potential
opportunities in the market and various insights available in the market. Business
)A
plans are not only responsible for guiding the business organization but also help in
identifying the broader concepts in the market.
9. Business plan will help in identifying and securing the financing:-

Business plans will help in identifying different types of finance courses available
(c
in the market. It will also help in securing these sources of finance through proper
planning and evaluation. The selection of a source of finance is a very crucial
decision for any business organization because the entrepreneur will have to make
necessary decisions regarding the best source of finance that could fulfill all the
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financial requirements of the business. Evaluation and selection of the sources of
finance depend upon the requirement of the funds and the nature of the business. The
entrepreneur can get various types of funds available but the entrepreneur will have to
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select the source of finance that is best for the business. The different types of sources
of funds are venture capitalists, loans from the banks, debentures, equity shares, and
other sources of finance available in the market. These sources of finance need to be
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evaluated before implementation and the business. It is not necessary that the sources
of finance are always beneficial for the business organization and always deliver the
optimum funds to the business. The entrepreneur will have to evaluate those funds that
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are available to the business in minimum time and also do not create liability over the
business. A business plan will help in evaluating the future requirements of the business
and will also help in identifying and other long-term visions of the business. This will
help the business organization eliminate those sources of finance that are secure and
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create liability for the business. Business plans will guide the entrepreneur and link
their financial requirements with the overall objectives of the business. Evaluation and
analysis of the financial needs of the business are very necessary and a business plan
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because it will help in the elimination of unrealistic decisions for the business.
10. It will help in recruiting the best personnel for the business:-
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Business plans are not only related to the financial objectives of the business or
delivering a better quality of products in the market. But it also focuses on hiring for
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recruiting the best personnel and employees for the business. Business plans will guide
the entrepreneur for the future requirements of the business. This will help the business
organization identify the employee gap in the business and recruit the necessary
employees in the business. Business plans will also help in retaining the employees
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in the business and providing them training on a timely basis. Small business tries to
attract more employees and workers towards the business rather than undergoing a
recruitment activity because recruitment activity will be very costly for a small business
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organization. A business plan will act as a guiding tool and will help the entrepreneur
recruit skilled and unskilled labor for the company for meeting their future business
objectives and goals. The recruitment of professionals and specialized employees
can also be done and the identification of the needs of the specialized employees in
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the business. A business plan will guide the entrepreneur towards the recruitment of
employees and identification of the needs of employees in the business.
A business plan is very important in any business organization because it not
only acts as a guiding tool but it also helps in identifying various problems and future
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opportunities in the market. The problems in the business can be reduced through a
business plan because it acts as a tool for identifying the business problems and also
helps in identifying the potential solutions to the problems. Business plans will help
)A
in identifying the requirements of the business in the future according to the future
objectives of the business. This guide to the entrepreneur in a better manner related to
potential problems in the market and the competitive strategy in the market. Business
plans are more related to the long-term objectives of the business but it also guides the
entrepreneur in framing its short-term objectives and operational plans of the business.
(c
The entrepreneur can make decisions regarding growth opportunities and future
challenges of the business.

3.2.2 Elements of a Business Plan

Notes
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There are various types of essential elements that need to be involved in the
business plan so that the formulation and preparation of the business can be done
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effectively. Below mentioned are the different elements required in a business plan:-
1. Executive summary:-
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Executive summary refers to the outline of the business or the summary of the
business that highlights the major objectives of the company. The executive summary
should highlight the goals of the business and what the company wants to achieve in
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the future. The executive summary should be kept small and simple so that the reader
can get an idea about the business objectives. A good executive summary highlights
the mission statement of the company and gives the reader a recent to further
evaluate the business plan. Executive summary depends upon the business plan of
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the company. If the business plan is very large and highlights different aspects of the
business, it could be summarized on a page. The executive summary will include the
business concept that is what the business will serve to the customers the products and
services of the company are being highlighted in the executive summary. The reason
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for selling the product should also be highlighted in the executive summary because
it will give a reason to the customers to purchase the product. The financial features
of the company, such as the sales volume, profit of the company, and the return on
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investment should be highlighted in the executive summary. The current business
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position and the financial requirements of the business can even be highlighted in the
executive summary this will help the investors identify the position of the company in
the market and what is the requirement of the business about financial needs. The
major achievements of the business such as some awards or other achievements
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should be highlighted in the executive summary that will give a positive impression in
front of the customers.
2. Company description:-
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Company description will include the goals and the target of the company. The
description of the company should be short and descriptive that highlights maximum
information about the business. Company description will include the present goals of
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the company and the future objectives of the business. It will also explain the way the
company evaluates the business challenges and the forms of converting the challenges
into the strength of the company. Company description could give relevant information
about the business through statistical data and highlight the profit and success
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of the business and the description. It should also highlight the new products of the
business and the development of the existing product. The operations of the business
should be highlighted in the business description that will include the service industry,
manufacturing industry, or wholesale industry. This will help the reader to make better
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decisions dependent upon the business description. The type of business that is a sole
proprietorship, partnership, corporation, or joint venture should be highlighted and the
future vision of expansion of the business is described in it. The business description
will also include the customers of the company and the distributor of the company.
After-sales services and the promotion and advertisement activities that are being
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adopted by the business can be highlighted in the business description. It is majorly

a detailed analysis of what the business is serving to the customers and the way of

serving the product in the market is being highlighted in the business description. It also
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includes all the information related to business such as the financial position, nature of
the business, and other critical information in it.
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3. Market analysis:-
A business plan will include the marketing analysis and the marketing strategies of
the company. It will include the elements related to defining the market. It will include
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the potential market for the company and the ways of increasing the sales in the
potential market. Marketing strategies of the business will also include the marketing
and distribution strategies of the business. A business plan does not only define
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the strategies of the business but also defines the way of achieving the business
strategies. Market analysis will start with identifying the potential market and the size
of the business. This will help in framing the business strategies and growth prospects
of the business. A business plan will define the sales of the company and the ways
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of improving the sales in the market. The entrepreneur will define the segment of
the business based on geographical distribution and other factors. This will help the
business organization frame business strategies and marketing strategies according to
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the geographical factors and preferences of the customers.
Market analysis will include the growth opportunities in the industry and the ways
of increasing the users and customers of the company. A business plan could include
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different industry factors and different industry factors that increase the revenue and
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improve the performance of the business in the market. A business plan will include
the conversion rate of the company. This includes the way the company converts the
potential customers into leads of the company. Using the conversion rates the growth of
the market can continue and the market share of the company can increase.
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Market analysis will include the positioning of the business that means the
positioning strategies of the company. The positional strategies will include the way
the company represents the business in the minds of the customers. There are various
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types of attributes that are responsible for creating a positioning in the market. Market
analysis will also include the pricing of the product of the business plan that will focus
on determining the price of the product based on the overall cost and profit of the
company. The price of the product is also determined based on the competitive pricing
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policy. The market trends and customer expectations are also responsible for fixing the
product price.
4. Competitive analysis:-
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Formulation of the business plan should include the competitor’s analysis tools
that will include the competitive strategy related to identifying and analyzing the sales
strategy of the competitors. The competitor analysis will include evaluating the strength
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and weaknesses of the competitors in the market. It will help in the formulation of
marketing strategies of the business. It will also help in identifying the potential of the
business in the market in comparison with other competitors. Competitor’s analysis
will include the identification of various skills and future business strategies of the
competitors. This will help the business organization evaluate the strategies that
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better attract customers in the market. Competitor’s analysis will include identifying
the product, price, place, and promotion strategies of other competitors in the market.
This will help in making major changes in the business organization according to the
different competitors. The early entry strategies of the competitors in the market will
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help the business organizations frame better strategies for customer acquisition.
5. Describing management and operations of the business:-
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A business plan will include describing the management and cooperation activities
of the business. This will include activities that relate to the daily functioning of the
business organization. The daily logistics and availability of raw materials that help in
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daily production activities are included in a business plan. A business plan will include
the introduction of the managers of the company. This will include introducing the skills
and professional abilities of the managers in the organization that will help in making
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better decisions for investors and customers. Effective and proper introduction of
the managers of the business is very necessary so that the strength of the business
organization could be highlighted in a business plan. The operational activities should
also be highlighted in a business plan so that the company can highlight the supply
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chain and the capital requirement of the business in the market.
6. Classification of the product:-
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A business plan will include the classification of the product based on the different
nature of the product. The product of the company can be classified based on the size,
shape, and utility of the products. The classification of the products in the business plan
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will help in classifying and identifying the products in the market. This will also help in
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highlighting the uses and different aspects of the products in the market. Classification
of the product will help in the identification of the products and the product portfolio
based on the price of the product and the size of the products. The product portfolio is
very important to be highlighted in the business plan because the business organization
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has been set up to deliver the products and services to the customers in the market.
Classification of the products in the business plan is very necessary because the brand
value of the company has been established based on the products and services in
the market. It is very necessary to classify the business products and services of the
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business so that the investors can identify the products in the product portfolio so that
investment decisions become very easy.
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7. Marketing plans:-
A business plan will include the marketing plan of the business that will include the
future business and marketing strategies of the company. Marketing plans will include
the future business strategies of the company and the related budget for the marketing
strategies. The marketing plans of the company will include the way of advertisement
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and promotional activities are adopted by business organizations for future business
expansion. A business plan will help in highlighting the marketing plans so that the
customers and the investors could make better decisions regarding investment and
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consumption of the products. Marketing plans will act as a roadmap for the business
organization to achieve the future revenue goals and objectives of the company. The
way of presenting the products and services in the market is also highlighted in the
marketing plans of the company.
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8. Sales strategy:-
A business plan will include the sales strategy of a company that is the way of

selling the products and services in the market. The same strategy will include the
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distributors and the ways of attracting different distributors towards the company. This
will increase the sales and will attract more customers or towards the company. Well-
structured distribution and sales strategy will also help in the timely delivery of products
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to the customers and create more loyal customers of the company. The sales strategy
is related to the increase in revenue and sales strategy will also help in the creation of
sales targets for the company. The sales strategy of the company will include ways of
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distribution and different distribution channels of the company post office in a business
plan. The company should highlight the sales strategy and the different distributors of
the company so that the reach of the products and services in the market would be
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identified by the reader.
9. Funding requests:-
The business plan should also highlight the funding request after highlighting all
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the essential elements of the company. The funding request should include the amount
that the company is willing to raise through different investors. It should also highlight
the ways of optimum utilization of the funds of the company so that the investors good
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trust the company and invest funds in the business. Important highlights of the company
should be written in the funding request that will include the amount and the time within
which the company wants to raise the fund. Funding requests should also include the
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purpose of raising funds from the investors say for example for business expansion
or expansion of the product line. The funding request will eliminate the chances and
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problems related to fundraising through investors.
10. Financial projections and forecasting:-

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The final element of a business plan is the financial projections and forecasting.
This will include the financial forecast of the business about the future requirements of
funds and the ways of utilizing the funds in the business. Financial projections will also
help in making better decisions for the business organization by identifying the future
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requirements of funds and ways of utilizing the funds in a better manner. The business
organizations will highlight the financial projections and forecasting in the business
plan so that the investors and the readers could easily identify the future forecasting
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of a business to financial requirements. This will help the business organization and
investors make better decisions related to investment and the future business goals
of the company. The financial projections and forecasting will help in creating trust
amongst the investors and readers because they will highlight the future objectives of
the company. The investors will get a chance to think over the investment decisions
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in the business and make optimum utilization of the financial resources. Financial
projections and forecasting are related to a company’s growth because through
financial projections the company can highlight the overall goals of the business for the
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upcoming years.
3.2.3 Tailoring the Business Plan to a Specific Audience:-

A business plan does not decide to fulfill the requirements of a particular business
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entity but a business plan should fulfill the requirements of different types of audiences.
The requirements of the audience should be fulfilled by evaluating the business plan.

Following are the types of audience of a business plan and the different ways of
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tailoring the business plan according to the requirement of the audience:-
1. Venture capitalist:-
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Venture capitalists are the ones that provide equity funding to the company. They
invest in those companies in which the potential of growth in the short term is very
high. Venture capitalists are very analytical and analyze different types of factors before
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investing in any business. When businesses do not have adequate funds to implement
the creative ideas in the market at that time venture capitalists provide funds to the
business organizations to fulfill their financial requirements. The business plan of any
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business should be designed keeping in mind the venture capitalist because a large
number of funds will be provided by the venture capitalist. The executive summary
and the concept of the business should highlight the long-term vision and mission of
the company. The company should try to create a positive impression in front of the
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venture capitalist and should highlight the strong management and operations team of
the company. This will attract the venture capitalist to see an opportunity in the business
organization and provide funds to the company. The business plan should also highlight
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the benefits that the venture capitalist will get and should also write the statistical
information regarding the profit and growth of venture capitalists in the business.
2. Bankers:- r
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The bankers are external parties to the organization but they influence various
decisions of the company. There are various types of financial requirements of the
business and the entrepreneur will have to raise funds from bank loans and other
facilities provided by the bank. The business organization must maintain a long-term and
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healthy relationship with the bankers so that the acquisition of funds from the banks at a
short notice can easily be arranged. Meeting financial requirements through bank loans
will benefit both the company and the bank. The bank will lend a large number of funds
to the big organization and will also expect a higher interest returned from the company.
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The bank will have an interest in the company’s business plan because banks will only
provide loans to those business organizations that have a good cash flow in the market.
The previous financial position of the company will be evaluated by the bank to ensure
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that the bank’s funds are not being given to a company with a bad financial position. The
business plan of the company should highlight the cash flow statement of the company
and should also give information regarding the assets of the company. Highlighting the
tangible and intangible assets in the business plan will attract more banks to provide
loan facilities to the companies against the assets of the company. A bank will expect
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a proper financial statement regarding the assets and liabilities of the company so that
decision-making regarding loan facilities can be done very easily.
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3. Investors:-
Investors are those individuals that are ready to invest in the business organization
and want to increase their wealth. Investors in the business organization will evaluate
the business plan and will evaluate the assets, growth potential in the company,
and possibilities of fast growth in the business. Investors do not invest in those
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organizations that do not offer fast and higher growth returns to them. The major
objective of investors is to evaluate the business plan based on the previous financial

position of the company and the growth of the investors in the market for startup
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business plan must include the investor’s position in the business and the various
benefits offered by the company to their investors. By highlighting the financial
benefits of the investors in the market will attract investors to provide funds in the
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business. The major emphasis of the business plan to attract investors is to highlight
a strong management team and the market potential of the company. Defining the
future expansion or growth and future strategies of the business in the business plan
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will attract investors to invest in the creative ideas of the business. Investors have a
key role in the development of the business organization so the entrepreneur and the
company should focus on including those factors that attract the investors towards the
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company.
4. Potential partners:-
It is not always possible for a business organization to work as a sole
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proprietorship in the market. When the company is expanding in the market it might
be possible that the business organization requires various partners to effectively fulfill
the customer requirements. For this reason, the company will require different partners
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to work according to the market requirement and maintain the brand value in the
market. The business plan will highlight the various advantages of the company and the
ownership structure of the company to attract potential partners in the business. The
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business plan should highlight the requirements of a partner, that is the partners should
have the same Synergy and proprietary products to become a partner of the company.
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The business plan can highlight the requirements of the partner for the company. This
will make it easy for the business organization to select a good partner for the company
and evaluate its previous financial position. A potential partner will majorly focus upon
the product and the services offered by the business organization. The potential partner
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company will not focus upon the sales of the business organization but will focus on the
future strategies of the business so that when a partnership firm is being formed what
will be the vision and mission of the company in the future.
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The potential partner will also focus on the ownership structure and the control
and accountability in the business organization. The business plan should highlight
the potential partners’ share in the company so that it becomes easy for the other
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business organizations to decide on the strategic partners of the market. If the

business organizations are willing to contribute on an equal ratio so the other firms
that see potential in the company and are willing to become a partner of the company
will evaluate the ownership of the partners as a major concern. Because when
the ownership of the company is equal then the profit and loss of the business are
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equally divided within the partners. The requirements of a partner company should be
highlighted so that decision-making becomes very easy.
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5. Customers:-
Customers are a very important element of any business organization. The
business is being established to serve the customers and fulfill their requirements.
The business plan should highlight the different services and products offered by the
company and the future products and services that will be offered by the company
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in the coming years. The business plan of the company should highlight the stability
strategies of the company to deliver a positive image of the company in front of the

customers. It also highlighted the various necessary steps taken by the company
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to create good relations with the customers. The future strategies for fulfilling the
requirements of the customers and the various services provided by the company to
attract the customers should be highlighted in a business plan this section is not only
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for the customers but the suppliers and the potential partner of the company can
even get attracted towards the future goal of the business organization to satisfy the
customer needs. It is very necessary that the business plan is being prepared to keep
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in mind the customers of the company because it will give a positive impression of
the company in front of the supplier and other business partners and will present the
necessary measures of the company to convert potential customers into the lead of the
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company.
6. Suppliers:-
The supplier of the company matters to the business organization because the
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suppliers act as a source of raw material for the company. The suppliers are very
important for any business organization for fulfilling the production targets of the
company. The business plan should highlight the supply chain of the company so
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that it becomes easy for other suppliers to connect with the business organization.
The business plan should also highlight the financial position of the company that will
ensure the suppliers that the companies have enough funds to pay their suppliers. The
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suppliers are more interested in the growth and development of the company because
when a company expands or grows in the market the suppliers also expand in their
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business. The major focus of the supplier is on the growth and revenue of the business
organization because the suppliers are indirectly connected with the business growth.
The company can even highlight the use of various advanced technologies for
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effective supply chain management. A fully secured and technology-based supply chain
will attract the suppliers and will also reduce the problems at the stage of supplying
the raw materials. A business plan can highlight the use of advanced technologies
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such as a sensor system used by any business organization for effective supply
chain management. The supply chain of the business organization is a very important
element because an effective and well-managed supply chain system enhances
the performance and growth of the business organization. The company should
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also highlight the best supplier of the company and the statistical data related to the
supplying of raw materials done by the best supplier. This will attract more suppliers to
get connected with the business and will also motivate the suppliers to get recognition
in the market. The company can highlight the various benefits offered by the company
to the suppliers such as more connectivity in the market by getting connected with the
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business that will attract suppliers to become a part of the business organization.
7. Strategic partners:-
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Strategic partners are the ones that solve a major business problem related to
technology, distribution, or any problem related to market expansion. The strategic
partners are experts in particular areas as some strategic partners are experts in
delivering advanced technologies to the market leaders. The business plan should
highlight the various types of benefits offered to the strategic partners such as market
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recognition and other training and development activities. The company should
make sure that critical information related to the financial and marketing strategy

of the business should not be highlighted in the business plan because it could give
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an advantage to the competitors and the competitors can make use of the critical
information of the business. The business plan should only highlight the potential
strategic partners of the company and the services are the products offered by the
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strategic partners to the business organization. This will attract the investors and will
motivate the investors to invest in the highly strategic business organization. This will
also motivate the potential partners of the company because the partners will evaluate
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strategic partners as one of the growth opportunities in the business. The company
should not highlight all the strategic partners of the company in the business plan
because the competitors can manipulate the strategic partner of the company and can
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even negotiate the partners financially. This could give a major disadvantage to the
business and the company can even lose strategic partners of the business. Strategic
partners must be revealed in the business plan when trust is being built between the
company and the strategic partners. This will ensure that the strategic partners will not
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leave the business organization at any cost and the competitors cannot manipulate the
strategic partners at any point in time.
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8. Managers:-
The business standard highlights the management team of the company. This
will include the professional experience and the qualifications of the managers in the
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industry. The managers of the business should get regulations in the business plan.
The company performance in the market and the key role of the managers in achieving
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the target of the business organization should be highlighted in the business plan.
The business plan of the company should also include the profit and revenue of the
company to make it easy for the managers of the company to identify the growth
and position of the company in the market. The most important factor that affects the
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managers’ mindset is the financial position of the company. The business plan should
highlight the financial measures of the business for the set targets of the company.
Managers of the business organization will monitor the company’s performance through
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business plans. So the business plan of the company should include various factors
that benefit the management team and also give various advantages to the managers.
3.2.4 How to Write the Perfect Business Plan

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Introduction
In the sphere of advancement and innovation, the business convention plays a
vital role in boosting the financial or economic structure of the region. The construction
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of written provision organizes the value of the planning that enhances the scope of
execution. The settling of planning builds the principles-oriented structure that allows
quality and quantity audacity to the project. It adds socio-economic growth with the
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strengthening of the environmental output. The powerful impression of the industry

plan guarantees the theoretical layout of the practical implementation that one needs to
construct. The objective of the business plan executes the sense of practicality without
any deviation from the enterprise.
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Components of the business plan

A business plan refers to the alignment of the written document that arranges

the detailed configuration of a business’s technical and general prospects. With the
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settlement of business arrangements, depending on the form of venture, one proceeds
with building the layout. The framework of knowledge and innovative capabilities
or skill programs determine the specific venture-based competition in the market. It
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allows the estimation of choosing the site of a unique layout for standing out of the line.
Such convention needs critical analysis of all prospects for the better placement of the
opportunities in a successful manner. Every business prospect operates with particular
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aptitudes that focus on the interior principle of the branch. It settles a novel perspective
in the market. Yet, the construction of the business plan follows the accommodation of
the parts.
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1. The first section for the evolving scope of the planning proceeds with the official or
executive-based summarized version. It proceeds with the valuation of central
points that a business is supposed to follow. The synopsis adds the company’s
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outlook or mission-based statement, services, product value, management service,
and other information about staff and location. It supplies traits about the valuation of
the commercial data with the inclusion of high-prospect-based plans.
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2. The second side of the segment acts as a business-based portrayal. It carries the
valuation of target orientation directed by objectives, commodities, and employment
of the industry. The central relationship of the business assignment focuses on
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a company to an active audience. The process of knowing your business and
interpreting its features or risks in consideration of a business plan remains an
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intelligent choice of a venture. The outlining requires the scope of a legal entity,
trading name, nature of corporate, ideas, objectives, mission statement, and
personnel. Business portrayal recognizes chiefly as the individual functionary state
that represents the exact features of the business.
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3. With such inclusion, the next component of the business trends focuses on market-
oriented inspection. Under the sphere of market estimation, the analysis of the
essential target observes the behavior of the audience and associative demographics
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for better social associations. It sustains the central idea of expanding the market
connection of the company or business for processing with more possibilities. From
the arrival of opportunities, the holder needs to explore the section of marketing
research. One can use the medium of a questionnaire with a sharper or precise
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focus to utilize the external and internal setting of the market sphere. Such analysis
permits the holder to form a better scheme and idea which produces productive
estimates.
4. The scope of possibilities allows one to strengthen the proclamation of an exchange
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program or market proposal. After business estimation, the knowledge signifies

exceptional selling recommendations. It instills strategic planning of trading of
commodities in the position of the competitive market stand. For example, managing
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persons can design the unique variation of the SWOT analysis. It implies the write-
down of strengths, weaknesses, opportunities, and threats of concern. It roughly
estimates the presence of the balancing objective of the market value based on
the business’s progressive and surviving nature. For perfect indulgence in the
examination, one should add objective goals in three variants of the shorter term (end
(c
of the initial year), medium-term (subsequent two years), and long term (following
five-year preparation).

5. With the analysis of capital’s trade probability, the accountability of analyzing

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the trends of competition gains potential value. The investigation provides a
valid sketch-based structure that displays a likely route of standing out of the side
and achieving success without being a competitive race. Such analysis does not
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emphasize the prime aim of witnessing trends but also about monitoring the growth
of one’s own business as per such trends.
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6. Another influential component of business relies on managerial rationale. Obeying
the standard functioning of management scope allows an increase in the potential
value of the business merchandise. It enhances the productivity verification in the
organization with the increasing range of operational management. The distribution
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channels of margin based on profits or selling rate of commodities (direct, indirect,
or third party) need to be critically decided. Such contribution settles the prospect
of quality standards and their levels, which ensures the value of the employing
personnel position of the business in the market.
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7. With the validation of the functional organization, the crucial stand obtains as the
segment of the monetary outgrowth. It authorizes the section of conducting rational
business designing with the critical analysis about the economic flow. For instance,
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to secure sufficient financial output for obtaining stocks and materials for the supply
chain. Even the projecting sales with forecasting about the profits and losses with
the calculative order remains central to know the trading profit or depreciation.
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Understanding of calculation and layout of the bank transition, employees’ salaries,
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VAT payment, net-based cash flow, and balance sheet develops the positive scope
of financial forecasting.
8. The conventional use of the appendix acts as a crucial portion for the evidential
support for the business credibility. By adding vital variables to the appendices, one
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should ensure the placement of the business’s nature, evidential records of personnel
and commodities, the account of market examination, and estimates about financial
status. Indicating the positioning and display of appendices should remain segregated
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from the whole unit in the last. The internal or external attachment accountability of
the verified document enlisting should remain distinctly by numbering.
9. Besides the traditional business planning components, the additional sphere scope
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issues the extra-productive connection with the social-environment sphere. The

supplementary impact of sustaining products without harming the environment
influences society. It satisfies and expands the horizon of the company using social
responsibility as an integral core value. Assurance of such conditions can be placed
in appendices or special feature sections.
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Additional traits of business planning

The composition of the business does not only include the positioning of the
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standard components. Yet, it covers the more extensive reach of interpretation. The
connectivity of the business plan comprises the presence of elements mentioned
before in a precise manner. However, the mode of writing such business variation
also enhances the reach of the parts. Without placing the information or factual data
about the company in a readable use, it becomes futile. However, one should grasp
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the practice of producing a sound argument or statement of the potential information

pattern or parts. The linguistic channelization of the business plan processes through

the interior value obtaining approval of interested or potential stakeholders. The support
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of potential or interested client’s satisfaction by the inclusion of the following traits of the
knowledge in business planning:
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1. Inclusion of clarity in description- The indulges of simplistic language with straight
application surpass the value of meaning in direct go, without any complexity. Any
interested individual restrains from proceeding consciously through the mingled
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arrangement of the business plan with linear facts and informational records. Instead,
one would go for the planning-based set that signifies the assurance of clarity with
the application of orderly arrangement of presentation of ideas separately. Otherwise,
with the inclination of visual or illustrative functions as tabular construction, chart or
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graph-based data representation allows the occupancy of clarity.
2. Compilation of information in a brief framework- Planning of any business-based
structure does not entail an in-depth description. Instead, it covers the essential
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information in sharper and precise construction. Accordingly, the business plan’s
layout should precisely contain information that the reader is supposed to know. The
additional prospect of explanation can generate the ground of confusion or becomes
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dull for the reader.
3. Presence of logical association- In the informational sphere of the business plan,
specific emphasis upon the logical sequencing of the content should undergo a
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process of checking. The placement of the continuous unnecessary data creates the
monotonous and illogical association of the reader. It removes the stand of liability
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from the context. By eliminating such conditions, the business plan must embrace
the value of logical analysis and the association of truth.
4. Occupancy of the truthful figures of quantity- Sometimes, for expanding the
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range of business reach, the numeral change of any components impressively

reveals higher targets. However, the actual number-based achieved targets vary
and present immense gaps. Such occurrence of fraudulent pictures does not justify
any relationship-based emphasis. Rather, it questions the integrity of the business
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operation and its precision.
The business plan’s construction emphasizes its maintenance with the initial
rough sketch based on the layout of the components’ value. It settles the actual
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trending grounds of the business with the inclusion of the economic specification.
Every business holder should become capable of handling the channels of financial
state planning. It implies the actual financial status with the significance observance
to the side of debit or credit one carries. The value of the plan occurs only with the
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formation of a viable economic state with practical estimation for the former coming
years. Business plan does not match the significance of the investment proposal. As the
construction of the business planning remains an internal document for the guidance
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assurance value. It does not attempt to convince investors of the outside business for
funding in a specified business venture.
Significance
With the scope of the modern world and technological advancement, the prospect
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of starting a business frequently appears as a trending source of the management

layout. Categorical distinction settles the approaches of the business plan as per
the status of the traditional or modern startup variation. Both sides allow the value
of commercial appearance and transparent understanding about the planning of

Notes
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associative administrative situations as per the approach one takes. The enterprise
utility with the introduction of the planning enhances the scope of answering the
general question that builds the understanding of the workable features and value of
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the corporation. With the allowance of the business plan, the automatic conceptual
enhancement of the knowledge utilizes the product scope. It emerges along with the
improvement of the likelihood of accomplishment. The audacity of traits like knowing,
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identifying, and detailing a business plan provides the essence of a transparent picture
of the whole convention. The presence of such a clear image along with execution
marks the active reliance on a business plan. And it leads the company to the
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successful journey of brilliance.
3.2.5 Why Some BP Fail - Common Pitfalls to be Avoided
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Introduction
Any record of the modern world proceeds with the structure of the outlining. That
initiates the value of its proficiency. Similarly, the business plan refers to a recorded
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document that persists guidance or precedence for the company’s organizational
structure. Accountability of the component-based value of the organization classifies
the valuation of decision-making and assurance. Businesspersons explore the horizon
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of possibilities and opportunities based on the scope while constructing the planning
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structure. The settlement of any business plan motivates the analysis of competitive
alliances in the sectional provinces of marketing, financial, and operational range.
It frames the developmental structure of the internal side organization and shows the
route of formulating decisions.
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Failure of a business plan does not directly refer to the state of deprivation of
any specific information or component. Yet, it leads to the collapse of business due to
incompetent preparation. The presence of loopholes in the planning-based structure
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causes the failure of business activities. It deducts the value of the assurance of the
benefiting stage of the company. The position of the business failure refers to the situation
of when a company faces the inadequacy of producing any earnings or additional
financial value to cover its initial expenses. Such conditions occur due to categories of
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diverse reasons within the scope of personal outlook or organizational fallback.
Reasons for failure of business plans

Every business plan-based conditioning faces challenges in the process of its
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workability staging. The business struggle initiates from the first process of getting
started to the last stage of proving the practicality of the step-in actuality. It challenges
more insignificant precedence of the activities of the company in its regulation.
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Establishing the value of the business targets through planning and completing terms
out to be significant criteria of success. However, the accountability of the following
reasons generates a business planning failure:
1. Absence of effective planning and leadership- The performing value of

business prospects increases its output by developing practical or influential
(c
planning. The formulation of the planning is not only the sole criteria. Its
implementation allows a business to reach successive positions. Accordingly,

the deviation in planning building or its execution leads to the failure in the
Notes
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prospect of the business alliance.
2. Absence of quality of standing out the line- The service or product initiation
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does not solely direct to the success. In the modern world, with the advanced
technological orientation, any service can become outdated in preceding
times. It’s just a matter of time for a product to get outsourced or outmoded.
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Additionally, it leads to the collapse of the services due to competition in the
market.
3. Inadequate management scaling- The perspective of any corporation relies
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on foundational keystones of authentic principles. If the management does not
fulfill such a principle, then the authority fails to deliver profitable results. Such
situations occur when the management neglects to listen to the customer’s
needs, employees’ concerns, and the absence of micro-managing. Companies’
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performance relies on communication and feedback procedures from the
employees, customers, and other delegates. It also guides to the smaller
provisions of the downfalls that direct into the realm of low administration
capabilities, like:
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●● Deficiency of focus in internal projects and routine work or shortfall in
achieving daily targets.
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Shortage of core values (like teamwork, obligation, confidence, honesty,
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and respect) in the functional structure.
●● No strategy for dealing with inactivity in the professional sphere.
●● Lack of micromanaging of smaller groups and deviation in tasks.
●● Lack of litigation on the sectional sequence of the feedback option.
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●● Over expansion of the organization in diverse scopes of practical ranges

of markets or employee placement.
With such reports of failure, the business automatically falls into the category of
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downfall.
4. Deficit of monetary support- Every business prospect runs on the assurance

of funds. From the smaller technical task to the major-leagues of work needs
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the care of fiscal assistance. If the company fails to bring investors, then an
alarming sign develops for the declining growth phase of the company. The
existence of the business relies on the placement of financial aid. Without such
alignment, the company may cease to pay its charges, loans, and additional
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monetary responsibilities.
5. Mistakes at the individual stand- Even the organizational unit can commit the
misstep at a personal level that can cause enterprise failure. Active individuals
)A
of the organization hold a valuable view of the process of the company.

Their presence ensures functional progress of tasks and management
routes. However, at the time-specific personal attitude leads to impoverished
supervision or endeavor. Such provisional cases occur in the smaller behavior
manners of actions like:
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●● Negligence in leadership causes downfall in a checkable position of

decision making and employee supervision.

●● The downfall of the administration for ignoring the event or learning from
Notes
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minor deviations or mistakes. By studying from blunders catalogs as the
founding step of learning plus growth. If one ignores the stand of minor
issues, then it occurs in a continuous repetition expression.
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●● Misuse or personal utility of official material or funds generates a massive
negative imbalance in the components of the business plan.
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●● With the absence of secondary or plan B, after the initial business plan.
The valuable business prospect ensures the existence of a secondary
plan for the successful integration of activities. Without such order, the
accountability of planning remains the sole criteria for succession. That
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probably appears risky for some models.
●● Over-excessive enthusiasm without the practical outgrowth plans
execution. Merely supplying the moral significance or implication without
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the factual information or the status of the data restrains the idea of the
successful organizational plan.
6. Placement of conceptual or grammatical errors- It occurs through the
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minor provision of the erroneous step. Yet, the occurrence of such mistakes
also affects the status of the business planning. It adds a sense of fraudulent
leniency in handling the stake of the work. It also adds the occurrence of false
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assumptions created by not reliable content. However, the layout restrains from
using the structure of the opinion-based statements. While it should use the
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factual representation of data in a precise manner. The presence of simplistic
indulgences creates a transparent figure in the mind of the business workers
regarding the venture prospect that allows them to work productively.
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Common Pitfalls to be Avoided

Despite unintentional erroneous steps, one can change the wave of success
towards the process of the business perspective. By expanding and converting the
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layout of a business plan, the occurrence of the failure can restrain itself automatically.
The careful orientation in business planning can generate avoidance of the common
pitfall. The ordering holds the sequence in the following form:
1. To essentially make an effective business plan and stick to it throughout
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its implementation without any deviation. To start noting or writing the

positioning of goals as per duration-based terms of the company. For instance,
the expectancy from the business in one financial year, for two, and later on
long-interval planning. It allows the perspective of distinct channels to follow
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and does not deviate from the prospect of goals in sudden circumstances.
2. To avoid the formation of deviation in the management setup of the
business plan. The business head should try to build an advisory panel or board
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that assists in the functioning of the micromanagement in the company. The

hiring of the team lead and operational manager ensures the participation of all
planned configurations accordingly. The assistance of such active role-based
employees lowers the rate of management divergence.
3. By understanding the dynamics between the business environment and
(c
customers’ needs, the keen prospect of the business enhances. Customers

connect the chain of the company from region to region. The valuation of

customers’ or clients’ feedback and presence channelizes the potentiality of the

Notes
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company. To fulfill their needs as per their subjective consideration becomes
crucial for standing a robust stand in the industry. If one fails to do so and does
not act upon the requirements, then the client withdraws or ends the contract.
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They move to another potential business proposal or another competitor in the
market. That is why taking feedback from the customers allows a business to
acknowledge the chances of improvement. The facet of improving the state
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does not suppress the business value. Rather it enhances the scope of more
learning.
4. Finances for the business setup exercise an essential function. Launching a
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business solely based on a successful or unique idea remains the approach.
In the practical essence, it requires the sponsorship of other categories. That
carries the accountability of transforming the layout of the thought into practical
application. Hence, the business manager needs to check the financial
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description. The aftermath for improving the stand of the financial support
emerges from the outlook of securing some improving sides. For instance, the
settlement of securing the loans payment in the cases of emergencies, offering
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incentives for the enthusiasm or hardworking gain, increasing set or goal of
daily targets.
5. Transformation of an idea in an effort is not an easy task. It takes
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determination, confidence, and the possibility of minimum risks. Understanding
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the in-depth nature of the work allows the acceptance of the business plan
in an established manner. Spreading, the connection between learning from
mistakes and believing in a tryout. Managing leads take the channelization of
the business plan to its ultimate level of the progressive stand. It reduces the
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connection of errors that usually occurs at the individual stages.

6. Enhancing technological advancement within the business plan develops
the status of the company. It introduces the phases that imply the up-to-
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date version of the business. By avoiding the position of being outdated or

outsold, business consideration should undergo the perspective of the trends
in the world. Hence, the corporation managing body needs to get in touch with
the unique perspective of their service that steps aside from the competitive
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marketing panel. It needs to move forwards with connectivity to the modern

trends in the IT space (informational technology).
While writing the business plan, the aim of being a successful venture proceeds
through the follow-up connection of gaining acceptance. An industry strategy should
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entail the arrangement of sufficient market-based data. It must reveal the significance of
the authority as productive and creative. Presentation of services or products should not
be represented in the structure of bragging. Instead, the explanation should display the
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qualitative and quantitative assurance of the product or service. The demonstration of

economic meets should exhibit the reasonable calculation of contingencies. The setup
of the business layout should refrain from using the technical information without giving
any general context or introduction. When the allocation of a business plan holds the
technical alignment of words or calculating data, then it becomes an in-depth analysis,
(c
not the summarized version. However, the channelization of the business prospect
should avoid unintentional mistakes in the company strategy. And follow their unique
pattern with complete dedication and willingness to achieve triumph.
3.2.6 Examining Sample Business Plans

Notes
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Introduction
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In the innovative sphere of creativity, the layout of the business-based plan
relies on the potentiality of the maker. With the textual orientation, one can subscribe
to the potential guidelines for the layout design. However, the central structure of the
business plan holds to the creative aspect of the maker, the nature of the industry, and
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the particular needs of the management. For instance, coffee shops and multinational
company’s business plans differ in their orientation but endure similar common points.
Similarly, a perfect business plan needs to examine the nature of the work initially for a
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more approved perception. Through the understanding of the work, one automatically
settles for the components of the business outlining.
General guidelines
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Every business prospect carries a general guideline structure of presenting a
short-summarized version about the characteristics of their business. The layout of
such a presentation depends upon the nature of the work. The customary arrangement
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occurs more like a simplistic guideline instead of one formal template. Hence, the
layout depends on the other factors that a company keeps. For examining the types
of business plans and their multiple orientations according to the distinct nature of
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work, first, let’s have a glance at the components or general guidance of the business
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plan. The sections of the guidelines segregate based on the distinct segments of the
company’s functionality. It decides the configuration of the company works and presents
a simple constructive arrangement as:
1. Official or executive synopsis- It includes the mission-based or purposive

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statement about the company or the business. It accompanies the informational

structure of the business, market, and financial analysis. The analysis of the
company’s goal or objective occurs through this section.
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2. Business-based or company description- It reveals the structure and

organization ownership acknowledgment. The central focus of business
description gives space to the organizational history, location, and management
review.
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3. Explanation about products or services- The classification of products

plus services often gets mixed up with the business or executive summaries.
While some management branches like it to present it as a separate category
of information. However, as before-mentioned, the actual segregation and
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placement of the information are in the hands of management. Therefore,

the section of the products and services introduces and gives information on
business works and their settings.
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4. Market-based analysis- Under the analytical supply of information based on

the market influences carries the accountability of the demographic distinction. It
explores the spaces of the target position, functionality, requirement, competition
evaluation, challenges for the management, inquiry about opportunities,
schemes, or regulations based on the market scope.
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5. Business strategy or trade program- It shares the estimation of the business

analysis through the market competition and conventional reflective actions.

The site presents information about the strategic influence based on strengths
Notes
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(achievement), weaknesses, opportunities, and the report of risk elements. It
indicates the settlement of targeting prices and exchange strategy.
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6. Operational or managerial description- It presents the layout of the personnel
configuration of businesses. It settles the knowledge about the placement of
essential assets or commodities holders as direct or indirect parities. Additionally,
it supports the layout of the supplier chain and other assistance regarding the
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influential roles.
7. Financial or monetary function- The section offers information about the
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settlement of the funding, structure of cost, and investors according to the
orientation of the business purpose. It settles the learning about the influential
assumptions, forecasting, proceeding years planning through the technical
calculative modes.
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8. Utilization of the appendix- It exhibits evidential records or backup support for
reliable information already given in the above sections. It serves the positioning
of businesses’ credibility about their claims, accounts, and nature. However,
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business planning enlists the categories of records that support the analysis or
forecasting of the business expansion in preceding times.
Types of businesses plans

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The distinction of the business program-based planning varies as per its nature of
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work. The basic segregation of the business plan occurs through the classification of
the duration, operational orientation, and repetitiveness.
1. Based on duration capabilities- The adaptation of the duration supplies the
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planning between some specific period. It comprises a short-term strategy that

focuses upon the function between one or less than one year. And a long-term
plan sets the framework with the determination of five-year functioning or more.
The components remain similar in their functional outlining.
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2. As per operational orientation- Segregation of the operating arrangement

manages by three different segregations:
- Tactical or operational planning leads to the layout that categorizes
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the short period and management activities in simplistic and level-based

classification. It includes multiple programs and strategies that reflect
feasible targets and simple steps for reaching the progressive place.
- A strategic plan determines the positioning of the long-term placing
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of the planning. The determination of the profitable state, growth, and

development of the company enhances strategic layout. It adds future
courses and elements that affect the achievement of the company. It
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works through the cultivation of prime administration-based prospects and

conditioning.
- With functional-based planning, the settlement of the business determines
the status of the finances, marketing, exchanges, and purchases-selling. It
includes a guidelines structure that directs to practical-based capabilities
(c
of the business orientation. It analyzes the managing prospect and figures

out the marketing side of the enterprise.

3. The repetitiveness type determines the usage of the planning for one single
Notes
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time or multiple prospects. It covers two sides of the outlining:
- Plans for single-utility covers simple references for the particular or
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specified conditioning. It settles information about a fixed situation that
accounts for a shorter period. The specific situation-based planning reveals
the budgetary operations, strategic stand for the management activities,
general purpose of the company, and programming of the policies. A
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settlement of progressive company or business always encompasses
the prospect of the management by objectives (MBO) that state factual
knowledge about a condition.
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- Standing or multiple-use plans refers to the structure of a written
document that is used for multiple purposes. It usually remains a regular
permanent textual layout of the company’s accomplishments and holding
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values. It carries the side of companies’ policies, procedures, methods
of operational capacities, and rules or regulations of the establishment.
Its elements establish the scope of decision-making and managerial
decisions based on the central principles in the company’s policies.
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Another distinction of businesses plan focuses upon the qualities similar to the
components-based value of the market. It operates a policies-based structure that
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allows the shaping of practicality into the management branch of the company. The
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layout of the business plan fixes based on industry regulation. Some businesses
present their designs in less than ten pages, some in more than twenty pages, and
even some in a page poster segment. With the extensive reach of the creative horizon,
a business plan holds different arrangements as per their convenience and vision of
success. The template of the planning section carries through the simplistic formatting,
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tabular formatting, charts or pictures inclusions, and so on. The examination of the
business plan links to the extension of the market.
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Analyzing case studies

As discussed earlier, the placement of the business plans differs as per the
consideration of the business range as a small or large representation. The extensive
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franchises of business carry more complexities in means of details of management and

operational staff. However, the prospect of the smaller business embraces the sides of
simple and detailed information with the establishment of the business planning. The
layout of both conventions remains the same. The only difference occurs through the
participation of the data.
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Case one- Lilly has spent the last four years working in an antique magazine
collection shop. She has worked in different levels of sales, marketing, analyzing
the state of magazines and the business functionality in the past years of her works.
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During that time, she has discovered her passion for producing personalized calendars
and diaries with the symbolisms of caricature figures with a separate addition to the
magazine collection side. However, caricature-based products creation will be funded
by her saving through prior working by the compilation of magazine collection alongside
(c
the caricature products. The compiling of her business plan to put her business
objectives remains smaller in orientation without any segment of a more extended

enterprise section of operational management space. Instead, it covers the viable

Notes
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business concept of planning components.
The layout of her business plan could include the following segments: Summary
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display based on magazine shop experience- Additionally, a new alignment of the
caricature productions. The purposive side of business joins through the dream and
passion. Moving to the business description throughout the years, introduction about
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the products with the additional caricature pieces. Then the comparative state between
the other shops in the region based on similar product or different, and their productivity.
Then the plan moves to the business strategy that involves the promotions-based
convention of the shop, about its growth perspective. The operational management
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involves the placement of employees the shop needs after the new addition. The
financial segment includes the placement of her savings and additional investment
supports. Lastly, the use of an appendix reveals her accountability.
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Case two- Taylor operates her own business of manufacturing and currently
employs forty-five people who help her generate USD 1.5 million turnovers. Her
company has just won a huge contract to supply a large truck manufacturer with distinct
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elements. The deal involves operating additional workers for handling the excessive
demand by the agreement. The expansion of her current company ratio needs to be
added either on a similar site or a new area with a larger work allocation possibility.
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Taylor is looking for financial expansion through investors’ grants or fresh
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investments. She needs a marketing plan to satisfy both potential investors and to
improve guidance for her business. She needs to establish a business plan that
acknowledges the compatibility of the company. It should reveal the company that
deserves funding in and regulation to the government scheme or programs-based
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investment. The conditioning of the business plan in Taylor’s case needs to be formal
with the exact arrangement of factual information with credible results. The business
plan should need to follow the conditioning of the following points:
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1. To present an authentic or accountable executive summary with a visionary

statement about the company’s goal and objectives. For instance, for achieving
the scope of higher hallmarks of the manufacturing industry.
2. With the positioning of market analysis, Taylors needs to place a comparative
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study of manufacturing industries in her region and boundaries area. Also, it is

required to present the daily target covered by 45 employees.
3. Operational or managerial description can entail the workforce development of
the company and its strengths or weaknesses.
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4. Later on, the exercise of planning moves to a business strategy. The company
carries out short-or-long term duration planning. It also includes the workable
structure of the potential manufacturer generated in the past with a turnover of
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1.5million USD. A similar fact also occurs with the aspect of the financial function
of the company. Along with the cost structure of raw material, machines, and
use of resources like water and electricity.
5. Lastly, the placement of the postscript of appendices covers certified material
(c
and records that Taylor’s company carries and estimating estimates and
forecasting based on prior numbers of profits or losses.

3.2.7 Understanding the Investor’s Perspective and Presenting the

Business Plan. Notes
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Investment
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In simple words, investment means if we purchase any assets or have earned any
sum of money. And we are using the assets to make a profit then it is known as an
investment in assets. On the other hand, putting the sum of money in the bank, stocks,
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cryptocurrencies, etc. for getting interested in the future is also known as investment.
Investor
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Investors are those people or entities who invest their money in such a way that
they earn profit in the future. Investors’ work is not very simple, because they have to
analyze the business in many parameters and find out the suitable opportunities for
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investment or risk that they may face while investing.
Investor’s Perspective
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Here, perspective means a special attitude. So, the Investor’s Perspective is the
point of view of the investors that how they will deal with the investment. It may be in
the challenges in business that how they are overcoming particular challenges or how
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they are identifying the opportunities for their business.
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These all things come from the investor’s perspective.
Business Plan
It is a document that explains your business, what it does, what its goal is, what
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kinds of products or services it offers, your business strategy, how you are able to earn
money from your business, and many other things.
There are some basic purposes of a business plan such as

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- Give a clear view about the future financial performance of your business,
- Provides knowledge about the risks as well as opportunities that you may get in
the future,
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- Provides detailed information about the business’ goal, purposes, behavior,

competitors, etc.
How do Investors Prospect a Business Plan?

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To understand the behavior of investors in the business one should have to

analyze what the upsides and downsides are happening in the business, what are the
threats and challenges for the investors in adopting a particular business plan.
)A
The situation of the investor investing is dependent on the situation if they are
investing in equity or debts.
The main difference between equity and shares is the contractual nature of
the loan. As equity and debts are very different, investors have to make it clear to
(c
themselves in what perspective they are going to invest.

So, all investors expect to see a business plan before investing in it.
Notes
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Every investor feels little doubts about how to invest in the market. So as the
solution to this problem the investors usually follow the following process.
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●● Skimming: This is the initial stage, and, in this stage, the analyst has to look
for the executive summary of the business plan, and then he may decide that
he has to do investment or not. And to make analysts skim your business plan
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you have to make sure that:
1. The look of your business plan is professional. As the look gives the first
impression so always make sure your business plan is written in such a
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way that investors do not have to make a high effort in reading your plan.
So, you must format your business plan in a very professional way so the
investors will read your business plan.
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2. Always try to make your summary as short as possible. The short,
accurate, and appealing summary makes a very good impression on the
analyst. Your business plan’s summary is such a thing from which the
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reader gets to understand all your business plans in less than 5 minutes.
But you should not have to cover everything, you just have to write such
points which attract the readers to invest in your business.
●● r
Due diligence: After skimming your business, the reader wants to know your
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market competition. If he gets to know that your product in the market is not
overcrowded, then he wants to know about your strategy.
The reader will also look for the number of challenges that you have to face
and the opportunities that your business will get in the future.
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So, you have to make it easy for the investors to know your sources, ability to
face challenges.
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And if you pass according to their need then the investor will make a point in
which they need clarification from you and they will conduct a meeting with
you to get their doubts to be resolved.
And after completing all these processes, if the investor is happy with your
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plan then he will write a memorandum and show interest in investing in your
business.
●● Committee: Committee members are those people who take the final
review of your plan and judge whether your plan is giving a good investment
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opportunity or not.
The committee member always checks whether you are loyal to them or not.
Sometimes, they also use some tricks to check your loyalty to them.
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For example, they can’t discuss the biggest risk of your plan with you and
want to check your loyalty. At that time, you must have to disclose all the
challenges with them. So, they will ensure that you and your plan are loyal to
them.
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And they start investing in your business.

For what do the investors look before investing?

Notes
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As we all know investors invest their money to receive a good return in the coming
future. So, they want to put their money into a growing business. That’s the reason you
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have to put an effort into making such a business plan which shows that your business
is growing.
There are many investors, and they all have their point of view on which company
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they will invest in. But the common thing among all the investors is that if they feel more
secure and high return in any company, they will go with it.
Before investing in any business most investors search for some more things in
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your business idea. Let’s get to know about those points in detail.
●● Hard Data: If your company has a running business then, you must have
shown your past financial performance and show the investor that you have
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an excellent financial performance in past but if you haven’t then been loyal
and speak to the investor and make them confident that you have a very good
plan that you will be able to make more profit.
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If your company is a start-up company then you have to show your best plan
for a business that how you will be able to make an excellent profit in the
coming year and investors will get a good return on their investment.
●● r
A rock-solid Business Plan: A rock-solid business plan can show your
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investors how serious you are about your business. And if the investors feel
you are very serious with your business plan it will give a good impact and
there will be a high chance that investors will invest in your business.
The business plan only can’t be able to give the best impression and attract
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the investors. To do these things you have to show that you are very much
serious about your business and anyhow you will make your business best.
●● Uniqueness: Everyone wants to see something unique. Investors also like to

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invest in an innovative unique business plan. Because if you use a common

business plan then you have to face very high competition.
And if there is high competition then the chance of your business success
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will be less. So, always try to choose such a business plan which has
comparatively low competition in the market.
●● A Strong Narrative: You have to become a narrator to your investor and

tell them why they should invest in your business plan. Because I see many
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business plans daily and they are people, not a robot that will read all the
terms that you have written in your business plan.
So, if you provide them with a better narration then there will be a huge
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chance that you will be the investor in your business.
●● Business Readiness: Show your investor that you are not among the people
who can only talk about their business. But you are among those people who
can make the plan true.
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To show business readiness you have to do a lot of research and analysis to

set up your business. You have to find your proper marketplace where you

have to do your business. You have to find out your supplier and every other
Notes
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needed thing.
●● Your Need and Goal: If you are thinking of taking money from investors and
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running away then it is not possible for you. Because every investor first sees
your need for money, your goal for which you need money.
Not only this, but they also look at your strategy to do business and they also
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have their strategy to exit your business if they don’t feel secure with your
company.
●● A Clear Investment Structure: You have to make a clear investment
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structure that allows investors to freely invest in your business. You have to
clearly define which investor is allowed to take a part in decision making and
which has not.
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Always make a legal agreement with your investors, shareholders, debentures
holders so that you and the investor both feel secure with one another.
Business Plan Presentation
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As we already know the business plan is a document that provides investors with
information about the business goals, strategy, plan, ideas, financial status, etc.
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So, a business plan presentation is something, not a word document, but it
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contains many slides, and you have to elaborate on all the slides by providing all the
required information.
It is easy to understand, and it saves the time of investors. Because investors didn’t
have to make any effort in reading the wordy document.
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Here, all the efforts are done by you as you are elaborating all the slides in front of
them. And so, this method engages more people at a single time.
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Key Elements to Create a Business Plan Presentation

●● Executive Summary: Summary, is the thing that should be written at last. It could
explain all your business plans shortly and simply. But the summary must be
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meaningful and easy to understand.

●● Company Profile: Mention all the details about your company like its history,
financial statements, key resources, location, targeted market, etc. And put all
these details in a bullet format then the focus directly comes on it. And if you use
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paragraphs then there is a chance that this information may be missed to read.
●● Market Analysis: Through a market analysis you will be able to find the strategy
used by your competitor and so, you will be able to overcome your threats and
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introduce new opportunities in the business.

●● For showing market analysis data, you may use some visual pictures in your slide.
●● Customer Profile: In this slide, you have to talk about your customer. Who will be
your customer, in which market you will find your customer most, how to attract the
(c
customers, their needs, their job details, etc. everything is to find out by you. So,
you will be able to target your customer.

●● Perceptual Map: In a slide, this map will show the investor that in your business
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nature which product is in high demand and who are your competitors. It also
helps to know which brand the customers preferred most.
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●● Porter’s Five Forces: This is a tool that is used to measure your competitive
strength with your competitors. From using this tool, the vision will be clear that
your business idea is profitable or not.
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●● SWOT Analysis: SWOT Analysis means the analysis of strengths, weaknesses,
opportunities, and threats. And once, the business gets to know about these all
terms then, the business will run smoothly.
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●● So, showing the correct SWOT Analysis in the presentation is very important.
●● PEST Analysis: PEST Analysis stands for analysis of Political, Economic, Socio-
Cultural, and Technological factors. It will help in the risk management and making
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market strategy by considering all the external factors.
●● This is a great way from which you will be able to know about the external factors
of your business environment.
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●● Competitor Profile: You have to collect various data of your competitors. Such
as their market strategy, sales, revenue, etc. And then, analyze the data and find
out your opportunity to overcome opponent threats and run your business more
efficiently. r
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●● Marketing & Sales Strategies: Manufacturing a product is very simple but the
tough thing is to sell it. So, you have to make different strategies for marketing and
selling your products or services.
●● Organizational Structure & Management: List down all the organizational
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structures that you have to manage in your business organization. Here, you can
use an organizational chart to show it in a slide.
●● Services & Products: Here, you have to provide the full information about the
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product or service that you are offering. If you add a visualization of your product
or service then, it will be more attractive and interesting.
●● Financial Plan: This is the most important part of the business plan presentation.
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As in this slide, you have to provide all financial information about your business.
In this, you have to include both past financial information as well as a plan of finance.
Forgiving a business plan presentation, you must choose the digital way
where the investors may visualize your plan and get a better understanding of it.
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3.2.8 Valuation of Business Plan and the Elevator Pitch

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Value of Business Plan

A business plan is very important for every business organization. Because it gives
the first impression to the outsiders as well as investors.
As the business plan shows the complete detail about the organization. The details
(c
include the historical detail as well as plans.

So, the person who is reading your business plan can be able to get a full idea
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about your organization by seeing your business plan. Thus, you have to make your
business plan in such an attractive way that the investors get attracted by seeing your
business plan willing to invest in your business.
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That’s why the value of the business plan is very high, as from the business plan
you get the financial support for your business and many other things.
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Strategy for Valuation of Business Plan
Suppose your business plan is negatively taken by the investors, but your plan is
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very good. Then, if you will efficiently present your business plan there is a huge chance
that the investor will invest in your business.
But for presenting your business plan you must have to make your slides very
carefully. You may have to insert more pictures that can describe your words and you
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have to describe that picture that what they are for.
There is a very huge difference between hearing, reading, and visualizing the
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business plan. In reading the investors may skip the important points and can’t be able
to know your exact business plan.
In hearing they may feel bored after a particular time. So, I suggest you give a
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presentation to your idea, so they are visualizing your idea on the screen and hearing
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the words by you.
And for that, you have to prepare a plan for your presentation. So, you should
always have to follow the below-given strategy for better presentation.
●● Obtain leads & referrals: Investors can’t get to themselves so; you have to make
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a list of the investors who invests in a business like yours. Once, you have made
a list then, find their name, addresses, phone number, and mail id. Now you can
call them directly to come to the business plan presentation and also give a formal
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mail to them.
●● Research your target: Make your network grow more so, you will be able to know
more investors who are willing to invest. There are many investors available in the
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market, but you have to target only those investors you are willing to invest in a
business like yours. Research about the requirements of those investors, the fund
that they will invest in your business, and many other things.
●● Make your pitch: First, do a formal mail with an introductory letter to the investors
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and let them know about your business plan presentation. In this social media
and networking world, your business plan presentation may be shared from one
investor to another.
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●● So, in the letter of introduction, you must give the required details which attract
more and more people to come to your presentation.
●● But in today’s time, many mails come to us daily, some are useful, and some are
not. So, you have to take care that your mail is redressed by the investors or not.
And for that, you are able to ask them for a response in the mail.
(c

●● And, if you can’t get any response on mail from more than a week, you may call
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the investor and explain about your presentation, then resend the mail by asking
them to read it.
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●● And if they are not interested then, don’t force them. Just leave that investor and
look for another one.
●● Try to meet people in person: Yeah, this is the age online. Everything is online,
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and you are also communicating with investors using online mode. Such as call,
text, mail, conference call, and many others.
●● But using these methods only cannot make your relationship better. Because
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many people do the same and the investors may get many calls daily, there is a
huge chance that they will forget about you.
●● But if you meet them in person then, it will provide a better impact and they will
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know you by your business. And thus, you may have increased the chance to
make money from them in your business plan.
●● Defuse objections: You may be thinking that you have made a very good
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business plan and provide all the necessary information in it. But you are wrong.
Although you have made a very good business plan, investors must raise some
obligations with your plan.
●● r
But you have to find that obligation before the investors do and also find out a
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solution for it. So, you will be able to avoid any objections that arise from the
investors.
●● Get a commitment: To find an investor you must have to ask about investors.
Then only you will be able to find them out. And when you get all the answers
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to objections, then go with the last question for the investor. In that question ask
investors if they are willing to make a high return with your business or not.
And after asking this question to close the business plan presentation.
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Elevator Pitch
Elevator pitch is a technique to grab the attention of your investors or anyone
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towards yourself and then you start giving a business plan presentation. In general, the
elevator pitch is also known as “Elevator Speech”.
With the help of Elevator Pitch, you will be able to attract an investor to your
business plan. So, you must have to give your best pitch in Infront of the investors,
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shareholders as well as debenture holders.
Thus, you must have to know about the technique to create an elevator pitch or
speech.
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How to Create an Elevator Pitch?

Creating a pitch and delivering it in the right way may take some time. But have to
keep patient while creating a pitch, you must have to find the best pitch which sounds
like a natural conversation.
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Here are some steps to create a good idol elevator pitch. But be clear that if the
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situation varies then the approach will also vary. There are the general steps from which
you will be able to create an idol elevator pitch.
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●● Identify your Goal: Identity what is your goal and put it in your pitch. So, the
investors get to know that you have a good product idea. And you always
have to stick with your goal and never run out of your goal because it shows
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you are not stable.
●● Explain What you do: When you start your pitch always start with the work
that your organization is doing or do in the future. Here, you can also be
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able to highlight the problems that you have solved for the development of
business.
●● Communicate your USP: An USP stands for Unique Selling Proposition.
Here, you have to show how you make your selling proposition so unique that
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customers will be attracted to your product or services. You must highlight all
the plans that make your company’s product or service a unique one.
●● Engage with a Question: After completing USP, you have to engage your
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audience with a question. And while you are doing this all things never feel
hesitant because it is the part of your presentation that shows how much
confident you are with your business plan.
●● r
Put it all together: After completing all the above steps you have to put them
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all together in your pitch. Then review it and do the correctness wherever
needed. And also note the time that you take to present your business plan.
●● Practice: As we all know practice is the only thing that makes you perfect in
everything. So, you have to do a lot of practice with your presentation then
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only you will be able to deliver your pitch smoothly and perfectly in front of an
audience.
Components in the best Elevator Pitch

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At the time when you have to raise money from investors, you have to make a
perfect business strategy. So, you will be able to achieve your goal.
An elevator pitch is like an executive summary that gives a perfect and quick
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overview of the business plan.
And as the elevator pitch provides an exclusive impact on the audience thus, you
have to provide all the necessary details in your pitch.
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Some important components that you always have to include in your pitch are as
given below.
●● Define the problem: It is the most important thing that you have to define
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the problem that you are going to face in the future while implementing
your business plan. You may have to face many types of problems such
as creating customers, identifying the distributors, making your place in the
market, and so on. So, never merge every problem in a single slide.
You just set the category of the problems and challenges that you have to face
(c
at different stages of your business.,highlight

●● Describe your solution: Many entrepreneurs can pitch their problems and
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forget to get the solution for them. But you have not done this, you have to
find the solutions to your problem and then put them in such a manner that
your audience will understand your point of view.
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As with many problems in the organization, you have to find an opportunity in
that problem and make a team to solve those challenges.
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Then, it will provide a very good impression of your business to your audience.
●● Know your target market: Now, you have identified your problems and
solution to those problems. Thus, this is a time where you have to select your
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targeted market and elaborate on that market in your pitch. That is why you
are selecting that particular market. And how that market will give you profit in
the future.
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To target a market you must have to know about some special things of the
market such as market segmentation, your potential market, your customer’s
spending habits as well as income, and many other things. Then, only you will
be able to target your market efficiently and effectively.
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●● Describe the competition: When you want to start any business in the
market there is competition if you haven’t come with your unique idea. If you
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are doing business with a product that is already on market, then you have to
face a challenge from your competitors.
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You have to do more work to motivate the customer to buy your product or
services. So, whenever you enter the market, always try to come up with an
innovative and unique idea. So, you will find less competition in the market,
and you will be able to establish your business smoothly.
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●● Share who’s on your team: As investors are going to invest in your business
so they have the right to know about your plan as well as your team that is
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working with you.

So, in this slide, you have to give an introduction to your team members and
show that you are working in a team. If you have a great unique idea for the
business but you have no coordination with the team then you can’t be able to
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implement your idea.

So, team coordination is very important and thus, the investors want to know
about your team. That you will be able to work in a team or not.
●● Include a financial summary: Your audience who want to invest in your
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business is very much interested in your financial plan, your financial history,
and the things related to finance.
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So, don’t forget to attach your financial summary in a slide. Because your
financial plan is the only thing where everyone becomes attentive and listens
to your plan carefully.
A financial summary helps to identify your business model very easily.
Sometimes, you may think a business model is a tough thing but shortly it
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daily to is not. It is the record of all your bills as well as expenses.

●● Show traction with milestones: In this slide, you have to express your
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future goals and the strategy that you have made for achieving that particular
goal. When you try to achieve your future goal, put some milestones in it and
mention them in your business plan presentation.
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If you talk about your upcoming milestone and the strategy to achieve it then
your audience feels more secure and thinks you are going to succeed in your
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plan very soon.
●● Put it all together: After completing all the above steps, now you have to put
all these strategies together into your presentation. You also have to check
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the outlines that you have put in your article. Do cross-check that everything is
perfect in your presentation.
Always try to use attractive slides in your presentation and explain each slide
in an effective as well as efficient way.
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Mistakes to Avoid while Pitching to Investors
Now, you get to know what are the things that must be included in your business
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plan pitch but then also you may fail to deliver the perfect pitch because you may
include some unnecessary things in it.
And adding useless things to your pitch can spoil all your presentations.
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Some examples of common mistakes that an entrepreneur makes while pitching a
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business plan are given below.
●● Memory lapses, it’s a very common mistake that an entrepreneur forgets what
he has to speak up.
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●● Overlooking the facts is also not a good thing for a presentation.

●● Mismatch
●● Pitching for a long duration of time.
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●● Overselling your product in pitch.
3.2.9 Evaluation of Business plan Introduction

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Why do you need a Business Plan for your Business?

You must be thinking, ``Why do we need a business plan? Why spend our time
giving a presentation of a business plan?
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So, to provide you with the answers to these questions, here are some of the
reasons for which you have to make a business plan.
Let’s get started,
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●● To prove that you are very serious with your business: In a business, if
you are using a proper idea, strategy, and plan to accomplish your goal then it
seems that you are very serious about your business and so the employees,
investors, and outsiders have a good trust in you.
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On another hand, if you have no plan for your business then no one will trust
in your words and they feel that you will fail in your business or you dump the
business shortly.

●● To establish business milestones: Your business plan must be long-term.

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So, you need to keep milestones to it. Because milestones are the things that
give you the motivation to work more.
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When there is a milestone completed then you as well as your team feel
too glad at yourself and so you will be self-motivated to work more for the
achieving of the final goal of the business.
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●● A better understanding of your competitors: If you create a business
plan then, you have to analyze your competitors. Each company has its
competitors according to the business size and nature.
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So, if you will keep a good analysis of your competitors then you get to
know what are the challenges that you may have to face and so, you will get
prepared for it.
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Not only this, but by doing analysis you will also be able to find out
opportunities that come in the market.
●● A better understanding of your customer: As the competitor’s analysis is
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very important for the business. Customer analysis is also very important. By
doing a customer analysis you will be able to know the needs of customers.
And if you get to know about their needs then modify your product as well as

services according to them.
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Because customers are the only person for whom you are manufacturing
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goods or providing service.
●● To enunciate previously unstated assumptions: When you start making a

business plan then you must have to write many things about such a thing
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that is yet to happen. So, you have to assume the situation from which you
have to face challenges and so you also have to bring solutions to them.
As you have assumed many things from which you may have to face
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challenges so, when the time comes to face challenges, you already know
what the steps will be taken by you.
●● To assess the feasibility of your venture: In a business plan, you have to

do much different research in your targeted market. So, you get to know about
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your competitor’s competition power and also the feasibility of your ventures.
As you know, there are many ventures present in the market, but you only
have to deal with the targeted one and you must have to know the feasibility
of your venture.
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●● Documentation of your revenue model: Your revenue model describes

how you are going to make money with your business. This is a very tough
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question to every entrepreneur in which way they are going to make a profit.
So, while you start documentation of your revenue model you may have to
analyze a different level. So, while you are documenting your business model
you may address many different opportunities as well as challenges to your
business.
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●● To determine your financial needs: Every business has to raise the funds
and for the same reason they make a business plan and present it in front

of the investors. But there is a thing that you and your investors both have to
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get clarified. So, in your business plan always mention, what is your financial
need? How and where are you going to spend it?
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You must mention each and everything in your business plan.
●● To attract investors: A business plan is a document that attracts investors to

invest in the business.
nl
Because in a business plan investors may be looking for the high return and
the way to exit, financial position of the company as well as strategy to make a
high return with a company.
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●● For reducing the risk of choosing the wrong opportunity: If you create a
business plan then it means you have done a huge analysis of your market,
competitors as well as customers. So, you are knowing the opportunities that
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bring too many challenges with them.
So, with the help of a business plan, you protect yourself from choosing the
wrong opportunities of the business.
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●● To position your brand: While you create a business plan it makes a clear
vision in your mind of what your product or service is about and how you are
going to make it a brand in your market.
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You will get to know your current position in the market, and you are also
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knowing the position where you have to go in the future.
From the above points now, it has become clear that if you consider a
business plan in your organization then, it will provide you many benefits in
the short run as well as the long run.
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Types of Business Plans

Business plans provide the complete details as well as a guide to the owner,
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investors, etc. Every businessman writes their business plan very carefully. But the
business plan is divided into many types, so you must be careful while selecting the
business plan to write.
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You must have to choose the right business plan structure while writing it. Some
types of business plans are start-up business plans, Internal Business Plans, Strategic
Business Plans, Feasibility Business Plans, Operational Business Plans, and Growth
Business Plans.
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These all types of plans are as described below.
●● Start-up Business Plans: If you have a new business establishment and

want to make a business plan, then you must go with the start-up business
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plan. In this business plan, you have to mention the product or services that
you are going to offer, details about your management team, your future
goals, etc.
You may also be able to include financial terms by showing them the place
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where you are going to invest in the future.

●● Internal Business Plans: These business plans are only for a targeted
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audience who works inside the business. These plans describe the current
situation of the business.
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For example, the cost and revenue-making plan are shown to the marketing
team thus, they will be able to do better work with the help of the plan.
●● Strategic Business Plans: It gives an overview of the company’s goal and
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how the company is going to achieve it. Every department of the business
organization depends on the strategic business plan.
Because as the strategy of the business is changed then the whole working
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structure of the business will be affected by it.
So, the strategic plan must be made by doing a lot of research and analysis. It
is the only way from which your plan will succeed.
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●● Feasibility Business Plans: It is such a business plan which attracts the
investors to invest in your business at an initial stage and also it is the plan
that becomes very important while selling your business.
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These business plans are made in such a way that they can be able to attract
anyone to give a better value to the business.
●● Operational Business Plans: It is one of the internal plans of the business.

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No outsiders are allowed to interfere in this type of plan. An operational
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plan consists of the responsibility of employees’ working in the business
enterprises. It also shows the strategies of doing work in the future.
●● Growth Business Plans: It is written for both internal as well as external
business members. As the name suggests, growth business plans show the
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strategy as well as the plan from which you will be able to grow your business.
Here, you have to put all the details from which you will be able to grow
your business. For example, if you want to raise funds for the growth of the
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business then you have to mention it in your growth business plan.
●● To judge the success of your business: If you have a business plan then it
will be very simple for you to compare your actual operational results with the
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result that you have expected in your business plan. And thus, you will be able
to control the difference between your planned and actual results.
If you find that your actual result is low, then you have to compare, research
and find the problem of why you can’t be able to achieve the target.
m
And if you achieve more then consider that technique in your business plan.
How to Evaluate a Business Plan?

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By evaluating a business plan one is able to know the exact situation of the
business firm. A business plan provides a clear image of the firm.
So, by evaluating a business plan an investor gets the proper image of the
business firm. And here, I have listed some techniques to evaluate a business plan.
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●● Read and understand the executive summary: The first step to assess the
business plan is to read and understand the executive summary. It must be in

such a way that by reading the summary one can understand the whole content of
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the business plan.
The summary must be written in such a way that it attracts investors to invest in the
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business plan.
●● Analyze Opportunities from the Market: You have to do a proper analysis
of market opportunities. As the business environment has a dynamic nature
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and is growing too fast. So, you have to do regular research on it and mark the
opportunities as well as threats.
So, it will help you to expand your business and make more profit.
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●● Evaluate Strategy of the Business: Examine the strategy of your business in
such a way that it will be able to run in the market. So, whenever you make a
strategy, you must have to be practical.
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●● Because many strategies sound good on paper but when you start to develop
them in a practical way you may face many problems.
Thus, whenever you make a strategy, you must have to think practically.
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●● Examine the business environment: As you know, the business environment
is dynamic. So, if you do single-time research then it will not be helpful for your
business plan. Thus, you have to analyze your business in a regular interval of the
period. r
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●● While analyzing the business environment you must check the competition
in the industry, the power of suppliers as well as customers in the market, new
companies that have done start-ups in the market, threats that may arise in the
near future.
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●● Evaluate the Leadership Team: Make your team as best as possible. The
team must be an all-rounder. Every person in a team has their own executive’s
strengths as well as expertise.
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●● So, it will help the business to develop new ideas for making more profit. And
also, the work will be done effectively because there is an expert present in every
required field.
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●● Know the finances: Knowing about finance is the most important thing. Finance
is the only thing for which you are establishing a business, or an investor is
investing in your business.Thus, ensure that the given financial numbers are real
in nature as well as promising. A good business plan always gives a provision to
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the investors to exit as they wish. So, an investor feels secure and whenever they
feel that they may suffer from loss, immediately they withdraw their fund and exit
your business.
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●● View the business plan as a living document: Never evaluate the business plan
in a partition. Always try to evaluate the whole business plan considering a single
document.Read and understand all the important points in the business plan very
carefully so you can’t miss the important part of the business plan.After doing
analysis investors may conclude that they are willing to invest in the particular
(c
business plan or not if the business will be able to give profit to the investors or
not.

Benefits of business plan

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A business plan is something that gives the complete description of your business,
it includes all your market strategy, market research, and every other thing that is
in
related to your business.
But the main reasons to create a good business plan is as shown below,
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●● It helps to increase your chance of being a successful entrepreneur,
●● It helps to determine that in which field your business will make more profit,
●● Attracts investors to invest money in the business,
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●● Business Plan can help you in estimating your revenue and also help to
predict that how much market did you go a cover,
●● It can help you to do a complete market analysis, so you will be able to know
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better about your competitors, opportunities as well as challenges.
●● Helps to identify the problems in advance so you get a proper time to save
your business from any problem,
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●● You will be able to make a profit from the starting level of business with the
help of a proper business plan.
3.2.10 Faith in Entrepreneur and Entrepreneurial Terms

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Entrepreneur
In simple language, entrepreneurs are risk-takers in the market. An entrepreneur is
a person who bears the risk of starting a new business and after the start-up, he may
enjoy the reward if the business runs successfully. An entrepreneur is the creator of
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innovative ideas, goods, or services.
Entrepreneurs are important for the country as it plays a very vital role in the
development of the economy of the country. They can introduce new and innovative
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ideas in the market from which customer life becomes easy as they get the product or
services that they want to get.
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Entrepreneurship
The process from which an entrepreneur sets a business is known as
entrepreneurship. Entrepreneurs that want to be successful in the market must take a
high financial risk in business.
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And if it becomes successful by taking the financial risk then, it will be rewarded
with high profit, famous business name and it will be able to create continuous growth
opportunities. Most people think that entrepreneurship is of only one type, and it has a
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single meaning. But entrepreneurship has a wide range, and its two most popular types
are start-up entrepreneurship and small scale entrepreneurship.
Entrepreneurial Faith
Entrepreneurship is a spark of inspiration to the entire world. While you just relax
(c
and think about how simple life will become if someone provides you with a service that
you need. Provides you with a product that you are waiting for.

So, by thinking only nothing is possible to do. Some entrepreneurs come and
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understand your needs so that you will be able to use their products or services. If there
were no entrepreneurs in the world then in today’s time also, we all would be in the
stone age.
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We all must be thankful to the entrepreneurs that they came forward and
understand our needs then they develop their product or services according to our
nl
needs, wants as well as desires.
But as an entrepreneur, you must have to keep good faith in your business. And
show to the customer that you are loyal to customers as well as your business.
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You can keep faith in your business by being loyal to it, it is confidence, hope, inner
determination, etc. Entrepreneurship is highly creative and you must do research and
analysis on a daily basis, so that you will be able to run your business smoothly.
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And to support faith with the customers you must supply the best quality product or
services at a reasonable rate and of excellent quality. And you also must take feedback
from your customer so they will feel free to communicate with you.
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Entrepreneurial Faith is the thing that helps the entrepreneurs to keep faith and
trust in their business ownership, their investors, employees, and every other person
who is interested in the business.
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Faith is such an important thing that it creates a bond in the whole business
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organization thus, it helps in the successful running of the business.
Types of Entrepreneurship
There are many types of entrepreneurship in the market. It is possible to become
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an entrepreneur even if you are running a huge business and when you are a sole
proprietorship.
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The entrepreneur is the person who comes forward with an innovative idea and
runs the business.
Here, I have listed some types of entrepreneurships. So, let us get started with
them.
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●● Small Business Entrepreneurship: When you want to start a business, but you
do not have enough funds and resources then it will be better to choose small
business entrepreneurship. In small business entrepreneurship, you must be more
innovative than large business entrepreneurship.
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●● Some examples of small business entrepreneurship are local restaurants, local

stores, dry cleaners, etc.
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●● Scalable Startup Entrepreneurship: The scalable start-up entrepreneurship

concept is first developed by Steve Blank. In this concept, an entrepreneur
believes that he has the best idea to change the whole world.
●● And so, the entrepreneur hires highly professional as well as experienced people
to run their business and to work on the idea.
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●● Large Company Entrepreneurship: Large companies are experienced as well as

professional thus, they start growing very slowly after they achieve their targeted
goal. And at that time, they deny developing more products themself and thus to
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grow their business they buy another small company in the field which they are
looking for.
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●● For example, Facebook is a huge company, and it can develop new apps like
WhatsApp, but they did not do it. They just come across and buy the whole
WhatsApp company.
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●● Social Entrepreneurship: These are a type of entrepreneurs who are focused to
solve social problems that are common in every community. It may include food,
education, road, or money.
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●● The main aim of these entrepreneurs is to create a better world. Many of the social
entrepreneurs are of non-profit nature. These companies develop their product or
services with the motive of contributing solutions to social problems.
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●● Innovation Entrepreneurship: These entrepreneurs come into the market with
new inventions. It can supply innovation to the market. As it comes with innovative
ideas thus, it made a huge change in people’s life.
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●● For example, the Apple company always brings innovative ideas to the market.
And that is the only reason Apple is such a successful company today’s date.
Techniques to develop Faith in Enterprise

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Whenever your business becomes successful it is because of your faith in it. Faith
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is not everything, but it is something that keeps you motivated for doing better work in
your business.
Not only in the business but daily life also many things depend on faith. If you do
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not have faith, you cannot be able to complete any work smoothly.
Faith is used in every place, but it is tested only at the time when things are
becoming hard, and you feel afraid of that situation.
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As in our daily life, our business also needs to get faith. So, it will be able to run
smoothly in the market in the long run.
So, here are some techniques from which you will be able to develop faith in an
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enterprise.
●● Stop being realistic each time,

●● Always keep your vision clear about what you want. Faith can be imbalanced
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if you do not know your exact goal,

●● Always look for doing work and not for the result that you get after completing
the work,
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●● Remember that your faith is getting tested every time. So, you must keep faith
in whatever you are doing and complete the work.
Characteristics of Entrepreneurship
In a year, many entrepreneurs come into the market with their concept but all of
(c
them are not successful. It all happens because every person has their characteristics
and to become an entrepreneur the person must have some basic characteristics which
are as mentioned below.
●● Risk-taker: An entrepreneur must be a risk-taker because to do a business a

Notes
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person must have the courage to take a risk and set up a business. If a person
wants to do safe play, then the salaried job will be the best choice for him.
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To set up a business is also a risk that the business will run successfully or
not. So, the entrepreneur must be a risk-taker.
●● Innovation: An entrepreneur must be creative. So, he will be able to
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innovate the latest ideas regularly. Innovation is especially important for any
organization that wants to stay in the market for a long time.
Whenever a business wants to launch a new product or service then, the
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entrepreneur must have to introduce an innovative idea to launch the product
or service in the market.
●● Leadership Quality: To be a successful entrepreneur, you must develop
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leadership qualities in yourself. Because no business can run with a single
person.
Business needs teamwork and to hold a team in unity is particularly important
to take the work from the team.
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So, having the leadership quality helps an entrepreneur to keep discipline
among its employees as well as team members.
●● r
Open-minded: As the business runs in the dynamic business market, you
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must be open-minded to deal with problems that occur on a daily basis. You
must be capable of holding the opportunities which are beneficial for the
business.
For instance, you must be capable of using an online mode of payment if it will
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be needed by your customers.
●● Flexible: An entrepreneur must be flexible so; he will be able to adopt

the changes of business. If an entrepreneur is not flexible, then none of
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the employees wants to tell the idea to the entrepreneur because the
entrepreneur did not want to listen to it. He only wants to do whatever he
wants.
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●● Know your product: An entrepreneur must have to be aware of the product

and services that he is offering and, also, he must be aware of the competition
of that product and services in the market.
And for doing that, an entrepreneur must have to keep an eagle eye on the
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market and should predict the strategy of competitors.
Importance of Entrepreneurship
)A
Entrepreneur and Entrepreneurial terms are very important for the market
enterprise. So, you just have to keep faith in entrepreneurs and support them as a
team.
Entrepreneurs help the nation as well as the community and the whole world.
(c
It helps each person living in the community by creating employment, innovation, it

helps to social community development, helps to increase the standard of living of the

people and it also supports research and development. So, entrepreneurship is an all-
Notes
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rounder and is important for everyone.
Let’s discuss some of the importance of entrepreneurship in detail.
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●● Creation of Employment: As you already know, entrepreneurship cannot be
run by a single person. It needs hundreds and thousands of people.
So, under one entrepreneur many employees are working, and they are at
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that place by receiving a salary per month.
So, you can say that entrepreneurship helps in creating employment.
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●● Innovation: Entrepreneurs come into the market to do something innovative.
So, in the race of innovation, some entrepreneurs do innovation in the field of
technology, some in the field of quality products, and many more.
But whatever the innovation comes in the market it is for the customers only.
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Thus, the customers get its benefit directly.
●● Social Community Development: Wherever entrepreneurship establishes
there the development automatically takes place. Because in a business there
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are very high requirements of basic things such as 24 hours electricity supply,
better road facility, 24 hours water facility and many others.
And if the community did not have these facilities, then, the entrepreneur must
have arranged it all in that place. r
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So, it keeps support in the social community development.
●● Increase Standard of Living: Entrepreneurs play a very vital role in
increasing the standard of living of the people who are working in that
business enterprise. As they are employed in the business now, so they have
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their source of income. And if they are now earning money, they can consume
various goods which they weren’t able to consume in the past.
So, in this way, entrepreneurship helps to increase the standard of living of
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employees, and the standard of living can help in community development.

●● Research and Development: At the time when new products or services are
introduced in the market they must be researched by the team. And after being
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researched they conclude that whether that product or service is beneficial for
customers or not. And if they find the product is beneficial for the customers
then at this stage the product or services is being developed by the R & D team.
The entrepreneur also contributes to the R&D team for research in institutions,
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markets, and many other places. These all activities help to promote the R&D
team.
●● Spawns Entrepreneurship: As you know entrepreneurship is a game of risk
)A
and it is also the field where the new inexperienced people come and start
their idea of the venture. And if they get successful then they can convert their
small business into a giant business.
Entrepreneurship gives a proper chance to everyone who wants to enter this
field.
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Bottom Note:
Notes
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To keep faith in the Entrepreneur and Entrepreneurial term is very important to
the people in the business as well as the outsiders. Because entrepreneurship is the
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backbone of the country. As it gives the best economic support to the nation.
Entrepreneurs help the common people a lot. As it employs the people in the local
community. It helps to enhance the standard of living of people.
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And if there will be no faith in entrepreneurship then it will not be able to run
the business successfully and smoothly. And the time comes very fast when the
entrepreneur has to wind up their business and move on to being an employee to
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another business enterprise.
There are many types of entrepreneurs in the market such as small company
entrepreneurs, large company entrepreneurs, social entrepreneurs, innovative
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entrepreneurs, start-up entrepreneurs, and many more. So, while you want to become
an entrepreneur then you have to choose the right entrepreneur that you want to be.
As the people are getting knowledge of the advantages of entrepreneurs, they are
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moving forward to become entrepreneurs. And this is the best time when you can start
your career by being an entrepreneur if you have the relevant skill in this field.
For being an entrepreneur you must have to develop some qualities in yourself
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such as leadership qualities, risk-taking qualities, innovation, flexibility and also be
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open-minded.
3.2.11 Markets, Competition & Growth Strategies

Market refers to a physical or virtual setup or a point of interaction where a
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group of potential buyers and sellers can gather to exchange products, services,
securities, currency, or information under the protection of the law and in exchange for
consideration in an economy. The buyers’ key features are that they are interested in
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the product the seller has to offer, have the resources to purchase the product, and
are permitted by law and other regulatory authorities to acquire the product. The value
and prices of products and services are based on demand and supply in the market.
A perfect competition market ensures balance and is characterized by a high number
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of active buyers and sellers. But that balance can be disrupted by factors like prices,
incomes, expectations, technology, the cost of production, and the number of buyers
and sellers participating. Markets can also be categorized as developed or developing
markets, depending on factors like income levels, state of development, or openness to
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foreign trade. For fair trade, markets are subject to regulations set by an international,
national, or local governing body.
Markets have the following features:

)A
●● Products being sold and their differentiation

●● Freedom to enter and exit the market by potential firms
●● number of sellers and the distribution of market share
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●● Number of buyers and their relationship with sellers to dictate demand &
supply

The different kinds of markets are mentioned below:

Notes
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1. Physical Markets: Markets where buyers and sellers physically meet to
exchange products and services in exchange for money is called a physical
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market. Departmental stores, shopping malls, retail stores, etc. are examples
of such markets.
2. Virtual Markets: Markets function in society and any development or changes
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in their habits will affect markets also. Markets have come online now to facilitate
and convenience their buyers. Buyers and sellers can interact in the virtual
world and complete the transactions. Amazon, Flipkart, eBay are just some
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examples of virtual markets.
3. Auction Market: An auction market is a place where sellers and buyers decide
the lowest and highest prices they are willing to exchange and finally agree on
a price. The Stock Exchange is a good example of it where securities, shares,
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bonds, and other liquid assets are traded.
4. Consumer Markets: Consumer markets consist of FMCG products, consumer
durables, soft goods, and utilities for buyers. E.g. schools, colleges, salons, etc.
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5. Industrial Markets: Industrial markets involve B2B sales of goods and services
like finished goods, raw materials for corporations, and services like security
agencies, auditing, and legal services, etc.
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6. Black Market: Black market refers to an illegal exchange or marketplace where
transactions occur without the knowledge or oversight of regulatory agencies.
They fill the gap for certain banned goods and services in the economy.
Transactions are untraceable because deals tend to be undocumented and
cash only.
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Market Competition is rivalry among sellers selling similar products and services
to maximize revenues, profits, and market share growth. Market competition motivates
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companies to increase sales volume by utilizing the four components of the marketing
mix- product, price, place, and promotion. Markets should have true and fair market
competition practices so that the entrepreneurial spirit can thrive and firms with high-
quality goods and services can achieve success. Competitive markets also encourage
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the most efficient and valued use of scarce resources and reduce waste. Innovation
improves the standard of living. Such countries experience economic expansion and
development over the long term.
There are four basic types of competition:

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1. Pure / Perfect Competition

Pure or perfect competition is a market structure defined by a large number of
)A
buyers and sellers competing against each other. The industry produces an optimal
level of output with the lowest possible cost of production because individual firms can’t
influence market prices. Supply and demand determine the production and the market
prices set by the companies. Products are each other’s substitutes and there are no
significant barriers to entering and exiting the market. It is the opposite of monopoly
(c
market competition. The best examples of pure competition market structures are stock,
agricultural, and craft markets.

2. Monopolistic Competition
Notes
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Monopolistic competition is a market structure where there are a large number
of buyers and sellers with similar but highly differentiated products. The products are
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not perfect substitutes for each other but buyers can switch to its alternative if there is
a price hike. No single company has control over the market prices but can manage
their prices. The products are similar with slight differences like style, brand name,
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location, packaging, pricing, etc. which becomes the basis for the firms’ marketing and
advertising which is essential here. Consumers don’t differentiate among the products
based on price. Sellers can freely enter or exit the market and earn huge profits initially.
Examples include restaurants, clothing stores, FMCG, service and repair markets,
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tutoring companies and beauty products & services, etc.
3. Oligopoly Competition
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An oligopoly competition is dominated by a few firms selling homogeneous or
differentiated products resulting in limited competition. They can collaborate with or
compete against each other to increase prices and earn more profit. Oligopoly is not
favorable for consumers as the market price can be high because companies decide
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prices mutually which leads buyers to buy their substitutes. Pricing, profits, and
production levels change as the relationship between sellers and buyers changes.
Innovation is slow as all companies have equal market share, so they don’t put extra
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effort to get a competitive edge over the other companies. Entering into an oligopoly
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is difficult as the dominant companies control raw materials, patents, financial and
physical resources that create barriers for new entries and set high prices. Examples of
oligopolies are the automobile industry, oil & gas industry, steel industry, grocery store
chains, railroads, and wireless carrier industry.
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4. Pure Monopoly
A monopoly exists when there’s a single firm that controls the entire market and
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the firm and industry are synonymous. This firm is the sole producer of a product, and
there is no close substitute that gives the firm the highest level of market power. Firms
with monopolies often reduce output and hoard products, increasing prices to earn
more profit. A monopoly exists in capitalist economies where there is no control of the
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Govt. on the business transactions of companies. Entry or exit is blocked in a pure

monopoly and it is an undesirable market structure so the government makes policies
in such a way so that no company can gain a monopoly and each competitor has its
market share.
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A Growth Strategy is a plan of action to increase a business’s revenue and

market share by critically analyzing the industry one operates in, target market,
resources, and finances. It helps in making a firm’s position more dominant, stable,
)A
ready for market expansion and achievement of its overall direction and success.
The Ansoff Matrix summarizes four high-level business growth strategies

employed by companies:
●● Market Penetration: This strategy involves increasing market share in an

(c
existing market by lowering prices or using techniques like direct marketing to

create customer awareness of products or service offerings. E.g., Facebook

was launched in 2004 when MySpace ruled the roost. It started by focusing on
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a narrow target customer base, and then expanded gradually.
●● Market Development: This strategy is about entering a new market with
in
existing products. A new market can refer to a geographical expansion, a new
segment of customers, or a new channel to reach customers, such as adding
an online store to your physical location. Footwear firms like Nike, Reebok,
and Adidas continuously use market development to enter international
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markets for expansion.
●● Product Development: This strategy involves creating new products for
existing markets. It could mean differentiation in the existing product line or
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an entirely new product line. For example, Google started as a B2C company
offering a search engine. To earn revenue, it developed a new product,
AdWords, targeted at businesses that had to pay to advertise. It made sure it
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fit seamlessly with the user interface and ensured consumers were not put off
by the obvious advertising and continued using the search engine.
●● Diversification: The diversification growth strategy is the hardest and riskiest
strategy as it involves developing new products to sell to new unknown
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markets. The risks are high and so are the rewards. Companies can opt for
strategic partnerships & collaborations with established firms in that domain
to diversify into new markets and products to increase market share and
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revenues. For instance, Amazon’s retail dominance began in 1995 when
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consumers were not used to buying online. Amazon used the diversification
growth strategy to increase its market share by offering an improved customer
experience online and continues to expand in varied industries and bring
everything under one virtual roof.
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3.2.12 Risks, Returns & Rewards

Market risk is the risk associated with losses incurred in business due to
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unfavorable and uncontrollable movements that affect the environment as a whole in

which the business operates. They can cause a company’s revenues or profits to be
lower than what the owner had forecasted.
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Risks are an integral part of any business irrespective of size because economic
and social conditions are very unpredictable. It can’t be eliminated but mitigated to
a large extent through strategic planning, execution, and regular follow-up. Most
companies face preventable, internal, and external risks that can be managed through
acceptance, transfer, insurance, reduction, or elimination.
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When a risk becomes apparent, a well-prepared business can minimize the impact
on earnings, lost time, productivity, and negative impact on customers. Awareness
is the key here to save money and time while protecting the trust, reputation, and
)A
customer base you’ve worked so hard to achieve. Analyzing risk factors allows the
company to be prepared for contingencies the company may have to face in the future.
Strategies should be in place that can be quickly implemented to minimize the damage
caused by internal or external threats. It also helps in assessing which risks are worth
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preparing for and which can be taken care of later on.

There are 7 types of business risk a company should take into account:
Notes
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1. Economic Risk
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The economy is constantly fluctuating with the movements of the market, thereby
sometimes bringing positive changes and sometimes negative changes. We can’t
control the economy or the market but we can keep an eye on the trends and plan for
an economic downturn. Save as much money as possible to maintain a steady cash
nl
flow and operate within a lean budget with low overhead costs through all economic
cycles as a precautionary plan.
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2. Compliance Risk
Business owners have to adhere to a lot of compliance laws. Stay well versed in
applicable laws from national, state, and local agencies to minimize compliance risks.
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Non-compliance results in huge fines and penalties which depletes the cash reserves.
Join an industry organization, keep abreast with Govt. agency information and seek
assistance from consultants who specialize in compliance.
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3. Security and Fraud Risk
As more customers use online and mobile channels to share personal data to
make financial transactions, there is also a greater opportunity for hacking, leaking of
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sensitive data, fraud, and stealing money. Such an act impacts the trust and reputation
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of a company but also puts unnecessary financial liability on the firm for any data
breaches or fraud. Focus on security solutions, fraud detection tools, conduct due
diligence on your employees, and have full disclosure conversations with customers to
avoid any mishaps in the future.
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4. Financial Risk
This could involve bad debt from credit extended to customers, the company’s debt
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load, fluctuations in interest rates on loans taken, failure of an investment, etc. Keep
debt to a minimum by creating a plan that starts lowering debt load as soon as possible.
Start marketing your services to diversify your base and increase clients so the loss of
one won’t devastate your bottom line.
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5. Reputation Risk
In the age of social media, one unhappy customer, product failure, negative press
or lawsuit, or wrong tweet can adversely impact a company’s brand reputation. It can
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decrease your customer following and cause revenue to plummet. To avoid such an
irreversible debacle, regularly monitor what others are saying about the company online
and offline. Respond to all comments and help address any concerns immediately.
)A
6. Operational Risk
Operational risks are unexpected internal or external events that could cause
damage to the business. It could be natural disasters, technical problems, human
errors, strikes, etc. Such operational risks may seem trivial but can adversely impact
(c
the business in terms of money, time, and reputation. Address each of these potential
operational risks through training and a business continuity plan which establishes a
backup system or proactive measures to ensure operations aren’t affected.
7. Competition (or Comfort) Risk

Notes
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This business risk involves companies becoming complacent with their position
and stop innovating and improving. Increasing competition with an unwillingness
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to change may result in a loss of customers. A company must continually reassess
its performance, refine its strategy, maintain strong, interactive relationships with its
stakeholders and keep an eye on the competition by regularly researching its products
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and processes.
8. Strategic Risk
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Companies exposed to strategy risk can mitigate the potential for negative
consequences by creating and maintaining infrastructures that support high-risk
projects. A system established to control the financial hardship that occurs when a risky
venture fails often includes diversification of current projects, healthy cash flow, or the
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ability to finance new projects affordably, and a comprehensive process to review and
analyze potential ventures based on future ROI.
Returns on Business/ ROI
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A return on business, or financial return, or ROI is the money made or lost in a
business over some time. ROI can be determined by dividing net profit by total assets.
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So if your net profit is Rs. 100,000 and your total assets are Rs. 300,000, your ROI
would be .33 or 33%. A positive return means a profit and a negative return indicates a
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loss.
It helps identify past and potential financial returns. Entrepreneurs like to analyze
the ROI of a new project before committing to it because this measure indicates the
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value of an investment, how successful a venture will be, its financial returns, and
increased efficiency. Calculating a company’s potential or actual financial ROI involves
dividing the company’s annual income or profit by the amount of the original or current
investment.
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ROI is also used to describe opportunity cost or a return the investor gave up, to
invest in the company. If a business owner invests their money in the stock market, they
could expect to receive an annual return of 5% and would expect to see a similar, if not
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higher, ROI for their money invested in the company.
Smart companies use ROI to measure the success of short and long-term projects
because spring wisely and tracking ROI is the key to succeeding in the long run. If the
money generated from the project exceeds the amount spent, then a business could
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consider it an acceptable ROI.
A double-digit ROI is great for starters, but single-digit numbers are also good
enough in the beginning as long as they are positive. The company should aim to
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amplify and extend those. ROI from investment in assets will reflect in productivity and
marketing spend will show ROI in sales. Parameters to gauge positive ROI from search
engine optimization will vastly differ from ROI in new investments. Due diligence is
always a good idea before any investment. Big or small, analyze whether a particular
action will benefit your business or not. Without doing due diligence, you will encounter
(c
many rude awakenings.

ROI also has some limitations which have been mentioned below:
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1. A company’s cash flow is not directly related to ROI, so the true financial health
of the business may not always show using ROI alone. Depending solely on
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ROI to evaluate the financial health of a project only gives you an incomplete
understanding of finances and any decision based on it would be a disaster.
2. To calculate an accurate ROI, you need to know your expected future business
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expenses as well. If you don’t yet have accurate numbers or just variables, the
ROI may be inaccurate.
3. ROI only measures the tangible financial success of a project. It ignores
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intangible aspects of a project like employee satisfaction, employee retention,
relation-building, etc.
ROI differs from profit as the former deals with the money invested in the company
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and the return you realize on that money, while the former measures the financial
performance of the business. ROI is also different from the return on the owner’s equity
as only in sole proprietorships does equity equal the total investment or assets of the
business.
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You can use ROI to measure the performance of your pricing policies, inventory
investment, capital equipment investment, rate of earnings on total capital employed,
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invested capital, and proprietary equity and stock equity.
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Rewards from Business
Rewards from business are the intangible gains an entrepreneur obtains from
running his/her own business. They can’t be measured in numbers but are equally
important for the growth and culture of a company. Some rewards of running one’s
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own business are a sense of satisfaction, pride of building something from scratch,
giving livelihood to people, benefiting the society by launching your products, positive
feedback from clients, industry awards and recognition, etc.
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The rewards of owning a business are as follows:

●● Freedom and independence of being one’s boss. Establishing a work culture
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that is conducive to one’s ethics and making life-changing decisions. working

for yourself.
●● Personal fulfillment of owning and running a business and making products
that make customers happy. Earning respect from peers to take on such a
daunting task as running a business.
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●● Having the authority and responsibility to do things your way. But power is a
heady concoction and should be handled with care.
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●● The monetary return makes the risk worth it and helps reconfirm faith and
trust in our venture.
Break-even analysis helps new businesses in projecting income and expense

estimates for a year to determine whether the business will make enough sales revenue
to pay its expenses or not.
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A break-even forecast includes the following:

●● projected sales revenue

Notes
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●● fixed costs, such as rent and insurance
●● profit after deducting the direct cost of the product or service you provide (your
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gross profit), and
●● break-even point/revenue
If your company can bring in more than the amount of sales revenue you’ll need to
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meet your expenses, then your business stands a good chance of making money.
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Financial analysis of any business is the collection, evaluation, interpretation,
and presentation of financial data to assist in the day-to-day and futuristic decision-
making of the business. This analysis is useful for stakeholders like the management,
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shareholders, creditors, potential investors, tax authorities, auditors, etc to ascertain
the viability and profitability of the business. Financial Ratios provide a solid base for
understanding and interpreting the financial health of any business entity.
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Financial ratios in business represent mathematical relations or comparisons
between two single quantities and help make sense of the accounting information;
which aspects of the business are efficient and which are inefficient by comparing
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figures. Ratios compare the present conditions of the business to past performances
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and identify gains & weaknesses and strengths & shortcomings, to improve business
operations and increase revenue & profits. Financial ratios also help make comparisons
with competitors to see where the business stands in the market share.
Financial ratios come from two financial statements of the business:

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1. The balance sheet shows the business’s net value and includes assets, liabilities,
debt, and equity.
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2. The income statement includes the entire inflow and outflow of the business. It
shows how the business is utilizing the assets and working off the liabilities.
Following ratios are used in business to ascertain the profitability and other
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aspects to consider it a success:

1. The liquidity ratio helps in measuring the cash sufficiency of a business to pay off its
short-term liabilities. A liquidity ratio of 2 or more is desirable as it indicates that the
company is in a good position to pay its creditors. Some commonly used liquidity
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ratios are:
Name Formula Used for

)A
Current Ratio Current Assets / Comparing current assets like cash,

Current Liabilities inventory, accounts receivable, etc. to current
liabilities of the business
To check if the company will be able to pay
its debts which are due in the next 12 months
(c
Quick Ratio/ Quick Assets/ Uses quick assets which are easy to liquidate
Acid Test Ratio Current Liabilities against the current liabilities

Cash Ratio Cash + Marketable Considers only cash and marketable

Notes
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Securities/ Current securities which are immediately available
Liabilities to pay their debts.
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Business is financially sound if it has a cash
ratio of 1 or more.
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2. The profitability ratio is used to determine how well the business is generating
profits from its operations. Profit is the amount left from income earned after deducting
all related expenses. Some commonly used profitability ratios are:
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Gross Revenue (sales income) – Higher gross profit margin means efficient
Profit Cost of Goods Sold (raw business operation
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Margin material, labor, and other Gross Profit ratio is used to compare the past
production expenses) business performance and performance
/Revenue against its competitors
Operating Gross Profits- Operating Includes more expenses and is used to
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Margin Expense/ Revenue ascertain company’s profitability more
efficiently
Profit
Margin
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Total Revenue - Total
Expenses /Revenue
Helps investors to know how much profit
is generated from the total revenue of the
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business
Earnings Net Income – Preferred EPS is important for shareholders as it helps
per Share Dividend/Weighted in determining the return on investment
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(EPS) Av e r a g e O u t s t a n d i n g High EPS = High stock price of the company

Shares
3. The leverage ratio measures the utilization of credit taken by the business. It helps
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to ascertain the financial stability of the business by analyzing the total debt of the
company.

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Debt to Equity Total Debt (short High debt Equity ratio indicates that
Ratio/ Gearing term & long term business is dependent on debts for
Ratio debt) /Total Equity operation
Used by stakeholders to understand the
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company’s financial leverage

Debt to Asset Total Debt/Total To determine if the business, upon winding
Ratio Asset up, will be able to pay its debts or not
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Debt to asset ratio less than 1 is desirable

Debt Ratio/ Total Liabilities/ Determines a company’s liabilities
Solvency Ratio Total Asset A high ratio indicates potential solvency
issues
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Interest Coverage Earnings before Check if the company is in a position to

Notes
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Ratio interest and taxes/ meet its interest payment obligations
Interest Expense The ratio should be higher
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4. Activity ratio indicates the return generated from the company’s assets using the
sales, cost, and asset data. This ratio helps in identifying effective utilization of the
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assets and facilitates efficient management:

Receivable Annual Sales Credit/ Measures how soon the firms collect their
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Ratio (Accounts Receivable receivables
The ratio should be high
Inventory Cost of Goods Sold/ Reveals the rate at which the company’s
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Turnover Ratio Average Inventory inventory is converted to liquid assets
Asset Turnover Net Revenue/ Assets Value of revenue is measured as a
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Ratio percentage against the value of an
investment
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Financial ratios are like a preview of a movie, highlighting the important aspects of it.
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In the same way, financial ratios highlight important points of one’s business to different
stakeholders. To make the most of financial ratios, it’s best to look at trends, track and
compare the ratios over time, to have the most accurate position of the business. Doing
that early and often will help to predict the risks and handle them accordingly.
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1. It is considered as a guiding tool for the entrepreneur and the entire
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business__________.
2. ____________ It is considered as the outline of the business or summary of the
business that highlighting major objectives of the company.
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3. A ________ determines the positioning of the long-term placing of the planning.

4. These type of planning lead to the layout that categories the short period and
management activities in simplest and level based classification________.
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5. This type of risk will mitigate the potential for negative consequences by creating and
maintaining the infrastructure that support the high-risk project_________.
Summary
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●● The business plan help in finding solution to the business organisation and help in
achieving the objective of the business organisation in a better manner.
●● The business plan will include executive summary and company profile and other
related aspects of the business.
(c
●● An elevator pitch is being created by delivering it in the right way may take some
time.

●● Different types of risk are involved that could include economic risk, compliance
Notes
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risk, financial risk, operational risk and competition risk.
●● Financial analysis of any business could include collection and evaluation of the
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financial data to assist in the day-to-day and futuristic decision-making of the
business.
Activity
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1. Explain the role of marketing plans and for what reason the marketing plans are used
in the business plans.
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2. What are the common pitfalls to be avoided while preparing a business plan?

1. What are the different components of a business plan?
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2. Why business plan tailored according to specific audience?
3. What are different types of business plan?
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4. What are the different types of entrepreneurship?
5. Enlisted the phone types of financial ratios included in the business?
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6. What is the difference between inventory turnover ratio and asset turnover ratio
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Glossary
1. Synopsis- it includes the mission based of purposive statement about the company
or the business.
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2. Skimming- it is the initial stage that the analyst has to look for the executive summary
of a business plan.
3. Elevator pitch- it is a technique to grab the attention of your investors or anyone
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towards yourself and then you start giving a business plan presentation.
Further readings
1. Book- the dynamic business plan.
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Author- Morgan Thomson.
Answer
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1. Business plan
2. Executive summary
3. Strategic plan
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4. Tactical.
5. Strategic risk
(c

Unit - 3.3: Role of Government Institutions

Notes
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Objective
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●● To evaluate the role of government in promoting entrepreneurship.
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●● To identify different institutions that are rendering support services for
entrepreneurship.
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3.3.1 Role of Government in Promoting Entrepreneurship
The government plays a critical role in fostering entrepreneurship. To balance
regional development, the government develops industries in rural and backward
areas by providing various amenities. The government has set up a program to
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assist entrepreneurs in the fields of technology, finance, market development, and
entrepreneurial growth to help them accelerate and embrace changes in industrial
development. To achieve this goal, the federal and state governments established
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several institutions.
A notable conclusion of this research was that job creation in several countries
was driven by small, independently held firms rather than giant corporations. It was
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suggested that government policy should rely on indirect rather than direct techniques,
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with a larger emphasis on small businesses’ participation.
A. The small industries development organization

The Department of SSI and Auxiliary and Rural Industry’s Small Industries
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Development Organization (SIDO) is a subordinate office. It is for defining, planning,

and evaluating approaches and initiatives for the progress and enhancement of limited-
scope projects.
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The SIDO’s top official is the Development Commissioner. Various directors and
consultants assist him in advancing and executing various projects such as executive
preparation, consultancy, mechanical examination, opportunities for the expansion of
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various types of small-scale companies, modern residences, and so on.

The main function of SIDO are:
●● Coordination
To promote a public approach to small-scale industry development. Coordination of
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several state governments’ structures and projects. Keeping in touch with the relevant
Central Ministries, Planning Commission, State Governments, Financial Institutions,
and so on. To plan and coordinate projects relating to the advancement of mechanical
)A
bequests.
●● Industrial development
To store items for small-scale firms to create. To collect information on imported
shopper items and, after that, to empower the establishing of modern units to make
(c
these items by providing facilitated assistance. To provide necessary assistance for the
improvement of subordinate units, and To encourage small businesses to participate

in the Government Stores Purchase Program by providing them with critical direction,
Notes
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market guidance, and assistance.
●● Extension
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To develop arrangements with expert administrations to work on specialized
interaction, creation planning, hardware selection, and processing plant layout and
design. To provide consulting and planning services to strengthen the competitive
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functions of small businesses. To provide limited-scope firms with advertising
assistance to promote their products effectively, and To assist small-scale enterprises
with monetary analysis and data.
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SIDO assists in the provision of specialized and administrative inputs, the
preparation of project reports, and the training of business employees involved in
limited-scope enterprises. It isn’t just a local connection with financial and planning
organizations, the government, and other offices for the advancement and development
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of tiny mechanical units. It tries to advance the business by utilizing the planning and
administrative capabilities that have been developed.
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B. Management Development Institution
●● A platform for sharing information and experience to help senior managers
function as creative and effective leaders;
●● r
A source of guidance and assistance with organization development for
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institutions of all sorts in Seychelles.
●● A platform to promote enhanced public-sector services, as well as a research
and new thinking center for management practice.
●● Though the goal of any Management Development Institute (MDI) is to enable
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capacity development in the public sector, the institution has expanded

its management training programs to include all aspects of the economy to
assist the government in maintaining a strong economy. This is exemplified
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by its affiliation with SIBA (Seychelles International Business Authority), which

provides international training on offshore services and whose key business
activities include:
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●● A one-stop-shop for both licensing and regulation of the primary offshore

●● International Business Companies, International Trusts, Protected Cell
Companies, Companies Special License, and Limited Partnerships are all
registered with SIBA.
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●● SIBA also hosts and disseminates educational information for other offshore
entities/services offered by the local jurisdiction, such as Mutual Funds,
Offshore Trusts, and Offshore Companies.
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C. The Entrepreneurship Development Institute

1. To provide a variety of self-employment options around the country.
2. Professional training is being used to increase the supply of dynamic
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entrepreneurs.
3. Increasing the country’s entrepreneurial supply.

4. Encourage the growth of microbusinesses in rural areas.

Notes
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5. Instilling an entrepreneurial spirit in future generations.
6. Developing intrapreneurs or entrepreneurial managers to promote company
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excellence.
7. To create a support system that would make it easier for existing and aspiring
entrepreneurs to get started and maintain their businesses.
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D. National Institution of Entrepreneurship and Small Business Development
It is a coordinating and supervisory body for the activities of numerous institutions
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and agencies involved in entrepreneurship development, notably in the small-scale
industry sector.
The institute’s key goals are as follows:
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1. To hasten the process of entrepreneurial growth across the country and all
socioeconomic groups.
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2. To support institutions and agencies in implementing entrepreneurship
development programs.
3. To provide a standardized method for selecting, training, supporting, and
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sustaining potential entrepreneurs so that they can successfully start and run
their businesses.
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4. By organizing documentation and research work important to entrepreneurship
development, providing information support to trainers, promoters, and
entrepreneurs.
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5. To establish functional forums for the integration and exchange of information

that will aid policy creation and revision at various levels.
The Institute’s major functions are as follows:
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1. Improving training, strategy, and methodology.

2. Forming a scientific selection approach)
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3. Standardizing a model syllabus for distinct groups of people.

4. Creating training materials, manuals, and other resources.
5. Aiding and abetting 9th parties involved in entrepreneurship development.
6. Organizing programs for promoters, trainers, and entrepreneurs that are
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typically not offered by other organizations.

7. Organizing all actions that contribute to the country’s entrepreneurial culture
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development.
8. Publishing books to promote entrepreneurship and the growth of small
businesses.
E. National Institute of Small Industries Extension Training

(c
Its main responsibilities include:
1. providing training to small business owners;

2. conducting research programs related to the development of small-scale

Notes
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industries; and
3. entering into technical assistance agreements with international or other
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organizations for the provision of services related to the development of small-
scale industries.
Government’s Role in Entrepreneurship Promotion in different ways
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From the Focused Group Discussions with budding entrepreneurs, the following
conclusions were drawn:
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1. Establish a just legal system: The government should establish a just legal system
with strong property rights and contract law, as well as a well-organized bankruptcy
system that reassures lenders and allows failing entrepreneurs to recover.
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2. Streamline business registration: The average time it takes to start a small
business varies a lot from country to country. New Zealand takes the lead, taking
an average of half a day and requiring only one formal procedure to register a firm.
It takes 114 days and seventeen procedures in Venezuela—seventeen chances for
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delays and corruption. The United States is ranked twenty-first, with an average of
five days and six operations. However, in some countries, it takes years to register
a business since corruption pervades every sector, and the same is true in Kashmir,
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where obtaining authorization to create a business is fraught with difficulties.
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3. Encourage a varied funding universe: Entrepreneurship gurus suggest that having
multiple money streams is more significant than having one large pipeline. New
financial sources, such as equity crowd fundraising and peer-to-peer lending, can
be encouraged by the government. The 2012 JOBS Act, for example, included new
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exemptions that allowed small enterprises to raise money through crowd fundraising.
4. Enforce strong intellectual property rules: Both the government and private
organizations must enforce strong intellectual property laws to allow entrepreneurs to
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launch their businesses. Consider the following scenario: If IBM hadn’t licensed the
upstart company’s operating system—a deal made feasible by intellectual property
law Microsoft would never have prospered.
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5. De-stigmatize failure in business: Countries that do so have a greater rate of new

firm formation. According to the European Commission’s Competitiveness Council,
“failed entrepreneurs are a valuable resource.” Second-time start-ups have a lower
failure rate due to experience. Entrepreneurs should be supported and given a
second opportunity.
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6. Invest in education: Development experts agree that government investment in

education yields the greatest return on investment. More than a third of America’s
universities are now collaborating with small business incubators to launch new
)A
ventures. Furthermore, we should teach entrepreneurship to our high school pupils.

7. Simplify tax laws: Countries with attractive tax rates, simplified procedures, and
entrepreneurial support will attract a large number of new businesses. As a result, it
is critical to simplify tax regulations so that individuals can start their businesses.
(c
Entrepreneurship helps a country’s economic development in a variety of ways. It

is an important factor in product development and innovation, as well as the generation

of jobs. Another key factor to note is that, in some markets, entrepreneurship-driven

Notes
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economic growth is more inclusive and hence. Governments at all levels, both at the
national and state levels, have been taking steps to strengthen the entrepreneurial
environment as they recognize the benefits that entrepreneurship provides to the
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country’s economic growth.
One of the reasons for the decline in employment chances in the country is the
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economic recession. Youth unemployment is on the rise, and entrepreneurship is
playing a vital role in job creation in this area. An entrepreneur not only creates self-
employment, but also a framework for modest to large-scale employment. As these
businesses grow, so do the number of people who can work for them. Many start-ups in
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some countries that began as home-based businesses have grown to employ hundreds
of people. A company or entrepreneur with a novel idea has the potential to create jobs
and hence stimulate the economy.
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Apart from jobs, another area where entrepreneurship is fostering growth is
modernization in regional areas or Tier-II cities around the country. Entrepreneurs are
establishing enterprises in Tier-II cities due to financial constraints and competitiveness
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in metro areas. Some state governments provide incentives for SME establishment in
Tier II and III cities. The expansion of enterprises in these smaller towns has resulted
in several public advantages in the area, such as improved transportation, health
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care, and education, all of which contribute to the country’s balanced development.
As a result of cheaper prices and more inexpensive expertise, more entrepreneurs
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are establishing bases in their hometowns, drawing investor attention and incubation
centers to these areas.
Today, the entrepreneurial-driven economy is the answer to this requirement since

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it promotes innovation in the creation of goods and services, resulting in the availability
of goods at lower prices, making them more accessible. Entrepreneurs seek out new
opportunities, make efficient use of resources, and develop new products and services.
These are for domestic consumption, therefore they will increase national income and,
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in turn, lessen our reliance on imports, making the economy stronger.

Entrepreneurs, Without a question, are change and innovation accelerators.
Entrepreneurship is born out of a desire to fill a market need, and it is this need that
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puts the entire development process in motion. Our country’s entrepreneurial expansion
has resulted in a slew of economic benefits, including new firms, jobs, and products
and services. The government must now play a role in promoting this development
by providing opportunities for not just education aimed at developing entrepreneurial
abilities, but also by enacting favorable plans and policies to boost the country’s
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entrepreneurial ecosystem.
3.3.2 - Institutions Rendering Support for Promoting

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Entrepreneurship
How can government institutions support startups and save the economy?
Entrepreneurs and the businesses they create are critical to the revitalization
(c
of our economy, which is why policymakers must take steps to safeguard them.
Without companies like Zoom, WhatsApp, and Slack, the world today would most
likely be less productive, if not lonely. They can stay in touch with family, friends, and

coworkers despite being cooped up at home thanks to the technology developed by

Notes
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these companies, all of which were launched immediately after the Great Recession
of 2008. Legislators can continue to function during the pandemic, and the global
economy is slogging ahead, although slowly. As evidenced by all of this, entrepreneurs
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and the firms they build are important to the revival of our economies, which is why
policymakers must take efforts to protect them. The current economic crisis has put
start-ups and start-up ecosystems all over the world in jeopardy. They’ve run out of
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funds and are waiting for venture financing to dry up. Because COVID-19 has left entire
industries unworkable, teams working on cutting-edge technology are being disbanded,
and client demand is dwindling. To avoid a disaster, decisive policy action is required;
O
61 percent of start-ups around the world are banking on it. If they don’t already believe
an existing policy to be critical to their firm (45 percent), they expect one to be launched
very soon (16 percent ). Government leaders: Entrepreneurs have put far too much
time and money into their start-up ecosystem to see it be destroyed by COVID-19.
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Don’t kill start-ups and scale-ups; instead, pay attention to their demands and take
decisive action.
Here are the top four policy actions they want to take right now, in order of
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importance.
1. Direct grants and zero-interest loan

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Right now, cash is the most pressing worry for start-ups. Grants are regarded as
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the most beneficial policy vehicle (29 percent), followed by loans (12 percent ). The
funds are running out. A large percentage of start-ups are in the “red zone,” with 41%
having three months or less of capital runway remaining. Many small start-ups live on
only a few months’ worth of cash at a time - 29 percent did before the epidemic - but the
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crisis has pushed 40 percent more into this dangerous scenario since December. Even
start-ups that have raised Series A, B, or later rounds are in jeopardy, with 34% having
fewer than six months to go.
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In Japan, the government is assisting businesses that have lost more than half of
their yearly revenues due to the coronavirus with zero-interest unsecured loans. The
$500 million Business Support Fund in Australia distributes $10,000 grants. Other
measures are aimed at lowering overhead costs and allowing companies to prolong
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their runway. The United States, for example, gave a three-month postponement on
tax payments, while South Korea reduced business income taxes by up to 60%, and
Bahrain waived rent for tenants in state-owned homes for three months.
2. Access to venture capital investment

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If history is any guide, venture capital activity in 2020 will likely decline. This
creates a problem for the 18% of start-ups that want capital to expand their investment.
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Deals are being abandoned by investors. Term sheets were pulled by investors in over
20% of start-ups that had them before the epidemic. Meanwhile, 53% of start-ups are
having trouble raising funds or are dealing with an inattentive lead investor. Less than a
third of start-ups (28%) have progressed normally or have already acquired funding.
To avoid inefficiencies or unforeseen consequences, the government should

(c
use the same mechanism as the private market to infuse venture capital. Taiwan, for
example, provides six to twelve months of capital in exchange for preferred ownership

to start-ups. To link Malaysian start-ups with eligible investors, the Malaysia Digital
Notes
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Economy Corporation (MDEC) collaborated with a networking platform and a venture
capital business. Over 50 investors applied for the program, which ended in April.
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3. Employment support schemes
COVID-19 has had an impact on workers all across the world. The US shed
a record 20.5 million jobs in April, the fastest and steepest decrease since the
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government began keeping track of the data. Given these circumstances, it’s no
surprise that rapid support to protect employees is one of the top concerns for 17
percent of start-ups. The number of layoffs is increasing. According to our data, nearly
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three out of every four start-ups have had to lay off people, with 39 percent needing
to fire 20 percent or more of their employees and two-thirds firing 60 percent or more
of their full-time employees. North America has the highest percentage of corporations
cutting jobs (84%) followed by Europe (67%) and Asia (6%). (59 percent ).
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Employers in Germany can use the Kurzarbeit (shorter work-time) scheme to
part-time furlough staff. Workers agree to a decrease in working hours and pay in
exchange for the government compensating up to 67 percent of missed wages for up to
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a year. The program has been praised for its role in Germany’s quick recovery from the
financial crisis of 2008-09. In Austria, a comparable policy reimburses up to 90% of lost
wages.
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4. Promoting customer demand
One out of every ten entrepreneurs believes that demand-creation and increase
programs are the most beneficial policy responses for their company. It makes sense,
given that consumer spending is down, with long-term consequences, according to
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researchers. Three out of every four new businesses are in industries that have been
significantly impacted by the COVID-19 situation. Although the majority of businesses
have seen a slight drop in sales, a significant minority of them (16%) have lost more
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than 80%. Hire start-ups to assist agencies with their problems. Creative Solutions
Canada (ISC), for example, assists in the funding of innovative start-ups by identifying
the needs of government departments and challenging entrepreneurs to answer them.
It compensates businesses for their services while also allowing them to put their
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prototypes to the test in a real-world setting.
Benefits to startups by the Indian government.

In India, startups are getting increasingly popular. Startup India was launched
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and backed by the government, led by Prime Minister Narendra Modi. The Startup
India project aims to build a thriving startup environment in India. Its mission is to
help entrepreneurs build their businesses by harnessing innovation and technology.
)A
Entrepreneurs who start firms are given numerous benefits to promote growth and help
the Indian economy. The Startup India initiative provides many opportunities to startups
that want to start their firm in India.
Eligibility for registration under startup India

(c
As per the Startup India Action Plan, the following conditions must be completed to
be recognized as a startup:

●● It can be incorporated or registered in India for a period of up to ten years

Notes
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from the date of incorporation.
●● Is the business a private limited company, a partnership firm, or a limited
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liability partnership
●● For any of the financial years since incorporation/registration, the yearly
turnover has not exceeded Rs. 100 crore.
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●● Is it a scalable business model with a strong potential for job creation
or wealth creation, or is it working toward innovation, development, or
enhancement of products, processes, or services?
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●● It is vital to emphasize that an entity created through the division or
reconstruction of an existing firm is not a ‘Startup.’ Also, an entity will no
longer be referred to as a startup if it:
●● ten years from the date of incorporation/registration, or ten years from the
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date of its incorporation/registration, whichever comes first.
●● Generating revenue of much more over Rs. 100 crore in the previous year.
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Few major benefits include:
1. Simple process
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The Indian government has launched a smartphone app and a website to make it
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easier for entrepreneurs to register their businesses. Anybody interested in forming a
company can use the website to fill out using a simple application and submit papers.
The entire process is conducted fully online.
2. Cost reductions
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The government also publishes a list of patent and trademark facilitators. They will
offer high-quality Intellectual Property Rights services, such as patent examinations that
are completed quickly and at a lesser cost. All facilitator fees will be covered by the
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government, leaving just the statutory fees to be covered by the startup. The cost of
filing patents will be reduced by 80% for them.
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3. Easy access to fund

The government has established a fund of 10,000 crore rupees to provide venture
financing to companies. To encourage banks and other financial institutions to provide
venture capital, the government is also issuing guarantees to lenders.
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4. Three-year tax holiday

Startups will be free from paying income tax for three years if they obtain an Inter-
)A
Ministerial Board certification (IMB).
5. Tenders can be applied for.

Government tenders are open to startups. They are exempt from the “previous
experience/turnover” requirements that apply to regular businesses responding to
(c
government tenders.

6. Research and development facilities

Notes
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Seven additional Research Parks will be established to provide facilities for R and
D startups.
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7. There are no time-consuming regulations to comply with.
To save time and money, certain compliances have been streamlined for startups.
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Startups will be able to self-certify their adherence to nine labor rules and three
environmental rules (through the Startup mobile app).
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8. Investors can save money on taxes.
Capital gains taxes will not apply to anyone who invests their profits in government-
run venture funds. This will help startups attract additional investors.
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9. Select an investor.
Startups will be allowed to choose between VCs based on this notion, enabling
them to use their backers.
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10. Exit is simple.
In the event of an exit, a company can close its doors within 90 days of filing a
winding-up petition. r
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11. Get to know other business owners.
The government has proposed holding two startup fests each year, one on
a national level and one on an international level, to bring together the numerous
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stakeholders of a startup. This will open up a lot of doors for networking.
The government is very supportive of new businesses. They reap enormous

benefits, which is why more people are starting businesses.
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3.3.3 Institution set up by Central and State Government

The central government, as well as state governments, have established several
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organizations for the promotion of industries, whose choices and functions have an
impact on the country’s, region’s, and state’s industrial activity. This article discusses
the role and functions of various institutions.
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Central and state government organizations and their functions:

The Indian government has established the following institutions/organizations/
corporations/boards to study various areas of promoting and developing industry. They
)A
develop policies, coordinate activities, and track the advancement of industrial items
that are under their jurisdiction.
●● Khadi and village industries commission

●● Central silk boards
(c
●● Coir board
●● All India power looms board

●● Jute board
Notes
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All of these Commissions/Boards promote exclusively the industries that fall under
their scope, as the names of the Commissions/Boards indicate. These corporations
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set policies and programs for the development of products and industries that fall
under their jurisdiction, as well as coordinate and oversee the advancement of these
industries.
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Aside from these commissions and boards, many other federal agencies and
institutions provide services and assistance to businesses in their respective disciplines.
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1. National small industries corporation ltd:
The National Small Industries Corporation is abbreviated as NSIC. The National
Small Industries Corporation (NSIC) is a government of India organization that strives to
upgrade, assist, and promote India’s micro, small, and medium industries. The National
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Small Industries Corporation was established in 1955. Since its creation, NSIC has
been improving new and existing small businesses in the country and overseas. It is
also in charge of the company’s finances, marketing, raw material distribution plans,
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and technical support programs. The National Small Industries Corporation Limited
(NSIC) strives to support the growth of a variety of micro, medium, and small-scale
businesses, as well as the sale of projects and goods (Increasing export). Laghu Udyog
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Nigam runs a flawless operation thanks to its network of branch offices and technical
service centers all over the country. Aside from these responsibilities, NSIC primarily
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focuses on the training and incubation of industry entrepreneurs. NSIC offers a variety
of services to meet the demands of the business, personnel, and industry enterprise
sectors.
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2. Bureau of Indian Standards (BIS) Parwanoo, Solan

Since 1947, the country’s official standards agency, the Bureau of Indian Standards
(BIS), has effectively promoted and nurtured the standards movement. In 2017, the
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BIS Act was reorganized. It assumed the staff, assets, liabilities, and functions of
the erstwhile Indian Standards Institution (ISI), but with a broader scope and greater
authority, to facilitate the smooth progression of standardization, branding, and quality
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assurance operations, as well as matters linked to or ancillary to them. BIS is involved

in a variety of initiatives to serve the interests of both consumers and the industry.
3. Registrar of Companies
The Registrar of Companies (ROC) is an office within the Ministry of Corporate
m
Affairs (MCA), which is responsible for company and limited liability partnership
administration in India. In all of the major states/UTs, there are currently 25 Registrars
of Companies (ROCs). The Registrar of Companies also certifies that LLPs (Limited
)A
Liability Partnerships) comply with the Limited Liability Partnership Act of 2008. The
Registrar of Firms maintains a registry of records about companies that are registered
with them and makes this information available to the general public for a fee. With
the support of Regional Directors, the Central Government maintains administrative
control over the Registrar of Companies. There are currently seven Regional Directors
(c
overseeing the functioning of ROCs in their respective regions. The function of ROC are
as follows:

●● The ROC is responsible for the registration (also known as incorporation) of a

Notes
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company in the country.
●● It oversees the regulation and reporting of corporations, their shareholders,
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and their directors, as well as the administration of government reporting on a
variety of issues, including the annual submission of several documents.
●● The Registrar of Companies is critical to the development and facilitation of
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business culture.
●● Most crucially, the Registrar of Companies has the authority to file a petition
for a company’s winding up.
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●● Every company in the country needs the ROC’s clearance before it can start
operating. The ROC issues an incorporation certificate, which is indisputable
proof of a company’s existence. A corporation cannot cease to exist once it
has been incorporated unless its name is taken off the register of companies.
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●● It’s worth noting that, among other things, the Registrar of Companies has the
authority to request more information from any company. With the permission
of the court, it might inspect its premises and confiscate its records of
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accounts.
4. Food and nutrition border department of food, ministry of agriculture.
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The Food & Nutrition Board (FNB), established in 1964, is a national affiliated
body of the Ministry of Women & Child Development. In 1993, the FNB was transferred
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from the Ministry of Food to the Ministry of Women and Child Development (then the
Department of WCD). Nutrition is at the heart of good health and happiness. Nutrition
is inextricably related to the development of human resources, productivity, and,
eventually, national progress. Malnutrition is a complicated issue. It is both the source
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and the impact of poverty and illness, with a cyclical, intergenerational pattern. The
Food and Nutrition Board is made up of a technical wing at the federal level, four
regional offices and quality control laboratories in Delhi, Mumbai, Kolkata, and Chennai,
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and 43 Community Food and Nutrition Extension Units (CFNEUs) spread across 29
states and territories.
The Food and Nutrition Board’s activities include:

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●● Nutritional education and training, both for the general public and ICDS staff,
are essential.
●● Campaigns to raise public awareness about nutrition,
●● Material for nutrition education and training is being developed, produced, and
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distributed.
●● Training in Fruit and Vegetable Preservation and Nutrition on a Small Scale,
)A
●● Development and Promotion of Nutritious Foods that are readily available in

the community
●● Food Analysis and Standardization is a term used to describe the process of
analyzing and standard
●● Action should be taken in regards to the National Nutrition Policy.
(c

Goals and roles

Notes
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A strong and dynamic food processing sector is critical for reducing perishable
agricultural produce wastage, improving shelf life of food products, ensuring value
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addition to agricultural produce, diversifying and commercializing agriculture, creating
jobs, increasing farmer income, and creating surplus for agro-processed food export. All
segments of the economy, including the private, public, and cooperative sectors, have
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defined roles to play in the era of economic liberalization, and the Ministry encourages
their active engagement.
5. Department of personnel and training
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The Department of Personnel and Training has two functions. It serves as the
Government’s policymaker and watchdog, ensuring that all Ministries/Departments
adhere to certain agreed standards and norms in the recruitment, regulation of service
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conditions, posting/transfers, and deputation of workers, among other things. It
accomplishes this by issuing guidelines for all Ministries/Departments and overseeing
their implementation. In addition, it provides people management advice to all Central
Government organizations. On a much more essential stage, the Department is in
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charge of controlling the cadres of the IAS as well as the three Administrative Services
for the General Assembly. The Department also runs the Central Staffing Scheme,
under which suitable officers from the All India Services and Group ‘A’ Central Services
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are chosen and subsequently deputized to postings at the post of Deputy Secretary and
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Joint Secretary.
6. HP small industries development corporation

A separate company called the Small Industries Development Corporation has
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been established in many state governments to promote small-scale industries. They

engage in a variety of actions to promote small-scale industries. These Corporations
assist small-scale industries (SSI) in a variety of methods, from the installation stage
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through the start of production. In a nutshell, they provide infrastructure for small
businesses. Many backward areas in various states have been developed thanks to
the aid offered by the Small Industries Development Corporation. As a result, the Small
Industries Development Corporation has been instrumental in spreading industrial
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activity across various states.
●● Small Industries Development Corporation’s major goal is to promote the

growth of small-scale industries.
●● One of Small Industries Development Corporation’s key goals is to provide
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infrastructures such as roads, drainage, electricity, and water delivery.

●● Promote the building of industrial estates that will provide all critical
infrastructure for industrial buildings of all dimensions.
)A
●● To provide entrepreneurs with technical assistance through training facilities.

●● Establishment of industrial training colleges to promote skilled workers.
●● Industrial Estates and Industrial Areas should be planned and developed.
●● Medium and large units’ equity participation
(c

7. Khadi & village industries board

Notes
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It is a statutory body established by the Government of India in April 1957 (during
the second five-year plan) (as per an RTI) under the ‘Khadi and Village Industries
in
Commission Act of 1956’. It is the apex body for khadi and village industries in India,
reporting to the Ministry of Micro, Small, and Medium Enterprises. Its goal is to “plan,
develop, facilitate, coordinate, and help in the establishment and development of khadi
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and village businesses in rural parts of the country, in collaboration with other rural
development organizations as needed.”
The functions and duties of the KVIB
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A. Planning, organizing, and executing initiatives for the advancement of Khadi and
Village Industries are among the Board’s general functions.
B. Without limiting the generality of the preceding provision, the Board may take such
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actions as it deems appropriate
●● to promote, encourage, and assist in the development of Khadi and Village
Industries, as well as to carry on trade or business in the products of such
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industries;
●● to employ people who have worked in the Khadi and Village Industries
professionally.
●●
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to employ people who have worked professionally in the Khadi and Village
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Industries; and
●● to provide loans to individuals, societies, and institutions engaged in Khadi
and Village Industries;
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●● to encourage the formation of co-operative societies in Khadi and Village

Industries;
●● to establish training institutes to give the required skills and knowledge for the
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Khadi and Village Industries to thrive;

●● to manufacture tools and implements and arrange for their supply to
individuals, societies, and institutions engaged in Khadi and Village Industries;
●● to promote and research to enhance the quality and commercial viability of
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Khadi and Village Industries products;

●● to gather and disseminate data on Khadi and Village Industries from the
appropriate person or persons.
●● to carry out any other task that may be assigned to them.
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1. The________ is defining an planning different approaches and taking initiatives for
)A
the progress and enhancement of limited scope project.

2. The ____________ is an institution that helps in coordinating and supervising the body
for the activities of numerous institutions and agencies involved in entrepreneurship
development.
(c
3. The institutions being set up by the government provide___________ and

development activities to the small scale business.

Summary
Notes
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●● The small industries development organisation perform the role of coordination,
industrial development and extension of the small business.
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●● The management development institutions providing a platform for sharing
information and experience to help senior managers function as creative and
effective leaders.
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●● The government is encouraging the small business organisation to expand their
business by providing zero interest loan.
●● There are major benefits of registering the startup business that could include cost
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reductions and easy access of funds.
Activity
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1. If you want to set up a small business or industry in the market what could be e the
different objective of setting a business in the market?
2. What are the different government institutions that are providing different benefits to
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the small scale business?
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1. Explain small industries development organisation and its functions?
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2. What is government role in entrepreneurship promotion in different ways?
3. What are the different institutions that are rendering support for promoting
entrepreneurship?
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4. What are the different institutions set up by the central and state government for
developing small business organisations?
Glossary
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1. Harnessing- it refers to motivating Innovation and technology and building the

business organisation in the market.
2. Intellectual property rights- it refers to protecting the different intellectual property
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such as copyright and trademark from being copied or used by another business?
3. Food and nutrition board- it is a board setup to examine the quality of the product
manufactured by the business organisation.
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Further readings
1. Book- entrepreneurship management
)A
Author- Babar Khan
Answer
1. Small industry development organisation.
2. National institution of entrepreneurship and small business development.
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3. Training.

Unit - 3.4: The Importance of Team

Notes
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Objective
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●● To determine the importance of teamwork in a start-up business
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●● Evaluating various reasons for teamwork failure.
●● Determining various ways of building teamwork.
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3.4.1 Importance of Teamwork in a Startup
3.4.1.1: Why is teamwork important?
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Without the people that work behind the scenes, a company would be nothing.
While the entrepreneur may have lofty ambitions, it is ultimately the team with
whom he or she may achieve their objectives. Hiring the proper team is crucial for
any organization, but especially for a startup, because the team is responsible for
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understanding and carrying out the founder’s vision. Here are some reasons why the
core team is extremely important for any startup:
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1. One can’t realize the vision without their team, because the team is ultimately
responsible for breaking down the vision into short team goals and ensuring that
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the targets are met, thus playing a critical role in making their vision a reality.
How well and rapidly businesses can develop and accomplish milestones
depends on the quality of the team’s information, skills, competency, attitude,
and potential. Also, because most startups face a lack of resources and time,
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team members should be willing to multitask and wear numerous hats as

needed, allowing the entrepreneur to focus on the bigger picture and guide the
ship in the proper direction.
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2. An association’s way of life is a blend of the normal character, convictions, and

upsides of the establishing group, including the business person. Along these
lines, the way of life of any startup is vigorously influenced by the qualities and
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convictions of the center group. Even though building the way of life is anything
but an overnight errand and should be worked upon over the long haul, the
center group is instrumental in characterizing it and pervading it down the
progression. They fill in as crucial impetuses in proliferating the qualities that
one’s organization represents. Since it has an immediate bearing on the lead
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of their representatives and how they are seen outside, it is significant that the
‘social attack’ of the center colleagues be evaluated before they are employed
to guarantee they spread the qualities that may represent and have confidence
)A
in and to stay away from any struggles or conflicts whatsoever later stage.
3. By complementing one other’s talents and capabilities, including their, the
correct team composition will create synergies to their endeavor. While someone
might be a creative person, having a hardcore technical person on the team or
vice versa for any tech startup will assist business because a startup requires
(c
a diverse set of skills. They need people who can comprehend and effectively
manage various elements of a business, and this can only be accomplished if

they have personnel with a variety of skill sets who can collaborate to achieve
Notes
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the startup’s larger objectives.
4. VCs are said to invest in a company based on not only the business plans
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but also the core team because they understand that these plans might alter
daily as market conditions shift and new possibilities and difficulties arise. What
they’re looking for is a strong team that can adapt to changes and gives the
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startup a competitive advantage. A startup’s fate is largely determined by its
team, and even the strongest idea might fail if it is not implemented by a team
with the necessary skills.
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5. One needs someone at any startup to share their passion with, and who better
to share it with than their core team. They are, after all, the ones who will rejoice
with them when a business succeeds, console when one falters, and work
tirelessly to support each other and their dream startup. Every business will
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experience unanticipated setbacks at some point, whether it’s due to product
development, funding delays, or a cash shortage, and this is when the core
team will come to the rescue. A good team will stick by the team during the
tough times and act as an anchor to keep the ship afloat. No idea can be greater
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than the team that implements it, since, without the team, the idea will remain
just that: an idea. As a result, the most important factor for success is a fantastic
team. It is the foundation upon which a business is formed. So pick the core
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staff properly and watch as things start to fall into place naturally, making the
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road to their goal much smoother and faster.
There’s an all-too-common mindset among entrepreneurs that leads to disaster.

They believe that because they founded a firm on the strength of their fantastic idea
and possibly with their own money, the startup’s success is dependent on them. That,
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however, is just fantasy. In truth, a startup is only as good as the people who put it
together. Furthermore, it can only be successful if the team can work well together,
competing productively but always with a single goal in mind. Scaling and longevity
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need building out the team so that they not only work well for the firm but also work well
together.
1. Sink or swim together

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According to Insight’s study, one of the most prevalent reasons for startups failing
is because they had the wrong personnel. A shocking 23% of failed firms nearly a
quarter of them failed due to a lack of collaboration. Nothing will persuade employees
that a startup sinks or swims together unless they see this. When a team works well
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together, when everyone is on the same page and believes in the same goal, they can
create a better product, sell it more effectively, compete more aggressively, and put
their existing cash to greater use.
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2. Greater Flexibility for the Organization

Companies might benefit from teamwork because it allows them to be more
adaptable. Problems or bottlenecks can sometimes be resolved more readily by
bringing people from various aspects of a project together into one team. Automobile
(c
makers, for example, may employ this strategy while developing vehicles. Instead of
going through distinct departments for each new automobile design, such as design,

engineering, and parts supply, the car manufacturer will put together a single team
Notes
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that includes employees from all of those departments to create each car. As problems
occur in one area, the entire team can address them, allowing the job to move forward
much more quickly.
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3. Creating an attractive culture
Team Building is beneficial not only to the current startup but also to the company’s
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future chances. One doesn’t need a flow chart to see a direct correlation between
overall team-building activities and the capacity to acquire important industry talent.
One may develop an appealing company culture by investing in team building. And if
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the company workplace culture is appealing, they will have a leg up on the competition
when it comes to hiring. To put it another way, a great team breeds even better teams.
4. Set goals and responsibility
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Setting roles and responsibilities for each member of the team will aid in the
smooth operation of the company. Making decisions on who has final authority, who
is in charge of finances, and who keeps the tea bags stocked will make their work-life
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much more efficient. Everyone will know what their responsibilities are, and jobs will not
be forgotten or duplicated unnecessarily. Talk to their coworkers frequently to ensure
that all are working toward the same goal. For the firm to fulfill its goals, everyone
should know what its responsibilities are. r
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5. Fostering creativity and innovation
Some businesses employ teams and teamwork to foster a creative work
atmosphere. These organizations’ organizational structures are frequently based almost
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entirely on teamwork, with employees hired into generic work areas and then assigned
to projects that best match their skills and interests. There is no line of command or
leadership hierarchy, and leaders are appointed. Employees are free to form new teams
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as new ideas come to them when they use teams to their full potential. This is known
as a flat lattice teamwork-based corporate structure, and it is utilized by businesses that
want to be innovators.
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6. Creating internal procurement and sticking to timelines

While manuals and procedures for common jobs like “How to invoice clients” and
“How to save files so that everyone can access them” may appear routine and tedious
at first, they can and will save a lot of time in the long run. Nothing is more frustrating
m
than failing to deliver projects on time to their clients; use project management
applications or tools to ensure that everyone is on the same page. One may assign
tasks to team members, establish completion dates, and transmit files to clients using
these apps. Really, very beneficial.
)A
7. Team Building activities for startups

What employees truly mean when it says “teambuilding” is “drawing people closer
together.” Those old “trust fall” exercises, which are supposed to develop a culture
(c
of reciprocal trust, don’t work because they’re, well, not pleasant. They should try
entertaining team-building tasks to bring individuals closer. Why not test the coworkers’
mettle with a rollicking game of ax throwing instead of collapsing back into one
other’s arms? Rather than trying to form a team in the office with a whiteboard and a
Notes
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PowerPoint presentation, go somewhere interesting where employees can get to know
one another outside of the startup work environment. That is the most effective strategy
to establish mutually beneficial relationships.
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8. Trusting teammates
Because startups are typically tiny firms, it is vital that one can rely on their
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coworkers. To retain efficiency, innovation, and sanity in the office, they must trust their
coworkers’ abilities and capacity to execute their duties well. Remember that managers
are selected to work with their coworkers for a reason: everyone brings their unique
O
combination of talents, knowledge, and contacts to the table. They can accomplish
anything when their diverse abilities are combined.
In conclusion, research backs up common sense when it comes to the value of
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teambuilding in businesses. Employee silos or attempting to handle everything themself
are not the best ways to achieve healthy scalability and longevity. Last but not least,
size is important when it comes to teamwork. There is a limit to how many people
can work together at the same time without causing pandemonium. When working
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with groups, there are numerous challenges to overcome: everyone must understand
their role, the process, and the tasks. This is where the team leader’s position is
critical. They must ensure that everyone is on the same page in terms of knowing the
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job requirements and their role in the team. The firm will get numerous benefits from
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effective teamwork. One may improve team productivity through planning and strategy,
as well as the use of technology and effective leadership. It’s also not the best method
to create a work culture that will attract top people in the future. Bring the staff together
for frequent activity outings and foster their relationships outside of the workplace to
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help them grow.
3.4.2 When Teamwork Fails

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3.4.2.1: When and why does teamwork fail?

There are so many causes why teamwork fails, and understanding how and
where to work around them and will help you prevent them. Finding a technique to get
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coworkers to operate as a team is critical for any organization that wants to have a
productive and effective workforce.
Having a group of employees who work well together toward a single purpose is
significantly preferable to having a group of employees who are frequently in conflict.
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It is possible to build a work environment where great things may be accomplished

by cultivating an environment where teamwork is prioritized and understanding the
reasons why teamwork fails.
)A
1. Poor communication
A lack of communication is a common reason for underperforming teams. Without
effective communication, people are unlikely to understand the tasks they are expected
to do. Such uncertainty will, at best, begin to create finishing delays. Workers may
(c
develop bad attitudes or opt to leave the company entirely in the worst-case scenario.

2. Lack of vision
Notes
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A team will never be able to position itself for success if they do not have a clear
and well-communicated purpose or vision for their job. When people don’t understand
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why they’re working together, they sway in various directions, which leads to everyone
making different assumptions. A team may begin a project with a vision, but the vision
becomes clouded when team members perceive it differently.
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3. Ineffective leadership
One element that leads to the overall performance of the team is insufficient
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management. While a lack of communication is one of the most common causes of
poor leadership, it is far from the sole one. The delegation, keeping people focused and
energized, and requesting regular feedback are all examples of good leadership skills.
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4. Unclear roles
There’s nothing more frustrating than not knowing what they are supposed to
do. When duties are unclear, people find themselves unsure of what to do next. As a
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result, team members concentrate on a few key tasks that make them feel productive,
only to discover later that they were wasting their time. Without clear duties and
expectations for each team member, they may take on a task that is inappropriate for
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their experience and ability, setting the team up for failure.
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5. Low employee engagement
Several disengagement-inducing external influences contribute to
underperformance. Employees who loathe their jobs or feel devalued by their bosses
are less suitable to accomplish well in their respective jobs or as members of a team.
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6. Poor decision making

Most teams fail in two areas when it comes to developing a solid decision-making
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strategy. The first is when people overthink decisions and waste a significant amount
of time doing so. As a result, one may find themself unable to decide at all. The second
is when they don’t spend enough time thinking through their ideas and rush into
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implementation and thrashing mode, only to give up or make it through bruised and
wounded afterward.
7. Lack of motivation
Underperformance can be caused by insufficient involvement, but also can be
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caused through other causes such as mental exhaustion, mental distress, or self-
doubt. This could take some time to get to the bottom of motivation issues, but it is an
important topic for team members to address.
)A
8. Fixed mindset
Due to their fixed thinking approach, many teams fail to progress or inspire. The
majority of them fail because they already believe they can’t modify, better, or reframe
(c
their position. This frequently results in the smartest or most technically proficient
members of the team becoming stuck in one place. It’s normal for some teams to believe
that if they can’t solve a problem quickly using their standard method, there isn’t one.

9. Poor job fit

Notes
e
When employees are in the wrong jobs, it is more difficult to work. The reason is
very simple: when individuals have a job that matches their abilities, they do better at
in
work. Leaders and managers, however, often lack a comprehensive understanding of
the qualities required for various tasks, and therefore job characteristics. Fortunately,
behavioral assessments and other methods can help determine which people are best
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suited for various vocations.
10. Lack of resources
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One of the biggest killers of a team as a whole is a lack of sufficient or appropriate
resources. This is sometimes the fault of the team, but most of the time it is the
fault of the organization that chartered the team in the first place. If they don’t have
the necessary tools, authority, or equipment, their team’s morale will suffer, and their
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devotion will begin to wane.
11. Lack of formal training
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When employees fail to perform tasks or function as part of a team, a lack of
training maybeis to a fault. Many college programs may not equip graduates with all of
the abilities they will need once they enter the workforce. As a result, firms must invest
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in and empower their employees extensively.
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12. Misalignment
Teams fail when they believe they are on the same page when they are not.
Before a team can be productive, it must align on numerous taskwork and teamwork
elements. All team members, for example, must agree on team goals, timetables, work
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roles, how and when to communicate, and who to turn to for specific information and
resources. Misalignment among members can lead to misunderstandings and incorrect
assumptions, resulting in lower-quality work and missed deadlines as members try to
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realign.
How to stop the team from failing?

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According to researchers estimates, 60% of teams fail, leaving team members with
bad feelings for the rest of their lives. Despite this, teams persevere because, in many
circumstances, there is no other option. Dealing with corporate difficulties or large-scale
strategic planning necessitates a diverse range of talents, which no single individual
possesses. As a result, businesses assemble groups of experts from many fields to
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evaluate, analyze, and provide a solution to whatever problem they’ve been given.
It’s not because cooperation is fundamentally wrong or because employees dislike

working in groups. In fact, according to a survey conducted by the Center for Creative
)A
Leadership (CCL), 70% of senior-level executives prefer working as part of a team, and
nearly all 91% believe that teams are critical to organizational success. The problem
is to properly structure and lead teams so that they can complete their tasks. Here are
seven ideas to get started:
(c
1. Provide good team management.

A team’s performance is only as excellent as its leader’s. This is because a
team manager is in charge of the majority of the items on this list. This person must
Notes
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have great project management and interpersonal skills, as well as the ability to
assign work, follow up, and resolve team problems. A team leader must also be able
to use relationships outside of the team to ensure that it has the resources it needs
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to succeed. However, each team member must also feel responsible for the group’s
overall performance.
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2. Get support from on high
Many teams fail because company leaders do not support them from the start. This
is important since teams frequently need to employ resources to complete their work,
O
and such expenses must be approved by higher-ups. These could include a budget for
team training, materials, or funding for administrative support from a third party. Another
duty of leaders is to make sure that there aren’t too many teams working at the same
time. Individual team members should not be overworked to the point where they are
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unable to focus fully on their team’s tasks. Overworked teams are more likely to fail.
3. Picking the right player for the right role
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The most effective teams are those in which each member brings a unique set
of skills to the table. A corporation should carefully analyze what responsibilities are
required to achieve its objective before forming a team. Then, a selected team leader
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should go over each candidate’s resume, level, and background to put together the
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best possible team. It’s also critical that each team member understands their function
and what is expected of them as a result. There will almost always be overlaps in team
member expertise, therefore position definition would be helpful.
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4. Set a clear goal and timeframe

There is a beginning, a middle, and an end to every good story. That is something
that should be available to teams as well. Setting a purpose and scope of work, as well
U
as a timeframe for deliverables, from the beginning will help a team succeed. However,
as a company’s goals shift, it’s occasionally vital to be flexible in these areas. However,
if a team’s mission is not decided upon and communicated to all stakeholders (team
members and the larger organization) from the start, problems are likely to arise.
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5. Managing time well

Team meetings frequently go too long and waste time because there is so much
work to be done and so many voices in the room. As people’s attention spans diminish,
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meetings become less productive. Each meeting should begin with a concise statement
of accomplishment to keep it focused and succinct. Furthermore, it provides the team
the impression that they are making tangible progress, no matter how tiny, which boosts
morale. It’s preferable to meet more frequently for shorter amounts of time rather than
)A
try to cover a greater agenda-less frequently.
Increasing the productivity of a team is a multi-step process that needs patience

and persistence. Take some time to assess the team and figure out why it isn’t
performing well. Then, get feedback from the team on what they want one to improve
(c
on and what steps they can take to satisfy those needs. Throughout the process, pay
attention to each team member and be open to any advice they might well have. Make

a strategy with their partner that explains to them their objectives and the steps they
Notes
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will take to achieve them. Determine that everybody else realizes what is necessary
to accomplish those goals, and provide training and other forms of support to both
individuals and the entire team. If evaluations show that certain team members are
in
underperforming because they aren’t in the right roles, do not be afraid to reassign
them to other roles or teams where they might be more effective.
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3.4.3: Forming and Building Teams
A team’s commitment to introspection and continuous evaluation improves its
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efficacy. In addition to analyzing accomplishments in terms of reaching specific goals,
teams must comprehend their development as a group to be high-performing. So far,
they have largely talked about a team as a whole, rather than the individuals who
make up that squad. This is like characterizing an automobile solely by its model and
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color without taking into account what’s behind the hood. It observes and interacts
with external qualities, but internal attributes are what make things work. The internal
qualities of a team include its members and how they interact with one another.
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For a team to be productive, its members must be able to collaborate and
contribute to the team’s goals. This, however, does not occur on its own; it emerges
as a result of the team’s collaboration. When the team first meets, they are likely to sit
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around and stare at each other, unsure of where to start. They are not a team at first;
they are just individuals who have been assigned to work together. They come to know
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each other over time, learn what to anticipate from one another, how to divide labor
and assign duties, and how to coordinate their efforts. They begin to function as a team
rather than a collection of individuals as a result of this process.
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The importance of Team Building
1. Building trust
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Trust is essential when it comes to building productive teams. Teams must be

able to trust one another to work together. That they can rely on one another in an
emergency. Furthermore, as teams develop trust, they allow each other the freedom
and liberty to complete tasks and make their own decisions. People feel comfortable
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when they are trusted. They open up when they feel protected. They let their
teammates know about their strengths and weaknesses. People are more forward-
thinking in their ideas, taking risks, talking to each other, and eventually coming to an
agreement. As a consequence, there’s more collaboration and communication, and
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members of the team are less afraid to discuss their shortcomings.
2. Regulates communication
)A
Whenever professionals operate as a team, they interact. They discuss the

topic at hand and the best strategy to reach the desired goal with one another. They
strategize, break up into smaller groups, hold meetings, and try to complete the
assignment as quickly as possible. Employees can also use communication to learn
about their responsibilities and what their teammates are up to. Personnel can track
(c
their performance and support each other if one of them fails to accomplish their goals if
they are informed of what their colleagues are doing.

3. Increases productivity
Notes
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Teams split up the task. This means that if one team member has less work, she
can assist another team member in doing their task. As a consequence, the work can
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be completed quicker, resulting in increased production and a positive impact on the
bottom line. Employee and organizational productivity are both increased when teams
are formed. Since they work in a group, people can gain new skills and improve on
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those they already have. This improves team productivity and effectiveness, allowing
more work to be completed in less time over time. As a result, when businesses
achieve their objectives and offer their all, they can generate more revenue.
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4. Brings people together
The best part about working in a group is that one always has someone on their
side. One of the most significant advantages of team building is that it strengthens
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employee interpersonal interactions. When people work together, they share their
experiences, including successes and disappointments. It pulls them closer together
and increases their trust in one another. When team member A assists team member B,
team member B will almost always return the favor. Employees get together to fight off
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against their foes and share the limelight.
5. Fosters creativity and learning

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Workers who are part of an effective group are more inclined to learn from as well
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as complement one another skills. When compared to working on a project alone,
cooperation offers different perspectives and ideas. It blends personal experiences with
fresh, inventive concepts, making work more enjoyable and efficient. As just a result,
anybody can learn from each other and offer something unique.
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6. Healthy competition
It has been proved that when a task is turned into a competition, people perform
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better. Conducting team-building events in the workplace can be a terrific way to bring
out their employees’ competitive side. Team development activities are enjoyable
games in which employees compete with one another to complete their challenges. The
major goal of these games is to instill a sense of teamwork in employees, allowing them
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to collaborate with other teams while learning problem-solving, communication, and

cooperation skills.
7. Make people more accepting

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It should be a level playing field when it comes to achieving success. Everyone

should be treated equally in terms of importance, resources, and opportunity to
achieve their objectives. Their employees must do their part as organizations become
)A
more accepting of ethnic and gender diversity. Forming teams with people of various
nationalities and origins is always a good idea. Because they are more accepting and
understanding of one other’s differences, such groups are generally more creative. It
teaches them that their preconceived notions about someone are incorrect and that that
team member is a lot of joy to work with.
(c

8. Resolves conflicts
Notes
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Whenever employees work jointly, there’ll always be conflicts. Team members must
gracefully handle disagreements instead of permitting them to develop into full-fledged
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conflicts. On the other extreme, competition isn’t always a negative idea. Conflicts can
occasionally be turned into beneficial activities. If people with different experiences are
put together instead of those with similar experiences, disagreements may occur. The
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key to settling such disagreements is for individuals to be willing to listen to and accept
different points of view. They can do more than a group formed on similar experiences if
team members can pool their different perspectives, abilities, and experiences.
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9. Employees acquire skills
It is critical to developing a team. Employees can learn from one another and gain
new talents as a result of it. Employees who work as part of a team are more likely to
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take on leadership roles and see their coworkers complete their tasks. Before making
any decisions, they must reach an agreement to perform and achieve their aim. This
necessitates employees having conversations, communicating, and actively listening to
one another. Problem-solving talents, planning abilities, and decision-making abilities
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are all enhanced by teamwork. It also instills in team members the ability to take
responsibility for their decisions and actions.
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10. Improvement company culture
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Collaboration between teams enhances workplace creativity and innovation.
Employees are more communicative and collaborative. This boosts their productivity
and efficiency, eliminates disagreements and misunderstandings, and encourages
individuals to be more accepting of one another. People begin to be recognized, which
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drives them and others to produce more and better results in the future. This boosts
the company’s overall profitability while also encouraging a healthy and motivating
workplace culture.
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Stages of team forming and building a team
1. Forming stage
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The development stage includes a time of training and tries to get to know one
another. Lack of certainty is high at this point, and people crave leadership and
direction. Control could be sought from a manager or business owner or expertise.
Members of the team are asking questions such as, “What does the team have to
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give?” “How does one know what is expected of me?” “Will one be accepted?” As
people learn to know one another, the majority of the encounters are interpersonal.
2. Storming stage
)A
Smashing is the most difficult and risky stage to complete. Throughout this period,
which is marked by competition and conflict, personality types emerge. As effort
is redirected to inefficient activities, the performance of the team may decline at this
time. As members argue about team goals, factions and cliques may emerge around
(c
strong characters or regions of disagreement. To get through this phase, individuals

must overcome obstacles, accept differences between individuals, and work through

divergent viewpoints on team tasks and goals. That’s where teams may become
Notes
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stymied. If disagreements are not addressed, long-term issues may occur.
3. Norming stage
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If teams are making it through the performing stage, conflict is resolved and a
sense of unity emerges. During the norming stage, the agreement is reached on
who the leader or leaders are, as well as the duties of individual members. Conflicts
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between people start to dissolve away, as well as a feeling of connection and unity
emerges. Performance of the team increases throughout this stage as individuals
learn how to work and together concentrate on the team’s objectives. The rest of the
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squad’s peace, on the other hand, is fragile, and if tensions arise, the team may resume
assaulting.
4. Performing stage
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Inside the opportune spot, unanimity and collaboration are all well, and the group
is competent, organized, and well-functioning. Everyone is committed to the group’s
performance, and there is a sound and coherent infrastructure in place. Issues and
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arguments persist, but they are dealt with constructively. The group is focusing on
problem-solving and meeting team goals.
5. Adjourning stage r
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At this stage, the majority of the team’s goals have been accomplished. The
emphasis is on finishing the last tasks and documenting effort and results. Specific
individuals may be shifted to various teams as the demand decreases, and the group
may disintegrate. A formal acknowledgment of the team’s labor and achievement as the
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project draws to a close might be beneficial. Participants can be removed, and the team
can revert to the creation or stormy stage and begin the development process anew if
the team is an organization generally with ongoing duties.
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1. When the team do not have a focused and well communicated__________ in that
condition the team can fail.
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2. Building____________ is very important for overcoming the failures in the team and
building a strong team.
3. A __________ stage divorce to performing speed and the conflict is solved and
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unity emerges and the stage. In this stage the leaders as well as the bookies of the
individual members are being provided to them.
Summary
)A
●● Teamwork is a very important activity in the start-up business organisation

because it will help in determining the strength and weaknesses of the member in
the team and collaborating with each other to achieve the business objectives.
●● There could be multiple reasons for teamwork failure that could include poor
(c
communication and unclear roles of the team members.

●● Building a train will help in increasing the productivity and bringing the people of
Notes
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different cultures and the team together.
●● It is very important for the business to focus on team building and build trust
in
among the members of the team for bringing maximum output.
Activity
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1. Why it is so important to build a strong team in a start-up business?
2. Why it is important to provide major emphasis on every member of the team?
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1. What are the different reasons for failure of a team in a business?
2. How can a business overcome the failure in the team?
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3. What is the importance of team building in a start-up business?
4. What are the stages of team forming and building a team?
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Glossary
1. Misalignment- when the team is not aligned properly and the the team is not guided
regarding the reporting relationship with each other in that condition it is referred to
as misalignment. r
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2. Smashing- it is the most difficult and risky stage to complete. In this stage the conflict
and different types of disagreements may occur.
3. Adjourning- at this stage the goals and the efforts are being utilised to achieve the
overall objective of the business.
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Further readings
1. Book- leadership and team building
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Author- Uday Kumar haldar
Answer
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1. Purpose
2. Trust.
3. Norming.
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)A
(c

Case study
Notes
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Amazon is currently one of the most famous and successful online shopping
in
platforms. It has expanded its market in National and international countries and is also
providing various portfolios of products to the customers.
Amazon was started by Jeff Bezos with the initial aim of selling books, music, and
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videos on an online platform. Afterward, it started selling consumer electronics and
home improvement items. The success of Amazon is being derived from an effective
business plan.
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Jeff Bezos had a vision and mission of bringing the company towards success and
wanted to create an online platform for the consumers that could provide various types
of products and services on digital media. The major objective of Amazon was to focus
on consumer requirements and create digital marketing strategies.
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Amazon worked on the RACE framework that stands for reach, act, convert,
and engage. The initial objective of Amazon was to reach customers through various
keywords and Ad Words that help in the initial growth of the business. The next step
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was to act on the keywords for creating business experiences through learning and
testing. By using personalization and relevant marketing strategies Amazon converted
various leads into potential. The major objective of Amazon was to engage the
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customers for a longer period and the strategies of the company’s board to provide
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customer-centric services so that the customer feels delighted and engaged with the
company for a long period.
Amazon works on its business plan to identify the factors that affect the business
plan and through working on different elements the company evaluates its sales
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strategies and future marketing plans. The major objective of Amazon was to work on
marketing and the growth of the business.
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The success mantra of Amazon is to focus on the strategies because business

strategies will help a company identify its core competencies and strengths of the
business. Jeff Bezos had the vision of becoming the earth’s biggest customer-centric
company in minimum time. The major objective of Amazon was to include all the
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different segments of the people in the business that means including the customers,
sellers, developers, content writers, enterprises, and all the other market-related
entities. By doing so just because I wanted to give a single platform to different people
to showcase their talent and provide an easier and very cost-effective platform for
selling products and services all over the world.
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The major focus of Amazon was on building a customer-centric company and

giving major focus and importance to the customers of the company. This behavior of
)A
Amazon not only helped in increasing the profit and growth of the company but also
created a brand value in the mind of the customers.
The business plan of Amazon focuses on all the required elements such as the
description of various products and services, the competitive analysis, market analysis,
and the description of the management team. This way Amazon wanted to forecast
(c
its strengths and weaknesses to the general public so that it becomes easier for the
investors and suppliers to make effective decisions for investment purposes.

Amazon has now launched its products with the name of Amazon prime, kindle,
Notes
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and various other products in the international market. The major goal of Amazon is to
connect with people and expand the market through goodwill.
in
Amazon has increased its revenue by 43.8% from the previous financial year.
The sales and revenue of the company have increased tremendously in 2021 and are
expected to increase more in the next financial year. The major goal of Amazon is to
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connect different people with the company so that the company can grow and even the
connected parties with the company can get an equal chance of growing in the market.
It is connecting small sellers and local sellers with the company to give the sellers a
platform to sell their products on a digital platform. This business model is increasing
O
the revenue of the company and is also helping the business organization grow in the
market.
Amazon is involved in innovation activities to increase revenue. Jeff Bezos is not
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the only person that is involved in making all the major decisions for the company
because Amazon is motivating all the connected parties with the business organization
for bringing the company to the top of the table. Amazon is working with different clients
si
and is giving equal opportunities to every connected party with the business so that it
becomes easier for the company to expand the business and make the product and
services available to the customers at the two steps in a very effective manner. Amazon
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is the teamwork of suppliers, delivery men, customers, and other related entities. With
the help of strong and effective team management, Amazon is giving an online platform
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to the retailers that provide a greater margin of revenue to the retailers.
It is generally believed that digital platforms or businesses that function on digital

media will require highly specialized people for its functioning. Amazon has proved it
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wrong because it is a collaboration between every business entity.
Amazon is daily working for the betterment of the consumers and is also providing
better after-sales services to the consumers. Amazon provides effective complaint
U
handling and management of the business models.
There are approximately 76 million customer accounts of Amazon and 1.3

million active sellers of Amazon. This number could not have been possible with the
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collaboration of sellers and customers. Amazon is only providing a platform to the seller
and the customers to sell and purchase the product. Amazon is dealing to provide a
fee-based membership program to the customers to join Amazon for a long period and
get connected with the company.
m
Amazon has been successful in setting an effective business model for other
companies in the market with the collaboration of different sellers and buyers. It has
been following different business plans in its new business strategies to engage the
customers and provide correct information to the sellers and customers on time.
)A
1. Amazon has been a successful business in the market in a very short period. What
could be the different business plans followed by Amazon for engaging customers
and suppliers?
2. Amazon is a collaboration of different business entities; it is a good example
(c
of teamwork and effective management of the team. What could be the different
importance of teamwork in a business?

Module - IV
Notes
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Structure:
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4.1 Entrepreneurial Challenges
4.1.1 Entrepreneurial challenges as an individual
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41.2 Entrepreneurial challenges as an entrepreneur
4.1.3 Skills of managing business risk enhancing success.
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4.1.6 Nature of emplyee morale
4.1.7 Measures to improve morale
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4.1.8 Steps to success of morale
4.2 Legal Form of new venture
4.2.1 Various types of business ownership
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4.2.2 Sole Proprietorship and its features
4.2.3 Advantages and disadvantages of sole proprietorship
4.2.4 Joint Hindu Family Business r
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4.2.5 Advantages and disadvantages of Joint Hindu Family Business
4.2.6 Partnership and its feature
4.2.8 Coopertive Society and its features
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4.2.9 Types of cooperative Societies

4.2.10 Advantages and disadvantages of cooperative Societies
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4.2.11 Joint Stock Company and its features

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4.2.14 Comparative analysis of forms of organisations

4.3 Legal Issues related to venture
4.3.2 5 Essential Legal Issues To Address Before Securing Venture Capital
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4.3.3 Legal issues faced by entrepreneurs

)A
4.3.5 Patents
4.3.6 Copyrights and related rights
4.3.7 Copyright protection in India
4.3.8 Trademarks
(c
4.3.9 Bankruptcy
Case Study

Unit - 4.1: Entrepreneurial Challenges

Notes
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Objective
in
●● To determine entrepreneurial challenges as an individual.
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●● To determine innovation moral.
●● To determine steps for successful morale.
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4.1.1 Entrepreneurial Challenges as an Individual
Individuals get drawn to being an entrepreneur taking a gander at the achievement
delighted in by fruitful entrepreneurs. Notwithstanding, they simply check out the
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product of these individuals’ prosperity and don’t have the foggiest idea about the battle
they have done to become fruitful.
The excursion to turning into a business visionary isn’t easy. You will accomplish
si
something that nobody has done previously. What’s more, you will have nobody to go to
in attempting times. You should confront every one of the difficulties and work out every
one of them as they come. Coming up next are a couple of normal difficulties that each
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entrepreneur appears while beginning their business.
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1. Getting funds for your business:
The main test that each entrepreneur goes over is to get assets for their
undertaking. It is nearly simple for an accomplished finance manager to gather reserves
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and to draw in financial backers for the new undertaking.
Then again, for another business person, the test of drawing in financial backers
and gathering reserves becomes testing given different reasons, for example,
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They don’t have a set of experiences on the lookout. They don’t have associations
with the perfect individuals. Financial backers don’t confide in them. They probably
won’t be acceptable at persuading financial backers to put resources into their
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business. What’s more, assuming you are a youthful business person, there are
chances that you may likewise be taking care of your schooling credit. The absence of
enough assets can become why your business doesn’t take off from the beginning.
In any case, on the off chance that you some way or another figure out how to
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get assets for your business, you are as yet not liberated from hazard. The underlying
few months of your endeavor can be testing. You probably won’t make any benefit,
and there are chances you may wind up spending higher than anticipated. In such
)A
a situation, on the off chance that you don’t have reinforcement monetary help, your
entire endeavors to set up the business will be squandered, and you will wind up with
an obligation to pay.
2. Leaving your career:

(c
Going to your well-paying position and responding to the call of strolling into
obscure domains isn’t everybody’s teacup. This could be perhaps the most difficult
decision that you need to make as a business person. A few money managers maintain
their independent ventures alongside their consistent and well-paying positions. They
Notes
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may work late evenings and at the end of the week. Yet, assuming you need your
business to develop essentially, then, at that point, you are needed to give up position
work and get into your business full-time.
in
In any case, unloading your grounded vocation is difficult, particularly when
your future is flighty. Tragically, you will be the one in particular who will settle on
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this decision—my idea is never to disregard your impulses and consistently make
determined choices.
3. Confronting dismissal:
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Confronting dismissal is one of the predominant difficulties that are looked at by
business visionaries. You will be dismissed for your thought, age, and involvement with
the business world. Regardless you do, you can’t stay away from the dismissals. You
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will be dismissed for something. Just an individual who has unfaltering trust and strong
trust in his thought can endure the dismissals in such a situation. The hardest piece
of dismissal is that you won’t just be dismissed by outsiders, yet your loved ones will
likewise dismiss you. In this manner, you need to remain unyielding when confronted
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with dismissals.
You should look for the organization of individuals who have an uplifting outlook
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and have faith in you and your thoughts. Likewise, you can befriend new business
people out on the lookout. They can comprehend your circumstance better as they
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may be going through a similar stage or have been there before. On the off chance
that they can’t give you an answer, they can uphold you. Their help will assist you with
confronting the difficulties.
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4. Dynamic:
Taking choices all alone, while staying alert that an off-base choice can cause you
misfortunes, is one of the normal difficulties business people face. Along these lines,
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the dynamic can be named quite possibly the most unpleasant of all the challenges
looked at by business visionary.
As you are an entrepreneur, you will need to take all the enormous too little choices
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for your organization all alone. The pressure of dynamic is genuine and can’t be stayed
away from.
In any case, with experience and with exhaustive examinations, you will figure out
how to settle on speedy and ideal choices.
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5. Confronting analysis:
Another test that a business person face is an analysis. You will be scrutinized by
)A
individuals who know you and who don’t have any acquaintance with you. They will
caution you about your business thoughts and let you know the outcomes of a bombed
business. They may force their frailties on you.
Also, you will be reprimanded by individuals who are envious or might fear your
(c
business’ prosperity. They will reprimand you for preventing you from chipping away at
your thoughts.

They may be thinking about your business as a danger to their own business.
Notes
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In such a situation, you ought to likewise zero in just on the positive side and be in
the organization of individuals who support your thought. Make an organization with
experienced financial specialists. You can take in examples from their experience and
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can utilize their aptitude to develop your business.
4. Keeping on track:
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Keeping on track is a test looked at by business people and particularly youthful
business people. You may have created an item, or your business thought is great, yet
it will all be squandered on the off chance that you don’t have the foggiest idea of how
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to keep on track. Being a business visionary may look fun, yet it isn’t entertaining. You
can turn into a business person by having another business thought or a progressive
item, however, you can become fruitful provided that you are centered around
developing your business.
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Here and there, youthful business people get occupied by little impermanent
victories and fail to remember what their definitive objective is. Remember your
objective and avoid all interruptions. Remaining on track is the best way to assemble an
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effective business.
5. Passing up life:
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Passing up life is a test that all business visionaries face, and it’s anything but a
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transitory test that they will look toward the start of their vocations. They will confront
this test all through the excursion. A business venture is difficult. You will be needed
to place your everything into turning into an effective business person. There will be
numerous occurrences working alone in your office on a celebration night or a unique
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day like your birthday. You will be needed to forfeit your family time, personal time, and
your recreation time to make your business effective. Relax. This will all result on the off
chance that you become fruitful in building up your business. You can take motivation
U
from every one of the extraordinary business people of the world.
6. Depression:
One test looked at by business people is “depression.” Every business person has
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felt alone sometimes, and it is somewhat of a battle that nobody discusses. Business is
something that accompanies no standard book or manual. You won’t ever be ready for
it, and you will learn by reaching out.
You will be so bustling sorting out all that you won’t have the opportunity to see
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your loved ones. You will lose numerous companions on account of an absence of time.
Yet, recollect that you are making these penances for your better future. When your
business begins running all alone, and you have a group that you can trust and depend
)A
on, attempt to get some downtime sometimes so your family doesn’t feel desolate.
CONCLUSION:
An entrepreneur fabricates his business without any preparation and chips away
(c
at another organization that nobody has worked at any point ever on previously.
Hence, confronting difficulties now and then is normal. In any case, in case you are

intellectually ready to address the difficulties, it will end up being somewhat simple for
Notes
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you to endure the pressure related to business.
4.1.2 Entrepreneurial Challenges as an Entrepreneur
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Entrepreneurs face many difficulties in the present super cutthroat business world.
Luckily, business visionaries additionally have more assets than any other time in
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recent memory to handle those issues. The accompanying 10 challenges are looked
at by numerous business people today. Maybe you’ve clashed with some of them as
of now. Peruse on to realize why each challenge exists, and to get arrangements and
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workarounds so you can work your business productively and effectively.
The enterprising way of life can undoubtedly get glamorized by individuals who are
outwardly examining. It’s the embodiment of the American Dream antique and is, for the
most part, praised with so much “not settled,” “eager,” and “effective.” In any case, the
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existence of a business visionary is really difficult. As the mainstream society states:
“The battle is genuine.”
If you end up gathering an effective business person, you can have confidence that
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she or he has endured a decent number of battles and mishaps throughout the long
term. Infrequently will you experience somebody who arrived at the top with practically
no obstruction.
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Thus, given that information, you shouldn’t be daunted if you feel things aren’t
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turning out well for you. The excursion of the business visionary is regularly loaded up
with potholes, hindrances, and misfortunes. The following are a couple of the most well-
known ... just as a little exhortation on the best way to defeat them.
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1. Using time effectively and focus:

Not every person is removed to work for himself, or to lead an organization,
besides. The majority of us are normally intended to flourish in organized conditions.
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At the end of the day, the vast majority need heading; they desire rules to prod them
the correct way. That isn’t to say we as a whole love structure, yet virtually we all need
some proportion of it.
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So even business people might battle when they end up working with the overall
construction eliminated. The greatest way this radiates through is in using time
effectively. At the point when you’re working with five, six, or seven unique obligations
simultaneously, overseeing them all and apportioning the proper measure of time
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to each turns out to be beyond difficult. In case this is the battle you’re confronting at
present; you unquestionably are in good company. While you can’t handle or extend the
time you have - there will consistently be only 24 hours in a day - you can handle how
you manage that time. Here are a few hints that business people have observed to be
)A
extremely valuable:
2. Employing the Right People:

An applicant might expect that the person’s the just one fearing the new employee
(c
screening, yet that is not the situation. In truth, the business visionary could be similarly
as stressed over it, maybe much more so. That is because the business person’s

business is on the line. The right recruit could prompt development and achievement,
Notes
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yet some unacceptable recruit can wreck the entire thing. At the point when you take
a gander at it that way, it can mean a ton of strain! Assuming you battle with the test of
recruiting the ideal individuals, maybe you need to patch up your onboarding system.
in
Start with the pursuit interaction. Is it true that you are by and large adequately selective
with regards to the capabilities you’re searching for and the terms you set? It may
require half a month longer to gather a rundown of qualified competitors when you set
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more severe and broad models, yet it’s greatly improved over the long haul to take as
much time as necessary than to surge and recruit some unacceptable individual.
You may likewise have to consider how you approach the meeting. Is it accurate
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to say that you are posing the right inquiries and affecting the perfect individuals?
Recruiting workers shouldn’t be something you do all alone. Attempt to include however
many others as could reasonably be expected and go out of the way to investigate
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references. Employing is difficult; however, it shouldn’t need to be a significant test
by the same token. By building up the right measures and remaining patient, you can
make onboarding probably the best strength of your business.
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3. Self-esteem and Meeting Expectations:
As referenced before, business people will in general have solid characters.
Furthermore, because business achievement is normally estimated by how well an
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organization performs monetarily, business people tend to attach their self-esteem to
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their total assets. In any case, recollecting most of the organizations at last fall flat, so
this can compel numerous business people into a battle with personality traits that have
been founded on elevated assumptions.
In case you’re a business person, it’s vital to assemble a day-to-day existence

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and personality yourself outside of your vocation and organizations. You need to deal
with making a solid establishment that completely incorporates family, companions,
diversions, religion, and different interests. This will give you something to clutch if you
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neglect to meet assumptions in your profession. This could well occur, occasionally.
4. Income Management:
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Cash flow is fundamental for private venture endurance, yet numerous business
visionaries battle to cover the bills (not to mention themselves) while they’re trusting
that checks will show up. A contributor to the issue originates from deferred invoicing,
which is normal in the enterprising scene. You play out a task, send a receipt, then,
at that point, get compensated (ideally) after 30 days. Meanwhile, you need to pay
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everything from your representatives or workers for hire to your home loan to your
staple bill. Holding back to get compensated can make it hard to get by — and when a
client doesn’t pay, you can hazard everything.
)A
Proper planning and arranging are basic to keeping up with income, yet even these
will not generally save you from worrying about bills. One approach to further develop
income is to require an upfront installment for your items and administrations. Your
initial investment should cover all costs related to a given task or deal just as some
(c
benefit for you. By requiring an upfront installment, you can essentially have confidence
you will not be left covering others’ bills; by cushioning the initial investment with some
benefit, you can pay your own.

One more methodology for further developing income is to require quicker receipt
Notes
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installments. Receipt customers within 15 days, which is a large portion of the common
receipt time frame. This implies if a client is late with an installment, you have fourteen
days to address it and get compensated before the following month’s bills are expected.
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Likewise, an ever-increasing number of organizations are requiring prompt installment
upon project finishing — and in our advanced age when clients can pay solicitations
directly from their cell phones, it’s anything but a stretch to demand quick installment.
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You can likewise address income from the board from the opposite side of the
situation by requesting that your merchants receive you at 45, 60, or even 90 days to
permit plenty of time for your installments to show up and checks to go through. If you
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can build up a decent connection with sellers and are a decent client, they might work
with you once you clarify your procedure.
Also, in case you’re searching for a simpler method to take care of bills and set
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aside cash, consider sending browsers through email.
5. Showcasing Strategy
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You don’t have the foggiest idea about the most ideal approach to showcase your
items and administrations: print, on the web, versatile, publicizing, and so forth. You
need to amplify your profit from speculation with effective, designated promotion that
gets results. r
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Again, in case you’re not proficient at making promoting plans and putting
advertisements, it’s a smart thought to re-appropriate your showcasing technique to
somebody who is. Now, all you need is a center advertising plan: Who is your crowd,
and what promoting exercises will you embrace to inspire buys? Give your organizer
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a spending plan and advise them to create an arrangement that effectively utilizes that
spending plan to deliver benefits.
This isn’t the ideal opportunity for experimentation. You can do that later after
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you’ve set up a gauge that works.
4.1.3 Skills of Managing Business Risk Enhancing Success

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Risk management isn’t to attempt to peruse a precious stone ball, however,

to uncover the wellsprings of hazard and settle on them noticeable to key leaders
and partners as far as likelihood. Hence understanding the specialized danger, the
executives’ abilities are fundamental.
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The customary responsive way to deal with ensuring the resource of the
association should be supplanted by a dynamic and proactive vision pointed toward
accomplishing the association’s central goal, objectives, and objective under any
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pressure or shock.
The objective is to pressure the similitudes of hazard the executives in all
associations without sabotaging the particular of each, ideally prompting a more open
field of open positions for all danger the board proficient who could move starting with
one area then onto the next.
(c
Risk management has quickly advanced in the last decade and has turned into
an imperative capacity in numerous foundations. The current danger the management

framework cut across the whole association. With a quick assessment of the danger
Notes
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space including more non-insurable dangers, taking on new methodologies has
become important to be a successful danger administrator. Characterizing the skills
needed for this position is an overwhelming errand, not to mention discovering the
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people that have them.
Risk management is an ability which does not just relate to the sole situation of
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the risk manager; rather it applies to each representative who wishes to have an
emergency course of action for the potential dangers which they might experience in
their regular work schedule.
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Moreover, comprehend that risk management abilities require long periods of
involvement and difficult work to turn into an expert of the quality for future work. The
fundamental parts of risk management expertise are the capacity to recognize risk,
quantify it, to like its results, and afterward make a move in like manner.
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Skills of a Successful Risk Professional
1. Critical thinking:
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Risk management is an essential business. At the more elevated levels, you might
be planning risk management arrangements and cycles for a whole association. You’ll
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be both exhaustive and innovative in your methodology.
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Social occasion models: You tackle issues constantly in your regular day-to-day
existence. Ponder times when you’ve hit a tangle – possibly a financing deficit for an
excursion or an individual from a venture bunch who phoned in debilitated without
a second to spare. How did you deal with fixing it? The more you attempt to do, the
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more issues you’ll stumble into! Engage in anything where you need to assume liability.
Critical thinking models are ensured.
During the application interaction: In case you’re given undertakings or issues

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to tackle at talk with, consider cautiously, take as much time as necessary and be
inventive. If it helps, talk through your manners of thinking. Your questionnaire will need
to know how you approach the issue.
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2. Insightful abilities:
The foundation of risk management is dissecting changes, working out their
possible impacts, and adjusting them against the organization’s general danger hunger.
Social affair models: In case you’re a business understudy, social researcher,

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or analyst you ought to have experience dissecting measurable information. Think

back on testing tasks and depict how you succeeded. An examination doesn’t need
to incorporate numbers. Any paper where you dissect the proof to pick and support
)A
a determination is a legitimate model. Volunteer for undertakings where a choice

should be made dependent on proof – for instance, picking a setting for an occasion
dependent on factors like area, reasonableness and cost.
During the application cycle: You might have to do online tests to show your logical
(c
abilities. Discover test tests on the web and invocations exhortation books to assist you
with understanding the kinds of inquiry you may confront. During any undertaking, listen
cautiously to the inquiries and don’t be reluctant to pose for an explanation.

3. Great correspondence and show abilities:

Notes
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This point is attached to the past one. Somewhat recently, not settled that
preferably risk managers bought to be taught in quantitative money. In any case,
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they additionally ought to be knowledgeable about exchanging or having had been
presented to front office work. They should likewise have the option to pass on complex
monetary items and hazard the executive’s ideas, practices, and cycles to senior
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less specialized crowds, including front office chiefs, senior administration, and the
directorate. As top managerial staff put forth an attempt to have Risk Management as a
customary point in the plan, it is extremely normal for risk managers to be called upon,
to sum up, the different dangers that the firm is presented to, and delivering significant
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results that can be followed up at the chief advisory group level by request of the
directorate or the danger council. Solid relational and relational abilities are basic for
risk managers to be fruitful.
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4. Procedure:
Risk managers should continually reposition their associations to endure and
fill in a fierce climate. They need to realize how to react to circumstances in the best
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manner and put forward significant objectives for the association. Anyone could say
that they are going to “decrease the association’s danger”. It is another assignment out
and out to get where the association should be and make SMART objectives (Specific,
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Measurable, Achievable, Relevant, and Time-Limited) to achieve this. An effective
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danger expert will know what procedures to execute, how to go with regards to them,
and when to begin the cycle. Look at this MindTools manual for getting more familiar
with how SMART objectives can help any individual or association.
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5. Versatility:
One consistent with regards to any dangerous climate is that it won’t ever be
stale. At some point, a danger expert might need to deal with a standing emergency;
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the following, a worker introducing danger to information uprightness. They are relied
upon to be imaginative and adaptable, ready to forestall or take care of any issue that
introduces itself.
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Notwithstanding conventional dynamic methods, they should have the option

to split away from setting up practices and carry out inventive thoughts. Without this
capacity, a danger expert might end up encompassed by dangers with no viable
method to control them.
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Especially in huge, complex associations, the capacity to work rapidly and under
tension is additionally key. An emergency is frequently difficult to anticipate, and when
they occur, the danger group should act rapidly and handle numerous needs without a
moment’s delay to limit the effect of the danger and keep it from happening once more.
)A
6. Working under pressure:

Dangers can change in a moment when something surprising happens and you
should have the option to refresh your methodologies and respond immediately. If
(c
things turn out badly, your business congruity plans need to make all the difference.
Strain regularly comes from the unusual. Attempt to track down a volunteer chance,
for example, exhortation line work or working with youngsters, when the unusual may

occur whenever. Everybody has times when they figure, “For what reason did I do this
Notes
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to myself?”. Monitor those occasions. On the off chance that you consented to play in
a foundation show during your test period, for what reason was it advantageous to put
yourself under that amount of tension?
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Stay as quiet as possible and don’t get bothered by sudden inquiries. You’re
permitted to pause and think before you offer your response.
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A piece of functioning admirably under tension is realizing how to keep away from
additional strain. On the off chance that you get your application in well before the cut-
off time, you’re exhibiting that you can keep your cool during an unpleasant application
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measure and not let things wind up crazy.
As apparent tension frequently comes from unusual. With the change in

circumstance, the prerequisite of association continues to change. So, one of the key
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dangers administrator expertise is to remain quiet and keep cool during an upsetting
circumstance. Some portion of functioning admirably under tension is realizing how to
keep away from additional strain.
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Key danger supervisor expertise isn’t simply limited to the exactness of work yet
additionally to finish the function admirably before the cut-off time. This shows a decent
enthusiastic remainder balance during an unpleasant work pressure circumstance.
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Entrepreneurial motivation is the cycle that actuates and propels the business
visionary to apply a more significant level of endeavors for the accomplishment of his/
her enterprising objectives. All in all, entrepreneurial motivation alludes to the powers
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or drive inside a business visionary that influences the heading, force, and ingenuity
of his/her willful conduct as a business person. So, to say, an inspirational business
person will want to apply a specific degree of exertion (force), for a specific timeframe
(tirelessness) toward a specific objective (course).
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Entrepreneurial motivation is the method involved with changing a normal person

to an amazing money manager, who can set out open doors and help in expanding
riches and monetary turn of events. It is characterized as different components animate
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longings and initiates energy in business visionaries which cause them to achieve a
specific objective. Business is the most common way of distinguishing qualities and
openings which help in the perfect acknowledgment for planning, creating, and showing
another business to confront dangers and dangers adequately.
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Motivation is viewed as “the inward express that stimulates exercises and

coordinates or channels conduct towards the objective”.
Motivation is the interaction that excites activity, supports the movement in

)A
progress, and directs the example of action.
In like manner, the pioneering inspiration might be characterized as the interaction

that actuates and propels the business person to apply a more elevated level of
endeavors for the accomplishment of his/her entrepreneurial goals. At the end of
(c
the day, the pioneering inspiration alludes to the powers or drive inside a business
visionary that influences the heading, force, and timelessness of his/her willful conduct
as a business visionary. So, to say, a persuasive business visionary will want to apply
a specific degree of exertion (force), for a specific timeframe (tirelessness) toward a

Notes
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specific objective (heading).
The requirement for and meaning of pioneering inspiration in running an endeavor
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can best be valued as: “While an association resembles a vehicle, business ventures
as driving and the enterprising inspiration as fuel or force that makes the hierarchical
vehicle move or run.”
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To turn into an entrepreneur one ought to distinguish their qualities and openings
from the outer climate. Here motivation assumes a significant part in recognizing their
qualities to become solid pioneers or amazing entrepreneurs which makes them to
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tolerate dangers and face vulnerability to arrive at pre-portrayed objectives.
Motivation makes entrepreneurs by satisfying more elevated level necessities like

acknowledgment, regard, and self-realization. Different hypotheses clarified inspiration
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as an affecting idea, it can bring out secret gifts and innovativeness, and it adds to
the singular objectives and social advancement. Maslow’s need order hypothesis,
Hertzberg’s two-factor hypothesis, and David MC Cleland’s gained needs hypothesis
demonstrated that inspiration can bring energy, excitement, imagination, and efficiency
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in satisfying the ideal destinations.
Motivation services as the explanation, or reasons, that force somebody to keep
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endeavoring and working. It gives expectation and clearness when conditions become
hard and debilitating. Enterprising motivation, then, at that point, is basic in somebody’s
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choice to set out on the excursion of making a business.
Motivation is additionally critical to those that entrepreneurs work with and

cooperate with. Business people need to comprehend, tap into, and support their
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inspiration for beginning a business, yet they likewise should have the option to rouse
others to get tied up with their thoughts. Regardless of whether it’s inspiring venture
gatherings to give start-up financing or rousing inevitable representatives during the
good ‘old days, motivation is vital to keeping everybody in total agreement about the
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mission of the new business and running after satisfying that.
Nature of Motivation
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The idea of inspiration arising out of the above definitions can be communicated as
follows:
1. Motivation is inward to man:

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Motivation can’t be seen in the light of the fact that it is inward to man. It is
externalized through conduct. It enacts the man to push toward his/her objective.
)A
2. A Single rationale can cause various practices:

An individual with a solitary longing or rationale to procure eminence in the general
public might move towards joining legislative issues, accomplish extra schooling and
preparation, join indistinguishable gatherings, and change his superficial presentation.
(c
3. Various thought processes might bring about single conduct:

It is likewise conceivable that the equivalent or single conduct might be brought

about by numerous thought processes. For instance, if an individual purchases a

Notes
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vehicle, his such conduct might be brought about by various intentions, for example, to
look appealing, be decent, acquire acknowledgment from a comparative gathering of
people, separate the status, etc.
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4. Motivations travel every which way:
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Like tides, motivations can arise and afterward vanish. Motivations that arose at
a state of time may not stay with a similar force at another mark of time. For example,
a business visionary excessively worried about the amplification of benefit procuring
during his underlying age as an entrepreneur might turn his anxiety towards other
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higher things like contributing towards humanitarian exercises in friendly wellbeing and
instruction once he begins acquiring adequate benefits.
Motivations associated with the climate: The climate wherein we inhabit a state
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of time may either trigger or smother our intentions. You likely have encountered
climate or circumstance when the power of your appetite got simply you smelled the
scent of tasteful food. You might want an astounding exhibition sacking the principal
position in your assessment and yet may likewise be very touchy to being avoided and
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hated by your cohorts if you truly perform excessively well and get a lot of acclaim and
appreciation from your educators. Along these lines, what this demonstrates is that
human conduct is the aftereffect of a few powers contrasting both way and aim.
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Motivation initiates inborn qualities to accomplish a specific objective, many
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inquiries emerge while knowing this idea, for example, for what reason can’t every
one of the people become pioneers or entrepreneurs even though they face some
inspiration during his/her lifetime? Who can become compelling inspirations? What
kind of inspiration can impact one’s conduct? Is the degree of inspiration choosing
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the force of externalized conduct? And so on, pioneering inspiration is a mental cycle
where every one of the thought processes may not impact with similar power, it shifts
with the discernment levels of the people and factors liable for the inspiration. Here and
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there a solitary thought process can impact to become solid and incredible business
visionaries, these intentions might come from different factors as follows.
1. Internal Factors:
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●● Need for self-completion:

It is clarified by Maslow and it is the high-level need that alludes to the craving
for self-satisfaction. The need for opportunity and self-satisfaction makes the people or
representatives of the association cause them to turn out to be amazing pioneers or
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business visionaries.
●● Confidence:
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People having a positive attitude get spurred by discovering openings during basic
circumstances moreover. Uplifting outlook and insight propel a person to turn out great
all-around during troubles and predicaments too.
●● Uplifting perspective:
(c
The uplifting perspective is the main factor that propels people to become fruitful
business visionaries. Adjusting an uplifting perspective can lead a person to foster

useful reasoning; it inspires them to turn out to be amazing business visionaries. At long
Notes
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last, the uplifting outlook can demonstrate how significant they are.
●● Self-inspiration:
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The vast majority of the fruitful and incredible business visionaries are self-
propelled; here they satisfy the ideal goals by spurring themselves. However numerous
people have thoughts yet they can’t put those for business advancement, but self-
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propelled individuals can make choices to carry out thoughts.
2. External Factors:
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●● Impact:
The impact of relatives, companions, and society spurs the people to become
business visionaries. The degree of impact shows an impact on the person, conduct,
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and improvement, it comes from the outer climate. Here individuals get affected by
seeing effective business visionaries or by the expressions of others.
●● Accessibility of assets:
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Asset accessibility spurs to a serious degree to become entrepreneurs,
accessibility of land, work, cash, hardware, and materials make the individual begin
another business. However, there is innovativeness, knowledge, responsibility, and
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energy in the people, yet the inaccessibility of assets turns into an impediment for new
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participants or entrepreneurs.

Innovation implies recharging - a reestablishment that is effectively dispatched
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available. Developments are significant for new businesses to go to the market;

however, even huge organizations need advancements altogether not to be surpassed
by more modest ones. However, for what reason are a few organizations more
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innovative than others, and which job does worker inspiration play here?
The main factor for an organization’s capacity to enhance is the inspiration

and responsibility of its workers. Inventive workers secure a maintainable market
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advantage, bring cash and consequently contribute significantly to the endurance of an

organization. The development culture of an organization is straightforwardly identified
with the responsibility of directors and representatives.
It’s perhaps the hardest test a chief faces: How would you get your kin to think
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innovatively—to shake things up—while keeping your ordinary tasks moving along as
planned? Advancement isn’t cared for in most other business capacities and exercises.
There are no dependable formats, rules, measures, or even proportions of progress. It
might be said, each demonstration of advancement is an interesting accomplishment, a
)A
jump of the individual—or the aggregate—creative mind that can be neither anticipated
nor recreated. Development, so, is everything except the same old thing.
But then certain associations are by one way or another ready to think of good
thoughts again and again. A portion of the thoughts are intended for new items, some
(c
for better approaches for working, others are intended for new techniques, still others
for completely new lines of business. Is there confidentiality to these organizations’

triumphs? Can different associations gain from their models? To discover, people went
Notes
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to individuals generally qualified to reply—not creators (although you’ll track down
a couple of them in the gathering), however those who’ve had the option to motivate
others to imaginative virtuoso. We asked them a solitary inquiry: “What’s the one thing
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you’ve done that most enlivened advancement in your association?” Here’s what they
needed to say.
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How they have dealt with energizing development is to make it conventional.
I mean we don’t separate it from the remainder of our business. Many organizations
make advancement headline news, and all that uncommon consideration has a
confusing impact. By serving it up as something outlandish, you confine it based on
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what’s not unexpected. Organizations don’t trumpet their quality affirmation measures
or their bundling as unique practices since they’re essential for the fiber of what they
do—they’re a common business. The equivalent must be valid for advancement. Too
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often we’ve seen corporate development programs that are what might be compared to
football’s Hail Mary pass—they start with a wide range of expectations and energy, yet
in the end they once in a while produce results. Also, for what reason would they? For
development to be solid, it should be tended to methodically, similar to any business
si
issue in which you characterize the issue and afterward tackle it: What would we like to
achieve, and how? What assets will we require? Who will be in the group? How would
we spur and prize them? What’s more, how might we gauge achievement?
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The present generally pursued business ability is the capacity to start. In any case,
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the impression of the inventive strategy is as yet because of self-restricting suspicions
about aha lights blazing over the top of some enlivened virtuoso as opposed to the very
much oversaw tirelessness of normal individuals. At P&G, they consider inventiveness
not as a secretive endowment of the skilled few however as the regular undertaking of
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making non obvious associations—uniting things that don’t ordinarily go together. One
approach to do that is to take a gander at inconsistencies in the commercial center. For
instance, we fostered an item called ThermaCare, an expendable warming cushion that
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gives controlled low-level warmth to no less than eight hours. How’d we concocted it?
Bunches of maturing gen X-errs out there have a wide range of squeaks and muscle
twinges. Medications can treat the aggravation, yet they can likewise make different
issues, similar to stomach illnesses. So, you have an inconsistency: People would
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prefer not to live with torment, yet they would prefer not to take painkillers. We saw
that inconsistency on the lookout and saw it as a challenge to make an advancement
item, one that settled a conundrum without requiring any trade-offs. You can perceive
how openings like this can come up in pretty much any industry. In the broadcast
communications business, before call pausing, for instance, you could either chat on
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the telephone or get calls yet not both.
●● Advancement culture:
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Just 10% of organizations with low responsibility have an advancement

and blunder culture, while the rate in organizations with high responsibility is
91%. A comparable picture can be seen when chiefs manage botches made by
representatives. 77% of profoundly dedicated organizations use botches as a wellspring
of progress, while just 21% of the less dedicated use them as a wellspring of progress.
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●● Chiefs as mentors:
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In organizations with an undeniable degree of worker responsibility, administrators
center more around individuals related administration errands like instructing, input, and
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representative inspiration. In organizations with an undeniable degree of responsibility,
all supervisors (100%!) consider themselves to be mentors for their representatives; in
organizations with a low degree of responsibility, this just applies to 34 percent.
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●● Criticism:
95% of chiefs give normal input in organizations with high responsibility and
guarantee that workers are persuaded. In those with low responsibility, just 21% give
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criticism and for just 10% worker inspiration is an issue.
●● Dynamic position:
95% with high responsibility award the important dynamic power. With a low
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degree of responsibility, this is just 52%.
The review not just outlines the monetary significance of spurred representatives,
yet in addition shows that the ideal administrators are considerably more significant
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inspirations than workplaces, motivations, or pay rates.
Little signals - enormous impact

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An organization needs representatives who show business ventures inside
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the organization - individuals who have the attitude of a start-up organizer yet work
for an organization. Corporate business visionaries are an outrageous illustration
of advancement culture, yet even little motions concerning the director bring the
development culture the correct way:
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●● Tune in:
Numerous advancements of representatives with high development potential
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fall flat because their bosses overlook ground-breaking thoughts - or don’t tune in.
From their day-by-day practice, in any case, representatives normally think best with
regards to their space of liability and are probably going to perceive the chances for
development. It is subsequently even more critical to pay attention to workers as needs
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are - these are significant driving forces for inspiration and representative fulfillment.
●● Data trade:
To propel workers, the trading of data is similarly pretty much as significant as the
warning capacity of the board. If supervisors furnish their workers with vital information,
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this likewise fortifies inspiration.
●● Seriously approaching thoughts:

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A few chefs don’t treat their workers’ thoughts and ideas seriously, which at last
addresses a critical snag to an enthusiastic development culture. Sometimes this
disguises the desire of the unrivaled towards the worker, who draws out an imaginative
thought. Envy is on a basic level an enemy of advancement culture and in this manner
a significant obstruction to setting up a positive development culture.
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●● Appreciation:
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Numerous representatives have smart thoughts, yet right away oddball them since
they don’t know about the worth of their thoughts or because their thoughts are not
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esteemed. The executives regularly tragically say that ground-breaking thoughts are
excessively costly - as per the proverb “We surely will not! Also, when novel thoughts
emerge, there is regularly an absence of input from the chief. The equivalent applies to
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acclaim and appreciation for the way that the representative has gone out of the way
to work out and propose a ground-breaking thought. Notwithstanding, perceiving and
liking representative thoughts as needs be is a significant persuasive perspective and
ought to be moored likewise in the advancement culture.
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Conclusion: Using the capability of representatives for advancement
A fundamental achievement factor for each advancement is the development
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culture in an organization. Directors assume the vital part here. If they consider
themselves to be mentors, move in a dynamic position, give ordinary input and value
the thoughts of their workers, the inspiration of the representatives and consequently
the creative capacity of the organization increases altogether.
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4.1.6 Nature of Employee Morale
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Employee morale is characterized as the mentality, fulfillment, and in the general
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standpoint of representatives during their relationship with an association or a business.
A worker that is fulfilled and roused at the working environment normally will in
general have a higher assurance than their partners. Representative commitment and
worker fulfillment assume a significant part for workers to be content in their working
environment.
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Representatives who are distraught in their working environment, who continually

grumble and deny about the different traits in an association, similar to worker
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strategies, work environment culture, offices at work, and so forth will, in general, have
a low representative spirit. This is very apparent in their conduct. Worker resolve is an
intricate idea since it includes a ton of variables that influence their confidence.
Employee morale is indispensable to association culture-a positive aggregate

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mentality will establish a positive workspace for everybody. Assuming your association
has a helpless assurance or a culture of misery, it is plausible that in your association
workers have a low or negative spirit that can unfavorably influence the efficiency of
the association. It can prompt the more prominent worker to wear down, just in the first
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place.
Employee morale is the relationship that a specific worker or a gathering of

representatives has with their work and the association they work for. High employee
)A
morale implies that representatives are glad, and this is intelligent in the sort of work
they produce. Then again, a low representative spirit brings about less usefulness and
cynicism among workers. It is significant for each association to persistently keep the
worker spirit high.
(c
As indicated by Dalton E. McFarland, confidence is essentially a gathering marvel.

It is an idea that depicts the degree of great or ominous disposition of representatives

by and large to all parts of their work—the work, the organization, their assignments,
Notes
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working conditions, individual laborers, bosses, etc.
So how might you gauge the assurance of workers? It’s simple! The following are a
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couple of tips that you can use to check if the representative confidence is high or not:
1. Stay associated with your workers: A criticism is a viable instrument to

keep in contact with your representatives. Send a representative commitment
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overview at opportune stretches to get direct input regarding how connected
with or propelled are your workers. The reactions to the review will assist you
with deciding their disposition and thus their confidence.
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2. Your administrators should be mentors: Over the last decade or thereabouts,
the meaning of a supervisor has somewhat moved from being a drill sergeant to
a mentor. Your chiefs ought to resemble mentors. They ought to have the option
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to assist workers with learning and develop inside the association. A decent
director or a boss won’t just persuade a representative to perform better yet
additionally assist them with settling issues and related issues.
3. A decent working environment culture: Like you can’t just incite worker
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commitment, you can’t expect that a negative work culture will assist with
initiating a high resolve. Decent work culture will assist representatives with
getting comfortable quicker particularly the new workers. New representatives
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are generally powerless to work environment tattles. One negative word can
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settle on them questioning their choice to be in the association along these lines
influencing your worker Net Promoter Score.
Factors Affecting Employee Morale

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Employee morale is a perplexing wonder and relies upon different components.

Here is the distinctive standard that influences worker confidence:
1. Association Itself: While it might sound astonishing, however, the actual

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association is one of the most significant components that influence worker

assurance. An association impacts a worker’s demeanor towards his/her work.
The standing of an association can develop regardless, their demeanor towards it.
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2. Kind of work: The idea of work a representative is performing at his/her work

environment additionally is incredibly dependable to decide the confidence.
On the off chance that the representative is relied upon to play out a similar
errand day in and out, there is going to be fatigue-related to it sometimes.
It can exacerbate circumstances for a worker. Chaotic association structure
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likewise influences representatives, if the worker feels that he/she is only a

gear-tooth machine in a plant line, rather than a genuine individual, this also
may unfavorably influence their resolve.
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3. Individual ascribes: Mental and actual wellbeing assumes a significant part

in deciding representative assurance. On the off chance that the worker isn’t
genuinely or intellectually fit, this can be a likely snag in their advancement
and learning in their work environment. There are likewise other significant
(c
components that worry about their advancement and thus their confidence:
age, training capability, long periods of involvement, word-related levels, reward
discernment, and comparative elements.

4. Management and criticism: The degree of oversight obtained by a

Notes
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representative is a gigantic factor that influences the spirit. On the off chance
that the workers feel they have no bearing or don’t comprehend the hierarchical
objectives and responsibilities, then, at that point, it is the work of the bosses
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and the authority in the association to get them in total agreement. Yet, there
ought not to be an excess of obstruction as well if the representatives are
allowed to work their confidence will be high.
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5. Balance between serious and fun activities: Most associations neglect to
perceive the significance of a solid balance between serious and fun activities.
Significantly, the representatives have a few exercises to unwind while they
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are busy working. It’s not just about the foosball culture or a stock loaded
down with food. Significantly, legitimate direction and guidance are given to the
representatives at whatever point is required.
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Simple Ways to Boost Employee Morale
Employee morale is controlled by how representatives see their workplace and
their general degree of fulfillment in their work environment. Representative spirit
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directly affects worker maintenance. An uninvolved or miserable representative won’t
remain for long in an association that he/she can’t excuse their objectives and progress
with.
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Here are the 4 straightforward methods of boosting representative spirit in your
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working environment as referenced by HR pioneers across the globe:
1. Smooth out work dependent on abilities: It is significant for Human Resources

to select and appoint individuals dependent on their range of abilities. You can’t
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enlist a legal counselor and anticipate him/her to do undertakings that you would
anticipate that an engineer should do. Permitting individuals to work dependent
on their ability is a mutually beneficial arrangement for the two representatives
and bosses.
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The ability of the executives is intricate, yet vital. On the off chance that you
can’t deal with your representatives and relegate them undertakings that they
are employed to complete then it’s an ideal opportunity to re-examine your
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systems because plainly, they won’t yield the normal outcomes. Along these
lines, ensure you put resources into a skilled HR group, so the ability that is
obtained performs well and stays glad.
2. Train them well for a proficient turn of events: Most associations neglect
m
to comprehend the significance of preparing their staff. Be it representative

onboarding or some other proper preparation measure, representatives ought
to be exceptional to play out their assignments at work and accomplish their
)A
objectives. There ought to be a spending plan doled out toward the beginning of
the monetary year that works with the preparation and improvement program.
This preparation will assist representatives with honing their abilities, which won’t
just help them yet in addition to the association. An efficient and independent
labor force is each association’s fantasy, so pay for these courses that touch
(c
the creative mind and spark interest, assemble certainty and prompt a high-
resolution labor force.

3. Be available to criticism: Many associations today advance the entryway

Notes
e
strategy, where a representative is allowed to communicate what they feel to
their bosses or their announcing authority since they are available to input. On
the off chance that your representatives realize their voice is being heard and
in
they are considered as a vital piece of the association, this will reflect in their
certainty.
nl
On the off chance that the representatives feel they can’t import data to you,
there are more prominent possibilities that the data won’t ever be passed on
to you, rather you will simply make adjustments inside the group and you will
be distanced from whatever is occurring in your group. Rather than be open to
O
input, straightforwardness is the need of great importance for most associations
thus it ought to be.
4.1.7 Measures to Improve Morale
ty
Morale addresses a composite of sentiments, mentalities, and opinions that add to
general sensations of fulfillment. It is a perspective and soul influencing ability to work,
si
which, thus, influences organizational and individual destinations. It depicts the general
gathering fulfillment.
1. High morale and low morale:

r
On the off chance that the energy and ability to work at a gathering is high, we
ve
can say the spirit is high as well as the other way around. Similarly, as great wellbeing
is fundamental for an individual, high assurance is essential for an association. High
spirit addresses a disposition of fulfillment with want to proceed and readiness to
make progress toward the objectives of the gathering. Under states of high assurance,
ni
laborers do not have many complaints, dissatisfactions, and grievances. They are clear
with regards to the objectives—individual and authoritative—and are happy with human
relations in the association.
U
2. Assurance versus inspiration:

Assurance ought to be recognized from inspiration. Albeit both are intellectual
ity
ideas, they are very unique. Assurance is a composite of sentiments, mentalities, and
sentiments that add to the general sensation of fulfillment in the work environment. Yet,
inspiration is something that moves an individual to activity.
It is a course of animating individuals to activity to achieve the ideal objective. It is

m
a component of drives and needs. Inspiration is concerned with ‘preparation of energy’,

though confidence is worried about ‘assembly of opinions’.
3. Confidence influences efficiency:

)A
Confidence directly affects efficiency. High confidence prompts high efficiency and
low assurance prompts low usefulness.
4. Estimation of morale:
(c
It is difficult to gauge resolve straightforwardly as it is an immaterial perspective of

the specialists.

Four strategies can be utilized for estimating the resolve of the representative in a
Notes
e
roundabout way:
a. Perception:
in
The chiefs can quantify the assurance of the representatives by distinctly noticing
and concentrating on their exercises and conduct. Since the administrator is near the
location of the activity, they can generally discover surprising practices and report
nl
immediately. Perception is anything but a truly dependable method of estimating
confidence.
O
b. Disposition or assurance review:
Study assists with knowing the assessment of the representatives either by direct
meeting or by-polls. Endeavors are made to discover the perspective of representatives
ty
about their work, colleagues, administrators, and the association.
c. Confidence pointers:
si
Representative assurance can be estimated by inspecting organization records
regarding non-appearance, work turnover, vacillations in yield, quality records,
unnecessary waste, and scrap, preparing records, mishap rate, and the number of
complaints documented.
r
ve
d. Idea boxes:
Workers can be approached to place their grievances, fights, and suggestions
in idea boxes even without unveiling their personalities. Resolve creates long-haul
advantages, for example, working on the generosity and expanding the efficiency for
ni
the association, and a fulfilled worker is a resource for the association.
Importance/ Benefits of Morale:

U
Confidence is a significant piece of the hierarchical environment. It is a crucial

element of association achievement since it mirrors the perspectives and opinions of
authoritative individuals towards the association, its destinations, and arrangements.
ity
Spirit is the all-out fulfillment that representatives get from their work, their work bunch,
their chief, their association, and their current circumstance.
Advantages of High Morale:

Assurance of workers should be kept high to accomplish the accompanying
m
advantages:
1. Willing collaboration towards targets of the association.

)A
2. Dedication to the association and its initiative or the executives

3. Great discipline—deliberate adjustment to rules and guidelines
4. High levels of workers’ advantage in their positions and association
5. Pride in the association
(c
6. Decrease of paces of truancy and work turnover

7. Cheerful representatives are useful workers

Notes
e
Low spirit shows the presence of mental turmoil. Such a circumstance will have
the accompanying unfriendly outcomes;
in
1. High paces of non-appearance and work turnover
2. Unnecessary protests and complaints
nl
3. Dissatisfaction among the laborers
4. Grinding among the laborers and their gatherings
O
5. Opposition towards the administration of the association
6. Absence of discipline
Measures to Improve Morale
ty
Morale buildings are a constant cycle that can’t be halted in any event, briefly.
Resolve can’t be kept up with at an undeniable level for eternity. It is dynamic.
Resolve building might be done either on an individual premise or ground premise.
si
Spirit expanding on a bunch of premises is consistently best. Gathering spirit can
be expanded by understanding the overall vibes. It will consequently accomplish the
singular assurance.
r
Following are the significant stages to accomplish high confidence among
ve
representatives:
1. Reasonable compensation:
Compensation ought to be reasonable and fair since this is the main factor
ni
influencing the representative resolve. The essential and impetus pay plans ought to be
reasonable.
U
2. Motivations:
Financial and non-money-related motivators to the workers are imperative to
inspire them. Workers can be offered additional advantages to further develop spirit.
These can incorporate downtime, the alternative to telecommuting, an adaptable
ity
timetable, or straightforward acknowledgment when work is all around done.
3. Workplace:
The state of work ought to be cordial for the worker’s psychological and actual
m
prosperity. Representatives might be more worried about elusive advantages, for

example, the balance between fun and serious activities and the air in the work
environment.
)A
4. Occupation fulfillment:
All around set representatives to invest heavily and premium in their work and feel
fulfilled.
(c
5. Two-way correspondence:
Two-way correspondence (vertical and descending) is important to know the
feelings of workers in the association. Association strategies and projects ought to be

Notes
e
appropriately conveyed to workers.
6. Preparing:
in
In this always advancing universe of new advancements and thoughts, workers
need to keep awake to date with improvements in their field. Preparing gives mental
nl
fulfillment to workers and works on their exhibition.
7. Labourer’s interest:
O
Laborers should be counseled and taken into certainty at whatever point a change
is to be presented.
8. Gathering of people exercises:
ty
These exercises urge workers to take on a local area administration project
together. Workers will probably partake in the chance to reward their neighborhood
community. The board ought to energize the gathering of people exercising by the
si
laborers. This will assist with creating more prominent gathering cohesiveness for
building high spirit.
9. Guiding: r
ve
Worker directing assists the representatives with their issues and objections
and gives them a chance to refocus since the instructor is fair-minded. It assists with
lessening non-appearance and work turnover. The arrival of enthusiastic strain alone
may serve to limit disappointments.
ni
10. Approaching workers with deference:

Treat workers with kindness and regard their merit—say please and much obliged.
U
Get some information about their end of the week, and check out projects that they are
dealing with. Subsequently, a despondent worker is an inefficient representative.
An organization needs to seek after strategies like the ones referenced above to
ity
assist its business with turning into a more agreeable work environment. Not exclusively
will representatives begin to anticipate their workdays, the association will profit from
the freshly discovered proficiency.
11. Applause:
m
Recognition of representatives in broad daylight for the great work done

enormously assists with utilizing further excitement and energy in the specialists. It
additionally expands the assurance of the workers.
)A
12. Opportunity of Worker:

If a specialist is dealt with like a pinion in a wheel in the processing plant and isn’t
given free hand in working, he loses his advantage in the work. To keep up with the
(c
laborer’s assurance at a significant level, it is fundamental that he ought to be given a

serious level of opportunity. Be that as it may, opportunity ought not to be given at the
expense of discipline.

13. Acceptable conduct of Authorities:

Notes
e
The conduct of administrators, chiefs, and others enormously help in deciding a
representative’s confidence. Specialists ought to be circumspect towards the laborers.
in
On the off chance that the specialist is continually hindered and reprimanded, he loses
regard for his prevalence which thus lets down his resolve.
nl
14. Workers Participation in Management:
Workers’ interest in administration is the best apparatus for working on
representatives’ spirit. It expands certainty and makes the feeling of belongingness
O
concerning the specialists. Since a laborer partakes during the time spent dynamic, he
feels that his situation in the firm has been raised.
Different Factors:
ty
Notwithstanding the previously mentioned measures certain different factors
additionally contribute in further developing resolve viz; taking care of complaints at
appropriate stage and time, representative advising; appointment of power; legitimate
si
advancement strategy, aggregate bartering, and so forth
4.1.8 Steps to Success of Morale

r
Each business professes to esteem employee morale; however, few find ways
ve
to work on the functioning conditions and encounters of their representatives. At the
point when leaders need to zero in on resolve, they frequently get diverted by other
significant issues that should be addressed to stay with the running.
In any case, representative assurance truly is a fundamental organizational issue.

ni
Investigations have discovered that organizations with undeniable degrees of spirit

have 26% higher income than those that don’t. As you will see, the representative spirit
is a benefits issue.
U
All in all, how might you further develop representative assurance? It takes more
than a couple of worker trips and birthday festivities. Follow these means to review your
present activities practices to see where your resolve is low.
ity
On the off chance that your representatives are hauling themselves into work with
a gloomy appearance and office chuckling is non-existent, then, at that point, staff
resolve certainly needs a lift.
Low representative spirit could be costing your business substantially more than
m
you might suspect. Just as adding to higher non-appearance, lower consumer loyalty,
and lower staff consistency standards, low confidence among your staff will likewise
affect general efficiency and productivity. Worker resolve is basic for representative
)A
commitment and that is the way to business achievement.
1. Speak with Your Team Members

Your workers comprehend that you can’t let them know everything – there is data
(c
that is classified or unessential to their positions. Notwithstanding, if your colleagues

begin to imagine that you are intentionally concealing data, they will begin to get
dubious and lose trust in your supervisory crew.

Correspondence shows that you regard and care for your group. At the point when
Notes
e
you share uplifting news and speak the truth about awful news, you show that you
accept that your group can deal with the obligation. Frequently, the board attempts to
restrict data to just chiefs and fundamental staff. They would prefer not to stress over
in
their workers or make tattle, which normally has the contrary impact. Workers regularly
expect to be the most noticeably terrible and may babble further with one another until
the genuine news comes out.
nl
At the point when you convey, you let your staff in on that everybody is in the same
boat collectively. You trust your representatives as grown-ups. You will uphold them
through difficult situations and let them in when potential issues emerge.
O
2. Put resources into the Careers:
Perhaps the most ideal approach to help representatives resolve without paying
ty
your staff extra is to put resources into your group. As per a review by Gallup, 59% of
millennial workers say freedoms to learn and develop are profoundly essential to them.
Similarly, 44% of Gen Xers and 41% of people born after WW2 say the same thing.
Your colleagues would prefer not to work in impasse occupations. They need their
si
managers to remember them and assist them with developing.
Working environment advancement will keep your representatives keen on their

r
positions, yet it can likewise fill in as a device to remember them for their work. Your
staff will feel remunerated for their ability with the capacity to accomplish astonishing
ve
and testing work.
3. Keep Your Mission and Objectives Clear

ni
Perhaps the best inquiry your representatives can pose is “the reason.” They
need to know why they are attempting to achieve something, why interaction is done a
specific way, and why they should mind. Organizations that consider worker fulfillment
will respond to these inquiries and urge them to pose more.
U
At the point when your workers have clear objectives and a mission at the top of
the priority list, they can think of novel plans to accomplish it. They can be inventive
and innovative. For instance, assuming you need to offer the best client care in your
ity
industry, your colleagues can recognize staying focused with clients and freedoms
to smooth out measures. This is better for your organization over the long haul
than basically anticipating that employees should do whatever you tell them. An
unmistakable mission can likewise cause your group to feel like everybody is dealing
m
with a similar group to achieve their objectives together. This forms kinship and a
feeling of direction in the work.
4. Pay Your Employees

)A
This might appear to be an undeniable idea, yet many organizations struggle to

pay their representatives on schedule and precisely. To start with, your in-house
group is delicate to changes in organization accounts. On the off chance that your
representatives don’t figure you can pay them, they may frenzy and begin searching
(c
for more steady work. Then, your agreement and independent specialists need to get
compensated rapidly and hope to be compensated fairly. On the off chance that you
underestimate your project workers or require a while to pay them, they will discover
other work somewhere else. This implies that your ability pool shrivels as the best
Notes
e
workers for hire quit working with you.
Ensure you have solid finance, the executive’s framework and basic representative
in
time clock programming to pay your colleagues rapidly. Something else, your
confidence issue will turn into a worker maintenance and procurement issue too.
nl
5. Set aside Effort to Recognize Your Staff
It is not difficult to get so occupied in your everyday work that you don’t perceive
your representatives. You need them to work more earnestly and are so caught
O
up with cut-off times that it is difficult to appreciate the big picture. Be that as it may,
regardless of how bustling you get, you can generally save time to perceive your group
and express gratitude toward them for their work – this mainly requires a couple of
moments. A couple of kind words in a gathering or a cautiously created email can do
ty
more to support resolve than any group-building movement can. Remember that not
all representatives need a major public declaration about their work. While these are
pleasant, certain individuals may favor a one-on-one gathering of congrats or a written
by hand note of appreciation. Realize what your colleagues like so you can show your
si
acknowledgment in the most ideal ways conceivable.
6. Ensure Your Morale-Focused Activities Are Meaningful

r
At the point when organizations attempt to help resolve, they regularly go to group
ve
snacks, excursions, and other parties. Nonetheless, your representatives can without
much of a stretch tell when you are doing this fair to assuage them or are focusing on
the endeavors to bring down-level workers.
ni
For instance, a birthday festivity with five minutes of cake and a delicate suggestion
to return to work will not help the spirit. Neither will a worker lunch get-together that
chiefs are excessively occupied to (otherwise known as don’t have any desire to) join
in. These endeavors are bandages on issues and don’t resolve the main problems of
U
doubt and absence of correspondence.
In case you will present assurance-building exercises, ensure your whole group is
ready. These confidence programs will not work if by some stroke of good luck half of
ity
your staff cares. Furthermore, be real with regards to the exercises you pick. Discover
something your group loves and allow them to appreciate it. In case you will dispatch a
drive like this, ensure you are doing it right.
m
7. Distinguish Low Morale Within Your Staff

While a significant number of these means center around undeniable level
approaches to help resolve, supervisors likewise need to see individual colleagues and
)A
distinguish where assurance is low. While assurance might be high in by far most of
the organization, certain groups may be exhausted or incredulous of one another. You
might have to make certain strides inside a particular group to deal with the spirit or
change the mentalities of those representatives.
For instance, one group may feel like they are rarely perceived while different
(c
groups get all the commendations. Moving that one group to another area or including
them in different undertakings can all the more likely assist them with acknowledging

how esteemed they are and support their confidence – without rolling out clearing
Notes
e
improvements across the association. A couple of little changes to representatives with
low spirits can hugely affect your general association.
in
1. Thinking differently for determining various opportunities in the market and evaluating
the problems in the market is known as_________.
nl
2. ___________ is a cycle that propel the business visionary to apply a more significant
level of endeavour for the achievement of enterprise objectives.
O
3. _________ is characterized as the mentality and fulfilment of certain requirements
during the relationship with an association or a business.
4. It is a family business that is being operated by the members of the family is known
ty
as_______________.
5. _____________ is a partner claiming the partnership by a word which is is he is not
an actual partner but will be acting like one.
si
Summary
●● The challenges of an individual in the entrepreneurship could constitute of
r
arrangement of the funds and leaving the career for starting a new business.
ve
●● An individual can overcome the entrepreneurial challenges by focusing on time
management and making optimum utilisation of the team.
●● It is very important for the business organisation to focus on the factors that result
to failure in the business.
ni
●● High employee morale will help in willing collaboration towards the achievement
of the target of the company and better performance of the employees in the
company.
U
●● The employee morale can be increased by arranging employee collaboration

programs so that it becomes easier for the employees to collaborate with each
other.
ity
Activity
1. What is the nature of motivation?
2. What are the different factors that affect employee morale?
m

1. What could be different challenges faced by an entrepreneur?
)A
2. How can entrepreneurial challenges be overcome?

3. What are different skills required by an individual for successful implementation of
the business idea?
4. What are the different internal and external factors that affect the motivation?
(c
5. What are the different steps to success of morale?

Glossary
Notes
e
1. Showcasing strategy- it refers to implementation of various strategies and
identification of the opportunities to experimentation.
in
2. Versatility - it refers to identifying the dangerous climate and adopting different
strategies in different conditions.
3. Insightful abilities- it refers to different abilities undertaken by an individual for
nl
successful implementation of the plans.
Further reading
O
1. Book – chasing innovation
Author- Lily Irani
ty
Answers
1. Critical thinking
2. Entrepreneurial motivation.
si
3. Employee morale
4. Joint Hindu family business.
5. Partner by estoppel. r
ve
ni
U
ity
m
)A
(c

Unit - 4.2: Legal Form of New Venture

Notes
e
Objective
in
●● Enlist different types of business ownership forms.
nl
●● To evaluate different types of societies.
●● To evaluate different types of companies.
O
4.2.1 Various types of Business Ownership
Business is nothing but the one who is making money by selling or purchasing or
producing some products. The business provides profits and losses during the services
ty
or different stages of a business. And the business owner is responsible for the liability
of debt that occurred during the business. Types of ownership are explained below.
1. Sole proprietorship
si
2. Joint Hindu Family Business
3. Partnership
r
4. Co-operative Societies
ve
5. Joint-stock company
Sole Proprietorship:
A sole proprietorship is a business run by a single person. Anyone can start a sole
ni
proprietorship in India. To start a Proprietorship business in India, he must be at least

18 years old and should be an Indian citizen. There is no minimum investment required
to start this business, and it can be started even with Rs.1 as the initial investment.
U
Sole Proprietorship is a single-man business organization, who fully owns and manages
the entire business under its supervision. A sole proprietorship is a simple form of a
business without any legal registration and it’s a suitable choice to run a small or
medium scale business or industry. In a proprietorship, the personal income tax
ity
is paid from the profit of his business by a single owner. It is the easiest method to
start or establish a small-scale business as it doesn’t involve much government rules
and regulations. This type of business is very common in the sectors like consultants,
medical clinics/pharmacies, self-contracting firms, freelancers, other self-employed
m
individuals, etc.
And many individuals do their business under their name and it doesn’t require
any unique name or anything. It’s a less regulated business from the government/
)A
legal side. A sole proprietorship has unlimited liability and fewer legal formalities. And
the whole business is under the control of a single person. A sole proprietorship has
minimum compliance requirements. Therefore their agreements are confined to yearly
filings for sales, services, taxes. Sole ownership business is so easy to begin and set
up a business module within 15-20 days with the help of the pan card. And one needs
(c
to have GST registration in place. A sole proprietorship is economical as it requires

minimum compliance with no requirement of any auditor.

Advantages of a sole proprietorship:

Notes
e
●● cheap and easy
●● Has limited government rules and regulations
in
●● GST relaxation
●● Personal income
nl
●● Easy to shut down
●● Direct incentives/encouragement
●● Easy modification
O
●● Direct contact/individuality
●● Controlling
●● Privacy
ty
●● Tax advantages
●● Suitable for small business
si
Disadvantages of a sole proprietorship
●● Unlimited personal liability
●● Less protection
●● Limited resources r
ve
●● Limited skills
●● Less growth
●● Limited business life
ni
●● Fundraising difficulty
Joint-Hindu Family Business

U
A joint Hindu Family business is a specific type of business organization or firm

found in India. It is an old type of business that is formed and carried out by male
members of an undivided Hindu family. Three successive generations of the individual
in a particular Hindu undivided family can be members of this business and it is run
ity
according to Hindu law. Joint Hindu Family business is controlled by the eldest
individual in an undivided Hindu family, generally called “KARTA ‘’. All the members in
that particular business have equal share and ownership over that ancestor’s property
and those members are called coparceners. A minimum of two male members should
m
exist in an undivided Hindu family to start a business. And also some ancestor property
is required to start this type of business.
Advantages Joint Hindu Family Business

)A
●● Effective control on business

●● There is continuity in business
●● There is a limited liability
(c
●● High cooperation and loyalty between the members

Disadvantages of Joint Hindu Family business

Notes
e
●● Availability of limited resources
●● Unlimited liability of KARTA
in
●● Power or superiority of KARTA
●● Limited controlling and managerial skills
nl
Features of Joint Hindu Family business
●● It should include a minimum of 2 male members to form a business
O
●● Effective control by KARTA
●● Limited liability to members
●● Continuity of business is there
ty
●● Individual cooperation is much appreciated.
Partnership
si
r
between them whereas, in another type, liability is limited between them. A partnership
ve
ni
Features of Partnership
Formation:
U
It means the number of people involved in a business. A minimum of two persons

is required for partnership. An agreement is established between those two partners. An
agreement can be either talk or write.
ity
Liability:
All the partners are responsible for the liabilities of their business. If the company’s
assets are not enough to make up its business liabilities, private/personal properties are
pledged to cover the liabilities. And the liabilities can be solved with help of any one of
m
the partners who have enough financial background.
Risk bearing:
)A
equally responsible for any loss. They should share the same loss of life profit.
Decision making:
(c

making.

Continuity:
Notes
e
in
nl
Members:
According to the new companies act, 2013 says about the number of members
in a partnership and should not be more than 100. But the previous companies act
O
shows that the maximum number of partnerships should be limited to 10 or 20 for a firm
structure.
Mutual agency:
ty
This is a legal tie-up between the partners in a partnership business.
Advantages of partnership
si
●● Easy to form
●●
r
It is cheaper and requires fewer paper works.
ve
●● Low taxation procedures.
●● Easy to stop
Disadvantages of partnership
ni
●● Unlimited liability
●● All are equally responsible for any debt or legal obligations
Types of partners
U
Active partner:
An active partner runs the daily activities of the entire business. Capital to the
ity
business is contributed by active partners. They have an equal share in profit and
loss. If the active partner wants to resign/retire, he must provide prior notice .He is
responsible for liabilities of the business even after his resignation/retirement, unless he
provides a public notice.
m
Sleeping partner:
)A
Secret partner:
(c


Nominal partner:
Notes
e
The nominal partner will only be having a name in partnership. He does not provide
any capital, thus profit and loss need not be shared with him. But he will be liable to
in
outside people and others for what his partners have done.
Partner by Estoppel:
nl
O
Partner in Profits Only:
ty
Minor Partner:
si

r
There are four types of business partnerships.
ve
●● General partnership
●● Limited partnership
●● Limited liability partnership
ni
●● Limited liability limited partnership.
Cooperative Societies
U
Cooperative societies mean working together which means an association of

individuals who join and work together for the objective of the welfare of the members.
Such societies aim to protect their economic interest from the hands of middlemen’s
preoccupancy with a desire of making higher profits. It must register under the
ity
cooperative society act 1912.
Features of Cooperative Societies

m
Voluntary membership:
Anybody can join or anyone can leave as per his desire. Membership is open to all
caste, religions, or any gender.
)A
Legal Status:
Registration for cooperative societies is a must. It gives an identity to society that is
distinct from its members.
(c

Limited Liability:
Notes
e
The liability of the members in cooperative societies is limited which is an extent to
the total amount contributed by the members.
in
Control:
All the decision-making and controlling activities are carried by an elected
nl
managing committee.
Service motivation:
O
The purpose of cooperative societies is to help in the welfare of their members. If
any profits are generated, it is given to all members equally.
Advantages of cooperative societies
ty
●● It is easy to form
●● It has the Government full support
si
●● Economy in business
●● Liability is limited.
●● Equality in voting
Disadvantages of cooperative societies

r
ve
●● Resource availability is limited
●● Management is not in an inefficient way
●● Open to all that leads to lack of secrecy
ni
●● It has government control

●● Different opinions exist
U
Types of cooperative societies:

●● Consumers cooperative societies
●● Producers cooperative societies
ity
●● Marketing cooperative societies

●● Farmers cooperative societies
●● Credit cooperative societies
m
●● Cooperative housing societies
Joint-stock company:
)A
“shares”. Many of the large companies are joint-stock companies.
Features of Joint Stock Company

(c
Artificial Person:
An artificial legal person can hold property in his name. It is created by the law.


Notes
e
borrow, transfer, buy/purchase, or can enter into the contracts. The company can do
anything. The company can charge or be charged.
in
Separate Legal Entity:
nl
Formation:
O
get formed. Many legal papers and other rules and regulations are involved in it.
ty
Perpetual Succession:
under the law only. The company has continuity in its working.
si
Even if someone new joins or leaves due to death, it will not affect the functioning
of the company directly. All changes are under the law. Formation and closure of the
company are under the law
r
ve
Control:
elected by shareholders.
ni
Liability:
U
to the maximum of capital contributed by them.
Common seal:
ity
by a company seal.
m
Advantages of joint-stock company

●● A large amount of capital
)A
●● Limited liability
●● Continuity:
●● Efficient management:
●● Growth and expansion:
(c
●● Transfer of interest:
●● High public confidence

●● Social responsibilities
Notes
e
Disadvantages of Joint Stock Company
●● Complexity in formation
in
●● Lack of secrecy
●● Lack of motivation
nl
●● Decision is delay
●● Too much control by the government
●● Oligarchic management
O
●● Conflict in interest
ty
r si
ve
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4.2.2 Sole Proprietorship and Its Features

A proprietorship is a business run by a single person. In the past, most businesses
used to be run as a proprietorship. Nowadays, most businesses in smaller towns
U
and cities are run as Proprietorship. There is a certain qualification required to start a
proprietorship. Anyone can start a sole proprietorship in India. To start a Proprietorship
business in India, he must be at least 18 years old and should be an Indian citizen.
ity
There is no minimum investment required to start this business, and it can be started
even with Rs.1 as the initial investment. Sole Proprietorship is a single-man business
organization, who fully owns and manages the entire business under its supervision.
And in a sole proprietorship, business and person are the same and there is no
legal entity in that. A sole proprietorship is a simple form of a business without any
m
legal registration and it’s a suitable choice to run a small or medium scale business
or industry. In a proprietorship, the personal income tax is paid from the profit of his
business by a single owner. It is the easiest method to start or establish a small-scale
)A
business as it doesn’t involve much government rules and regulations. This type of
business is very common in the sectors like consultants, medical clinics/pharmacies,
self-contracting firms, freelancers, other self-employed individuals, etc. And many
individuals do their business under their name and it doesn’t require any unique name
or anything. It’s a less regulated business from the government/legal side.
(c
And government involvement is very less in this type of business. Therefore

the government security is a bit less as they are not registered anywhere. So, full

responsibility is for the one who manages the entire business. Those who are running
Notes
e
their own business must fill up the schedule C form when filing their annual return tax.
Later small sole proprietorship changed into another complex business structure such
as LLC, PSC, corporation, etc. And if the business grows gradually, they will start to hire
in
employees to their company and make a successful business firm. Simply we can say
that sole proprietorship is single ownership. There is no sharing of losses and profits.
It’s a one-man capital. The sole proprietorship has unlimited liability and fewer legal
nl
formalities. And the whole business is under the control of a single person. The sole
O
And one needs to have GST registration in place. The sole proprietorship is economical
as it requires minimum compliance with no requirement of any auditor.
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Features of a sole proprietorship:
r si
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Formation and closure:

There is no separate law involved in a sole proprietorship. Sole proprietorship
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requires hardly fewer legal formalities to start a business. It may require a license to
start the firm. And the closure of the business is also very easy. There is not too much
legal involvement in closing a sole proprietorship. A sole proprietorship is so cheap and
easy to form. It is so simple and less expensive to start a business. And the process
m
of starting a new sole proprietorship is varying from country to country, state to state,
medium to medium. In all ways, it requires zero capital to start and minimum paper
formalities. And it requires the minimum cost to maintain and repair. The only work is
to get permission or a license to start your business. It may depend upon the individual
)A
country or state. Single proprietorship can be closed at any time, whenever you require.
You don’t need any permission from anyone or require any legal paper formalities to
close your business. Therefore it is so easy to form as well as the closure of single
proprietorship.
(c
Liability:
Notes
e
in
car, or any personal land to cover his debts. For example: let’s say a company ABC is
a single proprietorship and has a liability of 1 lakh rupees at the time of dissolution. But
business assets are worth 50000 rupees only. In this case, he needs to go for some
nl
other ways like selling his home, or other properties to repay his debt of the remaining
50000 rupees.
O
Risk Bearer:
The risk of failure of a business is borne by the sole proprietor alone. When it is a
success and generates high profits, then all the benefits go to the sole proprietor only.
He can enjoy all the business benefits all alone. So it’s his responsibility to bring his
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business to success from a risk bearer stage.
Control:
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freedom of action. All the decisions related to his business lies within sole proprietors
only. Sole proprietors can plan their ideas without any interference from others. He is
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the one who manages and controls the whole business firm. Whatever decisions are
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taken by him, he is the one responsible for any difficulties related to that particular
decision.
No Separate Entity:
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As per business law, there is no distinction between a sole proprietor and his
business. Because the business doesn’t have a unique identity, that is different from its
owner. And the owner or the businessman is responsible for all the activities related to
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the business. Whatever happens, he is the one responsible for it.
Lack of Business Continuity:

A sole proprietorship has a single owner. And all the control and management
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activities are done by a single person only. As the proprietor and owner are the same,
there is a chance of shutting down the firm permanently. If something had happened to
him like death, bankruptcy, imprisonment or physical injury may lead to a permanent
closure of the business. Therefore, a sole proprietorship has no guarantee of its
m
working. The closure can happen at any period. That is why it has a short span of life in
all senses.
Less Growth:
)A
(c
limited in a sole proprietorship

Limited Managerial Skills

Notes
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fail in the multi-task. He cannot perform the task as an experienced employee. Maybe
in
he is good at purchasing, but if he doesn’t have any selling skills, it may lead to loss. So
in a sole proprietorship, all the activities are performed by a sole proprietor.
Privacy:
nl
O
secrecy in his business. You can check all your finance accounts by yourself. Privacy is
an important factor in a business. More privacy means more security for your business.
You should not provide any account statements, any documents related to business, or
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any legal papers to anyone. It’s all managed by a single owner only.
Capital:
si
In a sole proprietorship, the money employed by a businessman himself in the
business is from personal resources. If it is not enough to run his business, he may also
borrow money from his friends, relatives, or any other close individuals.
Single Ownership:
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Sole Proprietorship is a single-man business organization, who fully owns and
manages the entire business under its supervision. And in a sole proprietorship,
business and person are the same and there is no legal entity in that.
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Registration of sole proprietorship:

There are a few procedures to follow for registering a sole proprietorship.
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1. Pan Card: There must be a pan card associated with the proprietor. If not, just apply
for a pan card and get it as soon as possible. Pan card is the only document that
requires starting a small sole proprietorship. Sometimes it may differ from state to
state.
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2. Provide a unique name for your business: You should provide a unique name to
your business. It is the identity of your business and owner.
3. Apply for a bank account in the name business: So that all the business-related
transactions can be done through to your business account. So it is safe and secure
m
to transfer the amount and for other transactions.

4. There is no need for any registration required to start a sole proprietorship. But
)A
some common registrations are required. Registration is required only for getting a
license to your business.
a) Businesses need to get a registration certificate under the shops and
establishment act of the state.
(c
b) Business must be registered under GST if the annual turnover exceeds greater
than 20 lakh. This is only applicable for those who are doing a large business

and generates a huge profit and makes a turnover above 20 lakh. In this case,
Notes
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a sole proprietor must register his business under GST.
Documents Required:
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The following documents are essential for the registration of a sole proprietorship.
1. ID Proof
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2. Pan Card
3. Registered Office Proof
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4. Bank Account Details
Complains Required:
●● Must file an annual income tax return.
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●● Must file GST returns if registered under GST.
●● Must File TDS, if liable for a tax audit.
si
Time to taken for registration:
Once we submit the bank details, registration certification under the shop and
r
establishment act of respective states, and GST registration, it will take 10 days of
processing depending on the authority in respective sections or departments.
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How to convert sole proprietorship into LLC:
To convert sole proprietorship into LLC, we need to follow the following procedures.
●● File the documents related to the business to the state secretary.

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●● Re-file the company name as (doing business as”) to maintain your company
name.
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●● Obtain company’s employee identification number (EIN) from the IRS (Indian
Revenue Service)
Conclusion:
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A sole proprietorship is a single-owned running business start with a zero capital

investment. A sole proprietorship has many features with its pros and cons. They are:
it’s a single ownership establishment, individual risk-bearing, no need of legal entity,
there is much freedom to operate in anyways, unlimited liability, one-man control and
it’s small in size, lack of business continuity.
m
4.2.3 Advantages and Disadvantages of a Sole Proprietorship

)A
A sole proprietorship is a business run by a single person. Anyone can start a sole
proprietorship in India. To start a Proprietorship business in India, he must be at least
18 years old and should be an Indian citizen. There is no minimum investment required
to start this business, and it can be started even with Rs.1 as the initial investment.
Sole Proprietorship is a single-man business organization, who fully owns and manages
(c
the entire business under its supervision. A sole proprietorship is a simple form of a
business without any legal registration and it’s a suitable choice to run a small or
medium scale business or industry. In a proprietorship, the personal income tax
is paid from the profit of his business by a single owner. It is the easiest method to
Notes
e
start or establish a small-scale business as it doesn’t involve much government rules
and regulations. This type of business is very common in the sectors like consultants,
medical clinics/pharmacies, self-contracting firms, freelancers, other self-employed
in
individuals, etc. And many individuals do their business under their name and it
doesn’t require any unique name or anything. It’s a less regulated business from the
government/legal side. A sole proprietorship has unlimited liability and fewer legal
nl
formalities. And the whole business is under the control of a single person. A sole
O
And one needs to have GST registration in place. A sole proprietorship is economical as
it requires minimum compliance with no requirement of any auditor.
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Sole Proprietorship
Advantages Disadvantages
Cheap and easy Unlimited personal liability
si
Limited Government rules and regulations Less protection
Personal income Limited resources
GST relaxation Limited skills
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Easy to close/stop Less growth
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Direct incentives/encouragement Limited business life
Easy modification Fund raising difficulty
Direct contact/individuality Risk of wrong decisions
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Privacy
Controlling
Suitable for small business
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Quick Decision making:

Self-satisfaction or self-accomplishment
Benefits to society
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Simple, dynamic and flexible
Advantages of a sole proprietorship

m
Cheap and easy:

A sole proprietorship is so cheap and easy. It is so simple and less expensive to
start a business. And the process of starting a new sole proprietorship is varying from
)A
country to country, state to state, medium to medium. In all ways, it requires zero capital
to start and minimum paper formalities. And it requires the minimum cost to maintain
and repair. The only work is to get permission or a license to start your business. It may
depend upon the individual country or state.
(c
Limited government rules and regulations:

A sole proprietorship consists of very little regulation from government authorities.

Simply we can say that sole proprietorship can be started without any registration under
Notes
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any government authorities but adhere must be a required license.
Personal income:
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The income from your business is calculated as your income. Nothing will go out
for any other work apart from the maintenance of your business. All income generated
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belongs to the proprietor himself.
GST relaxation:
O
In a sole proprietorship, a person gets an exclusion from GST. And GST is
mandatory only for a business that has turned over greater than 20 lakhs.
Easy to close/stop:
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Single proprietorship can be closed at any time, whenever you require. You don’t
need any permission from anyone or not required any legal paper formalities to close
your business
si
Direct incentives/encouragement:
Sole proprietorship provides direct incentives as there is a direct relationship
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between efforts and rewards. So, incentives are based upon the owners’ interest and
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hard work. If the hard work or efforts are high, there is more income or rewards in his
business. Therefore there is a high profit in his business. Hard work in a single-owned
business is directly proportional to the profit of that business.
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Easy modification:
All the modifications can be done in sole proprietorship based on owners’ decisions
only. No one else can take part in it. All the decisions from top to bottom can be taken
U
by the owner only. No need to consult any others for any opinion. Therefore, there is
no wastage of time. And quick decisions and immediate action can be generated. It
provides easy changes in business concerning environmental changes. Simply we can
say that sole proprietorship is more flexible to carry out.
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Direct contact/individuality:
All the actions are done personally. He is the only one who deals with the customer
at every time. There is no second or third party in between. There is no sales team to
m
meet sales. All can be done by the owner itself. He is the one who contacts customers
directly with customers.
)A
Privacy:
secrecy in his business. You can check all your finance accounts by yourself. He
(c
doesn’t want to publish the firm’s account statements to the public.

Controlling:
Notes
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freedom of action
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Tax advantages:
Only personal income tax can be paid from the profit governed by the business
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entity. The business itself doesn’t want to pay any tax. And he can be free from paying
an unemployment tax for himself.
O
Suitable for small business:
A sole proprietorship is most suitable for starting a small-scale business as requires
only less capital and personal attention.
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Quick Decision Making
A sole proprietor has full freedom in decision-making in business. And he doesn’t
want to consult any other for taking decisions. All the decisions are based on his
si
thoughts and ideas. Quick decision-making helps to timely capitalization of market
opportunities as and when they arise. That means he can easily convert his assets or
income into capital.
r
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Self-satisfaction or self-accomplishment:
Sole proprietorship gives self-satisfaction in doing business alone. It gives personal
satisfaction while working for oneself. If the business becomes a success it not only
contributes to a sense of self-satisfaction but also gives a sense of self-accomplishment
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and confidence to move forward. Confident in the sense he may get a level of courage
to face difficult situations in his business.
U
Benefits to society:
A sole proprietorship has benefited a lot to nearby societies. In a sole
proprietorship, the ownership is diffused. If the business turns into a successful firm,
it employs some people. And the customer gets what they want very close to them or
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very nearby places.
Simple, dynamic, and flexible:

A sole proprietorship is so simple, dynamic, and flexible. The owner can do
m
anything according to his ideas. E.g.: if there is a demand for a particular product, then
he can increase the product scale and reach. And if the customer demand is low on a
particular product, then he can limit the stock and purchase and orders. So that he can
)A
save some amount of money. He is the owner and manager, so there is no wastage
of resources or products. He can perform according to demand and customer taste of
preference.
Disadvantages of a sole proprietorship:

(c
There are lots of disadvantages related to a sole proprietorship:

Unlimited personal liability:

Notes
e
in
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car, or any personal land to cover his debts.
Less protection:
O
As you are not registered under any government or state, you will not get any
security or consideration from the state or government. When it is registered under any
state, it has some security. When it is not registered, you have no support from the
state-side when it comes to liability.
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Limited resources:
A sole proprietorship has limited resources. So due to these limited resources,
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he can only arrange a limited capital which is not suitable for large-scale business.
Resources are limited to his savings or lending from others. The bank or other financial
institutions hang back to provide a long-term loan or other financial support to a single
r
proprietor. Lack of resources is the main reason for less growth of the business and
stands as a small business as always.
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Limited skills:
fail in the multi-task. He cannot perform the task as an experienced employee. Maybe he
ni
is good at purchasing, but if he doesn’t have any selling skills, it may lead to loss. So in
a sole proprietorship, all the activities are performed by a sole proprietor. The owner itself
takes all the managerial responsibilities like accounts, purchase, sales, marketing, etc. In
U
most cases, the sole proprietor is unable to perform well in all areas, which leads to an
imbalance in decision-making in all these areas. And he can’t hire any new employees or
opt for any alternative methods due to limited resources. A sole proprietorship is suitable
for small-scale activity businesses where customers demand personalized services.
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Less growth:
m
limited in a sole proprietorship.
)A
Limited business life:

As the proprietor and owner are the same, there is a chance of shutting down the
firm permanently. That means if something happened to the owner or any death, due to
huge debt, or due to bankruptcy, a business may come to an end. That is why it has a
(c
short span of life in all senses.

Fundraising difficulty:
Notes
e
As it is single ownership, it is very difficult to raise the fund. And sole proprietorship
doesn’t have any guarantee, it may end at any time, and there is no link with any other
in
entities, it is very difficult to get funds from a secondary or third party. Here the investors
are finding it difficult to invest in sole proprietorship as there are no personal assets or
properties for protection. And due to the credibility issues, a sole proprietorship may find
nl
it difficult to get loans from banks or financial institutions, or any other lending parties.
Lenders can provide loans to sole proprietorships at their own risk. As there is no
guarantee for repayment because the loan may become defaulted if the owner dies or
is disabled.
O
Risk of wrong decisions:
The sole proprietor is the one responsible for taking decisions. Sometimes, it may
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lead to risk in business. Nobody is there to assist or advise him or to guide him in the
right way.
Conclusion:
si
A sole proprietorship is suitable only for those who can manage everything
indefinitely. It is suitable where the investment is required in a small amount with low
r
risk and involves quick decision making and personal attention to the customers.
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4.2.4 Joint Hindu Family Business
found in India. It is abbreviated as “HUF”. It is an old type of business that is formed
ni
and carried out by male members of an undivided Hindu family. Three successive
generations of the individual in a particular Hindu undivided family can be members
of this business and it is run according to Hindu law. Joint Hindu Family business is
controlled by the eldest individual in an undivided Hindu family, generally called “KARTA
U
‘’. All the members in that particular business have equal share and ownership over
that ancestor’s property and those members are called coparceners. A minimum of two
male members should exist in an undivided Hindu family to start a business. And also
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some ancestor property is required to start this type of business. Hindu joint family is
allowed to purchase the properties and assets in its name. A separated PAN is allotted
to its partnership and Hindu joint family business has unlimited liability. This type of joint
Hindu family business is found in India only.
m
Joint Hindu family businesses are strictly run by a Hindu law and it consists of two
components
Dayabhaga: This type of form can be found in parts of West Bengal and Assam. In
)A
this type, both the male and female members of an undivided Hindu family are allowed
to be coparceners. And after the death of the father, his son can claim the right to
ancestral property.
Mitakshara: This type of business can be found in all parts of India except West
Bengal. Only male individuals of Hindu families can participate in proprietorship. That
(c
means only male members of an undivided Hindu family are allowed to be coparceners.

In Mitakshara law, if the coparcener dies, his share of interest is automatically merged
Notes
e
with remaining surviving coparceners.
In both cases, KARTA leads to control over all other members, and the decisions
in
made by him are final. In 2017, Delhi high court ruled that even female members in an
undivided Hindu family can play the role of KARTA.
Gender discrimination lies in joint Hindu family
nl
The present government has taken many steps to erase gender discrimination
from various communities in India. However, there is some area in a community
where gender discrimination is still practiced. And the government should bring some
O
law of order to change this following situation and make a free gender discrimination
community in India.
The government put a discussion on the status of a coparcener daughter born after
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or before the amendment act, shall have equal rights, the same as a son.
The Reserve Bank of India doesn’t consider females a KARTA of a joint Hindu
family and they refuse to open a bank account of Hindu joint family with a female as
si
KARTA of the same.
Hindu joint family will follow the existence only if a common male ancestor is
available from whom the HUF has started. And a property that is inherited from cannot
r
be a UHF property. But the self-earned property that can be put into HUF only if there is
ve
valid HUF exists legally.
Some other rights that are needed to be acceptable are, In case of divorcees, a
female can inherit property from her mother for her former children’s maintenance.
Then it requires a right that such property should also include or be regarded as a part
ni
of UHF with the females as “KARTA ‘’. And where there is no existence of any UHF,
then females should be allowed to create a new HUF with that property. And in case
of adoption, where daughters are decided to adopt children, then a female can inherit
U
property from her parents, Then it requires a right or rule that such property should also
include or be regarded as a part of UHF with the females as “KARTA”. And where there
is no existence of any UHF, then females should be allowed to create a new HUF with
that property. This will give social or financial security to their daughters.
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Other law and order should be ruled for that all the authorities of India should
recognize a female as a KARTA of HUF in case she inherits property from a male
or female ancestor. And in such HUF, husbands or children should be allowed to
participate as coparceners of the wife’s UHF.
m
Gender Equity in joint Hindu family:

According to Hindu amendments, 2005, a daughter of a coparcener from an
)A
undivided joint Hindu family has the right to become a coparcener, blood relation. At the
time of partition, coparcenary properties of a Hindu joint family shall be equally shared
to all the coparceners of that family irrespective of their gender.
In 2017, Delhi high court ruled that even female members in an undivided Hindu
(c
family can play the role of Karta.

Even a married daughter has equal share and rights in the property of a joint Hindu
Notes
e
family. Fathers wife, mother, paternal, grandmother, widow of parents have all the rights
in the partition property of the joint Hindu family. If she isn’t entitled to that partition
activity, she has the right to reopen that partition process.
in
Features of joint Hindu Family Business
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Formation:
To start a joint Hindu family, at least there should be two members in the undivided
Hindu family and they should possess ancestral property by them. If they have
O
inherited property, then it is easy to start a joint Hindu family business. Membership for
this business is carried out by birth. And there is no need for any agreement.it is run
according to the Hindu succession act, 1956.
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Liability:
The liability of all the members in joint Hindu business is limited except to KARTA.
Karta has unlimited liability. For other members, it is limited. KARTA is the head of
si
UHF. That is why he has unlimited liability. KARTA is much affected by high risks in the
business.
Control: r
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The entire control of the business is in the hands of KARTA. He goes for
discussions with coparceners about various decisions. But the decision made by
KARTA is independent. And all the decisions and actions taken by KARTA are final and
legally banned. The decisions made by him are bound to all other members of the joint
ni
Hindu family business.
Continuity:
U
There is always continuity in joint Hindu family business. Even after the death
of a KARTA, they will run continuously as the next elder person will take the charge
of KARTA. And he became the KARTA of the business and brought stability to the
business.in case, if they don’t want to continue the business even after the death of
ity
KARTA, they can terminate the business by mutual decisions and agreements of the
remaining members.
Minor Members:
m
Adding members in the business is mainly on the birth of a family member in an

undivided Hindu family. So that minor individuals are also a part of such business.
Minor members will be a part of this business and they will get or enjoy all benefits of
)A
the organization.
Registration:
Joint Hindu business doesn’t require any kind of registration. It’s free from
(c
registration. It is run by Hindu law.

Membership:
Notes
e
Karta and coparceners are two types of members in joint Hindu family businesses.
Karta is the eldest son in the undivided Hindu family and he is the one who controls
in
and manages the entire business. The remaining family members who are part of this
business are called coparceners. The membership to a joint Hindu family is by birth.
Therefore there is no limit to membership in the business.
nl
Sharing of profits and loss
All the members in an undivided Hindu family have equal rights to enjoy or to share
O
the loss and profits of the business. Even it applies to minor members also.
Legal status:
Joint Hindu family business doesn’t have any legal status. Like other businesses or
ty
forms, it is free from legal formalities registration. Registration is not compulsory for joint
Hindu business. So that it is free from any legal status.
si
Partition:
The control and management of joint Hindu businesses are within the hands of
KARTA. The co-parceners do not have any right to ask or interfere in decisions made
r
by KARTA. If any member of the coparcener is not satisfied with KARTA’s decision or
ve
action, he can demand partition.
Rights of KARTA:
KARTA cannot give up the debts which are already due in a joint Hindu family
ni
but he can give receipts, draw bills, or even make contracts. KARTA has the authority
or right or pledge or sells property related to joint Hindu business while running the
business of the firm.
U
Dissolution:
The dissolution of the joint Hindu family business is done by equal wish/ decision
from all the members. No individual member has the right to dissolve it. If the joint
ity
family business has faced bankruptcy, adult members and the KARTA will be adjudged
bankrupt and the share of members is used to pay off the debts faced by the joint Hindu
family business. All the decisions in these cases are taken by all the seniority members
of the business family.
m
Flexibility:
Joint Hindu family business has a great rate of flexibility. Karta can expand or even
)A
change the way of business or he can even close the business. And the coparceners
generally agree with all the decisions made by KARTA during the business run.
Secrecy:
There is high secrecy held in joint Hindu family business. KARTA and coparceners
(c
should keep all the business secrets to themselves. It is not necessary to reveal to the

public. And there is no need to publish their account statement, or any other business-
Notes
e
related documents to the public.
Credit standing:
in
Joint Hindu family business has high credit standability in the market. It’s because
of the unlimited liability of the KARTA. And he appropriately does the business. He
nl
also may get some financial help from the bank and other loans. As a result of these,
compete strength is much higher in the market for joint Hindu family businesses.
Examples for Joint Hindu Family Business
O
Reliance industries limited:
Reliance industries limited is a type of joint Hindu family business firm. The
ty
headquarters of the company is located in Mumbai. The founder of Reliance industries
is Dhirubhai Ambani. Textiles, energy, pharmaceutical, etc. are the businesses engaged
by the Reliance industries limited.
si
Son of Dhirubhai Ambani, Mr. Mukesh Ambani is the KARTA of the business. He
is the chairman and managing director of the company. His wife and children are also
members of the company.
Other examples are: r
ve
●● Tata Sons Private Limited
●● Mahindra & Mahindra Limited
●● Haldiram’s Private Limited
ni
Conclusion
The joint Hindu family business is only found in India. The eldest member of the
family is responsible for managing the whole business activities. The liability of the
U
KARTA is unlimited as he is the key decision-maker in the entire business activities. And
the business is run by Hindu Law.

ity
found in India. It is abbreviated as “HUF”. It is an old type of business that is formed

and carried out by male members of an undivided Hindu family. Three successive
generations of the individual in a particular Hindu undivided family can be members
of this business and it is run according to Hindu law. Joint Hindu Family business is
controlled by the eldest individual in an undivided Hindu family, generally called
m
“KARTA”. All the members in that particular business have equal share and ownership
over that ancestor’s property and those members are called coparceners. A minimum
of two male members should exist in an undivided Hindu family to start a business.
)A
And also some ancestor property is required to start this type of business. Hindu joint
family is allowed to purchase the properties and assets in its name. A separated PAN
is allotted to its partnership and Hindu joint family business has unlimited liability. This
type of joint Hindu family business is found in India only.
(c
Joint Hindu family businesses are strictly run by a Hindu law and it consists of two
components

Dayabhaga: This type of form can be found in parts of West Bengal and Assam. In
Notes
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this type, both the male and female members of an undivided Hindu family are allowed
to be coparceners. And after the death of the father, his son can claim the right to
ancestral property.
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Mitakshara: This type of business can be found in all parts of India except West
Bengal. Only male individuals of Hindu families can participate in proprietorship. That
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means only male members of an undivided Hindu family are allowed to be coparceners.
In Mitakshara law, if the coparcener dies, his share of interest is automatically merged
with remaining surviving coparceners.
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In both cases, KARTA leads to control over all other members, and the decisions
made by him are final. In 2017, Delhi high court ruled that even female members in an
undivided Hindu family can play the role of KARTA.
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Advantages of Joint Hindu Family Business
Effective control:
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The entire control of the business is in the hands of KARTA. He goes for
discussions with coparceners about various decisions. But the decision made by
KARTA is independent. And all the decisions and actions taken by KARTA are final and
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legally banned. The decisions made by him are bound to all other members of the joint
Hindu family business. He is the king of all the decisions. This reduces the conflicts
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between the members and no one will interfere in this decision. The decisions made by
him are the final decisions.
Continuity in business existence:

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There is always continuity in joint Hindu family business. Even after the death
of a KARTA, they will run continuously as the next elder person will take the charge
of KARTA. And he became the KARTA of the business and brought stability to the
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business.in case, if they don’t want to continue the business even after the death of
KARTA, they can terminate the business by mutual decisions and agreements of the
remaining members.
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4.2.5 Advantages and Disadvantages of Joint Hindu Family Business
Limited liability of members:

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business.
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Increased loyalty and cooperation:

A joint Hindu family business is run by family members themselves. Therefore
there is loyalty and cooperation among each other. They respect and value each other.
(c
They welcome everybody’s opinion and decision and put it into consideration. There
is great cooperation between the joint Hindu family members. The business growth is
considered a great achievement in their family. It’s a pride for them. This results in more

cooperation and loyalty in between them. And secure higher better cooperation from all
Notes
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the members.
Credit standing:
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Joint Hindu family business has high credit standability in the market. It’s because
of the unlimited liability of the KARTA. And he correctly does the business. He also may
get some financial help from the bank and other loans. As a result of these, compete
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strength is much higher in the market for joint Hindu family businesses in joint Hindu
families, the credit facility is very high. This is the reason for the unlimited liability of
KARTA. And KARTA is maintaining a good and strong relationship with most of the
O
people. This will help him to raise the fund for his business.
Membership:
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Karta and coparceners are two types of members in joint Hindu family businesses.
Karta is the eldest son in the undivided Hindu family and he is the one who controls
and manages the entire business. The remaining family members who are part of this
business are called coparceners. The membership to a joint Hindu family is by birth.
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Therefore there is no limit to membership in the business. However, three successive
generations in the male line are restricted.
Easy to start the business: r

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To start a joint Hindu family, at least there should be two members in the undivided
Hindu family and they should possess ancestral property by them. If they have
inherited property, then it is easy to start a joint Hindu family business. Membership for
this business is carried out by birth. And there is no need for any agreement. it is run
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according to the Hindu succession act, 1956. Joint Hindu business doesn’t require any
kind of registration. It’s free from registration. It is run by Hindu law.
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Secrecy:
There is high secrecy held in joint Hindu family business. KARTA and coparceners
should keep all the business secrets to themselves. It is not necessary to reveal to the
public. And there is no need to publish their account statement, or any other business-
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related documents to the public.
Prompt decision:
KARTA is the only person who performs control and guides the right direction over
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the business. He may not turn to ask anybody in taking the decisions. This gives a
quick decision on the business. Being a single king, he makes decisions very fast and
takes advantage of this opportunity.
)A
Economy:
For any business, the economy is a must. In a Hindu joint family business, the
economy is well planned and maintained by family members. Karta spends the money
with great care and economy.
(c

Natural affection between members:

Notes
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The joint Hindu family businesses are run by family members themselves.
And there is a natural love and affection among family members, which helps to run
in
the business efficiently and very smoothly. Affection between each other reflects
cooperation and success in the business. And there is least quarrel among family
members.
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Freedom:
KARTA has full freedom in selecting the business in his choice and direction. He
O
has the freedom to choose and express anything. He has the right to dissolve the
business too.
Disadvantages of joint Hindu Family Business
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Limited resources
The joint Hindu family business has limited resources. They mainly depend on
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ancestral properties. Therefore the expansion of business is limited. The available
resources are not sufficient to meet business expansion. Thus, it results in the size of
the business remaining small.
Unlimited liability of KARTA:

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business. Apart from the responsibility of taking a decision and managing the business,
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kARTA has adversely affected the disadvantages of unlimited liabilities. Sometimes,

his assets or properties are used to repay the debt amount. He took the entire burden
regarding debt liabilities.
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The dominance of KARTA:

KARTA cannot give up the debts which are already due in a joint Hindu family
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but he can give receipts, draw bills, or even make contracts. KARTA has the authority
or right or pledge or sells property related to joint Hindu business while running the
business of the firm. Sometimes, the management activities of KARTA cannot be
accepted by other business family members. This may lead to a chance of quarrels
between the members or bring a conflict among members. That even may cause a
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break in the family line.
Limited managerial skill:

)A
Karta acts as an all-rounder in the joint family member business. But he is not
an expert in doing all the managerial activities. As a result of this, there is a chance
of wrong decisions that will suffer business growth. So KARTA’s inability in taking
decisions in the proper direction may reflect in business losses. All these factors
(c
generate a poor profit for the joint Hindu family business. Moreover, KARTA didn’t get
enough time to do all the activities like management, production, sales, or marketing.

Short business life:

Notes
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Sometimes, the joint Hindu family business has a short span of life. All the
decisions are taken by KARTA. If any quarrel happens between the members, there is a
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chance of shutting down the business.
Disproportionate relationship between work and reward:
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The relation between work and reward is not in proportion. Karta is the only man
who acts as an earner but the profits are equally divided among all the members. E.g.:
KARTA is the kingmaker of the joint Hindu family business. And do all the activities
O
from top to bottom. And his hard work and proper direction in the business generate
high-value profit. And these profits are equally divided and shared with the entire
member including KARTA. Karta didn’t get even a single extra penny. This shows the
disproportionate relationship between work and reward.
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Limited members:
The joint Hindu family business is run by family members only. Outside individuals
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can’t take part in the membership of a joint Hindu family business.
Misuse of the power:

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All the business activities and power of joint Hindu family business is in the hands
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of KARTA only. That means the management is centralized by the KARTA’s power.
No one can interfere in KARTA’s activities and power. This may lead to misuse of that
power byKARTA and he uses that power for his own interest.
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Example for a joint Hindu Family Business
Mahindra & Mahindra limited

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Mahindra & Mahindra is a car manufacturing business firm situated in Maharashtra.

Its origin was in 1945 at Ludhiana. At its early stage, it was Muhammad and Mahindra,
later it turned into Mahindra and Mahindra. Kailash Chandra Mahindra and Jagdish
Chandra Mahindra and Malik Ghulam Muhammad are the founders of Mahindra and
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Mahindra. Anand Mahindra, the grandson of Jagdish Chandra Mahindra is playing the
role of KARTA. The remaining family members are also involved in this business. They
are the coparceners of this business. And the cooperation and strong decision-making
ability of its senior members results in the success of the company and standing like a
king from other manufacturing car companies.
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4.2.6 Partnership and Its Feature

)A

between them whereas, in other types, liability is limited between them. A partnership
(c
Types of Partners
Notes
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1. Active partner:
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An active partner runs the daily activities of the entire business. And contributes
capital to the business. They have an equal share in profit and loss. If the active partner
wants to resign/retire, he must provide prior notice .He is responsible for liabilities of the
business even after his resignation/retirement, unless he provides a public notice.
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2. Sleeping partner:
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3. Secret partner:
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4. Nominal partner:
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The nominal partner will only be having a name in the partnership. He does not
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provide any capital, thus profit and loss need not be shared with him. But he will be
liable to outside people and others for what his partners have done.
5. Partner by Estoppel:
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6. Partner in Profits Only:

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7. Minor Partner:
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Features of Partnership
)A
Formation:
The Indian Partnership Act, 1932 ruled for the formation of the partnership
business. It means the number of people involved in a business. A minimum of two
persons is required for partnership. An agreement is established between those two
partners. An agreement can be either talk or write. It’s a legal agreement where terms
(c
and conditions are agreed by mutual parties which include sharing of profits and losses,
conducting the business specified. The main aim of a partnership business is to run a

business by law to generate an income by profits. If people are doing business for a
Notes
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charity purpose it will not be considered as a partnership business.
Liability:
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Partners in a business organization have unlimited liabilities. All the partners are
responsible for the liabilities of their business. If the company’s assets are not enough
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to make up its business liabilities, private/personal properties are pledged to cover the
liabilities. And the liabilities can be solved with help of any one of the partners who
have enough financial background. The partners are together as well as individually
responsible for any liability facing their firm.
O
Risk bearing:
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equally responsible for any loss. They should share losses the same as profit sharing.
That means, the reward comes in the form of profit, they can share it. If it comes at a
loss, that could be also equally shared by partners.
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Decision making:
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making. The responsibility and day-to-day control of the firm are also shared by
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themselves. All the decisions in the firm are made or taken mutually.
Thus all the activities running in a firm are based on the efforts taken by all the
partners together.
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Continuity:
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Members:
At least a minimum of two members is required to form a partnership business
organization. Companies act 2013, says the maximum number of members should not
be more than 100. But the previous companies act shows that the maximum number of
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partnerships should be limited to 10 or 20 concerning firm structure. New companies

act 2014 says it should not be more than 50.
)A
Mutual agency:
This is a legal tie-up between the partners in a partnership business. All partners
are like agents and principals. Business is carried out by all the members together. One
partner acts as an agent of others and all his activities are tied up with other partners,
and he represents other partners also. He also can act as a principal. His thoughts,
(c
ideas, and other activities are tied upon them. Similarly, others also act like that.

Advantages of Partnership
Notes
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Easy to form and close:
in
A partnership organization can be formed very easily by a formal agreement
between two or more parties or business individuals, to manage and operate a
business and share the profits from that business. There is no compulsion concerning
the registration of the business organization. And the closure of the business firm is too
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easy a process that involves less complex legal formalities.
Balanced decision making:
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The partners look into their different areas of business at an expert level. Single
partner among those partners is not able or forced to do all the activities of the business
firm. All the activities are handled by all the partners and it will reduce the burden of
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work and lead to small mistakes in their decisions. If all the partners are involved in
the decision-making process, then the business activities are carried out very well with
these balanced decisions.
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More funds:
When compared to sole proprietorship, partnership businesses have more funds.
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The required amount of finance is contributed by all the partners in that specific
business.in this way, the firm can raise a huge amount of money which helps them to
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expand their business in more areas. Those funds can be used for additional project
operational activities whenever required.
Sharing of risks:
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In a partnership type of business, all the partners have equal rights in all types of
shares. All the partners must share the risk involved in running a partnership firm. Partners
should face all the types of risks affected in their business. They are equally responsible
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for any loss. They should share losses the same as profit sharing. By handling those
situations equally, it will reduce stress, anxiety, and burden on individual partners.
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Secrecy:
It is not necessary to publish its accounts information and other business-related
reports to the public. Legally it doesn’t require such kinds of activities. Therefore,
it can keep all the business ideas and documents related to business operation, etc.
confidential.
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Limitation of Partnership
)A
Unlimited liability:
All the company partners are liable for debt payment. They use personal assets
in case of an insufficient amount to repay the debt. All the partners are responsible for
the liabilities of their business. If the company’s assets are not enough to make up its
business liabilities, private/personal properties are pledged to cover the liabilities. And
(c
the liabilities can be solved with help of any one of the partners who have enough
financial background. This type of liability gives a drawback to any partner who is

having a large amount of wealth and assets. Because he has to pay the entire debt in
Notes
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case anyone fails or is unable to do so.
Limited resources:
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In every partnership business, there is a restriction in membership or partnership.
There is a limit for maximum partners in a particular partnership business. Hence with
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the limited members, the capital contribution becomes less. Due to that, the funds
collected from partners are insufficient to support the large-scale business activities
of the firm. This results in a situation where partnership firms will not expand in larger
areas. Its growth activities become limited to certain areas only with small size.
O
Possibility of conflicts:
A partnership business or firm is started with a mutual interest and mutual
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understanding between the parties. It’s run by those parties. In partnership business,
everything is shared. Even decision-making authority is shared. If there is any opinion
difference on the decision taken by partners may lead to conflict between partners.
Here, a Decision made by one partner is binding on another partner, these unwise
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decisions by one partner will ruin financially for others. If any of the partners resigned
from the firm that results in continuity of the partnership. The partnership may get
terminated as there are a lot of restrictions or formalities in transferring the ownership.
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Lack of continuity:
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Lack of public confidence:

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It is not necessary to publish the company’s accounts information and other

business-related reports to the public. Legally it doesn’t require such kinds of
activities. This creates a difficulty for any public members to see the financial status
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of the partnership firms. This results in limiting the confidence of the public about the
partnership firm and brings very low confidence among public members.
How to form a Partnership Legally?

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Select a structure:
To form a partnership business, they must be aware of their goals and vision. Try to
do a detailed study regarding the business structure and check whether it is acceptable
)A
in your state or required any legal formalities.
Agreement:
A formal agreement is compulsory apart from verbal communication or bond.
(c
The agreement involves the working nature of your business, loss and profit-sharing
formalities, and continuity of business even after the death of any one of the partners.

Business name:
Notes
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Provide a unique business for your business. And check it is available on the state
government website.
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Registration:
If you are planning to form a limited partnership, limited liability partnership, limited
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liability limited partnership, u need to register it with the state government. For that,
you need to furnish the following matters. Provide the state name where you start your
business, apply for a correct license for your business, and apply. Once you apply along
O
with the necessary documents, you can check the status of your application online.
Submit yearly reports:

Submit all your reports to the concerned authorities of the state.
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between them whereas, in other types, liability is limited between them. A partnership
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There are four types of business partnership based on liability.
1. General partnership
U
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4. Limited liability limited partnership.
A partnership has multiple owners. And no need to register with the state and any
legal formalities. You can say that you are in a partnership where you come up with
a mutual understanding with one or two parties or individuals without filing any state
m
paperwork. But in some cases, a legal filing with the state is required. In a partnership
business, the profit and loss are running over through the owner’s income for tax
purposes. Similarly, debts and liabilities are also running over through the owner’s
)A
income. Partnerships generally result in low taxation compared to other high-class

business firms.
General partnership:
It is a basic form of partnership. And the formation of a business entity with a
(c
state doesn’t require a general partnership. In many cases, partners in their business
sign an agreement between them. That agreement is the bond of their business

partnership. Both the ownership and profits are equally divided between them. Both the
Notes
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partners have Indi dual power to confine the business to contracts and loans. All the
partners have equal responsibility for the business’s liability and debt and other legal
obligations. Let’s give an example, there are two partners, and one partner takes a loan
in
and that business failed to repay the loan. In this case, both the individuals have the
responsibility in that loan liability. A general partnership is easy to start and stop. And it
automatically disappears if one dies or goes bankrupt.
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Advantages of general partnership:
●● Easy to form.
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●● It is cheaper and requires fewer paper works.
●● Low taxation procedures.
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●● Easy to stop.
Disadvantages:
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●● Unlimited liability.
●● All are equally responsible for any debt or legal obligations.
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How to start and form a general partnership?
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1. Pre-planning about the business going to do.
Both the partners have an idea about what business they are going to establish
in the market. They should perform a well-versed planning idea about the particular
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business.
2. Provide a unique name for the business.

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Choosing a name for your partnership business is crucial. As the name should be
unique and should resemble the business idea. If A and B are going to start a business
of organic foodstuff, then they are planning to put a name as AB store, it would not
work properly, because nobody understands what kind of business you are doing in the
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market. To provide an appropriate name like “AB organic food products” makes sense
and file a Doing Business As name with state authorities. Make sure that your business
name is unique .This is the one important thing you should keep in your mind. Once
your business name is approved, you can go for the remaining procedures.
m
3. Agreement.
The next step is to create an agreement between the partners for their business.
)A
Even though it doesn’t require any legal formalities, it has value among the partners
concerning their mutual interests and understanding. An agreement is a statement
that holds some kind of valuable information regarding partnerships and profit-sharing
which may help in the future if any fight occurs between them or any misunderstanding
between the partners. And the agreements consist of the following information
(c
●● Name of the business.

●● Nature of the business.

●● Percentage of ownership and profit-sharing.

Notes
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●● Partner investment.
●● Profit-sharing details.
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●● How they divide loss, debt, and other liabilities.
●● Partner’s duty.
●● Ownership change.
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●● After the solution of individual death.
●● How to divide assets after stopping the business.
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4. Get an employer identification number.
To hire employees into your firm, you need to require an employer identification
number.
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5. Open a bank account
For any business transaction, a bank account is compulsory. So by submitting your
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EIN to the bank, you can open a business account, so that all your transactions should
pass through this account only.
6. Get license and permission

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Once all u got done with the above matters, the next step is to get a license and work
permits from the concerned authorities. For that, you need to submit all the required dates
without any fail. Make it as soon as possible to avoid fines or other penalties.
7. Maintain proper tax files and other related papers accurately.

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Renew license and work permits at the right time.
Limited partnership
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This is a state-authorized partnership. In this partnership, there is one general

partner who has the full responsibility for the entire business and has one or more
limited partners who don’t have any active participation in managing the business .But
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they are also partners and they invest/provide money.
Limited partners are only involved in capital investment and they don’t have any
responsibility for business debts and liability. And they can also share the profits but
they can’t bear any loss more than what they have invested. Once they started to
m
perform management activities properly and actively, they became a general partner.
Characteristic of limited partner:

)A
●● Generally, a limited partnership consists of two partners, one is a general

partner with unlimited liability and another one is a special partner with limited
liabilities to their capital extent. It must have one or more general partners
along with one or more limited or special partners.
(c
●● Limited partners simply invest money into the business. He is not active
in the management activities of the business. But he can look into a

firm’s documents, files, and books to read and understand and to gather
Notes
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information. He may give pieces of advice and ideas to his general partners.
●● Any debt or bankruptcy or death of a limited partner does not dissolve or affect
in
the running of the business. That is why it is more strong and stable than any
other ordinary partnership company.
●● A limited partner cannot give his share to an outsider without any permission
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from general partners.
●● A limited partner cannot withdraw some part of his invested which is
contributed by him. If he did so, then liability for that becomes unlimited and
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he is responsible for separate liability for that amount.
●● A limited partnership must register under the partnership law. It is compulsory
to publish the amount contributed by the general partners and their liability
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extension to the public. If the limited partnership doesn’t register under any
law. Then the company’s liability is treated as a general partnership.
Advantages of limited partnership:
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●● It is more stable compared with other ordinary partnerships.
●● Mobilization of capital permits.
●● r
Independent control by general partners
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Disadvantages of limited partnership:
●● Limited partners have no role in the management business activities of the
firm.
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●● As the general partner is controlling the firm, there is a chance of misusing

his power. He may take an undue advantage on his position or may exploit a
limited partner.
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●● Creditworthiness is reduced because of the limited liability of the limited

partner.
●● It is not allowed in India.
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Limited liability partnership (LLP)

In this limited liability partnership, all the partners are managing the business
actively. And there is a limit in liabilities concerning others’ actions.in case of any error
or exclusion from one partner, other partners will not be responsible for it. But the
m
partners will be having strict responsibility for any debt or legal liabilities of business
activities. This limited liability partnership is not encouraged or not allowed in certain
countries. And it is also restricted to some professional fields.
)A
Advantages of limited liability partnership:

●● The establishment of such a partnership is easy
●● It requires a low cost to form
(c
●● It is easy to manage and run the partnership

●● No restriction for maximum members

●● All are distinct from each other

Notes
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●● Government involvement is less.
●● As there are not too many legal or Government formalities, it is easy to
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dissolve.
●● Audit required only if the company’s turnover exceeds Rupees 40 lakh.
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Disadvantages of limited liability partnership:
●● Liability may extend to the personal properties or assets of partners.
●● Fundraising from the public is very difficult.
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Limited liability limited partnership (LLLP)
It is a new type of partnership that is similar to a liability partnership. In a liability
partnership, the general partner has more liabilities than other partners, whereas, in a
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limited liability limited partnership, all partners have equal liability protection.
Benefits of a LLLP:
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●● Limited liability limited partnership can do anything the same as Limited
liability partnership can do.
●●
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Partners are protected from liabilities if the partnership is charged in any case.
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Limits of a LLLP:
●● Some states are not allowed to form LLLP.
●● The LLLP system is new and they have not even proven their reliability in
various situations.
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There are two types of business partnership based on duration.
Partnership at will:
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This type of partnership formation is based on the will of the business partner.
Partnership at will type of partnership firm can continue as long as the partner needs.
It can close or dissolve at any time if any partner gives the notice to withdraw the
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partnership of the firm. It all depends on an individual’s decision-based.
Particular partnership:
This type of partnership is formed to execute a particular project for a specific time.
m
We can say that if an individual wants to construct a hotel within six months. Then they
form a particular partnership, to accomplish that particular project at a given time. The
shutdown of partnership occurs automatically when the project is fulfilled or exit by the
given time.
)A
There are two types of business partnership based on tenure
A partnership is for fixed terms:

In this partnership, there is a fixed time for business. Normally it consists of a
(c
period of 2 years, or 5 years or any other time. And the partnership exits or dissolves
automatically after the specified time expires.

Flexible partnership:
Notes
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This type of partnership is formed either for a particular period or a new business.
There are two types of business partnerships based on legality.
in
Legal partnership:
This is the partnership that is formed under the partnership act 1932. And that type
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of formation is legal and legally approved.
Illegal partnership:
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This is in case if a partnership violates the constitutional law of a country or having
partners more than or less than the acceptable limit. In these cases, partnerships have
become illegal.
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4.2.8 Cooperative Society and Its Features
The word cooperative itself has a meaning of combine or joins. A business
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enterprise can be carried out in many forms and one of them is a cooperative society.
This cooperative form is mainly intended for combined help or mutual help, apart from
profit.
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Cooperative societies are an association of people who voluntarily form and work
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together aiming to help each other and for the prosperity of fellow members. These are
formed by people who lay in the lower section of society to prevent and protect their
economic interests from getting exploited by rich and higher sections of society.
Under the Cooperative societies Act, 1912 the cooperative society formed must be
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registered. The members themselves provide the fund for setting up, which is a very
simple process and only requires the consent of a few members. After the registration,
a legal specification is received by the society.
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The cooperative societies so far formed around the world function following values
and principles accepted by the International Co-operative Alliance. These principles
are the main cause for America’s electric cooperatives to function entirely differently
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from other applicability, by placing their members’ requirements first. Their principles
include Democratic Member Control, Members’ Economic Participation, Autonomy and
Independence, Education, Training, and Information, Cooperation among Cooperatives,
and Concern for Community.
m
Marketing, supply (or purchasing), consumer, service, and worker are the various
phases of cooperatives.
Marketing:
)A
In marketing cooperatives, the products are promoted and retailed by the

members themselves. These cooperatives include cooperatives that negotiate where
the cooperatives bargain with the producers and other users for a reasonable and
better cost for the products of members. But the cooperatives seldom visibly hold and
(c
manage the product. At the other extreme, certain retailing or marketing cooperatives
sort, evaluate trade, operate or organize member’s products. Kentucky is Hopkinsville

Elevator, which is an example which is a grain elevator designed to pile up or store

Notes
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grains, and trades for its members.
Supply:
in
In supply cooperatives, constant stock at appropriate prices is guaranteed and
provided to its members. Farmers generally use supply cooperatives to buy their initial
farm products like seeds, fertilizers, chemicals, etc. These cooperatives buy items as
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a whole that other members individually cannot do. One of the examples of a supply
cooperative in Kentucky is Kentucky Organic Farm and Feed, which consists of a
reasonable supply of organic feed to organic dairy and livestock producers.
O
Consumer:
This is the type of cooperative where consumers have access to goods and
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facilities. The most common type of these cooperatives are grocery stores which are
organized and arranged as a cooperative. This generally provides its consumers with
food items or services that never appeared before the establishment of cooperatives.
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An example of consumer cooperatives is a grocery store in Lexington, named
Good Food cooperatives.
Service:
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Service cooperatives are built to provide special services and facilities to the
members of the cooperatives. Those members can be businessmen, farmers,
consumers, etc.
Insurance, Finance, housing, utility, and health care cooperatives are the most
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common categories of service cooperatives. Rural-based Nolin RECC is a well-known

cooperative, distributes electrical facilities and services to enterprises and house
owners in rural regions. Central Kentucky Ag Credit and Farm Credit Mid-America
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contribute monetary services to rural house owners and farmers.
Worker:
Worker-owned cooperatives are the most popular cooperative, which is an
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enterprise that is owned by an employee and is organized as a cooperative. Here

every employee will be having the chance to get the membership of the cooperative.
This cooperative follows democratic principles such that cooperatives are managed
by members elected by other fellow members and that position is disregard to his/her
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business status. Any type of business can be formed into a worker cooperative. Isthmus
Engineering and Manufacturing located in Madison is an example of worker society,
which is a complete service engineering firm.
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List of Co-operative Societies in India
Amul:
Amul is an Indian Cooperative society; the world’s largest dairy farm located in
(c
Gujarat. In 1946, the establishment of Amul was started. Dr. Verghese Kurien is known
to be the founder of the White Revolution. The cooperative body which runs the Amul
brand is the Gujarat Cooperative Milk Marketing Federation Ltd. (GCMMF).

Horticultural Producers’ Cooperative Marketing and Processing Society (HOPCOMS):

Notes
e
HOPCOMS is a farmer’s cooperative society founded in 1965. The main
headquarters is located in Bengaluru. Initially, it was established with the aim of direct
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marketing farm products. The main functioning involves dispersal, warehousing, and
procurement. Dispersing means just the distribution of farm products, warehousing
involves storing these products and procurement means accumulation of materials.
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Indian Coffee House:
The Indian Coffee house was started in 1936 by the coffee cess committee. It is
O
carried out by cooperative society workers and is like a chain of restaurants. The main
concept behind Indian coffee houses was that Indians were not allowed to enter coffee
houses that were made for Europeans. So the first branch was started in Bombay.
There are 13 cooperative societies to run the Indian coffee house.
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Indian Farmers Fertilizer Cooperative Limited (IFFCO):
India’s largest fertilizer manufacturer is the Indian Farmers Fertilizer Cooperative
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Limited (IFFCO). It was established on 3rd November 1967. The Headquarters of IFCO
is located in New Delhi. IFCO has around 5 crore Indian farmers and 35,000 member
cooperatives
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Kerala Dinesh Beedi workers’ Central Co-op Society:
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In 1969, Kerala Dinesh Beedi workers’ Central Co-operative Society was formed.
This is one of the largest industrial cooperative societies in India. It provides full-time
employment to around 6,000 people. This was started as a refusal and struggle against
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the exploitation faced by beedi laborers from private firms.
Karnataka Milk Federation (KMF):

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Karnataka Milk Federation is the second-largest milk cooperative society in India.

Direct marketing of dairy products was the main objective behind this cooperative
society. KMF is the second-largest milk cooperative in India after AMUL. The KMF
products are promoted and distributed under the brand name ‘Nandini’.
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As cooperative society is one of the forms of business organization, two unique

characteristics are followed -i.e. characteristics of our constitution-Democracy and
secularism.
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Democracy: Democratize patterns are seen in a cooperative society. This is

because the role of decision-making lies in the hands of the managing committee which
are elected by members of the society. It follows the philosophy of ‘One man one vote.
)A
Secularism: The cooperative society works based on secularism. Secularism

means separation of religion and here it is separated from management. Whatever
the religion, caste, irrespective of these things, anyone can get the membership of the
society.
(c
Features:
The primary features of the cooperative society include the following:

Voluntary membership:
Notes
e
Membership in a cooperative society is non-compulsory. Irrespective of caste,
religion, age, etc., anyone can be a member. A person can join on his wish and
in
can leave if he wants to. No one forces him/her to join or leave the membership.
Procedurally a notice should be given before leaving the membership of the society
and no other further formalities are there. A member who wishes to leave can retake or
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withdraw his/her money which was provided as capital, but cannot share that amount
with any other members.
Members can join a cooperative society by their own choice. And a minimum of 10
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persons is required to form an association. The cooperative societies act, 1912, does
not restrict the limitation to the number of members. But after the formation of society,
the number of members should be specified correctly without any confusion.
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Legal status:
It is mandatory that the cooperative society formed should be registered under
the cooperative societies act, 1912. This will grant a separate lawful identity and
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specification in society that is different from its co-workers or members. The members
will be having limited liability. Even death, mental illness, the bankruptcy of members
does not affect the existence of the societies. It can procure resources and can make
settlements in its name. r
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Limited liability:
In a cooperative society, the liability is limited to a certain extent. Liability is a sum
of money or capital they provide in setting up the form. Thereby the personal belonging
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is safe from being used to remunerate the business dues and debts. This describes the
maximum probability of threat a member is demanded to tolerate. It is limited in a way
that all members can bear it.
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Control:
To operate the administrative tasks, respective officers are elected by members.
The control or decision-making power is handled by the elected members of the society.
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The cooperative society has a democratic nature in which its members can choose
or vote for their representative. Final decision-making is carried out by the elected
candidates.
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A cooperative society follows the concept of “one man one vote”. Any member
in the society has only one vote, disregarding the number of shares (s) he/she holds.
Therefore we can say that democratic principles are followed in a cooperative society.
)A
Service motive:
Apart from other forms of business organizations, Cooperative societies work not
only for making profits but also for serving the public. Mutual help and the welfare of
the public are the main objectives of a cooperative society. It trades products of good
(c
quality at economic prices to members by keeping a small amount of profit. Whatever

profit or surplus is generated is transferred to the general store and used for the welfare
of members.

Along with these primary features, there are some other distinct features like
Notes
e
Elimination of Middlemen, Cash Trading, Audit, Perpetual Existence, the spirit of Co-
Operation, Service Motto, Common Interest, and Ethics, Disposal of Surplus, and Fixed
Return on Capital, Capital Raising, Management of Affairs of Co-Operatives.
in
Elimination of middlemen ensures that the deal is done directly between the
customers and members. Therefore, no middlemen are present in this and this ensures
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that there is no compromise in the quality of products and the prices are very much
economic to the consumers. Cash Trading ensures that there are no debts or credit
expenses as a cooperative society buys and sells products based on cash. Thus
it ensures good working capital. Auditors assigned by the Government under the
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supervision and control of the Registrar of Co-operative Societies are constantly
checking and verifying the accounts of cooperative societies. And a cooperative society
once it is registered can get lifelong benefits (perpetual existence). Spirit of cooperation
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means that all members of society work as a team and with full cooperation without any
conflicts or disagreements. Capital rising can be described as the capital needed to rise
and carry out a cooperative society. This is achieved by funds given by members as
share capital. It has limited share capital and can therefore raise their capitals through
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loans and support from governments. Registration is also another feature that allows
the cooperative to have an independent status and the process is simple and doesn’t
consume any time. The co-operatives in a state are controlled and ruled by the special
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Acts, approved by the respective state. One example is the Maharashtra State Co-
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operative Society Act 1960. Service Motto, in which a cooperative society is categorized
basically to contribute maximum facilities to its members. As it is formed primarily for
giving certain essential services, it does not aim at profits. This does not mean societies
don’t function and operate for profit. It is quite natural for societies to obtain profits by
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extending their services to non-members.
All the features are related to one another in a way or another. For the successful
running of a cooperative society, all these features should be followed. Concerning
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productive and civilized developments, cooperative societies encourage the concept of’
fullest participation of all’ and ease a fair dispensation of the advantage of development.
They have a crucial role in taking action in opposing social rejection and exploitation.
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4.2.9 Types of Cooperative Societies

Under the Indian cooperative Societies Act, 1912, “Cooperative societies’ ‘ are a
society which has its objectives for the promotion of economic interests of its members
under cooperative principles”. Cooperative societies are associations formed voluntarily
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by people. Cooperative societies take form in various areas like banks, houses,
markets, agriculture, manufacture, purchase, etc. The most famous cooperative
societies formed in India are Amul, which is the largest dairy producer, and Indian
)A
Farmers Fertilizer Cooperative (IFCO), the largest fertilizer manufacturers
Different Types of Cooperative Societies are
1. Consumer’s co-operative societies:

(c
The cooperative society formed to protect the rights of consumers is Consumer’s

cooperative societies. The members of this cooperative society are those people
who desire to get products of good quality at a reasonable and economic price. This
involves the elimination of third parties and middlemen in business to get savings
Notes
e
and profit in business. In the case of profits, it is distributed among the members
according to their capital invested or the purchase they made. Examples of consumer
cooperative societies are credit unions, utility cooperatives, electric cooperatives,
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telephonic cooperatives, food cooperatives, health cooperatives, and nursery/child
care cooperatives. Credit cooperatives can meet the demands and requirements
of inadequately serviced communities including minorities, seniors, and youths.
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Cooperatives also provide electrical and telephonic services to more than 3000 crores
of people. Electric cooperatives are non-profit companies whose main intention is
to provide electricity to their consumers. Through digital switching and transmission
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facilities, Telephonic cooperatives provide their consumers with telephonic services,
Internet access, etc. Food cooperatives launched unit pricing or face value, labeling of
nutritional contents, and the sale of mass and organic products.
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Health care cooperatives are owned and managed by members and they provide
high-standard care facilities at the lowest cost. This health care system plays a crucial
role in preserving the health of citizens. In cooperative nursery schools and child care
centers, parents can decide strategies and take part as a support to classrooms.
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Fundraising, obtaining supplies for school, and preserving the appliances come
under these cooperatives. The involvement of parents in these activities reduces the
expenses so that savings can be given to its members.
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2. Producers co-operative societies:
Product cooperative societies are also known in another name as industrial
cooperatives. They are carried out by farmers, goods producers, or small entrepreneurs
like Ayurveda medicine producers, handloom makers, etc. for the protection of their
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rights. Here the raw materials and resources needed for the production are brought in
by the members themselves and are given to the producers. The final product is then
distributed directly to the non-members or the consumers without any middlemen or
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third parties. The resources are grouped by the producers and manufactured quantities
are increased, thereby reducing the trouble caused in competitive markets. Diary, fish
farmers, weavers, artisans, and tribal cooperatives are the best examples of producer
cooperative societies.
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Examples of producer cooperatives are:

●● Ocean Spray: Ocean Spray is an American agricultural cooperative of
growers of cranberries and grapefruits. The product manufactured includes
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fruit juices, fruit snacks, etc. The U.S is the Headquarter.

●● The Blueberry People: The Blueberry People were formed in 1936 and are a
grower-owned blueberry marketing cooperative society. The Headquarters is
)A
in Michigan.
●● Organic Valley: Organic Valley is a dairy producer, which is farmer-friendly
and supplies the purest milk in India. It was started in 1988. Their products
include milk, butter, cheese, protein shakes, creams, yogurts.
(c
●● Q Artist Cooperative: Q Artist Cooperative is an artist-owned producer co-

operative in Central Wisconsin. Their collection includes painting, jewelry,
drawings, photographic, ceramics, woods, and fibers.

3. Marketing co-operative societies:

Notes
e
This society is formed for helping small farmers, producers to sell or market their
products at more feasible prices. The members of marketing cooperative societies
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include farmers, producers who wish to sell their goods at a reasonable and fair price.
This also involves eliminating middlemen so that no amount is decreased as their
commission. This cooperative ensures that the producers get enough outcomes for
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their hard work. To sell those products at a possible price, they have to perform various
functions like transporting goods, warehousing, storing, packaging, etc. This also helps
the farmers to be aware of the market prices, strategies they have to carry out, helping
them to sanction loans, balance, or maintain the supply against the current demands.
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Example: Milk Cooperatives in Gujarat
Farmer’s co-operative societies:
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Poor farmers may not be able to increase yield themselves and get the best profits.
To protect farmers’ interests and rights, Farmers cooperative society was formed. The
members of this society consist of farmers who wish to take part in farming activities
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together. The main objective is to increase the advantage of extensive farming. In
progressive farming cooperatives, they provide finer standards of seeds, organic
manures and fertilizers, insecticides, equipment, and other advanced methodologies.
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This is done not only for helping them improve their crop yield but also helps to reduce
the issues related to farming on shattered or fragmented landholdings. In collective
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farming cooperatives, farmers are members for life long and cannot eliminate their
lands. But can change the land authority to another person.
Different cooperatives are:

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National Cooperative Development Corporation (NCDC):

In 1963, under the Ministry of Agriculture National Cooperative Development
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Corporation was established. Poultry, dairy, fishery comes under this. Various activities
like Irrigation, agro-insurance, agro-credit, rural sanitation, animal health, etc. are
provided funds.
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National Agricultural Cooperative Marketing Federation of India (NAFED):

It includes organization, promotion, and developing marketing techniques, storage,
and warehousing agricultural, horticultural, and forest products.
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Tribal Cooperative Marketing Development Federation of India Ltd:

This is to ensure high earnings and create employment opportunities for tribal
peoples. Exportation of tribal products, marketing, transporting comes under this.
)A
Indian Farmers Fertiliser Cooperative Limited (IFFCO):

IFFCO aims to promote its members for manufacturing and production of chemical
fertilizers like bio-fertilizers, petrochemicals, refining industrial chemicals and hydro-
(c
carbon, their inputs, etc.

4. Credit co-operative societies:

Notes
e
Credit co-operative societies are urban-based and rural-based banking societies.
The main aim is to give its members monetary help or loans at a low-interest rate
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and thereby protecting its members from the huge dues, bankrupts to conventional
financiers. They act as a primary bank but have an extremely customized banking
appearance. It has down payment schemes that resemble saving accounts, FD, RD,
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pension schemes, etc. The fund is collected as capital and the money deposited is
utilized to give loans to the members as personal loans, vehicle loans, educational
loans, etc. The credit cooperative societies are frequently assisted by State and
National government allowances (subsidies) and funding
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Example: Teachers Cooperative Credit society
There are three different classifications for credit cooperative society. The first
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one is the Primary Credit Cooperative Society, a group of people who are borrowers
and non-borrowers who reside in a specific region. Anyone within the locality can get a
membership and can take concern over the business matters of each other. Secondly,
Credit Cooperative Society Banks, which involves a collection of people where
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membership is limited to primary societies only and are also called a banking union.
And finally, State credit Co-operative society Banks, which is established to accept
down payments from wealthy urban classes. They act as a bridge between joint-stock
banks and the co-operative movements. r
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5. Co-operative housing societies:
Housing societies are formed to provide help to people with low income to build
a house at a reasonable cost. The idea behind housing societies is to build houses at
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an economic and reasonable price and provide the members to stay and give them
the chance to pay by installments. These societies build flats, apartments or provide
land plots to the members of the housing society in which the members can make a
house of their desire. Here one can become a member by simply purchasing a share in
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a cooperative society. Without needing to own real estate, the members can get a share
in the business, which provides them with a house to live in. This is common in cities.
There are two types of housing co-operatives:

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1. Tenant Ownership Housing Societies:

Here in this case either land will be on the lease or members will be the owner
of the houses. They must strictly follow the rules and regulations regarding lease and
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shifting of the house. But the members can build the house in any way they wish to.
2. Tenant Co-Partnership Housing Societies:

)A
The members have a residency right upon the payment of monthly rent and
primary share, but both the land and buildings are held by the societies either on a
contract basis or freehold.
The other characteristics of housing societies involve basic amenities, education,

(c
and recreation, health, and lifestyle. Basic amenities include water supply, electricity,
sanitation facilities. Construction and Operation of schools, parks, libraries, and gardens
also come under the society. Various programs like health programs, yoga, fitness

training, transportation, youth programs come under the health and lifestyle. These all
Notes
e
are managed and carried out by elected representatives. Examples are:
●● Vidarbha Premier Co-operative Housing Society is one of the housing
in
cooperatives in India, founded in 1930. It is located in Nagpur, in Maharashtra.
●● Kanungo Cooperative Group Housing Society Ltd, Patpar Ganj, Delhi
●● Sainik Cooperative House Building Society Ltd, Bardez, Goa.
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4.2.10 Advantages and Disadvantages of Cooperative Societies
As cooperative societies are associations or grouping of people, there will be
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benefits of teamwork as well as disputes between each other. The cooperative societies
so far formed around the world function following values and principles accepted by the
International Co-operative Alliance.
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The benefits of forming an association include equal distribution of profits, limited
liability, low taxes, no middlemen involved, government support, etc. A detailed
description of the advantages is described below.
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Advantages of cooperative society:
1. Equality in voting status:

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The cooperative society follows the principle of ‘one man one vote’ and thus
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ensures all members having equal rights to vote, apart from the contribution they
made for the formation. The cooperative society has a democratic nature in which its
members can choose or vote for their representative. Final decision-making is carried
out by the elected candidates.
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In a cooperative society, the liability is limited to a certain extent. Liability is a sum
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of money or capital they provide in setting up the form. Thereby the personal belonging
is safe from being used to remunerate the business dues and debts. This describes the
maximum probability of threat a member is demanded to tolerate. It is limited in a way
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that all members can bear it.
3. Stable existence:
Mental illness, death, the bankruptcy of members does not affect the existence of
the societies. It can procure resources and can make settlements in its name.
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4. The economy in operations:

)A
By the elimination of third parties and middlemen and voluntary facilities and
services provided by its members, functions, and operations of the cooperative society
can be carried out economically.
5. Support from the government:

(c
The government provides various support and help to members like loans at the
low-interest rate and relaxation in taxes. This is all because of following the principle of

democracy, they get the government’s support.

Notes
e
6. Ease of formation:
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The formation of a cooperative society is not complicated. They only need around
10 members to start and no restriction is kept to membership. But the correct number
of members has to be noted without any disputes and provide the reports of the
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government officials.
7. Equitable distribution of surplus:
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The profits or surplus produced within the cooperative societies are organized in
a fair way between its members. By this, all cooperative society members are equally
benefited. Not only do the members get benefits but society also gets benefits if the
surplus is not more than 10 %, it is then used for the welfare of the society.
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8. Each for all and all for each:
Here it describes mutual help and self-help, which is one of the objectives of a
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cooperative society. Members will be interacting and communicating with each other.
They work together in managing and running operations so that cooperatives can run
smoothly.
9. Elimination of middlemen:
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Direct dealing of producers and consumers is seen in a cooperative society, such
that it ensures fair and reasonable prices to the producers and consumers will be able
to get good quality products at their worth.
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10. Low tax:

As cooperative societies are non-profit organizations and for promoting their growth
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the government provides them with various concessions and exclusions.
11. Rural credit:

Cooperative societies provide funds to their members without charging high
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interest and thus act as relaxation to poor farmers, producers. Earlier they used to
depend on financers, traditional money lenders for money that charges high interest
which later turn to be a burden and headache.
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12. Role in agricultural progress:

Cooperative acts as a mediator between the government and agriculturists. This
helps them with good quality high yield producing seeds, fertilizers, etc. This helps to
)A
increase agricultural yields and products.
13. Own sources of finance:

Cooperative societies can utilize the funds in general reserve as they used to
(c
deposit their portion of profits or surplus produced into general reserves. And therefore
no need to depend on outside finances to meet its fund requirements.

14. Encourages thrift:

Notes
e
A cooperative society motivates the practice of saving and maximum utilization
among its members. And they ensure that funds provided are for useful operations and
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not for lavish expenses.
15. Fair price and good quality:
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Products are bought and sold as in mass volumes in hands from the production
side or to the customers who want. Purchasing in bulk quantities and vending
guarantees at reasonable prices, and no compromise in the quality of products.
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16. Social benefit:
Cooperative societies play a crucial part in replacing custom traditions and
holding back non-essential expenses. They use the surplus generated or the profits for
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providing primary facilities to society.
Disadvantages of Cooperative Society
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1. Limited resources:
As the cooperatives are mostly formed by weaker sections of society, the fund they
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provide as capital will be very low. And thereby the funds will be limited. Because of
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these limited fund resources, they cannot grow above their limits.
2. Inefficiency in management:
The cooperatives can’t assign expert managers and officials as they are unable
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to pay high salaries with their limited funds. The members who provide services and
facilities are not professional ones which can manage and run the functions very
effectively, they voluntarily perform them.
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3. Lack of secrecy:
As under the Societies act, disclosure obligation makes it difficult for the members
to keep their operations and functions confidential. Thus it lacks secrecy and
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confidentiality
4. Government control:
As the government offers several helping programs, they have to carry out and
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follow certain rules and regulations. Constant auditing accounts submission and other
operations have to follow those rules. In case of any interference or distraction caused
in cooperative society which is run by state cooperative departments will be having a
)A
drastic effect on the functioning of cooperatives.
5. Difference of opinion:
As the cooperative society functions as a whole, the members will sometimes
have disputes over the options. In case of personal interest and personal profits are
(c
considered then it overpowers the welfare of the society and its processing will be
shortened.

6. Misuse of funds:
Notes
e
Corruption is a major problem and can happen in all areas. Here if the members
of the ruling and controlling body are dishonest, they tend to cheat on the finances
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and funding of the cooperative societies. Due to such misuse and corruption, many
organizations are closed as they face various financial crises.
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7. Inefficiencies leading to losses:
Cooperative societies are run by short economic assets. Therefore they cannot
learn new technologies or accept the latest administration methodologies. The functions
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using traditional methods do not adapt to current business platforms and consequently
endure losses.
8. Limited scope:
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Cooperative societies cannot be installed or formed in all areas. The scope of such
an organization is limited to a few regions of business enterprises. As the funds are
limited, they cannot put up large budget projects and are not appropriate industries that
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involve large-scale production and investments.
9. Lack of accountability:
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As the organization and work are controlled by the administering committee,
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no one individual can be responsible for the systematic accomplishment of the
performance. Responsibility often tends to shift from one member to another in the
managing committee.
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A cooperative society divides its profit or surplus equally among its members and
is completely independent of the efforts made by individuals. Also, there are some
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lawful restrictions related to the share and bonus provided to its members. As there
is little or no connection between efforts made and rewards they get. Thereby it lacks
the motivation of members for full-hearted functioning for achieving success of the
organization.
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11. Low public confidence:

In many cooperative societies, political involvement and dominance are seen.
Thereby the purpose of which the society formed does not always succeed due to their
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sovereignty and thereby it lacks the confidence of the public to speak and act.
12. Lack of Loyalty:

)A
The mass business and agreements of cooperatives are carried out by its
members. Commitments and the devotedness of the members are important factors for
the success of an organization. For example, the dairy product brand ‘AMUL’ became
successful only because of the cooperation and loyalty of its workers. On the other
hand, another brand ‘Vijya’ was not successful as many farmers and workers shifted
(c
their commitment to other privatized company

Apart from these limits and demerits, there are other disadvantages which affect
Notes
e
the working of cooperative society and are as follows:
●● The members in cooperative societies may sometimes misuse the funds
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provided for their expenditure.
●● Casteism, Groupism, and favoritism in managing committees.
●● Inaccurate feeding of the accounts.
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●● Various obstacles are created by members who have a very traditional and
illiterate mentality.
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4.2.11 Joint Stock Company and Its Features
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holding hands together which makes the company grow vigorously. This is a give and
take process between the shareholders. The shareholders must bear its liabilities for
the debt owed by the company as the joint-stock Market Company was not integrated.
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That means, their personal properties are pledged to pay off the debts of the company.
The shares of joint-stock market companies are transferable. If the joint-stock company
is public, it is registered in the stock exchange for trading the share. Whereas in private,
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stock shares are transferable between the parties but it’s limited by agreement.
Types of Joint Stock Company

1. Chartered company
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2. Statutory company
3. Registered company
Chartered company:
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Chartered company is integrated with the state head by giving rights for trade and
exploration.
)A
E.g.: East India Company
Statutory company:
Statutory companies are formed by an act of parliament. Here all the actions,
responsibilities, rights are described by the parliament act.
(c

Registered company:
Notes
e
A registered company is formed by registering under a law.
E.g.: Jindal steel and power limited
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State bank of India
Grasim industries limited
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Features of Joint Stock Company
1. Artificial Person:
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An artificial legal person can hold property in his name. It is created by the law.
borrow, transfer, buy/purchase, or can enter into the contracts. The company can do
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anything. The company can charge or be charged. But it cannot eat, walk, run, breathe,
and so on. That’s why is called an artificial person.
2. Separate Legal Entity:
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A separate legal existence means the company has its property, bank account and can
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even enter a contract with members, etc. The company will not depend on its company
members for any business activities.
3. Formation:
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other forms of business. The company should be under the law “The Companies Act
2013” or under any previous company law.
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4. Perpetual Succession:
under the law only. The company has continuity in its working. Even if someone new
joins or leaves due to death, it will not affect the functioning of the company directly. All
changes are under the law. Formation and closure of the company are under the law.
m
5. Control:
)A

elected by shareholders, which appoint the top management official for running
the business smoothly. The selected director board holds a position that has high
significance as directors of the board are directly accountable to shareholders for the
working of the company. The shareholders have no right to involve themselves in day-
(c
to-day business running activities. All the controls are under the control of elected board
members.

6. Liability:
Notes
e
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to the maximum of capital contributed by them. In this, the creditors can use the
properties of the company to pay or settle their claims. And members of the company
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are not allowed to pay the debt of the company. It’s the company that owes the debt.
The company can ask the members to contribute to the loss only to the extent of the
remaining balance amount for the shares held by them. More than that, they don’t need
to pay. Eg: Ravi is a shareholder in a company. He holds 1000 shares of Rs. 20. For
O
each share, he has already paid Rs. 18. Then he is forced to pay Rs. 2000 only, in
case of any loss or failure of the company or to repay the debt of a company. Beyond
rs.2000, he is not liable to pay anything more towards the debt of the company.
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7. Members:
As per the companies act, it’s saying that at least a minimum of two members are
required to form a joint-stock company and the maximum is 50 members. Whereas in
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public, a minimum number of members is 7, and a maximum is not yet specified.
8. Transferability of shares:
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Joint-stock company shares can be transferred easily without any restriction
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between individuals. No need for any kind of involvement from the company while
transferring the share. It is purely from person to person. But he should inform the
company about the transfer, and then the only buyer can get any announcements or
information in the case. In a partnership firm, shares can’t transfer without the approval
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of other partners.
9. Separation of ownership from management

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The companies are not managed by all owners. Those who are elected are
responsible for managing the company. For that, they will conduct an election to find out
the board of directors by shareholders. And the selected board of members is managing
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the entire activities in the company.
10. Common seal:

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by a company seal.
)A
11. Registration.
The company must register under the companies’ act 2013 or under any previous law.
12. Risk bearing:

(c
Any loss must be managed by all the shareholders. All the shareholders have
equal responsibility in case of any risk caused to the company.

Formation of the joint-stock company:

Notes
e
Formation of the company can be defined as the organizing and undertaking a
business by promoting, sharing the capital, etc.
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Different phases in the formations are as follows:
Promotion:
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Promotion is nothing but just deciding what all machines, tasks, and materials are
required to start a company. The one who plays a role in doing all these operations is
called the promoter. The promoter has to show his ability in various areas like naming
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the company, what type of business is to be done, detailed studying about the scope of
business, taking appointments of various people involved in business, etc.
Incorporation:
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Incorporation is the second phase in the formation of a Joint Stock Company. It
involves registering a company which comes in ‘The Companies Act 1956’.
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Various steps involved in incorporation are documentation filling, fee payment and
registering, etc.
Capital subscription stage:

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This stage involves collecting and finalizing the capital for the launch of a new
company. It involves SEBI approval, minimum subscription, and prospectus, stock
exchange applications, etc.
Commencement of business:
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This is the last phase in the formation of a joint-stock company. When the
documentation process is done, the registrar will issue a certificate of commencement
of business. Only then the company can start its work.
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ity
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)A

holding hands together which makes the company grow vigorously.
(c

Merits of Joint Sector Companies

Notes
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1. a large amount of capital:
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Joint Stock Companies can collect a large amount of capital by issuing their shares
to the public. By getting loans from the financial institute, they can also collect a large
amount of capital. They can also collect money by issuing bonds or vouchers and other
securities. In a public company, there is no restriction for maximum members. Many
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can be involved in business. So that large number of people have an interest in the
firm by purchasing the share. The shares can be even transferrable; therefore they can
attract a wide range of people. A joint-stock company is one that raises a large number
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of funds when compared to other forms of business.
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There is a Limited liability to the shareholders in a joint-stock company. How much
they contributed to the business, only that much liability will affect them. No one could
pay or pledge their assets to pay the debt liabilities of a firm. That means the liability of
members is limited to the maximum of capital contributed by them. Creditors can claim
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over their personal properties due to loss. In this, the creditors can use the properties of
the company to pay or settle their claims. And members of the company are not allowed
to pay the debt of the company. It’s the company that owes the debt. The company can
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ask the members to contribute to the loss only to the extent of the remaining balance
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amount for the shares held by them. More than that, they don’t need to pay.
3. Continuity:
The company is independent of its members. The company will run even after
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the death, bankruptcy, inability of a member. A Joint Stock Company is ruled by law.
Whatever happens in the company, it is under the law only. The company has continuity
in its working. Even if someone new joins or leaves due to death, it will not affect the
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functioning of the company directly. All changes are under the law. Formation and
closure of the company are under the law.
4. Efficient management:
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The management has huge funds. So that they can afford to hire highly qualified
staff or any specialists to perform managerial business activities. A very small amount
of capital is collected, that is mobilized and employed together resulting in “power of
ownership” as distinguished from business control. Joint Stock Company permits all
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individuals whether that is a small or big organization, to become part of owners in

that organization. It also permits the use of the ability and skill of each member as an
entrepreneur along with his business management knowledge and controlling ability. It
)A
if is not used, then it would be a loss to the community.
5. Growth and expansion:

Joint-stock companies are highly allocated resources. They have high profits. So
they can use those profits for the company’s growth and expansion. Large amounts
(c
of funds are collected through shares along with company earnings leading to a vast
expansion to the growth of the company. Joint-stock firms are self–generating growth.

The managerial activities skills along with the sufficient funds bring the ultimate
Notes
e
business expansion and growth of the business.
6. Transfer of interest:
in
Shares can be sold in the market and shares can easily convert into money, which
gives an investment. That means, if the owner needs money, he can sell his shares and
earn money. He can also buy the shares at any time. Joint-stock company shares can
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be transferred easily without any restriction between individuals. No need for any kind
of involvement from the company while transferring the share. It is purely from person
to person. But he should inform the company about the transfer, and then the only
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buyer can get any announcements or information in the case.
7. High public confidence
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Companies are providing their annual reports, account statements, and plans and
programs to the public. It’s a trustworthy activity to a public audience. So the public has
more trust in the company.
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8. Social responsibilities:
The majority of joint-stock companies are running with high profits. And they
are also involved in social commitments like donating funds for social development
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activities. Such as building hospitals, schools, the welfare of citizens, etc.
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9. Low risk:
The risk of loss is equally shared by a large number of shareholders. So, each
shareholder has limited risk-bearing. And the risk-bearing is limited to only to the extent
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of the value of the share of each shareholder. There is no need to bear company risk by
a highly settled wealthy individual because large amounts of funds are collected from
both poor and rich individuals and are controlled under single management.
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Demerits of the Joint-Stock Company
1. Complexity in Formation:
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other forms of business. A large number of legal requirements and procedures are
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involved.
2. Lack of secrecy:
)A
All the documents are open to the public. The company needs to provide or submit
the required papers to the public as well as the company registrar. The management
of the company lies in the hands of many people. All the discussions related to the
business are held in the board of directors meeting. Hence, it is very difficult to maintain
secrets of the business activities.
(c

Notes
e
The company’s activities are managed by managers, not by owners. Whatever
efforts are done by managers; they will get a fixed salary. There is no hike in salary
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based on their efforts. The company’s profit is high but the salary is the same.in this
case, managers do not perform their best for the company.
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4. Decision is delay:
Important decisions are carried out through board meetings only. Once a decision
is taken, then it will circulate to all individuals of the business. Decision implementations
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can take place after approval from all the members of the business.
5. Too much control by the government:

A Joint Stock Company is formed by law. So every stage of business activities is
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passing through the legal formalities only. Like annual reports, audit reports, taxation
files, file returns, etc. are involved in it. If anything fails to submit or fails to maintain
properly, the company has to face a penalty. This reduces freedom of operations and
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puts off time, effort, and money.
6. Oligarchic management:
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Oligarchic management means the control of management activities is limited in
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few hands. All the management higher activities are managed by a board of members.
And the decision is also taken by them. So they only take the decision which is
favorable to them, they look into their benefits only not into shareholders’ side.
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7. Conflict in interest:
There might be conflict in decision-making. All the members have a different
opinion. E.g. Employees need hikes, consumers need good quality of items,
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shareholders want higher returns for their investments. So it is a bit difficult to satisfy all
these opinions to move forward.
The management doesn’t look into the interest of the shareholders. Management
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doesn’t have any role in it. And management is not owners. The management is
independent with its owner as it is organized with people who are not interested or

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A company is a corporate or incorporated firm that is ruled under the companies

act.
)A
Companies are classified based on ownership and liabilities.
Based on Ownership
Private company:
(c
Private companies are a company that confines or restricts the right of an individual
to transfer their share. Private companies can have a minimum of 2 members and a

maximum of 200 members. If there is a joint member, then their share is considered a
Notes
e
single member. This member limit is considered by excluding the current and previous
employees. It doesn’t allow subscribing their share by inviting the general public. They
cannot accept funds from the public in any situation. It is compulsory to use the name
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private limited after its name. The private limited company has required a minimum of 2
directors. And there is no maximum limit for adding directors. One lakh is the minimum
paid-up capital for a private company. And there is no maximum limit for paid-up capital.
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Privileges of private companies:
A private company can be commenced with a minimum of 2 members. To form
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a public company requires a minimum of 7 members. There is no requirement of any
notice or prospects as there is no invitation to the public to subscribe to a private
company’s share. Shares can be granted without receiving a minimum subscription.
Once the incorporation certificates are received; the private company can start the
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business activities. A private company requires a minimum of two directors whereas,
in a public company, a minimum of three directors is required. It is not necessary to
keep an index of members in private limited companies. But in a public company, it is
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compulsory to keep an index of members. A private company’s directors can have large
amounts of loans; there is no restriction on a minimum amount of loans. But in a public
company, there is a restriction on the amounts of loans to the directors.
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Public company:
Public companies can have a minimum of 2 members and there is no limit for
maximum members. Public companies are a company that does not confines or restrict
the right of an individual to transfer their share. That means it has no restriction to
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transfer its share. They can invite the public to subscribe to its shares. Five lakh is the
minimum paid-up capital for a public company. And there is no maximum limit for paid-
up capital. It can be more from time to time.
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Both private and public companies have shareholders. In a public company, no

shareholders are liable for payments. Moreover, it is a separate legal firm; all single
shareholders are part of it.
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Private companies are strictly regulated and monitored. They should submit their
financial statements to the government every year. And in the private company, at least
one of the board directors spent more than six months (182 days) in India to start their
company. Private companies are run by private owners, and the government or any
other government authorities has nothing to do with their decision-making.
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Certain documents are needed to be filled and submitted by the public company to
the registrar of companies.
)A
Memorandum of Association:
We can say that Memorandum of Association is a constitution of a company.
It includes the name of the public company, the total amount of funds, the registered
communication address, and the objective of the company.
(c

Articles of Association:
Notes
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Articles of Association consist of rules and regulations of the company by internal
management.
in
Prospectus:
The public company should issue a prospectus to invite the public to subscribe
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for its share. If anything mismatch in the prospects to the company by directors or
promoters is criminal liability.
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One person company (OPC)
The 2013 company act introduced a new concept of a company called One Person
Company. Therefore, the total list of ownership-based companies was updated as three
including a one-person company. One person company as its name says consists of
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only one person as to its members of the company. That means, unlike other types, the
minimum and maximum of the member is one person. If anything happened to a single
person like death, then the nominee becomes the member according to the article
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of association. And the nominee is mostly from family or close relatives. One-person
company has only one shareholder. One-person company has a single owner. It has a
separate legal entity. A One-person company involves less compliance. Too many legal
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formalities are not there. The member of the one-person company must be an Indian
resident. And in the one-person company, as a single ownership, the personal wealth
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is secure. The member should not be a minor. A minor cannot be a member or owner
of a one-person business. Members of a one-person company cannot run more than
one Person Company at a time. “One member in one Person Company” at a single
time policy should be followed. The one-person company cannot be converted into a
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“section A” company (A non-profit organization). If someone wants to change his one-

person company into a private limited or public limited firm, the following conditions
must be satisfied
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Minimum two years must be completed from the time of registration date or its
starting.
(Or) the company’s share capital must be 50 lakhs above

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(Or) the total turnover of the one-person company must be greater than 2 crores.
Private company Public company One person company

Director minimum 2 3 1
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Director maximum 15 15 15
Members minimum 2 7 1
)A
Members maximum 200 infinite 1
Based on Liability
Companies Limited by share:

(c
In this type of company, the shareholders should contribute some amount of money
towards the capital share. This contribution or payment of money can be paid at a time

or by installments. The members no need to pay anything more than a fixed value
Notes
e
towards the capital share and the companies are limited in their share. These types of
companies should place “limited” at the end of their organization. So, people came to
know that the liability of its members is limited who are going to invest into them.
in
Companies are limited by guarantee.
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Before the start or commencement of a company, every member is required to
pay a fixed amount, in case it needs to be liquidated. Such a fixed amount is called a
“guarantee”. There is no such sort of liability other than the share value and there is a
guarantee towards the members of the firm. Charities, clubs, etc. are some examples.
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Most of these companies are non-profit-making and have limited liability towards their
members. They can substitute the capital shares with guarantors who are ready to pay
the fixed guarantee amount on its liquidation.
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Unlimited Liability Company:
In this type of company, there is an unlimited liability to its shareholders. Such
types of company lie in papers and they do not exist in its physical form. Shareholders
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are required to pay whatever amount towards the total debts of the company during
its liquidation to meet the balance amount which needs to pay towards the company
liability. Members do not have direct liability towards their creditors.
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Public and private company in short:
Basis Private company Public company

Paid-up Capital 100000- minimum 500000-minimum
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No: of members 2-minimum 7-minimum

200-maximum Infinite-maximum
Name of the company Names as “private Names as “private
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limited” at the end of the limited” at the end of the

organization name organization name
Number of directors Minimum-2 directors Minimum-3 directors
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Maximum-15 Maximum-15
No need for independent One-third must be
directors independent directors
Index of members Not compulsory It is compulsory
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Managerial There is no restriction Restricted to 11% of the net

remuneration profit.
Public subscription Cannot invite It can invite
)A
Public deposit Not allowed by law Accepted if capital share

>100cr or turnover >500cr
Transfer share Restriction of transfer No restriction of transfer.
Amount of loan to No restriction Restricted
(c
directors

One person company in short:

Notes
e
One person company
Launched 2013-act
in
Number of members 1
Director minimum 1
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Director maximum 15
Membership transfer To nominee-after owner’s death only
ownership single
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6separted legal entity yes
Member Must be an Indian resident
Legal formalities less
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Age of member Minimum 18 years old
Transfer to section A Not Applicable
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Two years completed
Change into private or public Share capital>50 lakhs
Turnover >2 crores
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4.2.14 Comparative Analysis of Forms of Organizations
Business is nothing but a form of trade including sales and purchase to make a
profitable income. It has many merits as well as limitations. So you should keep some
important points while choosing an appropriate form of organization. So, comparison
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between each other’s business firm is a good practice for the opting for the best form
of organization. Each business organization has advantages and disadvantages.
The comparative analysis of a business firm is to draw attention to similarities and
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differences between different organizations based on the factors that affect the
operation and running of the firm.
Cost and easy way of setting up an organization:

ity
The Initial consideration to start a business is the “cost”. A sole proprietorship is the
easiest and less expensive way to start a business. For sole proprietorship, minimum
legal formalities and documents are required and it’s a small-scale operation of the
business. In the case of partnership type, there are fewer legal formalities, and less
m
expensive to start the business. It has a minimum scale of operation. Cooperative

societies and their related companies are must registered and cooperative societies
are required a long time to form and involve expensive legal procedures too. Company
)A
Type of organization is more complex and difficult to form and requires a large number
of documents and legal formalities. So, a sole proprietorship is the most commonly
chosen by an individual as it is easy to form and less costly.
Liability:
(c
In a sole proprietorship, the liability of the owner is unlimited. Similarly, in

partnership, the liability of the owners is also unlimited. in case of any debts and

requires additional money to repay, they need to sell or pledge their assets or land
Notes
e
properties. Both sole proprietorships and partnerships have a personal loss because of
debt liabilities. In the case of a joint Hindu family business, only KARTA has unlimited
liabilities. The companies and cooperative societies have limited liabilities. And the
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creditors can force them for payment to the extent of the company’s assets. Company
types of organizations have limited risk, and those types of companies are more
suitable for investors. The risk involved is less.
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Continuity:
Sole proprietorship and partnership firms are not uniform in their running. The
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continuity of sole proprietorship and partnership firms is affected by bankruptcy or the
death of the owner or partner. Whereas all these factors do not affect the continuity
of joint Hindu family business, cooperative societies, and company organization. The
company is the best choice if you are looking for a suitable structure of business in
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terms of continuity. The company is applicable for long-term business. And for short-
term business, partnership or proprietorship is the best option.
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Management ability:
In a sole proprietorship, all the activities are performed by the sole proprietor. Sole
proprietors have very limited skills. He cannot perform the entire task. He may fail in
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the multi-task. He cannot perform the task as an experienced employee. Whereas
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partnership or company organization, management skills are high and they are experts
in doing management and business activities. In a company organization, the work
is divided and allocated to different staff based on their area of experience. And in a
company organization, it allows the manager to specialize in specific areas, resulting in
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better decision making. There is a chance of conflicts among individuals due to different
opinions in the decision. If the work and project operations are more complex, then
the management requires skilled and highly professional staff to work on it. In these
situations, better go for company organization firms.
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For any simple projects and don’t require any highly skilled laborers, then
partnership or proprietorship is more applicable. In a joint Hindu family business, Karta
acts as an all-rounder in the joint family member business. But he is not an expert
ity
in doing all the managerial activities. As a result of this, there is a chance of wrong
decisions that will suffer business growth. So KARTA’s inability in taking decisions in
the proper direction may reflect in business losses. All these factors generate a poor
profit for the joint Hindu family business. Moreover, KARTA didn’t get enough time to
m
do all the activities like management, production, sales, or marketing. As it is a family

business, it is only applicable only for undivided Hindu families.
And the selection of an organization firm is based on the nature of the business
)A
operation and the requirement of skilled laborers.
Capital consideration:
Well-established companies collect funds by giving shares to a large number
of investors. In every partnership business, there is a restriction in membership or
(c
partnership. There is a limit for maximum partners in a particular partnership business.

Hence with the limited members, the capital contribution becomes less. Due to that,

the funds collected from partners are insufficient to support the large-scale business
Notes
e
activities of the firm. This results in a situation where partnership firms will not expand
in larger areas. Its growth activities become limited to certain areas only with small size.
The sole proprietorship has limited resources. So due to these limited resources, he
in
can only arrange a limited capital which is not suitable for large-scale business. For
large scale operations, company organization is more suitable. For small and medium
scale business operations, partnership or sole proprietorship is more suitable.
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Degree of control:
In a sole proprietorship, all the actions and decisions are controlled by proprietors
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only. If full decision-making power and full business operations control are required,
then proprietorship is the best one. And require complete freedom of action, a sole
proprietorship is more suitable. If the owner does not mind giving decision-making and
control, then you can go for a partnership or company type of business organization.
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In a company type of organization, the ownership and management are completely
independent. And a professional individual is selected to do or manage the affairs of the
company.
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Nature of the business:
If the organization requires a single contact person with customers or direct
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contact with customers like small bakery shops, a sole proprietorship is most suitable.
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Here they don’t require skilled laborers and business operation is small scale. For a
large scale of operation or any manufacturing type of operation, if they don’t require
any type of direct personal contact with the customer, the company form of organization
is suitable. In the case where professional service is required, you can go for a
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partnership type of organization.
Quick view on comparison:

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COMPARISON SOLE PARTNERSHIP HUF COOPERATIVE COMPANY

PROPRIETORSHIP SOCIETY
REGISTRATION Easy, minimum of Registration is Easy to form. Registration Registration

legal formalities. optional. Easy Less legal is compulsory. is compulsory.
ity
No need for any to form formalities. Have legal The lengthy

registration. Registration formalities. and expensive
is not process of
compulsory. formation
MEMBERS Only Owner/single Minimum -2 At least 2 from Minimum-10. Private Mini-2

m
ownership. Maximum-100 undivided No limit for Private-max

Hindu families. maximum 200
No limit for Public Min- 7
maximum. Public max-no
)A
limit
CAPITAL Limited finance Limited but Ancestral Limited finance A large amount
compare to Property. No of finance.
the sole, much public fund
more finance
(c

LIABILITY Unlimited Unlimited and Karta- Limited Limited

Notes
e
joint Unlimited
Coparceners
-Limited
in
CONTROL The owner takes Partners take a Karta makes The Managing Body of
all decisions. Quick decision. decisions. Committee Directors. The
decision made. Consent of all Control takes decisions. separation
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partners needed the entire between
business. ownership and
management.
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CONTINUITY Unstable. More Stable. Stable Stable due to Stable due to
Businesses and Sometimes business. separate legal separate legal
owners are the affected by Continue after status. status.
same the status of the death of
partners KARTA too
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Conclusion:
The selection of a suitable organization is purely based on the above-mentioned
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factors. So while going for an organization firm; you must consider all these factors.
Based on the nature of business and the number of skilled workers required, you can
also opt for a suitable form of business organization. Startup cost, liability, continuity,
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managerial skill, and control, nature of business are the key factors to be considered
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from your side when you are choosing a form of business organization. All these factors
must be considered while planning for a business formation.

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1. _________ is a form of business organization in which controlling and directing of

the business is done by a single individual.
2. This is a type of business and joint Hindu undivided business that is been found in
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the areas of West Bengal and Assam__________.

3. The freedom of selecting the business and operating the business in the joint Hindu
family e will relate with____________.
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4. The ______________ partner will have limited liability according to the share
contributed by him in the business.
5. What does IFFCO stands for__________________.
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Summary
●● The sole proprietorship is responsible for taking the risk and return of the business
and is the sole manager of the business.
)A
●● In a partnership form two or more individuals come together with a common

objective of manufacturing or selling the product in the market. The partnership
profit and the liability is being determined according to the share of the partners.
●● The joint Hindu family business is being managed by the members of the family
(c
and the Karta of the family is responsible for taking the major decisions for the
business.

●● The liability of the members is limited as the Karta has an unlimited liability in the
Notes
e
joint Hindu family business and is most affected by the risk in the market.
●● The cooperative societies are an association of people who voluntarily form and
in
work together email to help each other II for prosperity to fellow members.
Activity
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1. If you get a chance to start a business what type of business ownership will you
prefer and why?
2. List down different cooperative societies in India.
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1. What are the advantages and disadvantages of joint Hindu family business?
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2. What are the advantages and disadvantages of partnership business?
3. How can a partnership business be formed legally?
4. What are different cooperative societies explain in brief?
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5. How can a joint stock company be formed also provide its advantages and
disadvantages?
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6. What are the different types of companies based on ownership?
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Glossary
1. Mitakshara- this type of business can be found in all parts of India except West Bengal.
Only male individuals of the Hindu families can participate in the proprietorship.
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2. Credit standing- credit stand ability refers to the liability of different partners in the
business.
3. Tenant ownership- these type of ownership will include lease and shifting of the
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property from one individual to another.
Further reading
1. Book – venture capitalist financing in India.
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Author – JC Verma.
Answer
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1. Sole proprietorship
2. Dayabhaga.
3. Karta
)A
4. Limited liability partner

5. Indian farmer’s fertilizer cooperative limited.
(c

Unit - 4.3: Legal Issues Related to Venture

Notes
e
Objective
in
●● To determine intellectual property right.
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●● To determine the legal basis that every Indian start-up should know.
●● To evaluate the legal challenges faced by the entrepreneurs.
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There is no denying the startup blast in the nation and their expansion in numbers.
Yet, it is additionally a fact that a considerable lot of these neglect to become effective
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and wind up shutting shop following a couple of years. One of the essential purposes
for that can be the absence of mindfulness about the laws, rules, and guidelines. At
the end of the day, alongside energy for building one-of-a-kind arrangements and
conveying client enchantment, information about startup legalities is likewise similarly
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significant.
This article will walk you through a portion of the significant lawful data you ought
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to know about as a startup and business person before setting out on any undertaking.
We will cover everything from formalizing an author’s consent to shielding protected
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innovation with the goal that you find out about some significant lawful issues.
Effective new companies are driven by enthusiastic business people who are
focused on building exceptional arrangements that convey client amusement. While
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having a solid spotlight on clients and the market, it is similarly basic to have a decent
understanding with regards to the essential laws, decisions and guidelines that are
appropriate for the smooth running of the business.
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From formalizing an originators’ consent to defending protected innovation to

upholding business contracts, it is fundamental that business visionaries know and are
fully informed regarding the most recent laws administering their business and market.
Here are some significant legitimate fundamentals that new companies and business
ity
visionaries in India ought to know about before leaving on an undertaking:
The idea of Startup manages the activity of an organization in its underlying

stages. It is viewed as those new companies are established by at least one business
visionaries who meet up to foster an item or administration as per the interest of the
m
customers. The Patents (Amendment) Rules, 2016 characterize new businesses as

substances that pursue advancement, improvement, sending, or commercialization
of new items, cycles, or administrations driven by innovation or protected innovation.
)A
What’s more, there ought not to be a pass of over a long time from the date of joining/
enlistment with a most extreme turnover of INR 25 crore each year. Then again, the
Patent (Amendment) Rules, 2017, characterizes a startup as any Indian element
which is perceived as a Startup by a skillful authority under Startup India Initiative or
an unfamiliar substance that is fit for satisfying the standards for turnover and time of
(c
consolidation/enlistment according to Startup India Initiative. As recommended by the

Startup India Initiative, an element is a startup if:

●● It is consolidated as a private restricted organization or enrolled as an

Notes
e
association firm or restricted obligation organization in India.
●● It is enrolled or joined in India, not before seven years and ten years for the
in
Biotechnology new companies.
●● The turnover of the substance for any of the monetary years since its
enrollment/consolidation has not surpassed the restriction of INR 25 crores.
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●● It has not been shaped by parting or reproduction of a business that was at
that point in presence.
●● It runs after advancement, improvement, or improvement of items or cycles or
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benefits, or on the other hand in case it is a versatile plan of action with a high
capability of business age or formation of riches.
●● Moreover, a startup requires lawful acknowledgment and must perform
legitimate work for which information about the lawful nuts and bolts is
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fundamental.
Legitimate BASICS
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To maintain a business easily, have a piece of concise information about the
legalities engaged with the lead of the business. Hence in a concise, after are the
legitimate nuts and bolts engaged with working of a startup:
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1. Nature of business and originator’s understanding
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The underlying advance to begin a business manages the kind of business wherein
the originators ought to be clear with regards to the idea of the business. The business
type incorporates sole ownership, private restricted, public restricted, organization,
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restricted obligation association, and so on before setting up the business the main
advantage is to choose the idea of the business as each sort of business is done with
various lawful prerequisites. Another necessity is the drafting of a Founder’s Agreement.
A Founder’s Agreement is a report which establishes the subtleties of the establishing
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group and the business, including the jobs, obligations, chief pay, functional subtleties,
and leave statements, among others. The record goes about as an aide with all
fundamental subtleties for the arrangement of a substantial establishment and scales a
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business.
2. Permits to operate
As indicated by the idea of the business, there are a few sorts of licenses pertinent
in India. Licenses are essential for maintaining a business as the shortfall of pertinent
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licenses could prompt expensive claims and fights in court. Permits to operate are the
authoritative archives that permit a business to work. Conversely, business enrollment
is the most common way of posting a business with the enlistment center. By and large,
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there is a typical permit that is pertinent to a wide range of businesses, however, there
are occurrences that require extra licenses like an E-trade organization requires VAT
Registration, Professional Tax, and so forth through an eatery requires Food Safety
License, Prevention of Food Adulteration Act, Certificate of Environmental Clearance
and so on
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3. Experience with Taxation and Accounting laws

Expenses are a significant piece of each business. There are different sorts
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of duties appropriate to organizations like focal assessment, state duty, or nearby
expenses. The idea of assessments fluctuates from one area to another. India, to
advance new companies dispatched the ‘Startup India’ drive in 2016 and presented
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different exceptions and duty occasions for new businesses and new organizations. The
drive permits an exception of 3 years to a startup from an installment of annual duty
alongside exclusion from capital additions and ventures above Fair Market Value. The
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most common way of bookkeeping ought to be ordinary with the upkeep of books of
records. These record books ought to be reviewed every once in a while, to guarantee
adherence to the important bookkeeping and tax assessment rules. The interaction
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ought to not be overlooked as it could prompt errors.
4. Labor Laws
Work laws are a need for each association independent of its tendency of business
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and size. The foundation of an organization and the employment of individuals to start
working naturally makes the firm subject to work laws. Taking everything into account,
they get an exclusion of one year by marking self-assertion under the Startup India
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conspires, which establishes these nine laws:
●● The Industrial Disputes Act, 1947

●●
●●
The Trade Unit Act, 1926
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Building and Other Constructions Workers’ (Regulation of Employment and
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Conditions of
●● Service) Act, 1996
●● The Industrial Employment (Standing Orders) Act, 1946
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●● The Inter-State Migrant Workmen (Regulation of Employment and Conditions

of Service)
●● Act, 1979
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●● The Payment of Gratuity Act, 1972

●● The Contract Labor (Regulation and Abolition) Act, 1970
●● The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
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●● The Employees’ State Insurance Act, 1948.
New businesses recruit both full-time and low maintenance workers; in this way,
the representative arrangements ought to establish all business subtleties of the two
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kinds of representatives as an appealing representative strategy assists withdrawal in

great ability. Thus, these strategies ought to be considered as they help in boosting the
assurance of the worker and increment efficiency.
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5. Protected innovation
Protected innovation is one of the touchiest data for the business in the current
world. The new companies could protect their licensed innovation with the ‘Plan for
Startups Intellectual Property Protection (SIPP) under Startup India drive. Taste alludes
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to Start-Ups Property Protection imagined defending Patents, Trademarks, and designs

of imaginative and intriguing Startups.

Targets of the plan

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●● To advance mindfulness and reception of Intellectual Property Rights among
startups.
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●● To support and coach inventive and arising advances among Startups.
●● To direct the Startups on assurance and market them by giving admittance to
excellent administrations and assets.
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6. Who can apply?
Any startup ensured by the Start-up Certification Board for having creative
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effortlessness is qualified to apply. The term startup is all around clarified in Rule 2 (FB)
of Patent (Amendment) Rules 2017. Every one of the licenses in India is constrained by
the Office of the Controller General of Patents, Designs, and Trademarks.
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7. Agreement the board
An agreement is a base for maintaining a business. It is fundamental to guarantee
smooth working of work and guarantees plan of action in non-satisfaction of work.
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Essential information about different parts of an agreement is valuable for business
visionaries. The Indian Contract Act, 1872, characterizes agreements and expresses
all arrangements made by the free assent of gatherings who are equipped to contract,
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with legal thought and item which isn’t explicitly announced void are contracts. The
agreements assist the new businesses with guaranteeing checks upon the assigned
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work to the worker. New companies communicate with many individuals in the packed
market, and this cooperation forces dangers of robbery of thoughts and developments,
consequently, Non-Disclosure Agreement (NDA) assume a significant part in getting the
new businesses. These NDAs are helpful to secure business data and are utilized by
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the new companies while talking about the data identified with business with individuals
outside the association.
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8. Ending up of business
The ending up of a startup requires a piece of earlier data to the representatives
just as the sellers about the ending up of the business. The method involved with
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twisting up could be completed in the accompanying ways:
Quick track Exit

It is the most dependable method of closing down a startup as it is more affordable
and permits end up in a brief timeframe. An organization can apply for a most optimized
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plan of attack wind up if:
●● it doesn’t have any resources and liabilities;

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●● It hasn’t had any activity for as long as a year.
Deliberate conclusion
The other quick approach to close down an organization is through deliberate
conclusion. This method of twisting up should be possible on a condition wherein
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the partners and additionally, banks are in total agreement concerning the subtleties
of the conclusion. Even though it is a simple course now and again, it neglects to be
pragmatic and pertinent.
Indebtedness and Bankruptcy Code 2016

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Another method for conclusion could be utilized by business visionaries. The
Code is material to new companies which have a basic obligation structure, where a
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bankruptcy proficient is available to exchange the resources of the organization within
90 days, consenting to the states of ‘Startup India Action Plan’.The condition where a
startup would not like to proceed with it can apply to be a ‘Lethargic Company’, which
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permits an organization to remain above water with the least consistency.
Conclusion
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From thoughts to the executives, every one of the fields of Startup requires
satisfaction of certain lawful conditions under different laws of India. These laws do
not just force conditions on the working of a startup yet additionally give a safeguard
to shield the Startup from any outside danger. The laws guarantee the appropriate
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working of the representatives and permit the greatest usefulness. In this manner, to be
effective, the new companies ought to be very much aware of the legitimate nuts and
bolts to guarantee the appropriate working of the business.
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4.3.2 5 Essential Legal Issues To Address Before Securing Venture
Capital
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As per the MoneyTree™ Report by PricewaterhouseCoopers, investors put $71.9
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billion of every 5,052 arrangements last year in the U.S., making 2017 the second
year that saw dollar financing top $70B. The PwC MoneyTree Report further notes that
worldwide subsidizing expanded almost half in 2017, with $164B contributed across
11,042 arrangements.
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So, what are these endeavor reserves and other expert financial backer gatherings
searching for? A problematic business idea, solid and experienced administration, and
a make way to development are givens. Notwithstanding, most expert financial backers
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will likewise be looking for other, more subtle things, particularly once bargains reach
due perseverance. Below we investigate five of the more significant lawful issues that
proficient financial backers are probably going to audit in a norm due to persistence
measures before choosing to make an interest in a beginning phase organization.
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Investors settle on choices continually concerning whether to put resources into

different new companies. Most of the time, the appropriate response is no. There
can be many explanations behind this choice, including that the start-up isn’t inside
the association’s concentration or phase of wanted speculation. Yet, accepting the
organization is inside the speculation boundaries of the asset, the following are 15 key
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deciding elements for whether an endeavor firm will or won’t choose to put resources
into a start-up that is looking for investment.
1. Corporate Governance
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Regardless of whether your organization is an enterprise, restricted risk

organization (LLC), or association when looking for the venture, you ought
to guarantee the accompanying: the fundamental administration structure
is finished and consented to by all partners; the hierarchical reports are
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sufficient and complete, and all gatherings of the governing body/chiefs or

investor activities are appropriately reflected in the minutes. Furthermore, the
organization ought to be treated as a different element (and not as the modified

conscience of the originators or of another business), and the valuable records

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of the organization ought to be finished.
After concluding whether to make endeavor speculation, a financial backer
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will probably demand an audit of those authoritative archives and minutes
to acquire a superior view of the moves the organization has made before—
including when to whom and what sort of value awards were granted. One
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of the most well-known issues we see with beginning phase organizations is
that there are continuous debates concerning who claims value and how much
value they own. This can stay away from by looking for lawful advice when you
issue value to guarantee that it is done accurately.
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2. Investor Agreements
The most straightforward and most ideal approach to clarify what all of the value
holders’ privileges are in an organization is to have an investors’ understanding
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or working arrangement. Once more, legitimate guidance can help you in
setting up these sorts of arrangements and in figuring out what arrangements
to incorporate. Normal arrangements incorporate democratic plans, limitations
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on share move, “tag and drag” rights in case of a deal, against weakening
arrangements, and privileges of first deal or refusal.
As far as we can tell, these arrangements are regularly examined or ready in
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the draft, yet too often are never concluded and endorsed by all gatherings.
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This prompts vulnerability for resulting financial backers in the organization
and what rights all gatherings have. The shortfall of a last and consented to
investors’ arrangement may likewise permit certain value holders to hinder a
potential endeavor venture and to hold the exchange prisoner except if they are
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given special rights.

3. Licensed innovation
If your organization resembles some beginning phase organizations (e.g.,
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revolved around or based upon its protected innovation), then, at that point,
it is fundamental that there is an unmistakable chain of title to that protected
innovation from its start through its possession by the organization. If any
individuals helped with making the organization’s protected innovation,
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a financial backer will hope to see consented to licensed innovation task

arrangements, doling out any potential proprietorship rights or claims to the
organization. Moreover, contingent upon the idea of your protected innovation,
it could be judicious to lead ingenuity to affirm that you are not encroaching on
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outsider licensed innovation.

4. Composed Contracts
Albeit an understanding doesn’t need to be recorded as a hard copy to be
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enforceable, it is a smart thought to guarantee that every one of your material

arrangements is recorded as a hard copy, contain exceptionally significant
terms, and are executed by all gatherings. The sorts of arrangements that ought
to be recorded as a hard copy incorporate seller and supply arrangements, client
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arrangements, guarantee and assurance terms, and business arrangements.

Before making a venture, a financial backer will probably demand to audit your
material agreements to acquire a clearer image of your business commitments.

Thus, while arranging a composed agreement, many outsiders will incorporate

Notes
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certain arrangements inside the agreement, including reimbursement, non-
contend, permit, and constraint of risk arrangements. Watch out for these
arrangements. On the off chance that some wind up being surprisingly uneven,
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they might turn into a hot-button issue during due determination and may
unfavorably influence your organization’s worth to an expected financial backer.
As usual, never wonder whether or not to request legitimate assistance in case
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you are uncertain of what an agreement says.
5. Administrative Issues and Other Potential “Masterpieces”
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Moving the convoluted administrative scene is an absolute necessity. This
is valid paying little heed to your industry. For instance, lately, a well-known
ridesharing application confronted a few administrative difficulties from state
and nearby government offices charging that its tasks are illicit.
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Before making speculation, financial backers will need to guarantee that your
marketing strategy isn’t imperiled because of administrative concerns. As
needs are, at the start, you should look for legitimate advice to recognize any
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possible administrative issues (like forthcoming enactment, suit, and expected
administrative activities) and to affirm that such administrative issues won’t
antagonistically affect your plan of action.
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Searching for replies to your start-up-related legitimate inquiries? Head over to
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our Entrepreneur Toolkit to download a supportive aide intended to help with
addressing some fundamental inquiries in regards to structure, dynamic, and
debate goals for your start-up.
In a new Angel Investing Podcast, host and private supporter, Tatyana Gray talked
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with Sam Bernard, a prestigious Utah investor, and accomplice at Peak Ventures. In
this meeting, Bernard clarified that the group is a top factor financial speculators search
for in a venture. “It’s the group that means the world,” says Bernard, expressing that
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80% of the choice is moored by the way they feel about the group. The primary concern
is: VCs put resources into individuals, not simply organizations.
Investors need to see a group that is “in with no reservations” all along (not
standing ready for financing to show up before they commit). The thought is that
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if the group is energetic with regards to their item or support and can get past the
“bootstraps” phase of development, then, at that point, they have the assurance to
beat any obstacles they will face in the development interaction. VCs additionally need
to see that the group shares the Founder’s vision and offers the applicable abilities
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and experience to confront future difficulties the business will look at as it grows.
Brilliant organizers are extremely key as they fabricate their center group, making it a
wellspring of significant worth that VCs find appealing. When in doubt, when financial
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speculators check out an organization, they will in general like to see a set number
of financial backers and they like to see licensed financial backers (more than $1
million of resources excluding their home or making a big-league salary numerous
years straight). This implies a VC will need to see the capitalization table (rundown of
investors, the amount of the organization they own, and the sum they have contributed).
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Beginning phase organizations frequently require numerous rounds of venture and the
collaboration of existing financial backers. Conveying countless little financial backers—
particularly family—can be a genuine test, making it difficult for more modest financial

backers to stay aware of bigger ones in later adjustments. A “chaotic” cap table is a
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mood killer and expands the danger of contention later on. Most business visionaries
walk a scarce difference to get genuinely necessary capital from the beginning without
adding things to their cap table.
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Investors would prefer not to see a “me as well” or “additionally run;” they need
to see a business that either gives a convincing motivation to individuals to transform
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from their present propensities, or sees something extraordinary. Therefore, investors
need to see an item that has solid differentiators. They’ll need to see that individuals
don’t have the motivation to purchase another person’s item or administration all things
considered. In case individuals are now utilizing a comparative item or administration,
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for what reason will they need to move to your item all things considered?
One of the principal individuals the investors will interact with is the Founder/CEO.
What is their quality? Are the individual rousing and an incredible communicator? Do
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they appear to be completely dedicated? Is it accurate to say that they will tune in and
accept guidance? Do they appear to be quiet and able under tension? Do they seem
like they would have the option to issue settlements and make changes should the
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business hit barricades? Is it accurate to say that they are enthusiastic and learned with
regards to their item/administration and industry? These markers frequently sign to VCs
that the Founder can succeed. On the off chance that a Founder feels they are deficient
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in such a manner, adding a solid CEO can be valuable.
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Being supported by a VC store has been glamorized in the beyond 10 years—and
it’s no big surprise why. Financial speculators not just subsidize youthful and creative
organizations, yet in addition bring an association with prepared experts and specialists
with a demonstrated capacity to create and grow a business.
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Since funding ventures will in general be high-hazard, with around 65% of VC-
sponsored organizations neglecting to return their capital, VCs will in general be
exceptionally specific with regards to where they place their cash. With such countless
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organizations looking for VC ventures, a contest for VC assets can be furious. Even
though investors are regularly putting resources into new companies or youthful
organizations, they need to see evidence that the business is a practical one. This
implies moving past having an item thought to have evidence that somebody will pay
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for it (outside of loved ones). They need to see a foothold with your center market. This
ought to be an expansive portion and purposeful, if not the VCs will be distrustful.
So, what do investors search for in a business? While fundamental, a “smart

thought” isn’t sufficient. Some extra factors weigh into funding choices, including the
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group, the evidence of idea, the size of the market, and the conditions of the venture.
4.3.3 Legal Issues Faced by Entrepreneurs

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In a larger part of business, people neglect to contemplate legitimate difficulties

when they need to set up another organization. While a large number of them incline
toward designating a lawyer for forestalling legitimate issues successfully, they will
offer answers for significant issues. The new businesses ought to consider working
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with a decent lawyer who can assist with defeating lawful entanglements generally.
Additionally, it will assist a great deal with finding out about lawful laws exhaustively
while making a beginning up.

Here are some significant key spaces of law each entrepreneur should know
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before setting up a beginning.
1. Licensed innovation rights
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Licensed innovation rights are lawful rights that permit a beginning proprietor
to ensure manifestations and creations appropriately for keeping away from
debates. Some of them incorporate copyrights, brand names, licenses,
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proprietary advantages, authorizing, protection, contracts, item security, and
risk. A beginning up should be zero in addition to shielding licensed innovation
from possible dangers.
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2. Business structure
It is fitting to realize the business structure exhaustively before setting up a start-
up firm. From company to organization, business people ought to think about
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legitimate contemplations before shaping a business. Every single business
has its arrangement of deciding that a beginning up proprietor should find out
about them exhaustively.
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3. Non-exposure arrangements
A non-exposure understanding, without further ado known as NDA, is an
agreement between two gatherings that forbid somebody from imparting
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classified data to outsiders or others. Indeed, it assumes a critical part in
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guaranteeing an undeniable degree of insurance to a business. There are
three unique sorts of NDAs implied for an organization to zero in addition to its
targets. A beginning up proprietor ought to consider setting up a non-revelation
arrangement while going into an agreement.
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4. Vesting
Vesting implies procuring resources contributed by representatives, investment
opportunities, or other advantage plans. It is a savvy one to consider vesting
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value over the long run as opposed to getting all offers immediately that can
assist with achieving objectives generally. Something else is that it will assist
with acquiring high benefits which eventually offer approaches to maintain a
business effectively.
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5. State and Federal assessments

Business people ought to see more with regards to state and government
burdens exhaustively. This is because they will affect a business structure
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successfully. Hence, it is important to more deeply study them before setting up

a new business.
6. Bookkeeping and money
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Most business visionaries don’t focus on bookkeeping and money exercises

after making an organization. It is fitting for them to zero in additional on them
appropriately that can assist with documenting tax collection papers at the ideal
opportunity.
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Rejuvenating your business dreams by branching out all alone is perhaps the
best demonstration of fortitude and aspiration one can show. A business venture
is an intense advance toward perpetual development prospects in the business

commercial center, however like any excursion, there will be knocks along the way to
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progress. Unavoidably, regardless of the amount you arrange, there will consistently
be unexpected issues that emerge, including lawful issues looked at by business
visionaries from brand names to protected innovation and then some. Here we’ll
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address a portion of the bigger instances of moral and legitimate issues in business,
how to remember them, and how you can deal with limiting your openness.
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For what reason is it significant for business people to shield themselves from
legitimate issues?
Sometimes the craving to get another endeavor fully operational as fast as
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conceivable can prompt disastrous misfortunes that couldn’t just injure a business
however could likewise land a person in huge legitimate difficulty also. With regards to
considering every contingency, it’s ideal to pass on it to an expert, and realizing where
to begin is a large portion of the fight. Being comfortable with a couple of the bigger
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lawful issues models can assist you with setting yourself up pre-dispatch or give you
a superior thought regarding where to begin retroactively defending yourself and your
business from future legitimate concerns.
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The decision of lawful direction and the profundity of their contribution is basic for
any business person hoping to advance into the business market. Recruiting an expert
to ensure you’re restricting your dangerous openness while assisting with guaranteeing
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your business makes headway on the right foot is basic to guaranteeing progress with
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progress. Discover a legal advisor who spends significant time in new companies and
new undertakings as there can be unobtrusive, however significant subtleties that might
be disregarded by somebody who doesn’t zero in primarily on business.
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Lawful issues models for a business person

You might be inquiring, “What are a few instances of moral and lawful issues in
business that I should pay special attention to as a business person?” While this
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rundown is in no way, shape, or form exhaustive, it features a portion of the bigger

issues that business people much of the time neglect or experience themselves.
Realizing where to begin and what to examine with your attorney will assist with
surrendering you a leg with regards to ensuring you and your business. View the
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rundown beneath for a portion of the subjects that merit the consideration of any
yearning business visionary.
●● Fail to adhere to corporate consistency laws: Corporate consistency is a wide

term covering everything from inner principles, guidelines, and techniques,
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just as the government and state laws overseeing your space of business.
Plan standard check-ups to ensure your business is working as per all laws
and rules.
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●● Licensed innovation, for example, brand name and copyright encroachments:

Entrepreneurs need to find extra prudent ways to guarantee they’re not
encroaching on another person’s protected innovation and to secure their own
all the while.
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●● Non-revelation arrangements (NDA’s): Ensuring NDAs are endorsed before

sharing ideas guarantees that you can keep up with private proprietary
advantages and works-in-progress.

●● Separate business and individual resources: Ensuring that you’re utilizing

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separate ledgers is only one basic strategy that can add a layer of security
between your resources and those of your business.
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●● Business handbooks and agreements: Working on a respectability handbook
and drafting an agreement with a legal advisor will assist with guaranteeing
that representatives are accurately educated, arranged, and secured.
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●● Worker end: Reduce your odds of a lawful counter by clarifying business
terms face to face just as on paper in representative manuals that
unmistakably archive rules, guidelines, and disciplinary activities should they
should be taken.
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●● Investor arrangements: All private companies should verify that conventional
investor and association arrangements exist and are lawfully restricted so that
there are no hazy situations for any of the partners.
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●● Effectively recording charges: Innumerable standards guidelines and laws
are administering the activity of the revenue-driven business. Ensure that you
have the right cycles and programming set up to keep a definite record of all
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monies coming in and going out; a little detail might cause genuine monetary
difficulty down the line.
Normal lawful mix-ups business visionaries make

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The two biggest slips up that business people make incorporate the accompanying:
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1. Employing a legal counselor with practically zero experience working
with business people
The significance of beginning early with regards to fusing the direction of a legal
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counselor can’t be focused on enough. Before you begin with your undertaking,
and in a perfect world while you’re as yet in the arranging stage, you ought to
research to discover a lawyer who works in new businesses and knows the
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intricate details of your industry just as nearby laws.

Having appropriate lawful insight through your dispatch just as prepared in the
remote possibility you are sued is basic.
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2. Fail to utilize NDA’s

Non-divulgence arrangements are lawfully restricting archives used to secure
industry privileged insights, delicate information, legitimacy as well as secret
data, and then some. These reports guarantee that thoughts and data won’t be
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taken by people near the project(s) being referred to. Those in the break of an
NDA might be dependent upon claims, monetary punishments, or may even
deal with criminal indictments. The previously mentioned lawful advice ought to
gladly assist you with drawing up an NDA.3,5,6
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India is one of the UK’s need abroad business sectors. If you intend to work
together in India, or on the other hand in case you are as of now exchanging there, it
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is crucial to realize how to utilize, watch and implement the rights you have over the
licensed innovation (IP) that you or your business own. This aid clarifies IP as a rule
and gives direction on the best way to apply these standards in the Indian market. It
depicts the issues you might look at with IP encroachment in India, offers exhortation on
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how you can adequately tackle these, and gives connections to wellsprings of additional
assistance.
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Protected innovation (IP) is a term alluding to a brand, development, plan,
or another sort of creation, which an individual or business has lawful rights over.
Practically all organizations own some type of IP, which could be a business resource.
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Normal sorts of IP include:
●● Copyright – this secures composed or distributed works like books, tunes,
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films, web content, and imaginative works;
●● Patents – this ensures business innovations, for instance, another business
item or interaction;
●● Designs – this ensures plans, for example, drawings or PC models;
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●● Trademarks – this secures signs, images, logos, words, or sounds that
recognize your items and administrations from those of your rivals.
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IP can be either enlisted or unregistered.
With unregistered IP, you naturally have lawful rights over your creation.
Unregistered types of IP incorporate copyright, unregistered plan rights, custom-based
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law exchange imprints and data set rights, private data, and proprietary innovations.
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With enrolled IP, you should apply to power, for example, the Intellectual Property Office
in the UK, to have your privileges perceived. On the off chance that you don’t do this,
others are allowed to take advantage of your manifestations.
Enlisted types of IP incorporate licenses, enrolled exchange stamps, and enrolled

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configuration rights. Copyright is additionally registerable.
Protected Innovation Rights – a Situation in India

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Copyright
India is a signatory to the Berne Convention on copyright. Nonetheless, it very
well might be a smart thought to enroll your copyright as doing as such may assist with
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demonstrating possession in case there are criminal procedures against infringers. As a

rule, however, enlistment isn’t important to keep a copyright encroachment guarantee in
India.
Enrolment is made, face to face or through an agent, with the Copyright Office.
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In 2016, copyright strategy was moved to India’s Ministry of Commerce and Industry.
All IPRs are presently directed by the Division for Industrial Property and Promotion
(DIPP). Web theft of movies, music, games, and programming is an issue in India, as is
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unapproved duplicating of actual books.
Patents
India’s Patents Act of 1970, 2003 Patent Rules, and the 2016 Patent Amendment
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Rules set out the law concerning licenses. As in the UK, there is no arrangement for
utility model licenses. The administrative expert for licenses is the Patent Registrar
under the workplace of the Controller General of Licenses, Designs, and TradeMarks,

which is essential for India’s Ministry of Commerce and Industry. Licenses are
substantial for quite a long time from the date of documenting an application, Notes
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dependent upon a yearly recharging expense. India’s patent law works under the ‘first
to record’ standard – that is, if two individuals apply for a patent on an indistinguishable
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development, the first to record the application will be granted the patent.
Designs
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The laws overseeing plans are the Designs Act 2000 and the Designs Rules 2001.
Plans are substantial for a limit of ten years, sustainable for a further five years.
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Trademarks
India’s exchange mark laws comprise the 1999 Trade Marks Act and the Trade
Marks Rules of 2002 and 2017. The administrative expert for licenses is the Controller
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General of Patents, Designs, and TradeMarks under the Department of Industrial Policy
and Promotion. The police presently have more strong powers in upholding exchange
mark law, including the capacity to look through premises and hold onto merchandise
associated with being fake without a warrant. Be that as it may, these forces are
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tempered by the necessity for the police to look for the Trade Mark Recorder’s
viewpoint on the enlistment of the imprint before making a move.
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This adds to the postponement and may bring about fake products being taken out
or sold. Business trademarks additionally comprise a type of exchange mark India, with
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assurance, independent of existing exchange names, for those wishing to exchange
under their last name. Due to the broad act of ‘cybersquatting’ – the enlistment in the
dishonesty of imprints by third parties enlisting space names for specific notable imprints
to offer them to the first rights proprietors – it is prudent for rights proprietors to enroll
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their area names in India as exchange checks as soon as could be expected. Enlistment
requires as long as two years. An exchange mark in India is substantial for a long time
and can be restored from there on endlessly for additional ten-year time frames.
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What is the need for IPR?

The advancement and prosperity of mankind lay on its ability to make and create
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new works in the space of innovation and culture.
●● Empowers development: The lawful assurance of new manifestations

energizes the responsibility of extra assets for additional advancement.
●● Financial development: The advancement and security of licensed innovation
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prod monetary development, makes new positions and ventures and improves
the quality and satisfaction throughout everyday life.
●● Protect the privileges of makers: IPR is needed to shield makers and different
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makers of their scholarly products, labor, and products by conceding them

certain time-restricted rights to control the utilization of the made merchandise.
●● It advances development and inventiveness and guarantees the simplicity of
working together.
●● It works with the exchange of innovation as unfamiliar direct speculation, joint
(c
endeavors, and authorizing.

Enlisting and implementing protected innovation rights in India

Notes
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To appreciate most sorts of protected innovation (IP) rights in India, you should
enroll them.
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For licenses, individual enlistments should be made in India, however for rights
other than modern plans you can apply under the particulars of the Patent Cooperation
Treaty, which is generally simpler and faster.
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For exchange marks, you should enlist them inside India, either through the
homegrown exchange mark framework or under the Madrid framework.
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For copyright, no enlistment is required except for enrolling copyrights with the
copyright specialists.
‘Need rights’ under the Paris Convention can help in the nearby enrolment of
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exchange imprints, plans, and licenses by permitting rights recently enlisted somewhere
else to become powerful in India, whenever recorded inside a time limit.
Upholding IP rights in India
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IP rights can be upheld by carrying activities to the common courts or through
criminal indictment. India’s IP laws set out techniques for both common and criminal
procedures, as does the Competition Act. Criminal procedures don’t have any
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significant bearing on patent and plan encroachments.
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An inconvenience of the common case is that you are probably not going
to recuperate enormous harms, and correctional harms against an infringer are
uncommon. In any case, on the off chance that you have a distinguished infringer, it
could be fitting to dispatch a common suit, since, supposing that a break directive is
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allowed the encroachment can be ended forthcoming the result of the case. Harms are
regularly granted in instances of copyright robbery and exchange mark encroachment
(which go under criminal suit); less so in patent cases.
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As in different nations, the Indian Government acquires criminal cases, albeit much
of the time activities follow protests to judges or police specialists by rights proprietors.
Criminal procedures against infringers convey the possibility of a lot more extreme
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cures, including fines and detainment.
Conclusion
India has made various changes in its IPR system to build effectiveness and
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has chopped down the time needed to give patents. The culture of advancement is
becoming the dominant focal point in the country. India is all around ready to zero in on
R&D. This has been reflected in its further developed positioning in Global Innovation
Index throughout the long term.
)A
A proficient and fair-protected innovation framework can assist all nations with
acknowledging licensed innovation’s potential as an impetus for the monetary turn of
events and social and social prosperity.
(c
4.3.5 Patents
A patent for innovation is allowed by the government to the designer, giving the

creator the option to stop others, for a restricted period, from making, utilizing, or selling
Notes
e
the development without their consent.
At the point when patent insurance is conceded the innovation turns into the
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property of the creator, which like some other type of property or business resource
can be purchased, sold, leased, or recruited. Licenses are regional rights: UK licenses
will just give the holder rights in the UK and rights to prevent others from bringing the
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protected items into the UK.
A patent is the conceding of property directly by a sovereign power to a designer.

This award gives the creator restrictive rights to the protected cycle, plan, or innovation
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for an assigned period in return for a far-reaching revelation of the development. They
are a type of spiritual right.
Government organizations commonly deal with and support applications for
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licenses. In the United States, the U.S. Patent and Trademark Office (USPTO), which
is important for the Department of Commerce, handles applications and awards
endorsements.
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●● A patent is the giving of property directly by a sovereign position to a designer.
●● A patent gives the creator elite rights to the protected interaction, plan,
or innovation for a specific period in return for a total revelation of the
development. r
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●● In June of 2018, the U.S. Patent and Trademark Office gave its 10 millionth
patent.
●● Utility licenses are the most widely recognized patent in the United States,
representing 90% of all given licenses.
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●● Utility and plant licenses are allowed for quite some time, while configuration
licenses are conceded for one or the other 14 or 15 years, contingent upon
when recorded.
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To be patentable your development must:

Be new - never been disclosed in any capacity, anyplace on the planet, before the
date on which the application for a patent is documented.
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Include an innovative advance - if when contrasted and what is known, it would not
be clear to somebody with great information and experience of the subject.
Be fit for mechanical application - a creation should be fit for being made or utilized
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in some sort of industry. This implies that the development should take the reasonable
type of a contraption or gadget, an item like some new material, or a mechanical cycle
or strategy for activity.
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Development isn’t patentable in case it is:

●● A revelation.
●● A logical hypothesis or numerical strategy.
●● A tasteful creation, abstract, sensational, or imaginative work.
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●● A plan or strategy for playing out a psychological demonstration, playing a

game, or working together.

●● The introduction of data or a PC program.

Notes
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●● If the development includes more than these theoretical angles so it has
actual components (like uncommon mechanical assembly to play another
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game) then, at that point, it very well might be patentable.
●● Likewise, it is preposterous to expect to get a patent for plant assortment,
a strategy for the treatment of the human or creature body by a medical
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procedure or treatment, or a technique for determination.
Format of patent security

In light of average designs in patent details since the last part of the 1970s, before
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this, they were probably going to come up short on a first page and search report.
1. The first page - utilized similarly a book will have a cover sheet, a patent will have
a first page which gives helpful bibliographical subtleties. It utilizes two-letter country
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codes and INID codes to recognize snippets of data.
2. A theoretical - (accumulated by the candidate) and might be a representation. This
design is turning out to be progressively normalized however the data given can
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fluctuate from one country to another.
3. Opening articulation - normally expresses the issue.
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4. Foundation data - US licenses are probably going to have a conversation of the
‘best in class’ with references to key licenses, books, or diary articles. Issue - the
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idea of the issue is illustrated.
5. Depiction of the innovation - Explains the creative advance and how it functions.
6. Cases - the numbered claims cover the lawful parts of the syndication, with the
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first being the fundamental cause and the later reliant cases alluding back to prior
claims in portraying what’s going on with regards to the development. In a distributed
application the cases are only an endeavor to get security while the conceded patent
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has the cases that are perceived in law.

7. Delineations - as many as required to appear in the development.
8. Search report - generally on the front or last page. At any rate, this comprises a
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rundown of licenses or different reports recommending that some essence of the

development isn’t new. More nitty-gritty inquiry 3 reports would show which claims
in the application were influenced, the sort of pertinence, and the specific page
and line numbers thought to be important in the referred to archive. Search reports
can be important when attempting to survey if the development is new. There has
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been normalization in the arrangement. Practically all nations presently utilize the
International Patent Classification, IPC.
)A
9. INID codes - these are numbers used to distinguish bibliographic components in

patent determinations, regularly on the front pages. They are just now and then
provided in the mathematical request and are nicknamed ‘INID codes’ after globally
concurred numbers for the recognizable proof of bibliographic information.
What rights does a patent give?

(c
A patent gives the option to prevent others from utilizing your creations. Then
again you can decide to allow others to utilize it under concurred terms. A patent
additionally carries the option to make a legitimate move against other people who
Notes
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may be encroaching and to guarantee harm. An innovator isn’t needed to get a
patent to incorporate a development, yet when the creation is unveiled, there will be
no assurance against others utilizing the creation and you would not be able to get a
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patent. The Intellectual Property Office doesn’t guarantee that others don’t duplicate
a protected creation. It is dependent upon the proprietor to make any important move
to guarantee a thought doesn’t encroach. Once ‘Conceded’ or in the public space any
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thoughts may not be reregistered.
Classification
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Any innovation ought to be kept secret until it is recorded at The UK Intellectual
Property Office. A classification arrangement ought to be endorsed before any
subtleties or depiction is uncovered. This doesn’t make a difference to patent lawyers
or other expert counsels or staff helping an individual from general society. This is
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naturally a circumstance of certainty.
Step by step instructions - Application for a Patent
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Before making a conventional application, a candidate should explore the Patent
and Trademark Office’s data set to check whether someone else or foundation has
asserted a patent for a comparable development. The development should be not the
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same as or an improvement upon a past plan to be considered for a patent. Candidates
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need to take care to keep up with precise records of the planning cycle and the means
taken to make the creation. Upholding the patent is up to the individual or substance
that applied for the patent.
To apply for a patent in the United States, the candidate submits explicit reports
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and pays related charges. Composed documentation incorporates drawings, depictions,

and cases of the thing to be protected. A proper vow or revelation affirming the
credibility of the development or improvement of a current innovation should be marked
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and presented by the creator. After the expense installment, the application is audited
and either endorsed or denied.
Patent Categories
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There are three various types of patents: utility patents, configuration patents, and
plant patents.
Utility Patents: The most widely recognized sort of patent, these are conceded to
new machines, synthetic compounds, and cycles.
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Configuration Patents: Granted to ensure the special appearance or plan of

produced objects, like the surface ornamentation or by and large plan of the item.
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Plant Patents: Granted for the innovation and biogenetic propagation of new
and particular plant assortments, including crossbreeds (agamic proliferation implies
the plant is replicated by implies other than from seeds, for example, by uniting or
establishing of cuttings).
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4.3.6 Copyrights and Related Rights

Copyright is a type of licensed innovation security allowed under Indian law to the
makers of unique works of creation like scholarly works (counting PC projects, tables,
Notes
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and gatherings including PC data sets which might be communicated in words, codes,
plans, or in some other structure, including a machine comprehensible medium),
sensational, melodic and imaginative works, cinematographic movies and sound
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accounts.
Intellectual property law secures articulations of thoughts instead of actual
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thoughts. Under area 13 of the Copyright Act 1957, copyright security is given on
scholarly works, sensational works, melodic works, creative works, cinematograph
movies, and sound recording. For instance, books, PC programs are ensured under the
Act as artistic works.
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Copyright alludes to a heap of elite rights vested in the proprietor of copyright by
the ethics of Section 14 of the Act. These rights can be practiced exclusively by the
proprietor of the copyright or by whatever other individual is properly authorized in such
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a manner by the proprietor of copyright. These rights incorporate the right of variation,
right of multiplication, right of distribution, right to make interpretations, correspondence
to the public, and so on
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Copyright security is given on all original abstract, imaginative, melodic or
sensational, cinematograph, and sound recording work. Unique means that the work
has not been replicated from some other source. Copyright insurance starts the second
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a work is made, and its enlistment is discretionary. Anyway, it is consistently prudent
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to get an enlistment for superior insurance. Copyright enrollment doesn’t give any
rights and is only at first sight evidence of a section regarding the work in the Copyright
Register kept up with by the Registrar of Copyrights.
According to Section 17 of the Act, the creator or maker of the work is the primary
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proprietor of copyright. A special case for this standard is that the business turns
into the proprietor of copyright in conditions where the representative makes a work
throughout and extent of the business.
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Copyright enlistment is significant to a copyright holder who wishes to make a

common or criminal move against the infringer. Enlistment customs are straightforward
and the desk work is the least. If the work has been made by an individual other than a
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representative, it is important to document with the application, a duplicate of the task

deed.
Indian viewpoint on copyright security:

The Copyright Act, 1957 gives copyright assurance in India. It presents copyright
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security in the accompanying two structures:
(A) Economic Rights:

)A
The copyright remains alive in unique abstract, emotional, melodic, and creative
works; cinemagraphs, movies, and sound accounts. The creators of copyright in the
aforementioned works appreciate monetary rights u/s 14 of the Act. The rights are, in
regard of abstract, sensational, and melodic, other than PC program, to duplicate the
(c
work in any material structure remembering the putting away of it for any medium
by electronic means, to give duplicates of the work to the general population, to
play out the work out in the open or conveying it to the general population, to make

any cinematograph film or sound recording in regard of the work, and to make any
Notes
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interpretation or variation of the work.
On account of the PC program, the creator appreciates notwithstanding the
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aforementioned rights, the option to sell or give on a recruit, or make available for
purchase or recruit any duplicate of the PC program in any case whether such duplicate
has been sold or given on employment on before events. On account of an imaginative
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work, the rights accessible to a creator remember the option to imitate the work for any
material structure, remembering portrayal for three components of a two-dimensional
work or in two elements of a three-dimensional work, to impart or gives duplicates of the
work to the general population, to remember the work for any cinematograph work, and
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to make any transformation of the work.
On account of a cinematograph film, the creator partakes in the option to duplicate

the film including a photo of any picture shaping part thereof, to sell or give on recruit or
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make available for purchase or recruit, any duplicate of the film, and to convey the film
to people in general. These rights are comparably accessible to the creator of sound
recording. Notwithstanding the previously mentioned rights, the creator of artwork,
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model, drawing or of a composition of an abstract, sensational or melodic work, in case
he was the principal proprietor of the copyright, will be qualified for reserve a privilege to
partake in the resale cost of such unique duplicate given that the resale cost surpasses
rupees 10,000.
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(B) Moral Rights:
Segment 57 of the Act characterizes the two essential moral privileges of a creator.
These are:
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●● Right of paternity, and

●● Right of trustworthiness.
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The right of paternity alludes to one side of a creator to guarantee initiation of

work and an option to keep all others from asserting the origin of his work. Right of
respectability enables the creator to forestall twisting, mutilation, or different changes of
his work, or some other activity comparable to said work, which would be biased to his
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honor or notoriety.
The stipulation to segment 57(1) gives that the creator will not reserve any privilege
to limit or guarantee harms regarding any variation of a PC program to what area 52
(1)(aa) applies (for example figuring out something similar). It should be noticed that
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inability to show work or to show it as per the general inclination of the creator will
not be considered to be an encroachment of the rights given by this segment. The
legitimate delegates of the creator might practice the rights that gave the pond a creator
)A
of work by area 57(1), other than the option to guarantee initiation of the work.
The fate of copyright in India:

The intellectual property laws in India are set to be revised with the presentation
of the arrangements against circumvention and Rights Management Information in the
(c
Indian copyright system even though India is under no commitment to present these
progressions as it’s anything but a signatory to WCT or WPPT.

“Duplicating a book is like taking someone’s adornments. Huge scope coordinated

Notes
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replicating resembles looting a gem specialist’s shop or a bank. However, at that point,
there is a significant contrast. On account of a bank burglary the papers are brimming
with electrifying information and the entire may of the State, particularly the police, hops
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in to get the offender, there is the tension of popular assessment even on the appointed
authority attempting the case. The impact is electric.
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“The copyright doesn’t ensure the thought yet it secures the ability and the work
put in by the creators in delivering the work. An individual can’t be expected to take
responsibility for encroachment of copyright on the off chance that he has taken just
the thought engaged with the work and offered articulation to the thought in his specific
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manner. Two creators can deliver two unique works from a typical wellspring of data,
every one of them organizing that data in his specific manner and utilizing his language.
The course of action of the data and the language utilized ought to not be duplicated
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from a work wherein copyright remains alive.”
Conclusion:
The arrangements of the previously mentioned two institutions show that the
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Copyright security in India is solid and viable enough to deal with the Copyright of
the concerned individual. The security stretches out not exclusively to the Copyright
as perceived in the customary sense yet in addition in its advanced viewpoint. In this
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manner, online copyright issues are likewise satisfactorily secured, however not in a
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clear and express term.
To address the steadily expanding difficulties, as presented by the changed

conditions and most recent innovation, the current law can be excessively deciphered
to the point that all features of copyright are satisfactorily covered. This can be
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accomplished by applying the purposive interpretation method, which requires

the current law to be deciphered in such a way as equity is done in the reality and
conditions of the case.
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4.3.7 Copyright Protection in India

Copyright assurance is given on all Original scholarly, imaginative, melodic or
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emotional, cinematograph, and sound recording works. Unique means that the work
has not been duplicated from some other source. Copyright assurance begins the
second a work is made, and its enrolment is discretionary. Anyway, it is consistently
prudent to get enrolment for superior security. Copyright enrolment doesn’t give any
rights and is just an at first sight confirmation of a section regarding the work in the
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Copyright Register kept up with by the Registrar of Copyrights.
Copyright Protection:
)A
While copyright doesn’t ensure data or thoughts all alone, it secures the first
articulation of data and thoughts. Copyright applies just to scholarly, sensational,
melodic, and creative works. The rights which apply to every one of these
classifications shift.
(c
Copyright doesn’t ensure against the autonomous production of comparable works.

Legitimate activity against encroachment is confounded by the way that a wide range

of copyrights might exist for specific works – specifically for movies, broadcasts, and
Notes
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media items. In contrast to different types of licensed innovation, enrolment doesn’t
present copyright; all things being equal, it consequently results from the formation of
the first work in a material structure. This programmed right for the most part applies
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for the existence of the maker in addition to 70 years, even though it changes relying
upon the idea of the work and regardless of whether it has been distributed. Albeit a
copyright notice with the name and date of the proprietor isn’t required, it might assist
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with demonstrating your copyright possession and it is important to build up copyright in
certain nations abroad.
The copyright notice is a note imprinted on a protected work; it as a rule
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incorporates the © image, the date on which the work was made, and the name of the
maker. Notice of copyright might go about as an obstruction to infringers. According
to the Indian Copyright Act segment 13 of Chapter III, the insurance is given to the
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accompanying works:
●● Scholarly works;
●● Melodic works;
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●● Sensational works;
●● Creative works;
●●
●●
Cinematograph films;
Building works;
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●● Sound accounts;
●● PC program/programming.
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Intellectual property law consistently secures the maker, either completely or to

some degree, even after the task of copyright work to other people. Moral rights award
the creator the option to keep his name on the work always and shield him from any
twisting or adjustment of the work or other hostile activity according to the work that
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would be averse to the standing of the creator. To acquire copyright assurance the work
ought to have the accompanying
1. The work should be unique (Original importance, made from motivation and not
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acquired from some other existing sources. The work more likely than not been
made interestingly)
2. It should be fixed in some quantifiable structure. The introduction of the work
should be distinct and physical and should be fit for being perceived in a decent
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structure/perceived in its temperament.

3. First distribution A unique work ought not to be distributed previously.
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4. Work distributed after the passing of the creator; at the hour of death, the creator
should be a resident of India.
5. In the case of work distributed in India, the creator should be a resident of India
around then.
(c
Need for Copyright Protection

Note that copyright secures how the thought is introduced, as opposed to the
actual thought; for instance, in case it is resolved to paper or one more piece of media.
So, what makes it so critical to have copyright insurance? Of course, if it happens

Notes
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consequently, don’t you need to stress over it? While the facts confirm that your work is
naturally ensured, that doesn’t imply that individuals will not duplicate your benefit.
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Copyrights ought to be secured because it guarantees certain base shields for
creator’s privileges over their manifestations, consequently ensuring and compensating
their imagination. Since inventiveness is the way to advance, no cultivated society
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can easily overlook the fundamental prerequisite to energize the same thing. The
financial and social improvement of a general public relies upon innovativeness. There
is additionally the idea of copyright as a heritage that can keep going for quite a long
time, passed down like a piece of the domain. On account of scholarly, melodic, or
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imaginative works, copyrights might last an additional 70 years after the demise of the
first makers, and in the transmission or distributing cases this period might reach out to
50 years.
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If somebody encroaches your copyright, you will have legitimate grounds to sue
the liable party either to pay you a permit or to repay you for any monetary misfortune
you might have caused. If they utilize your work without your insight, you reserve the
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option to stop them from doing as such and to get paid for any profit they have procured
on the rear of your work. On the off chance that you see anybody utilize your work
without your insight or assent, we suggest that you counsel an IP master on what lawful
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move you should make. On the off chance that you have works that are protected
and host pulled in the consideration of different gatherings, you can investigate your
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permitting alternatives to guarantee that you can benefit monetarily from their utilization.
Permitting is your legitimate authorization to one more party to permit them to utilize
any (or the entirety) of your protected works.
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Conditions for Copyright Protection

Copyright doesn’t secure thoughts or realities themselves. Copyright secures the
determination and game plan of thoughts: i.e., their unique and inventive articulation
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when they are fixed in some unmistakable structure. The Requirements to Claim
Copyright Are:
●● Obsession
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The thoughts should be fixed in some unmistakable vehicle of articulation. Copyright

insurance is programmed, even though there are advantages to authoritatively
enlisting your work with the Copyright Office. Copyright insurance is prompt when
the articulation is fixed in a substantial structure. That is, it applies to drafts and
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finished works, both distributed and unpublished.

●● Innovation
A decent articulation of thoughts is ensured by copyright if and provided that it is
)A
unique. Neither quality nor uniqueness is required.

a) Indeed, even terrible work is likely to have copyright assurance.
b) Comparative works, however freely made, are separately liable to copyright
security.
(c
●● Insignificant Creativity
Difficult work isn’t sufficient to acquire copyright security.
Insignificant inventiveness is additionally required.

Notes
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Models:
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1. A rundown of parts for a kid’s toy is presumably not exposed to copyright.
a) A sheet of guidelines for gathering a toy from its parts might be likely to be
copyrighted.
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2. A total phone white page isn’t liable to copyright.
a) An ordered business repository registry might be liable to copyright.
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b) A site that gives the necessary resources to look through a white page’s
information base might be liable to copyright.
Copyright insurance isn’t accommodated;
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1. Works not fixed in unmistakable structure.
2. Titles, names, short expressions, mottos, techniques, authentic data, images,
or plans – be that as it may,
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3. brand name law might give some assurance to these works.
4. Thoughts or ideas, strategies, measures, plans, standards, revelations, and
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rules – nonetheless, in such cases patent or proprietary innovation law might
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give assurances to these works.
5. Works that are as of now in the public space and unique initiation isn’t discernible
are not covered under intellectual property law.
6. Copyright works that are now terminated.
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Conclusion:
Even though there are numerous limits to copyright and issues, understanding
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intellectual property law and use would guide us to utilize protected substances for
instructional exercise and exploration purposes in an extremely safe way. An adequate
degree of comprehension of copyright issues should be created during/before the
obtainment/membership of any assets. Now, an understanding/contract/agreement
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between the gatherings worried about the acquisition of assets would play a huge
part in ensuring the copyright of the holders. As a facilitator, the bookkeeper should
instruct his clients on copyright issues consistently. Furthermore, this may become one
of the significant components that might assume a huge part in lessening copyright
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encroachments among library clients.
4.3.8 Trademarks
)A
A trademark is a remarkable image or word(s) used to address a business or its

items. When enrolled, that equivalent image or series of words can’t be utilized by some
other association, always, as long as it stays being used and appropriate administrative
work and charges are paid. In contrast to licenses, which are allowed for a time of 20
years, reserve won’t ever end. Organizations do have to apply for themselves and
(c
get proprietorship affirmation with the U.S. Patent and Trademark Office to guarantee
insurance from copycats, notwithstanding.

Over the long run, brand names become inseparable from an organization name,
Notes
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so you don’t have to see the name to perceive a specific business. Think about the
apple shape with the chomp taken out that Apple utilizes as its logo, the swoosh logo
that Nike highlights on its items as a whole, or the brilliant curves McDonald’s enlisted
in
many years prior.
The way that we so effectively partner images and words with organizations and
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their brands is probably the greatest benefit of their utilization. At the point when a client
sees a natural logo or expression, they have moment acknowledgment, which can drive
inclination and, at last, deals.
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The essential capacity of an exchange mark is to recognize the labor and products
or administrations given by the merchant from those given by different brokers. An
exchange mark is consequently a significant component of any business as it not just
recognizes a merchant it additionally conveys to purchasers that the labor and products
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bearing the imprint come from an interesting source, discernible from the wide range of
various hotspots for those labor and products.
Regularly the term brand name is utilized to allude to both exchange checks and
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administration marks. The exchange mark versus administration mark qualification is
tiny, and these imprints are the same thing. The thing that matters is that an exchange
mark advances merchandise or items, though a help marks advances administrations.
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It gives off an impression of being generally expected to allude to support stamps
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as either brand names or administration marks. Be that as it may, the converse isn’t
accurate; and you can’t allude to an imprint appended to merchandise as a help mark.
® and ™ are normal images related to exchange marks. ® shows that the imprint
is an enrolled exchange mark and subsequently secured under the exchange mark
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law. ™ is only an image used to demonstrate that the imprint is being utilized by the
organization as an exchange mark. It doesn’t signify that the imprint is enlisted nor
secured under the exchange mark law. There is no necessity that you utilize any of
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the images, but there are two significant benefits to utilizing them. In the first place,
the images give notice to the world that you are asserting the images as exchange
imprints, and this will discourage others from endeavoring to utilize the name for their
own business.
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The words “brand name” “copyright” and “patent” are regularly utilized reciprocally
and mistakenly. Brand names, copyrights, and licenses are for the most part various
types of immaterial property that can be purchased and sold, authorized, or in any case,
taken advantage of for business acquisition. They each, nonetheless, secure various
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interests.
Licenses ensure innovations, revelations, and plans, while copyrights secure

unique works of initiation like canvases, PC projects, mild and compositional plans.
)A
Exchange marks don’t ensure creation or innovativeness by any means. Truth be told,
an exchange of imprints can be obtained with no inventive or imaginative contribution
from the proprietor at all. For example, when the general population precipitously
started alluding to “Coca Cola” as “Coke”, the new term turned into a source identifier
for the item, and hence naturally an exchange mark.
(c
The term trademark alludes to an unmistakable emblem, expression, word, or

image that means a particular item and legitimately separates it from any remaining
results of its sort. A brand name only distinguishes an item as having a place with a
Notes
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particular organization and perceives the organization’s responsibility for the brand.
Brand names are for the most part viewed as a type of licensed innovation and might
be enlisted.
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●● A brand name is an effectively unmistakable image, expression, or word that
indicates a particular item.
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●● It lawfully separates an item or administration from all others of its sort and
perceives the source organization’s responsibility for the brand.
●● Brand names could conceivably be enlisted and are signified by the ® and ™
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images separately.
●● Even though brand names don’t terminate, the proprietor should utilize them
to get the insurances related to them.
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A trademark does not just assist with recognizing items inside the legitimate
and business frameworks—yet similarly as fundamentally—with buyers. They are
utilized to distinguish and secure words and plan components that recognize the
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source, proprietor, or designer of an item or administration. They can be corporate
logos, mottos, groups, or the brand name of an item. As a brand name, a help mark
recognizes and separates the wellspring of assistance instead of an item, and the term
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brand name is regularly used to allude to the two brand names and administration
marks.
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Utilizing a brand name keeps others from utilizing an organization or person’s items
or administrations without their authorization. They additionally disallow any imprints
that have a probability of disarray with a current one. This implies that a business can’t
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utilize an image or brand name on the off chance that it looks or sounds comparative,
or has a comparative significance to one that is as of now on the books—particularly
if the items or administrations are connected. For example, a soda pop organization
can’t legitimately utilize an image that appears as though that of Coca-Cola, and it can’t
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utilize a name that sounds like Coke.
Indications of a Trademark
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To demonstrate that a brand name has been asserted organizations utilize one of
three images:
™ - Using the brand name image after a logo or expression alarms contenders that
you have asserted this image or expression as your own, however, you mustn’t have
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even officially applied for it.
® - Only brand names that have been formally allowed by the Trademark office can
utilize the ® image, which represents enrolled brand name.
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SM
- Companies that sell administrations, not items, have the choice to utilize the
assistance mark logo, yet most utilize the ™ rather for straightforwardness.
Ensuring a Trademark
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Albeit a brand name is given for the existence of an organization or item,

organizations do have to make preparations for phrases becoming nonexclusive. This
regularly occurs after some time when individuals utilize an organization’s item name
to mean all items or cycles like it. Think Kleenex utilized for facial tissues or Xerox for
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copying. To keep on guaranteeing that brand name, those organizations need to tell
individuals who abuse the term to stop.
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Advantages of Registration
When a brand name has been true, the proprietor gets three key advantages:
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●● A notification of guarantee to some other organizations considering utilizing a
similar image or word its brand name.
●● A legitimate assumption of possession, which can help battle off would-be clients.
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●● The selective right to utilize the asserted brand name.
Why register a trademark?
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Even though it isn’t obligatory to enroll a brand name to utilize it, an exchange
mark enlistment increases the value of a business. The generosity and notoriety of a
business can be diminished or discolored if others attempt to distort their labor and
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products as yours by embracing a brand that is comparative or indistinguishable from
your business. A portion of the critical advantages of enlisting a brand name include:
The trademark proprietor has the option to keep others from utilizing a comparative
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or indistinguishable imprint without his consent once the exchange mark is enlisted.
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Creates a legitimate discernment among the public with regards to the real
proprietorship and nature of the item.
Forestalls others to duplicate and utilize the brand name as the proprietor of an
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enlisted brand name can sue and gather harm from associations that encroach upon
the brand name.
A brand name enrolment diminishes the probability of another party guaranteeing

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that your brand name encroaches upon their brand name.
4.3.9 Bankruptcy
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Bankruptcy is an official action affecting an individual or business that can’t

reimburse their remarkable obligations. The liquidation cycle starts with an appeal
documented by the account holder, which is generally normal, or for loan losses, which
is more uncommon. Each of the borrower’s resources is estimated and assessed,
and the resources might be utilized to reimburse a part of the exceptional obligation.
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An individual or business has an opportunity to begin new by excusing obligations that

just can’t be paid while allowing leaders an opportunity to acquire some proportion of
reimbursement depending on the person’s or alternately business’ resources accessible
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for liquidation. In principle, the capacity to petition for financial protection helps the
general economy by permitting individuals and organizations another opportunity to
access credit and by giving banks a part of obligation reimbursement. Upon the fruitful
fulfillment of liquidation procedures, the debt holder is mitigated of the obligation
commitments that were caused preceding seeking financial protection.
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All liquidation cases in the United States are dealt with through government
courts. Any choices in government liquidation cases are made by an insolvency

judge, including whether an account holder is qualified to document and regardless

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of whether they ought to be released of their obligations. Organization over liquidation
cases is frequently taken care of by a trustee, an official named by the United States
Trustee Program of the Department of Justice, to address the borrower’s home in the
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proceeding.1 There is generally almost no immediate contact between the account
holder and the adjudicator except if there is some complaint put forth in the defense by
a leaser.
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At the point when an association can’t respect its monetary commitments or make
installments to its leaders, it declares financial insolvency. A request is documented
in the court for similar cases where every one of the remarkable obligations of the
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organization is allotted and settled upon if not completely from the organization’s
resources.
Liquidation recording is a legitimate course embraced by the organization to
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liberate itself from obligation commitments. Obligations that are not settled up on to loan
bosses completely are excused for the proprietors. Chapter 11 documenting fluctuates
in various nations.
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In India, on the off chance that you declare financial insolvency, it won’t go down
well with your credit score, which implies that it could be intense for you to get another
advance on the off chance that you intend to begin anew. In any case, it would save
you from any monetary difficulty. r
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For an obligation to be redressed, stress should be immediately recognized with
the goal that an answer or goal should be possible for such ailment. The obligations
can be Financial, in the type of merchandise, administrations, business, or duty to any
Government under any Law. The sole object of Insolvency Law is to guarantee that the
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Creditors are in a situation to get their sum without the conclusion of the industry.
Bankruptcy Law has a two-overlap reason:

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●● To offer alleviation to the debt holders from the provocation of his banks who’s
a guarantee he can’t meet and;
●● To give apparatus by which lenders who are not gotten in the installment of
their obligations are to be fulfilled.
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It depends on the Roman Principle ‘Cessio bonorum’ for example giving up by the
Debtor of every one of his merchandise for the advantages of his lenders as a trade-off
for the resistance from the court cycle.
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Cycle under Insolvency and Bankruptcy Code, 2016

Under the IBC, 2016, the goal cycle can be started by any monetary or functional
)A
lender, just as the actual Debtor. The Debtor while documenting an application needs
to record the assent of the Board of Directors. There are two cycles given under this
code which are Corporate Insolvency Resolution Process and Liquidation. In CIRP, the
Creditors are needed to evaluate the value of the business concerning if a business can
be restored. At the point when the goal interaction comes up short, then, at that point,
(c
the loan bosses settle on offering the resources of the organization to recuperate a lot
of contribution. The worth of default ought to be more than 1 Lakh rupees.

What would India be able to Adopt from unfamiliar Insolvency Laws and
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Suggestions
Each nation readies the draft of the law in their nation thinking about the
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homegrown Aspects. IBC, 2016 was sanctioned with the excellent item to alter,
combine and redesign law identifying with Insolvency without wasting much time for the
better interest of Business and the partners. Each of the 3 codes is business-driven
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and even. The principal intentions of the code have been to help the business by its
restoration and installment of contribution to the bank. Goal Plan is consistently OK as it
helps the business restoration and installment of levy to the banks.
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As in India and UK, there are tough principles as to assuming control over the
business by an IRP on the affirmation of use for Insolvency, while in the US the Debtor
has command over the administration after the confirmation of an application.
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As I would like to think, India ought to take on a similar part and alongside the
RP, the MD of the organization who knows about the business ought to be permitted to
settle on choices for the recovery of the organization. Another viewpoint is the period
which is 180 + 90 days in India. On the off chance that the cycle isn’t finished inside the
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period, the NCLT can arrange for liquidation of Assets.
Steps to petition for bankruptcy as a person

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In case you are in a monetary wreck and your liabilities are excessively high when
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contrasted with your resources, petitioning for financial protection will go about as a
restart button. It will give a legitimate and weight-free beginning to your life as you will
be diminished from every one of the obligations. If you intend to petition for financial
protection, you’ll need to think about these means:
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1. Set up your accounting report: Bankruptcy is a legitimately obtained status and

you should demonstrate it in court. Court choices depend on proof and for this
situation proof will be as the resources and liabilities you hold.
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2. Counsel a lawful guide: Talk to a specialist consultant on this. Your counselor will
concentrate on your asset report and investigate the chance of winning the legal
dispute. The guide will give a piece of knowledge on individual documenting or
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joint recording on the off chance that you are hitched.

3. Record a claim for bankruptcy status: Ask your attorney to document a request
under the Provincial Insolvency Act and battle the court case. When you win the
case, you will be considered bankrupt and will be soothed from the non stop
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bothering of leaders.
Benefits of petitioning for financial protection

Getting bankrupt is not the slightest bit a helpful state, however, it isn’t the stopping
)A
point by the same token. You might lose your fearlessness and internal compass, yet
you can make a rebound with cautious arranging. There are a couple of benefits that
show up with declaring financial insolvency:
Mental harmony: Financial pressure frequently pushes borrowers to a misguided

(c
course. Various instances of self-destruction and murder identified with people’s

obligation circumstances are accounted for ordinarily these days. By seeking financial
protection, a borrower can stay away from stress and provocation simultaneously.
Freedom to restart: Before seeking financial protection, borrowers don’t get

Notes
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sufficient time for arranging their future since the emphasis stays on leaders. Keep in
mind, even if every one of your resources is gone, you have your abilities and insight.
You can focus on your likely arrangements once your obligations are discounted post-
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chapter 11.
Detriments of petitioning for financial protection
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Monetary trouble brought about by insolvency can disturb your arrangements -
both for the present and what’s to come.
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Here are talked about a couple of impediments of liquidation:
Every one of your resources is lost: All your resources are exchanged if there
should be an occurrence of liquidation. The sum is just depleted out in settling loan
bosses’ cases. You are left with next to nothing which makes a restart profoundly
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troublesome.
Validity goes for a cost: Once you record a suit for bankrupt status, the message
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is noisy and clear that you are a defaulter. You lose believability according to banks.
The absence of believability makes it unthinkable for you to get an obligation later on.

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1. ________ is one of the richest data for the business in the current world that could
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protect the licensed innovation.
2. _____________ secure the composed or distributed work like books, web content
and imaginative works.
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3. Patent will help in ensuring business innovations and protecting it from________.

4. ___________ secure signs and logo from other business organisations in the market.
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5. The copyright act was established in_____________
Summary
1. Intellectual property rights will help in securing the business organisation and other
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essentials of the business from other rivalries in the market.

2. The patent could be classified into utility patent, configuration patent and plant
patent.
3. It is very essential for a business organisation to understand their economic rights
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and moral rights for protecting the business essentials from other uh business.
4. Bankruptcy is the liquidation cycle that starts with an appeal documented by the
account holder which is generally normal or for loan losses.
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Activity
1. Why it is necessary to undergo intellectual property right for protecting the essentials
of the business?
(c

1. What are the essential legal issues to address before securing venture capital?
2. What are the legal issues faced by the entrepreneurs?

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3. What is patent briefly explain the types of patent?
4. What is the difference between patent, copyright and trademark?
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5. Explain the concept of bankruptcy?
Glossary
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1. Vesting- implies for procuring the resources contributed by representative and
investment opportunities or other advantage plan.
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2. Melodic - it refers to tunes and songs of an individual that are being sung by him /
her.
3. Cinematography- it refers to to formation of pictures and videos.
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4. Bankruptcy- it is an official action affecting an individual or business that cannot
reimburse their remarkable obligation.
Further reading
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1. Book- intellectual property right.
Author- Neeraj Pandey
Answers
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1. Protected innovation.
2. Copyright.
3. Another use.
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4. Trademark.
5. 1957.
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Case Study
Notes
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Techopt is a sole proprietorship firm that started in 2016. The business has its
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registered office in Indore. The company is dealing with providing technical assistance
and recent software to big organizations and small companies to expand the business
on digital platforms.
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The need for digital media has made it necessary for the business organization to
expand the business through websites and business applications. Techopt is engaged
in providing customized and personalized business software and also designs websites
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for companies. The company is fully involved in providing technical products to different
business organizations in the market. The reach of the company is only limited to
Indore and does not have its other locations.
There are 15 employees in the company and all the employees of the company
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are highly specialized and qualified to design software and business applications. The
major goal of the business is to create customized business applications in the world of
the digital market. Even small business entrepreneurs are willing to start and provide
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services through digital platforms. This is making it very beneficial for tech opt to
increase its revenue in a very short period.
The entrepreneur is the sole owner of the business and is enjoying the profit and
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growth of the company. All the major decisions of the company regarding collaboration
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with different business organizations and a selection of the client are being done by
the entrepreneurs. The entrepreneur is the sole manager and decision-maker of the
business organization. This is helping the entrepreneur enhance his skills to better deal
with competition in the market.
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The revenue of the company has increased by 10% as compared to the previous
financial year. This is motivating the employees to work better in the company and
improve the performance of the company in the market. Techopt provides technical
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assistance to the employees and also provides training and development programs to
upgrade the employees with the recent technologies and development in the market.
The major focus of the entrepreneur is to bring maximum revenue and increase the
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services of the company in the Indore region. The entrepreneurs have the willingness
of expanding the business to different regions but he could not do so because he is the
sole proprietor and it will be very difficult for him to manage the business at different
locations. For this reason, he is unable to expand his business and serve maximum
customers across different regions.
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Techopt is one of the leading brands in Indore and has collaborations with different
information technology companies in the market. Techopt received collaboration
proposals from different regions and the international markets as well. But the
)A
entrepreneur is unable to decide to expand the market due to lack of manpower and
the entrepreneur does not have trust in other employees regarding the business
functioning.
The entrepreneur does not want any other partners for the business and wants
(c
to operate the business as a sole proprietor. The entrepreneurs have very creative
ideas to survive in the market but do not have ideas to expand in the business. The
company is best in providing its defined set of products and does not focus on exploring
the market requirements and the customer requirements. This is giving a major
Notes
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disadvantage to the business organization and due to this reason; different competitors
in the market are emerging.
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Techopt has even faced the problem of copyright issues in the initial stage of the
business. The other competitors in the market have copied the business name and
logo of the company. The entrepreneurs have to file a case against the company and
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it took approximately six years to prove the ownership over the business. This problem
was arising due to the non-registration of the business and the company did not have a
patent and trademark over business essentials.
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Later on, the company acquired a patent and trademark for all the essentials of
the business and created a brand value in the market. But the company and the
entrepreneur have to face various difficulties because of various legal formalities. There
are various difficulties faced by the entrepreneur while performing the legal formalities
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because he was the sole proprietor to manage the business organization and at the
same time manage the legal formalities of the court.
Since then the entrepreneur identified the importance of copyright protection and
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the business and implemented all the necessary intellectual properties for securing the
business essentials from other competitors.
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This benefit gave benefit to the company by imposing a penalty over the other
business organization that right copying the business essentially. This even made the
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entrepreneur more aware of different intellectual property protection acts in India that
give various benefits to different entrepreneurs from securing their business and giving
various legal protections to a business.
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Intellectual property protection gives various benefits to the entrepreneur and

even helps in establishing a unique brand name in the market. Techopt is one of the
successful and effective businesses in the market and can develop business value in
the market through delivering a better quality of services and products to the customers
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of the company.
1. Techopt is being operated by a sole proprietor and does not want to delegate
the proprietary rights to other business entrepreneurs. What could be the
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advantages and disadvantages of sole proprietorship of a business?

2. Techopt has faced various legal problems because of not registering the
essentials of the business. Taking this as an example what could be various
copyright protection and related rights of a business in India.
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(c

Module - 5: Emerging trends, Technologies and

Notes
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Practices in New Venture Creation
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Structure:
5.1 Technology-enabled Trends that will Help Shape Businesses and Economy
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5.1.1 Technology Trend awareness
5.1.2 Technology trends facing business in 2021 and beyond
5.1.3 8 Technology-Enabled Trends | Marketing
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5.1.4 Understanding Technical intelligence in business
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5.1.6 Technology intelligence : opportunites and threats
5.2 Technology Business Incubators
5.2.1 Incubators: Launchpads for modern economy
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5.2.2 Unique Benefis of TBI
5.2.3 Stages of Incubation at TBI
5.2.4 The Procedure of Incubation r
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5.2.5 Special Considerations for Nascent Incubators
5.2.6 Centre for Innovation, Incubation and Entrepreneurship (CIIE),
Examples 15
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5.3 Emergence and growth of new technology–based companies

5.3.1 Emerging New Technologies
5.3.2 New Technology based companies
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5.3.3 Intrapreneuship
5.4 Corporate Entrepreneurship
5.4.1 Corporate Versus Intrapreneurial Culture
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5.4.3 Strategies for growth
Case Study
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(c

Unit - 5.1: Technology-enabled trends that will help

Notes
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Shape Businesses and Economy
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Objective
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●● To evaluate different technology trends in the market.
●● To evaluate technology trend awareness.
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●● To evaluate technology intelligence.
5.1.1 Technology Trend Awareness

Implementation of technology has become a very important aspect in every
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business organization and the economy. Technology refers to the implementation of
advanced business processes that reduces the production time and helps in delivering
the products and services in less time and with the standard quality.
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Technology trend awareness refers to generating awareness regarding
the recent and new technologies in the market. It is a process of implementing
advanced technologies and gaining more knowledge and information regarding
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recent technologies in the market. Technology trend awareness will have a business
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organization implementing advanced technologies that I’ve been accepted in the market
for the industry.
It will further include the ability of an entrepreneur to recognize the need for
advanced technology in the business and understand the functioning of the advanced
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technologies for successfully implementing the upgraded technologies for the success
of the business.
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Technology trend awareness will also include the ability of an entrepreneur to be

aware and mindful regarding the popular technologies that are being launched in the
market and have gained greater acceptance in different industries for different markets.
There are different types of trends that are being followed by entrepreneurs to
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create a better quality of products and services for the customers. The technology
Trend awareness will help in giving tough competition to its competitors by analyzing
the need of implementing advanced technologies in the business.
Technology trends awareness will help entrepreneurs identify the usefulness of

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recent technologies in the market and the way of implementing these technologies in
the business. When an entrepreneur implements recent technologies in the business
organization it can be identified as an opportunity or as a threat. When an entrepreneur
)A
implements recent technology in the market it can give various competitive advantages
and a source of gaining larger market share. This could be one of the opportunities
for the business organization. But sometimes it might be possible that the recent
technologies being adopted by an entrepreneur are not fruitful and are not able to fulfill
the requirements of the business. In that case, it might create a threat for the business
(c
organization and can even increase the cost of the business.

New and recent entrepreneurs are engaged in identifying the technology trend
Notes
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awareness so that the business functioning can be based upon technologies and the
new business organizations can create a positive image in the minds of the customers
by implementing recent and good technologies in the business. The entrepreneur
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should not only focus on implementing the recent technologies in the business
but should also know about the technical functioning and way of implementing the
technology in the business.
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Importance of Technology Trend Awareness
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1. Gaining competitive advantage:
The major advantage of technology trend awareness will help the business organization
implement the best technologies in the business organization. This will help in getting
a competitive advantage in the market and gaining more customers and the market.
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Technology has become a very important part of the 21st-century business market because
without the implementation of recent technologies the overall development of the business
organization and the functioning of the business are very difficult. The business can work
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according to the market requirements and can deliver unique products and services in
minimum time by using advanced technologies. This will help the business organization get
a competitive advantage and also create a better quality of products and services for the
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customers. Technology will help the business organization in identifying the way of delivering
the products and services in the market. The business organization can create uniqueness
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and product delivery and can get an advantage in the market over other competitors.
2. Increasing the visibility to the customers:-

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Technology is one of the elements that is very necessary for business

organizations to incorporate and work according to the market requirements. Business
organizations are trying to deliver their products and services on the digital platform
and increase the visibility of the business on digital platforms also. Technology has
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become an important part of every individual, be it an entrepreneur or a customer. The

customers are more visible on online platforms and invest their maximum time on digital
platforms. This is one of the best platforms to increase the visibility of the business
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organization and launch various products and services to create awareness about the
product. Technology is helping the business organization in launching the business and
creating a trend in the market. Customers are mostly available on online platforms and
business organizations can connect with them in a very effective manner. Technology
has even made it helpful for the business organization to deliver the business idea
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creatively on a digital platform. The business organization incorporates various types

of launching campaigns and product awareness campaigns on online platforms and
collaborates with celebrities to increase the visibility of the business.
)A
Business organizations have to quickly identify the sources of technology that are
mostly being used by the customer so that it becomes easy for the entrepreneur or to
enhance the visibility of the products and services to the customers. If the customers
are more engaged in using mobile phones as compared to other gadgets such as
laptops for a computer then the business website should be built in such a manner
(c
that could easily be run on mobile applications. Technology has helped the business
organization become unique in the market and connect to customers in a better

manner. To increase the visibility of banks to the customers, the entrepreneur and their
Notes
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business have to first evaluate the requirements of the business and undergo research
and development activities so that the source of increasing the visibility through
technology can be identified.
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3. Increasing the business opportunities:-
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Technology trend awareness is not only responsible for making the business
operations easy and the business functioning process easy but it also helps the
business organization identify and generate new opportunities in the market. When
new technologies are being implemented and when a business organization identifies
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various recent technologies in the market it tries to implement this technology in the
business organization and firstly identify the various opportunities in the market. Various
technologies help the business organization and deliver the products and services in a
secured and easy manner such as sensor-based vehicles that keep track of the delivery
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vehicles so that no complications and delays in the delivery can take place. If such a
situation occurs through to the tracker the problem can be identified at the central office
of the business. Technologies are making the business functioning very easy and the
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business organizations are also getting familiar with other technologies adopted by the
competitors. The business organizations are also identifying opportunities to implement
various technologies in the business and this is helping the companies to increase the
revenue in the market. r
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4. Increasing the revenue of the business:-
Technology containers are helping the business organization increase revenue
by adopting the recent technologies in the market. This is helping the business
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organization in completing their production targets on time and delivering the products
and services to the customers on time that is creating a positive brand image in
the minds of the customers. The digital platforms are acting as a source of creating
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awareness about the products and services in the business. When a business
organization makes use of recent technologies in the business and creates awareness
about the products and services in the market through technology-based tools it will
help the companies in increasing the profit and creating brand awareness about the
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company in the market.
5. It helps in giving chance to fresher’s in the business:-

Fresher’s in the organization are more creative and always try to implement those
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business ideas that are based upon the customer requirements. As compared to
professional and experienced employees in the organization the fresher employees are
more aware of the recent trends in the market. This helps the business organization
in adopting the various technologies and delivering something creative in the market.
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Implementation of advanced technologies will give the fresh and the new employees a
chance in the organization to deliver their creativity within the company. This will help
the business organization in motivating the new employees towards the business goals
and also will lead towards the growth of the business organization. The new employees
(c
in the organization are more aware of the recent technologies in the market and are
more aware of handling these technologies in a better manner. The young employees
are more familiar with the technology and can easily work on the recent technologies.

This will help the business organization better work according to the market
Notes
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requirements.
Ways of improving the Technology Trend Awareness
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1. Joining the technology-related forums and reading-related blogs:-
The information regarding the upgraded technology and recent changes in the
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technology can be easily understood through reading technology-related blogs. The
entrepreneur can identify and incorporate the various technologies in the market and
can also get more knowledge about the technologies in the market by joining forums
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and reading blogs. The entrepreneur can even read the comments of the market
experts on a particular blog or a forum. This will help the business entrepreneur
identify the advantages and disadvantages of the technology and the opinions of other
entrepreneurs on recent trend awareness. Blogs and forums encourage the viewpoints
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of different entrepreneurs on certain advanced technology so that the market leaders
can identify the acceptability of technology by the entrepreneurs. An individual can clear
his or her doubts related to advanced technology is the way of delivering the products
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and services to advanced technologies and ways of implementing the technology
in the business. All these doubts can easily be cleared through a forum or a blog. An
entrepreneur can raise queries and doubts through a forum and a blog and will help
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other readers to get better knowledge about the recent technology trends. The blogs
and the forums will give the entrepreneur a hint related to the future technological
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advancements and future business expansion through implementing the technologies
in the business. The entrepreneur can get a greater idea about the technologies by
reading related blogs and websites for technology trend awareness.
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2. Follow technical people and experts on social media:-

The entrepreneur can even follow the technical people such as the people who
are always engaged in technical activities and have greater technical knowledge. The
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entrepreneur can follow these experts on social platforms such as Twitter, Linked In,
or any other famous social media platform. This will help the individual gain better
knowledge about the technology and the recent trends that are becoming more
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popular in the market. These technical experts and technology-friendly people will
regularly post the recent developments in the market and will try to create awareness
about the technical advancements from all over the world. This will help in improving
the knowledge and getting more market information regarding the recent market
technologies. This could help the business organization even identify those competitors
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that are regularly updating and upgrading the technical and technology of the business.
Social media have more power as compared to traditional media because on social
media information goes viral within seconds this could be one of the greatest sources
)A
of gaining market knowledge and the information regarding latest trends and technology
from all over the world. An entrepreneur should not only focus upon the domestic
market but should also focus upon the international market and should gain knowledge
about the recent technologies and development being done by the international
companies to improve the business functioning. This will help the business organization
(c
gain knowledge about the technology and can even have the business organization
implement and discover cost-effective technologies that could decrease the operational
cost of the business and improve the performance of the business in the market.
3. Attending technology-based seminar:-

Notes
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A seminar is a great source of information for the entrepreneur because in a
seminar on various market leaders and researches show their interest. A seminar is
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a place where entrepreneur awards and other individuals can get greater knowledge
about a recent technology. Seminars are being conducted to create awareness about
the technology and encourage the entrepreneurs to incorporate the recent technologies
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in the business organization. Seminars can be sponsored that could help the business
organization even incorporate the business technology and this also helps in creating
a network of technical people. Seminars provide entrance to the entrepreneur to
explore various business concepts and technology-driven business organizations
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that are successfully implementing different technologies from the market. A seminar
gives various examples to the entrepreneur and helps in meeting the industry experts.
If the seminar is being sponsored then various types of support are also being given
to the entrepreneurs who are interested in the technology and are ready to implement
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them in the business organization. Entrepreneurs can interact with the same level of
interest people and market experts who have greater knowledge and are more aware
of the various recent technological trends in the market. This will help the entrepreneur
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increase their knowledge and awareness regarding the technology and also identify the
need of implementing the technology in the market.
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4. Create a network of industry experts and entrepreneurs:-
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There should be a network within the organization and outside the organization
in which the industry experts that are more aware of the recent technological trends
and the entrepreneurs should be included. This will help the entrepreneurs gain
better knowledge about the technology and the various benefits of implementing the
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technology in the market. Industry experts are more aware of the various challenges
in the market and the ways of handling the challenges by using recent technologies.
This will help the business organization in gaining more knowledge about the market
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and the competitors in the market. Technology has become a very important aspect for
business functioning so the technical experts can give more knowledge and examples
of those business enterprises that have incorporated recent technologies in the
business and the growth of the business by implementing the technology.
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Technology trend awareness is very important in the 21st century to gain a

competitive advantage and lead in the market. The business must adopt technological
advancements in the business so that the company can fulfill customer requirements
and enhance the business performance.
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5.1.2 Technology Trends Facing Business in 2021 and Beyond

The use of technology is increasing in the business functioning and is becoming
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recent to follow upgraded technology in the business operations. Implementation of

advanced technologies in the business is making business operations easier and
simpler for business entrepreneurs. Various technology trends are making business
operations easy in the 21st century and business organizations are engaged in
implementing these recent technologies.
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1. Artificial intelligence:-
Notes
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Artificial intelligence is one of the most recent developments in the area of business
technology and is mostly being used by organizations. Artificial intelligence means
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the simulation of human intelligence in the operations of the business organization.
It will include implementing voice assistance, speech recognition, and various other
factors that make the business operations very easy. The business organizations are
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engaged in functioning on digital platforms and are more engaged in delivering the
products and services through digital services. This makes it necessary for business
organizations to implement artificial intelligence in business operations to make the
business process easy and understandable for the employees. Artificial intelligence will
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also help in addressing customer complaints through digital platforms and automatic
assistance that solve the customer queries and direct the cause of the customers to
higher authorities. Artificial intelligence has made business operations very easy for the
organization because it also keeps real-time data and provides customized services to
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the customers. A proper process and digital data of the customer is being developed
through artificial intelligence that keeps track of the problems of the customers and also
keeps business information of the suppliers.
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Artificial intelligence includes chat boards and voice assistants that provide virtual
communication between the digital assistance and the customer. The majority of the
problems of the customers are now being solved by artificial intelligence. This not only
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saves a company from hiring employees but also keeps track of the performance of the
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company. Artificial intelligence is one of the most important technological trends that are
being adopted by big organizations and small organizations in 2021 and this will further
be implemented and more modifications are expected in artificial intelligence in coming
years.
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2. Robots:-
Robots are being developed by highly qualified humans that know about
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implementing human functioning in a machine. Robots are machines that perform

similar operations as that of humans in a business. Many business organizations
have incorporated robots in their business functioning that is making the business
operation very easy and automatic. Robots are being used in business organizations
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for manufacturing and handling products in a better way. Robots are being used in
the business for packaging the products and carefully transferring the products to the
warehouses. Robots are being used by business organizations to handle customer
problems and even greet customers at the entry-level. It is becoming one of the
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attractive sources for serving the customers in a better manner and delivering the
products and services to the customers. Many restaurants are using robots for serving
the customers and delivering the foods to the customers at the doorsteps. Shopping
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malls and shopping outlets are using robots for keeping track of the stock of the
products and arrange the products in the racks. The use of robots will increase in future
business operations because the company can keep track of the performance of the
robots through computers and can even collect data from the robots. The business
functioning is becoming very easy by making use of robots because they work on
(c
computer programming that makes it easy for the business entrepreneur to get the work
done in minimum time.

3. Natural language processing: -

Notes
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Natural language processing can be better defined as chatbots that have been
used by a business organization to communicate with customers. Chatbots are used
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by business organizations to digitally communicate with customers and solve their
customers’ problems. It is very difficult for a big organization to solve the problems of
the customers and create a database of a large customer base. Chatbots are a very
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easy method of reaching the customers in minimum time and providing a very effective
solution to the customers. All the business organizations that have a website and are
operating on a digital platform incorporate chatbots on the website so that the queries
and problems of the customers can be solved digitally. This is very cost-effective and
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less time-consuming for both the customers and the company. Chatbots try to solve the
problems of the customers and if the problem of the customer is not being solved by a
chat boat then it directs the customer to a company’s assistant that could personally
solve the problem of the customer. Chatbots are being used by the company to build
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customer engagement and analyze the purchasing behavior of the customer.
4. Internet of things:-
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The Internet is becoming one of the most common platforms for small and big
organizations to market the product and create a trend over social media. Business
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organizations are using the internet as a source of increasing revenue and customers
and creating awareness about the products and services on digital platforms. Business
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organizations create digital campaigns and also create hash tags and other sources
for increasing product awareness in the market. The Internet is not only responsible
for creating awareness about the product in the market but for many companies is
using the internet in their product and service. Televisions, fans, air conditioners,
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water heaters, and various home appliances are being operated through the internet.
The technology is becoming so advanced that a customer can operate a product
or a service through the internet from any place. The customer can make the home
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before he or she reaches the house. This could be possible only through advanced
air conditioners that enable and provide the customer the facility of operating the air
conditioners from their office or any place. The Internet is also helpful for the customers
in creating privacy of their products and the technology is also helping the customers
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turn towards a healthier lifestyle. In the coming future the internet is going to be one of
the most common aspects that are incorporated in the product and service. The Internet
is not only a tool for creating awareness but it is a tool that could be incorporated within
the product and service so that the functioning of the product and services could be
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improved. In the future, more modifications and advancements could be expected from
the internet.
5. Edge computing:-
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Edge computing is one of the most important factors and tools that could improve
the data storage of the business in the future. Edge computing is storing the data in one
place that could be accessed from any location. Edge computing will be very important
for business organizations when privacy is one of the important factors for the company.
(c
The physical papers and data of the company can be misplaced or could be misused
by any of the internal or external factors. Edge computing is helping the business

organization create privacy and maintain the data of the company and it gives access
Notes
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to only a few people who have the authority to utilize the business data. Its computing
helps the business organization collect the information, process the information,
and deliver the information to different sources. It is making it easier for business
in
organizations to deliver information from one client to another. The disadvantages of
connectivity and other restrictions of the company are being reduced through edge
computing. It is an open-source that creates connectivity between different locations of
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the business.
Edge computing is a part of future business organizations that will direct the
entrepreneurs to design the infrastructure architecture in such a manner that focuses
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on the edge computing factor. It will provide the company with the benefit of enabling
the intelligent network that will help the devices to work in a similar manner irrespective
of the location. Edge computing will become a need for the business organization in the
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upcoming years because of the expansion of the business and the need of delivering
the information more privately and in a similar manner.
6. Customer relationship management:-
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The major function of any business organization is to work for the customer.
The companies are trying to create good relations with the customers through online
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platforms and softwares. Customer relationship management software focuses on
creating good relations between the customer, supplier, and other related parties of
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the business. Customer relationship management makes it easy for the business
organization to find the potential customers of the company and convert them into loyal
customers of the business. The major benefit of customer relationship management
software is to keep track of customer performance and the ways of increasing the
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customer of the business. There is software that is being developed by different

business organizations and is also implemented in the process of creating good
relationships with the customer. Customer relationship management software is making
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it easier for the company to connect with the customers wherever they are through
connecting them on social media or any other digital platform. CRM software is saving
the time of the business for doing repetitive jobs. There may be a set of customers who
have similar problems in that case CRM software provides a similar solution to such
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kinds of customers. This software makes it easy for the business organization to get
real-time reports and information regarding the sales performance of the company and
the trends in the market. This helps in making a future prediction regarding ways of
increasing the sales of the business. Customer relationship software is becoming one
of the major requirements of the business organization to solve customer problems
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and increase the sales and revenue of the company. It is one of the most recent trends
and the modifications in customer relationship management software are more likely to
occur in the future.
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7. Digital security:-
The security of the business information and processing of the business
information is very necessary. A business organization can secure the information and
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data of the customers through a digital platform. This will help the business organization
not only create privacy in the business operation but will also help the business in
easy accessibility of the data. When the business operations are expanding on a

digital platform the need for creating privacy and security of the business information
Notes
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is becoming very important. Various hackers are looking for business information and
create revenue from it. Data security is a very common issue and various technologies
are being used by companies to save data from hackers and other malpractices. In IT
in
companies and the business where information and data are very important in those
business organizations security of data becomes a major concern. Digital lockers and
various business applications are being used by companies to secure the data on a
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digital platform. Digital security of data is becoming a recent Trend and more important
for the company to become unique in the market and give tough competition to its
competitors in the market. Data is one of the assets for the business organization
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because the preferences of the customers and the business information and market
information are being collected by the company. The company will always focus on
maintaining uniqueness in the market through business information.
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8. Hyper automation:-
Hyper automation refers to a process of converting all the possible business
operations into automated ones. Hyper automation is a very expensive process and
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is not possible for every business organization to convert major business operations
automatically because this will require funds to incorporate automatic technology in
the business operation. Small business organizations will find hyper-automation an
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expensive process. A big business organization that wants an easy flow of business
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activities and easy operation within the company can implement hyper-automation.
Hyper automation will create connected and optimized business operations through
various technologies. Organizations that want growth and expansion in the market
can implement hyper-automation in the business function. This will help in gaining
efficiency in the business process. This will help and benefit the business organization
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in optimizing the workflow allocation and completion of the works efficiently. Quality of
products and services could be maintained through hyper automation and the use of
technical experts and other highly skilled employees could be reduced by incorporating
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hyper-automation.
The major disadvantage of the challenge of hyper-automation is that it is very

difficult to measure the success of the company and the employees in a hyper-
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automation business operation. It might not be possible for the stakeholders of the
company to get familiar with the highly automatic business operation and could
create confusion and demotivate the management team and the stakeholders. Hyper
automation will also make it difficult for the companies to work upon a highly automatic
system and to transform from a traditional business operation to an automatic business
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operation because this will reduce the work of the manpower and the employees within
the company may get terminated due to incorporating a highly automatic system.
But the need of the market and the competition within the market will motivate the
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companies and future to incorporate hyper-automation operations and techniques in

future.
9. Intelligent composable business:-

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Intelligent composable business refers to rearranging the business operations

according to the market requirements. The business operations could be altered
and rearranged according to the current situation. As the business organizations

are working on the digital platform and are engaged in satisfying the customer
Notes
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digitally, it becomes necessary for the entrepreneurs to make decisions on time and
the decision should be based upon the current business information. The business
organization should access the information and make necessary changes in the
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business information according to the market requirements and respond quickly to the
implications of the information. Intelligent composable business is based upon working
on technology and the collection of business information through an online database.
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The intelligent composable business will make more use of business information
that is based in real-time because it will help the business organization analyze the
current situation and make good decisions. The intelligent impossible business will be
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one of the most recent trends and will be a requirement of the business in the future
because making decisions based on the real-time and the current situation will be more
important for the business organization to get a competitive advantage and uniqueness
in the market.
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Technology will be one of the most important factors in the business organization
in the coming future and the advancement in the business organization through
technology will be equally important. There could be situations in the business that
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require quick response and quick action of the business organization, in that case,
the technology will be one of the most important factors in incorporating effective and
efficient decisions. The incorporation of 5 generations and 6 generation technology
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and network will be more common and necessary technological advancements in the
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business organization. The incorporation of the fifth generation technology and network
will benefit the business organization by making easy and fast decisions. 5 generation
technology will be quicker and will incorporate a business decision in very little time. In
the upcoming years, the use of technology will increase because of high competition
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and the need of the market. Small and big organizations will incorporate in making use
of advanced technologies for improving the performance and revenue of the company.
Artificial intelligence, distributed cloud, privacy-enhanced computation, and various
other developments will be very important for business operations. This will help the
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business organization in creating a centralized point for storing the business information
and handle the business problems and the customer problems effectively and efficiently.
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5.1.3 8 Technology-enabled Trends | Marketing

Various technology-enabled trends are helping the business organization
in acquiring customers and marketing the products and services in the market.
Technology is becoming an important element for the distribution and collection of
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information from customers. Below are the 8 technology trends:-
1. Distributing company creation:-

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In the 21st century, the development of the product and services is being done
with the help of technology. The organization implements and utilizes advanced
technology trends to manufacture the product and services for the customers. But other
than producing the products and services through technology the companies are now
involved in distributing the company’s products and services in the market through
(c
technology. Technology is becoming a very important element and distributing and

taking follow up from the customer’s.

The use of the internet is becoming very common for business entrepreneurs
Notes
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in distributing the product and improving the value chain and supply chain of the
business. The companies involved in outsourcing the distribution channel of the
company creation, that is the company is collaborating with different technology-
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friendly distribution companies that it effectively distributes the products and services by
effectively managing the supply chain of the company.
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By outsourcing the supply chain of the company the business entrepreneur is
reducing the cost of distribution and is enabling faster delivery of products and services
in the market. Certain organizations are involved only in the distribution of the products
and services and are always engaged in involving highly specialized technologies
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for the distribution process. This kind of supply chain company is making it easier for
manufacturing companies to distribute their products all over the market.
Distribution companies are exported in their area and are also involved in research
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and development activities so that the market trends and other distribution technologies
in the market can be identified. Through research and development companies try to
get a better idea about the customer’s requirements by taking feedback and analyzing
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the behavior of the customers. Different software and updated technologies make it
easier for business organizations to manage the work of large companies.
Large business organizations that have a major focus on producing better quality
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products and follow the trend in the market do not have enough capital and time to
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focus upon effective means of distribution strategy. This makes it necessary for the
business organizations to outsource and select a better distribution channel that is more
technology-friendly and is involved in distributing the products and services through
a highly specialized and technical manager. The distribution companies make use of
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sensor-based vehicles and QR codes that make it easy for the company to allocate and
distribute the products to a different location.
2. Using consumers as innovators:-

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Consumers are an important element for the business organization. The business
is being established to fulfill the requirements of the consumers. The consumers
are considered as the ultimate user of the product and service and the company is
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manufacturing the product and services for the consumers. The internet has made it
very easier for business organizations to interact and communicate with consumers.
The company takes the feedback of the consumers on digital platforms and provides
them with better services through online media.
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The consumers can even analyze the feedback of other consumers in the market
that have purchased the product and services of the company and the feedback
of other consumers will make it easier for an individual to purchase the product. The
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digital platform is making the buying and purchase of the product and service very
transparent. The consumer can provide feedback to the company through an online
platform on the website of the business. The company can even get the benefit of
greater customer engagement through an online platform.
Business organizations are now making use of the consumers to design the
(c
products and services according to their requirements. The business organization asks
the customers and consumers to send the design and the flavor of the product and

services which they want and the company will produce those products that are being
Notes
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mostly preferred by the other consumers. This is becoming one of the most effective
trends for increasing customer engagement and increasing the revenue of the company
by involving the consumers in the innovation activity. Consumers are acting as one of
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the important elements in giving creative ideas to the business organization.
The companies that are involved in after-sales services get a better analysis of the
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consumer’s behavior and increase the consumers of the company on a larger scale.
The business organization is assuming the consumers as the assets of the company
because the consumers are responsible for innovation in the business organization.
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The consumers of the company are engaged in viral marketing that is they are
involved in designing the product and of the services, testing the product, and also
responsible for marketing the product through word of mouth. When consumers like a
product of a particular company they are more likely to give preference of the product
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to other consumers that make it easier for the business organization to promote and
market the product.
In marketing and the creation of awareness, technology is playing a very vital
si
role because consumers are more active on social media platforms and engage in
following different trends in the market. If a certain product has a negative influence on
a consumer and the consumer does not like a product and makes use of social media
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to create a negative image of the product in the market then other consumers will follow
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the same. The company must always engage in creating a positive influence over the
consumers. The Internet will make it very cost-effective for business organizations to
generate loyalty amongst the customers. When a particular suggestion is being given
by consumers and the company adapts the same in the business operations the
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consumers will feel connected with the company and this way the consumers become a
part of the company as an innovator.
3. Making use of talent:-

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The business organizations are expanding their business in different sectors and
in different locations for this reason the company will require talented people who could
effectively manage and collaborate with other business organizations. The need of the
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market is making it important for business organizations to hire talented people. The
company is working on different software and internet technologies that are making
it easier for the business to manage the work on different platforms. To operate the
software and work on internet technologies the company will require talented people
that could work on the high technology-based systems effectively.
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The company can even hire freelancers and fresh talent for the business
organization to work on professional services. When the company will expand in different
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locations the need for talented human resources will increase. The company should
manage and collaborate with highly specialized people that could work according to
modern technology and give competition to other competitors in the market.
4. Extracting more value from interactions:-

(c
Interaction within the business organization and outside the business organization
is very important for developing the company in the market. By interacting with the
employees the company can identify the major problems of the employees and can
also identify the sources of increasing the efficiency of the employees in the company.
Notes
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Technology is becoming an essential part of the business organization for interacting
with the employees and the customers. Technology is helping the business organization
create value from interaction and is also making it easy for the company to generate the
in
right information from the employees and customers.
Interaction with the employees and the customers through video conferencing
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and the development of a virtual environment will help in generating and analyzing the
behavior of the employees of the customers. The company can get feedback from the
customers in a very cost-effective and minimum time.
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When companies use technology for interacting with the customers and employees
it increases the brand value of the company in the market. Through interaction with
the employees and customers, the company can develop managerial innovation
techniques to manage the various ways of developing and interacting with the business
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organization must invest
Timely interaction with the customers will help the business organization increase
the competitive advantage in the market and also increase the productivity of the
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employees. To increase the productivity of the employees the business organization
must invest in technologies that increase the interactivity and interaction with the
company and higher authorities. This will help the business organization get better
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feedback from the employees and the customers and will help in improving the
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performance of the company in the market.
5. Expanding automation:-
Business organizations are expanding their business growth through adopting
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automation systems and technologies. The business organization is engaging and

applying those technological systems that create communication with external
organizations. The business organization uses customer relationship management
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and various customer databases to forecast and create effective communication and
interaction with the customers and supply chain management systems.
Adapting the automated technologies in the business will help the business
improve the standard of supply chain management and will also help in improving
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and automating the tasks and processes of the business. The business entrepreneur
can even forecast the customer requirements and supply chain management in the
business.
Effective interaction with the business can be done through expanded automation
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technologies. The business organizations are involved in collaborating and are also
utilizing the database of each other to track the customer requirements and adopt
relevant strategies for expanding the business. The business organizations are more
)A
involved in collaboration because it is helping both the companies in increasing the

customer satisfaction and loyalty of the customers.
Collaborated companies are getting the advantage of effective supply chain

management and inventory management. It also it’s the business organization by
(c
reducing the cost of acquiring the relevant database and managing the distribution
channel. This increases the revenue of the companies and the growth of the company.

Automation and effective management of the business processes are helping in

Notes
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reducing the cost and is also making it easier for the business organizations to achieve
the business goals in very little time.
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6. Separating production and delivery:-
When the business organizations are large and the major focus of the business is
on the production activity the company should separate the production and the delivery
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of the business. This can be done by outsourcing the delivery of the product to different
retailers in the market.
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The outsourced business organization maintains good relations with the customers
and is also experienced in supply chain management. This business organization
delivers the products and services of big companies to customers in a very effective
manner. This reduces the cost and time of the business organization and distributing
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the products and delivering the products to the customers. The distribution channels
are very effective because they maintain stock of the products and are also the data
centers for the company. The feedback of the customer is being given to the business
organization by the distribution channel.
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Unbundling the production from the delivery activity will reduce the time and will
also help the business organization handle and track the business product and service
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delivery in a very effective manner through delivery partners.
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7. Enforcing more science into management:-
There are various sources from which the company can get information regarding
the business organization and the different factors in the market that could give a
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competitive advantage to the business organization. It depends upon the management

and the team to effectively implement the information into the business organization.
Big organizations work on predictive markets to improve the performance of the

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business. The decision-making of the business is being done based on business

information and other sources of data. The prediction market will help the business
organization make short-term forecasting and build the business based on accuracy
and the demands of the customers.
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The information generated from the market should be applied in the business
ideas for better engagement of the customers. The more the company knows about the
different offerings of the company and the business idea the more value of the business
is created in the market.
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The manager’s ability to convert an idea into reality is putting science into
management because there will be various types of skills that are required for
expanding the business organization and also delivering creative business concepts to
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the customers.
8. Establishing a business from information:-

Information is a very important aspect and an asset for the business organization
(c
because information acts as a source of identifying the market requirement. An

entrepreneur and establishment of the business organization based on the information
generated from the market. The information provides various opportunities to the

business organization and also helps in identifying the sources of raw material in the
Notes
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market.
The Internet has made it easier for business organizations to get better information
in
from the market and create businesses from the information. Many business
organizations work upon the information generated from the market and the information
is the key source of running a business. Online portals of property dealing or websites
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of finding a job These types of business organizations work on information and
information is only the key element or a product or service that is being offered to the
customers.
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The business organization can reshape its business according to the information
generated from the market. The information can be in the form of feedback that is being
generated and it acts as a source of the business expansion tool. Companies rely on
information because market information is very necessary for identifying the trends
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and the competitors’ policies and strategies. To gain a competitive advantage and
continuously increase the business growth information will be very important and the
source of acquiring the information will be equally important.
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The entrepreneur can get the market information from the internet and various
other digital platforms and social media platforms that help in identifying the trends and
requirements of the customers.
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5.1.4 Understanding Technical Intelligence in Business:-
Technical intelligence is the ability of a business organization to identify the
technological opportunities and threats in the market that affects business growth.
Through technical intelligence, the business organization can identify the future
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growth and survival opportunities in the market by adopting various technologies in the
business.
Technical intelligence makes use of upgraded technology to make decisions in the

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business and help the organization and strategic planning. Technical intelligence is a
very important aspect in the 21st century to gain a competitive advantage in the market
and identify the requirements of the customers in the market.
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Technological intelligence will make the business organization aware of the recent
developments in the market and identify various opportunities available in the market
through technological development. It also helps in identifying the various technological
opportunities in the business organization and helps the business organization grow in
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the market.
To gain a competitive advantage in the market the business organization must

make use of upgraded technologies and identify the emerging technologies in the
)A
business. The Internet has made it very easier for business organizations to identify the
different data sources of technological intelligence in a business.
Adapting to technological advancements in the business have benefited the

business organization in expanding the reach of the business and also have given
(c
massive growth to the business organization in recent times. It has made it very easier
for the business organization to deal with various challenges more easily and cheaply.

Technical intelligence in a business helps it easier for the business organization to

Notes
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gather business data and improve the way of delivering the products and services to
the customers. It also helps the business organization and easy data acquisition and
decision-making through intelligent technologies.
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In recent years there has been a massive development in the way of delivering
products and services and it is possible only through advanced technologies. Technology
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is making it easier for the business organization to take feedback from the customers
and deliver the product and services at their doorstep. Advanced technology has proved
to be a boom for the economy because it has made it easier for business organizations
to expand business in the international market and improve the country’s wealth.
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Technical intelligence gives various benefits to the business organization and
helps in identifying challenges and effectively solving the problems. This also helps the
business organization and gains a competitive advantage in the market.
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Benefits of Technical Intelligence in Business:-
1. Competitive analysis:-
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The business can get a competitive advantage in the market by adopting advanced
technologies and identifying various opportunities related to technology in the market.
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The way of reducing the competition in the market is to always engage in those
business activities that are easy and help in making quick business decisions.
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Technical intelligence will help the business organization and identify the various
sources of competition and also help the business organization in dealing with the
competition and the technical. The business organization can gather information about
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the market requirements and the competitors’ policies and strategies through different
online platforms.
The business organization and analyze the date of the competitors in the market
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and even according to the competitors in the market. Technical intelligence will help
the business organization and identify the various threats available in the market due
to other competitors in the business and will also help the business organization even
identify the various opportunities in the market.
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The development of the business depends upon the way the company faces the
challenge and deals with competition in the market. Technical intelligence will help
business organizations in identifying the various technologies available in the market
for business expansion and growth of the business. Technology business organization
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must become a necessity for business organizations in the 21st century so the
business entrepreneur should always be under good technical intelligence to identify
the various opportunities and threats related to modern technologies that could help
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business organizations grow in the market. Identification of various benefits of different

technologies will help a business in getting a competitive advantage.
2. Fast and accurate reports:-

Technical intelligence is not only responsible for identifying the opportunities
(c
and threats in the market but a business organization can work in a fast manner to
get a competitive advantage in the market. Technical intelligence is identifying the

opportunities in the market and taking actions to deal with competition and adopt
Notes
e
various technologies in the business.
A business organization will get accurate information regarding the technical
in
aspects of technology through technical intelligence. It is based upon the statistical data
of the market and the accurate information regarding the market that helps a business
organization adopt a particular technology and work upon the product and services
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according to the technical requirements.
Technical intelligence will help the business organization in identifying the various
trends in the market and adopt technological trends based on accurate business
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reports.
Technical intelligence is a way of dealing with modern technologies in a fast and

accurate manner based on market trends and statistical data based on research and
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development.
3. Helps in identifying technology opportunities:-
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Technical intelligence will work on various aspects of the market and will help the
business organization identify the various technological opportunities in the business.
Business organizations are expanding in the international market and there could
be various business opportunities available in the international market. Technical
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intelligence will help a business organization critically analyze the international market
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and identify the various technologies that could benefit a business organization.
Technical intelligence is not only about adopting modern technology in the business
function, but it is also about identifying those technologies that could help the business
organization grow and identify various future business opportunities in the market.
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Implementing recent and highly advanced technologies in the business will be very
beneficial for a company because it will help a business develop products and services
in minimum time and with better qualities.
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There are various technologies developed in the market that benefit the business
by delivering the product and services securely and easily. Technology is not only
required for producing the product and services but all the business functions require
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technology in the 21st century to deal with competition and work according to the
customer’s requirement. Technical intelligence will help business organizations deal
with customers in a better manual by adopting new technologies.
4. Technical intelligence will help in improving the quality of products:-

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Technical intelligence will help business organizations deliver the same quality
of products to different customers at different times. It is necessary that the brand
value of the market is being maintained and the company can deliver a similar type
)A
of product to different customers with the same quality. Quality measures are very
necessary because customers can identify the product by measuring the quality of the
product. Business organizations must focus and work on those technologies that help in
maintaining the quality of the product.
(c
Technical intelligence will help the business organization adopt the recent
technologies in the market and this will further help in increasing the revenue and

growth of the business. Various technologies are being developed in the market that
Notes
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work on maintaining the quality of the product in the market.
Automatic technologies are being launched in the market that removes the low
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quality of the products from the production line so that their rejection from the customer
and not be done based on the quality of the product.
A certain set of formulas are being used by a business organization to maintain
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the same level of quantity and the quality of the product, in particular packaging of a
product so that whenever a consumer consumes a product a similar type of product is
being delivered to him or her.
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Technical intelligence works building on those strategies for the business that
maintains business quality and product quality in the market.
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5. Increased operational efficiency:-
Technical intelligence will help business organizations in improving the operational
efficiency that is the business operations and the market. Business organizations are
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using sensor-based attendance systems to increase efficiency and reduce the time
of ensuring the presence of the daily wage workers in the factories. Technology has
made it very easier for the business to undergo the daily activities and operations of a
business.
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Many business organizations use robots and highly automatic machines to
undergo production and delivery of the products. The robots in the business are being
used for transferring files from one department to another or transferring products
from the production point to the warehouse. Technical intelligence is giving various
opportunities to the business organizations for undergoing the daily operational
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activities and it is reducing the cost of the business organization. This is making it very
easier for businesses to undergo complicated activities more easily.
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Big business makes use of technology and technical intelligence in the business
to make better decisions based upon market analysis. There are various recent trends
developed in technology that are making it easier for the big organization to handle
customer queries and problems and are also providing effective solutions to the
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customers. Technical intelligence is making it very easy for business organizations

to handle customer problems and create a database of customer problems for future
requirements.
6. Identifying market trends:-

m
Technical intelligence will help business organizations and identify the market
trends by properly analyzing the statistical data of the market. The statistical data
generated from the online platforms and various social media platforms will help the
)A
business organization in identifying the preferences of the customers. Technical

intelligence is not only about the identification of opportunities but is also about the
creation of opportunities.
Intelligence will help business organizations in identifying the market trends

(c
and also help in implementing the market trends into business operations. Technical
intelligence will help in implementing those technologies in the business that work
according to the market requirements and the trends in the market.
Technology trend awareness is about identifying the technical trend in the market
Notes
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and technical intelligence is about implementing recent trends and modifications in
practical terms. Technical intelligence will ensure that the market trends are beneficial
for the business and when implemented will give revenue and growth to the company.
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Business organizations must undergo technical analysis so that market
requirements and the statistical data collected through different online platforms act as
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a roadmap for business development and the generation of new ideas for the company.
7. Cope with rapid changes in the market:-
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Business is surrounded by various types of factors such as customers, suppliers,
Government, and other external and internal factors. It becomes necessary that
business organizations work according to internal and external factors of the company.
These factors are responsible for creating rapid changes in the market such as changes
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and demand of the customers, changes in the government policy, and changes in the
supplier’s supply chain policy. It becomes necessary for a business organization to work
according to the changes in the market and develop products and services according to
the market requirement.
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Technical intelligence will help business organizations to cope with different
changes in the market and prepare the business for future changes in the market.
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Through the internet and various other platforms, the business entrepreneur can
identify the way of changes and customer demands and the reasons for the changes
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in the demand. To solve a problem it is very necessary to analyze the reason for the
problem. Technology will help in identifying the future market changes by analyzing
various factors of the consumers and other related elements.
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In the 21st century, a business organization must become technology-friendly and

work according to the technology in the market. When technology is implemented in a
business there will be various changes in the business organization and the operations
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of the business technological intelligence will help entrepreneurs always prepare

themselves for future changes in the technology and the ways of adopting advanced
technologies in the market.
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8. Better data quality:-

Technical intelligence will help a business organization in collecting and utilizing
better quality data from various sources. When a business organization collects data
from the market there could be various types of data that can be collected it becomes
m
necessary to segment the data based upon the requirement of the company. Technical
intelligence will help in identifying the necessary data for the company and will also help
in segregating the required data according to the needs of the business.
)A
Data is one of the very important elements for analyzing the market requirements
and trends so that the business organizations can implement the technology and
other factors according to the requirements of the market. By analyzing the data the
entrepreneur can evaluate the requirements of the customers through statistical
information and various graphs and charts determined through technical analysis.
(c
Technical intelligence makes it very easy for a business to evaluate the data and
make decisions based on statistical information. Technical intelligence will also help

business organizations identify various opportunities in the market related to data

Notes
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collected. Data is one of the important aspects and an asset for the business to make
future decisions for the business. Technical intelligence will help in evaluating the
required data of the business according to the requirement of the company.
in
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Technology intelligence refers to identifying the opportunities and threats of
technology in the business after implementing them in the operations of the company.
Identification of the opportunities and threats of technology will help the business
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organization grow and increase revenue in the future.
Technology intelligence provides an entrepreneur with necessary information

regarding the technology that helps business organizations make strategic plans and
decisions. The Internet has become an important source for technology intelligence as
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major information regarding the technology is being collected from the internet.
A business organization needs to identify the opportunities and threats of

technology before implementing it into the business operations. By identifying the major
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factors the entrepreneur can evaluate the ability of the emerging technologies to fulfill
the company’s requirements.
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Technology intelligence is very important for a business organization because it
helps in identifying the emerging technologies in the market and the various trends in
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the market. This will help a business organization in adopting recent technologies and
will help in the massive growth of the company.
Technology has become a very important part of the business organization

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because with the use of modern technology the business entrepreneurs accumulate
and use the data and analyze it according to the requirements of the business.
Technological intelligence helps in improving the ways of achieving growth in the

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market and also helps a business organization in making quick decisions regarding
innovation in the business intelligence technologies.
There are several tools related to technological intelligence such as text mining
that refers to acquiring the high quality of information from the text first of the internet
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has become an important source for the business organization to acquire business
information and text-related information for the business.
Technology intelligence has become a need for the business entrepreneur

because to stay in the competition for a long period. In the 21st century, the business
m
organization must be based on various proper knowledge and information regarding

technology in the market.
Technology intelligence helps business entrepreneurs in collecting the information

)A
regarding recent technology and also helps in analyzing the information regarding
the technology in the market. Accumulation of technology information and analysis
of the information will help a business entrepreneur make better decisions regarding
modification and acquisition of upgraded technology in the market.
(c
The information generated from the analysis will be very beneficial for the
entrepreneur because it helps in making intelligent decisions based upon the analysis

of data. The entrepreneur will properly plan and analyze the technological information
Notes
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for proper guidance of the team. Technological intelligence includes a process that
helps the business entrepreneur deal with the challenges in a better manner and
communicates the information two different required sources:-
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1. Planning and organizing:-
The first step in technological intelligence is to plan, organize, and direct the
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competitive intelligence affords in a manner that could make better decisions for
the future. The planning of technological intelligence will be based upon the future
requirements and the objective of the company. Based on the plans of technological
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intelligence, the entrepreneur organizes the thoughts and directs the team towards
collecting information and further processing.
2. Collection of information:-
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The second step is to collect intelligence data and information regarding
technology. The information can be generated from various platforms such as online
media and other platforms that act as a source of information for the company. By
si
collecting intelligence information, recent trends and technological up-gradation
in the market could be easily analyzed. The collection of data from different sources
caliper business entrepreneurs to evaluate the market acceptability at different levels
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and will also give more information regarding the future acceptability of technological
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intelligence.
3. Analysis of data:-
The data collected in the second step is analyzed by the entrepreneur and different
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opportunities and challenges are being identified at this stage. Analysis of the data will
help business entrepreneurs identify the future opportunities in the market related to
technological up-gradation and different challenges that could occur after implementing
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the technologies in the business. Analysis of the data will help a business entrepreneur
make better decisions because the entrepreneur will evaluate market opportunities and
will try to convert the opportunities into action through creative thinking.
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4. Distribution of information for action:-

The last step is to distribute the required information after analysis. At this stage,
the results generated after analysis of the data are put into action. The major objective
of the distribution of the information is to get various advantages from the knowledge
m
that the previous processes have provided. At this stage, the major objective is to turn
the results into action and get a competitive advantage in the market. The major goal
is to evaluate the various factors generated from market analysis and make use of
different creative concepts to implement technological intelligence in the business.
)A
Technological intelligence will start with planning and organizing the technological
environment of a business and based on the plans collection of the data can easily
be done. This will help in making better decisions based on the detailed description
regarding the market requirements. Decisions based on the market requirements
(c
reduce the chances of failure and will also help the entrepreneur in evaluating the
situations in a better manner.

Levels of Technology Intelligence

Notes
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1. Macro level:-
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Macro-level technology intelligence refers to the trends and different developments
that are being implemented and the entire economy and the influence on the
development of the entire economy. Macro-level technology intelligence affects the
major sectors of the economy. These types of technology intelligence are required
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for mass production activities for the production of similar types of products and the
economy. Technology intelligence at the macro level affects the economy and the
different trends in the market. The changes in their technological intelligence at the
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macro level will have a major influence on the different trends and the requirements of
the customers.
2. Industry or business level:-
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Business level trains are those trends that affect the development of a particular
industry. These are the technological trends and development changes that specifically
affect a business or an industry. The business-level trends do not affect the economy
si
on a major level but these types of trends affect an industry such as the pharmaceutical
industry, different chemical industries in the market, and other industries. If a
technological trend is being adopted in a particular industry it is necessary to make
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required changes in the business organization so that the business level technological
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intelligence can be adopted. These types of technological intelligence are affecting
particular business organizations depending upon the requirement of the company.
3. Project level:-
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The technological trends that affect a particular project or a program are evaluated
at the project level or program level. Certain technological trends are specifically
designed to fulfill the requirements of a particular project. These types of technological
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trends are for a short period but are necessary for fulfilling the requirements of
a project. The technological trends adopted in the construction of bridges or the
development of metro stations are evaluated at the project level. Without the use of
technology and technology intelligence the development of bridges, it’s not possible in
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the fast-moving world. It becomes necessary to adopt updated technology according

to the requirements of the project so that projects do not get delayed. Market trends
and not included in the project level technological trend because it depends upon the
requirement of the project to adopt a certain technology in the project.
m
Different types of technological intelligence can be adopted by a business

organization depending upon the requirement of the business. Sometimes the business
organization only requires project-level technology intelligence to fulfill the requirement
)A
of a certain project. But at the same time, the company can even require technological
intelligence at a business level to change the technological requirement in the business.
It depends upon the requirement of the technology in the business and the market
trends followed in the business. Technological intelligence can be done internally as
well as externally. It depends upon the requirement of the business to undergo internal
(c
and external technological intelligence. Internal technological intelligence is referred to

as technology audit and external technology intelligence is referred to as technological
mapping.
Technology audit:-
Notes
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Technological audit refers to the evaluation of the internal technological
requirement of a business. The technological audit will include evaluation of the
in
business requirements and analysis of different technologies based on the internal
requirements to improve the practices of a business. Internal audit will help a business
organization identify the requirements of a business related to different assets and
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technology. The internal audit is done to identify the technological requirements in a
business and the various sources that affect the modification of the technology in the
business.
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The technological auditor will help an entrepreneur identify the various risks and
challenges within the organization and will also provide a roadmap to evaluate the
challenges and ways of overcoming the problems and future. The internal technological
audit will help the business organizations in improving the efficiency and the growth of
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the company. Technological intelligence will help business entrepreneurs identify the
various weaknesses and strengths of a company.
Technology mapping:-
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Technological mapping refers to the evaluation of the external environment to
analyze and collect external data to drive intelligence for making strategic decisions.
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Technological mapping will include a macro-level technological environment
and analysis of the industry environment to get a better idea about the external
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technological intelligence.
Technological mapping starts with scanning the business environment to evaluate

the emerging trends in the market. The second step in technological mapping is to
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monitor the pattern of technological Trends and environmental trends available in

the market. The third step is forecasting the future direction of the company and the
future business success based on the technological mapping. The last step is the
assessment of the data to evaluate and understand the organizational implication and
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the technological intelligence.
Internal and external audit of technological intelligence is very important

because by evaluating the internal environment or undergoing technological audit the
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technological requirements within the business organization can easily be evaluated.
Technological mapping will help business organizations evaluate the trends

and analyze the market requirements and the company requirements. Technological
mapping will help a company in making strategic plans for the business based on
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external audits and scanning the technological environment.
Importance of technology intelligence:-

)A
1. Technological intelligence is about the identification of the market opportunities

and threats that could affect the survival and growth of a business in the market.
It will help business organizations in identifying those recent technologies in the
market that are responsible for the growth of the company in the market.
(c
2. Technological intelligence will help the business in analyzing different

information related to future decision-making. It will help in evaluating and
collecting information necessary for making strategic planning.
3. Technology intelligence improves strategic thinking in the organization by

Notes
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analyzing the different requirements of the company.
4. Technological intelligence will provide necessary information regarding
in
upgraded technology for strategic decision-making and improving the way of
thinking regarding the recent technologies.
5. Technological intelligence will also help a company in evaluating the potential
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changes in the market and will guide the business organization in making
decisions according to the potential requirements.
6. Technological intelligence will help business organizations in understanding
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the external changes and evaluating the market requirements according to the
external requirement. This would help the company in the better formulation of
business strategies and evaluation of opportunities and threats in the market.
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7. The use of technology is becoming very important for business organizations
because a company cannot function without technology. It becomes necessary
for the business to identify the capabilities and the capacity of a company to get
modern technologies in the business.
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8. The use of the internet and upgraded technology is increasing the market that
makes it necessary for the business organization to adopt recent technologies
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and make requirements in the business. It gives a competitive advantage to the
business organization and helps in evaluating the future requirements of the
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company.
9. Internal auditing is very important in technological intelligence to identify the
requirements of a business and implement those technologies in the business
that are necessary and will benefit the company in the long run.
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10. Technological mapping helps in identifying the external technological

requirement and the external trends in the market. This will help the business
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organization in better development of strategic decisions and identification of

overall market requirements.
5.1.6 Technology Intelligence: Opportunities and Threats

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The use of technology is very common in production activities and is now also
becoming a common activity for utilizing the technology in every stage of the company.
Technology has become very necessary in the 21st century to deliver the products on
time and manufacture the products and services of the company.
m
Globalization and the emergence of the internet have made it very necessary
for business organizations to make use of technology in their business operations.
Technological intelligence deals with identifying the opportunities and threats of
)A
technology in the market. Technology is a very important asset for most organizations
because the major work of the company is being done through technology.
Technological intelligence will help in evaluating the opportunities and also help in
analyzing the threats in the market. Technological intelligence will also focus on evaluating
(c
the threats and also analyze the problems related to technological implementation.
Technology intelligence: - opportunities and threats:- A process

Technological intelligence will have various types of opportunities that help in

Notes
e
evaluating the business organization and source of different business information
regarding technological intelligence.
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1. Identifying the critical established technologies:-
Technological intelligence will help in identifying the critical area of interest and
the critical established technologies in the market. There could be different types of
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technologies that are necessary for the business functioning but the organization
has to forcefully identify those technological requirements that are very critical to
a business function. Technological intelligence will help in identifying these critical
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technologies that are necessary for the production and daily activities of the company.
These types of technologies will include production technologies, marketing-related
technologies, and research-based technologies. The company should first evaluate the
major requirements and accumulate those technologies that are very necessary for a
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business organization.
Technology intelligence will help in evaluating those critical and necessary

technologies that are according to the business requirement. The entrepreneur can
si
undergo a critical evaluation to identify the major requirements of the technologies.
When entering your company , evaluating the critical technologies required for a
company will reduce the cost of technologies and also will save a business organization
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at the initial stage from the maintenance cost of technologies. Technology intelligence
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is very necessary at the initial stage to evaluate the different opportunities in the market
related to those technologies that could help in business functioning and management
of the work.
Technology intelligence will firstly set priority on the important technologies

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based on the analytical hierarchy process. This will make it very easy for the business
organization to shortlist the necessary technologies for a business organization at the
initial stage of business development.
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2. Identifying competing technology for established technology:-

Competing technologies are those technologies that are similar to the advanced
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technologies and perform the same functions as that of the established technologies.
The entrepreneur can easily evaluate the competing technologies through technology
intelligence. Analysis of competing technologies will help a business organization adopt
similar technologies that are performing the same functions and are very cost-effective
to the company.
m
Technology intelligence will help in identifying the opportunities and the various
threats associated with computing technologies and established technologies. This
will help in making better decisions for the business technological advancement.
)A
Technological intelligence is necessary for taking strategic decisions based on the cost
and future requirements of the technology.
Evaluation of competing technologies will help evaluate business organizations

identify the future threats and problems that could occur by adopting competing
(c
technologies. Competing technologies are performing the same function but there
could be various challenges and problems that could occur by adopting competing
technologies. Technology intelligence will help in identifying these threats and problems
related to competing technologies and the opportunities related to established

Notes
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technologies.
Established technologies are more preferred by big enterprises because
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established technologies are being tested in extreme conditions and the chances of
failure and future problems are very less in established technologies.
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3. Information collection:-
Technology intelligence is based upon information regarding the requirement of the
technology in the market. There could be various sources from which information can
O
be collected to get a better idea about the technology in the market.
For identifying the various opportunities and threats in the market it is necessary
to collect information from various sources so that it becomes easier for businesses to
make decisions based on technology. Technology intelligence will help in analyzing the
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information collected and make better strategic decisions.
The information can be collected from external sources such as customers,
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suppliers, competitors, and other related partners. These external factors are more
related to a business and are more aware of the market trends and the customer
requirements. This will help in the further implementation of upgraded technology in the
business. Technology intelligence is based on recent market research and market data.
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Technology intelligence will deal with decision-making based on the market statistics
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and will also help in implementing those decisions that are more preferred by the
customers and other related parties in the market.
Information can also be collected from internal sources through research and
development, a database of the company, and market forecast. Feedback from various
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related partners within the business organization will help in making better technology
intelligence decisions.
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4. Analysis:-
Technology intelligence firstly deals with the analysis of the threats. Analysis of
threats is very common while implementing new technology in the business. There
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could be various characteristics and benefits related to technology but evaluation of

threats will help business organizations describe the technology in a better manner.
There could be various sources from which information can be generated about
a product, process, and material. The information is very important for identifying
m
the problem and opportunities in the business. Technological intelligence will help a
business entrepreneur deal with problems and challenges in a better manner.
There could be various ways of analyzing opportunities and threats and business.
)A
Business organizations implement SWOT analysis for evaluating the opportunities,

threats, and technology intelligence. Identification of the opportunities and threats
can help a business organization in identifying the various alternatives available in the
market and explore a different alternative that could be used by a business. Technology
intelligence deals not only with implementing advanced technologies in the market but
(c
also helps in evaluating various sources of technology and alternative technologies in the
market.

The morphological analysis will help in solving technical problems and identifying
Notes
e
possible technological solutions. This analysis explains all the possible solutions from
multiple dimensions and provides the best possible solution to a problem. These types
of analysis are best suited when there are alternative courses of action available in
in
the market and there are different types of technologies in the market. Technological
intelligence can evaluate the opportunities and threats of technology to a morphological
analysis because it deals with giving the best technological solution through proper
nl
evaluation of the market.
The Internet and advanced technologies have made the business function very
easy but at the same time, there are various problems and challenges that the business
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organization faces. The maintenance cost of advanced technology is very high and
the company will require technical and highly qualified people to handle technical data
and advanced technologies. These make it very expensive for businesses to regulate
technological intelligence in a business.
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Technology intelligence will provide various opportunities for the business
organizations if proper analysis of technical data is being done because there could be
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multiple ways of using technology and entrepreneurship can get a better idea about the
technology through technological intelligence.
Proper analysis and then evaluation of the data is very necessary for technological
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intelligence because it depends upon the market statistics and evaluation to implement
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certain technology in the business.
5. Helps in distributing the results:-

Technological intelligence is not only about the evaluation of the market
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requirements and analysis of the statistical data but it is also about the distribution of
the relevant information to different departments to make technological decisions
in the business. Technological intelligence will help in distributing the data according
to the requirements of the departments and will also keep a proper check over the
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implementation of the technologies.
Various opportunities can be identified at the stage of distribution of sea results

because at this stage the market requirements and the future market potential can be
ity
identified. There could be various opportunities and threats related to technology that
could easily be identified through technological results.
Technological intelligence is about evaluation and making proper decisions based

on statistical information. It also helps in monitoring and keeping track of technical
m
intelligence. Intelligence helps evaluate the market requirements and distribution

of the results to different departments according to the requirement. The resulting
development team should always be in contact with the technical team to get a better
)A
idea about the technological intelligence in the market. It will help in identifying the
opportunities and threats in the business organization related to different technologies.
Various advantages of technology intelligence that could lead towards various

opportunities:-
(c
1. Reduction in human error:-

Technology deals with automatic systems and does not involve human interference
in the operations of the business. This reduces the human error that could result in
Notes
e
delays in operations and other problems in the business. Introduction in the human and
able to give various opportunities and the business related to technology because there
are various highly automatic technologies developed in the market that work through
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automatic systems and do not require human interference.
Technology in the 21st-century book is based on a certain set of algorithms and is
nl
based on a certain set of principles. This makes it easier for the business organization
to implement the technology in the business. Technology intelligence works on
identifying the various future business opportunities related to technology and will also
help in motivating the team to undergo research and development activity to identify
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advanced technologies in the market. The business operations and daily operation
of a business will be incurred without any interference and error. This will ensure the
reliability of the data and the technological intelligence can prove to be very beneficial
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for the company.
Many countries evaluate weather forecasting based on highly advanced

technologies to ensure accuracy in the information. This type of information needs to
si
be accurate because future decisions of various factors will depend upon reliable
information.
2. Proper analysis and scanning of the environment:-

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Technology intelligence deals with proper analysis and scanning of the
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environment based on technical information. Technical decisions are very crucial
for any business organization and this will require proper analysis and scanning of
the environment. Technological intelligence will help in identifying various problems
and challenges related to the implementation of the technology and will also help in
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identifying various opportunities in the market.
Sometimes it might be possible that technology may not get the support of the
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customer or the employees within the company. The technology intelligence will help
in analyzing and evaluating the market acceptability of technology and will also help
in making major decisions regarding changes in the technology. This will reduce the
unnecessary cost and wasteful activities in the business and will also help in evaluating
ity
and analyzing the business opportunities in the market.
3. Market acceptability of technology:-

Technological intelligence helps business organizations and the overall
m
environment identify the technological acceptance in the market. It is very necessary

that after the development of a technology that is being accepted in the market and
becomes necessary for a business to get market acceptability regarding a particular
technology.
)A
For this purpose technology intelligence is very necessary to evaluate the future
problems and challenges that could occur after implementing a particular technology
in the market. it will also help in identifying the weaknesses of technology and will also
evaluate the market acceptability of the technology. Technology intelligence will provide
(c
proper analysis and evaluation of statistical data regarding the market acceptability of
technology that could help business organizations identify and evaluate the prospects
of the technology.
Certain threats of technology intelligence:-

Notes
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1. Technology intelligence will cost very high to a business entrepreneur because
adopting advanced technologies and regularly updating the technology is a
in
very costly process. This code limited business organizations from frequently
upgrading the technology that could create a threat of giving other competitors
a chance to expand in the market.
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2. Technology intelligence is based on highly specialized and critical statistical
data because other decisions are based on market analysis and statistical data.
If the statistical data is not correct then the decisions based on technology
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intelligence will also lead to unproductive decisions.
Technology intelligence is not always about the identification of future opportunities
but it is also about identifying the future threats of a business. It will give a major idea
about the problems and challenges that could occur after implementing a certain set of
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technology in the economy. Technology intelligence will benefit a business organization
by guiding the business towards new technologies.
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1. ____________ is one of the most recent developments in the area of the business
technology and includes simulation of human intelligence in the operations of the
business activities. r
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2. ______________ are being made with highly qualified humans that know about
implementing human functioning in a machine.
3. The______________ refers to rearranging the business operations according to the
market requirement and altering the current situation.
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4. ________________ refers to identify the opportunities and threats of the technology

in the business after implementing them in the operations of the company.
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Summary
●● Implementation of the technology has become a very important aspect of every
business organisation and economy.
ity
●● Technology trend awareness will help the entrepreneurs identify the usefulness
of the recent technologies in the market and the way of implementing these
technologies in the business.
●● The use of technology does not include use of computer but it also includes use of
m
artificial intelligence and robots in the business operations.

●● The technology intelligence has become a need for the business entrepreneur
because to stay in the market it helps in identifying the problems and challenges
)A
related with the technology.
Activity
1. According to you what could be different uses of robot in a business?
(c
2. Why there is a need of implementing technological changes in the business

Question and exercises.

Notes
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1. Briefly explain the importance of technology trend awareness in the business?
2. What are the different ways of improving the technology trend awareness in the
in
business?
3. What are the different technology enabled marketing trends of a business?
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4. What are the different benefits of implementing technical intelligence in the business?
Glossary
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1. Advancement- advancement refers to making major changes with the help of the
technologies.
2. Hyper automation- it refers to process of converting all the possible business
operations into automatic operations.
ty
3. Technology audit- it refers to evaluation of the internal technological requirements of
a business.
si
4. Technology mapping- it refers to evaluation of the external environment of the
business and analysis and collection of the external data to drive intelligence for
making strategic decisions.
Further readings r
ve
1. Book - driving digital strategy.
Author- Sunil Gupta.
Answers
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1. Artificial intelligence
2. Robots
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3. Intelligent composable business.

4. Technology intelligence.
ity
m
)A
(c

Unit - 5.2: Technology Business Incubators

Notes
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Objective
in
●● To evaluate different types of incubators.
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●● To determine different stages of incubators.
5.2.1 Incubators: Launchpads for a Modern Economy
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Meaning
An incubator firm is an organization that is engaged in the business of fostering
early-stage companies through different phases of development until the companies
ty
have enough financial, physical, and human resources to function on their own.
It helps new companies/ start-ups by providing training on management and
si
office space. Moreover, it provides affordable space, offices, and services that are
shared, management training that is hands-on, support on marketing, and some form
of financing. This formal concept of business incubation began in the United States in
1959. Joseph Mancuso opened a warehouse in Batavia, New York, named Batavia
Industrial Center. r
ve
This incubation further expanded to the United Kingdom and Europe. It is
estimated by the U.S.-based International Business Innovation Association that there
are about 7,000 incubators worldwide. The implementation of incubation activities is not
only limited to developed countries but also developing countries.
ni
They are aiming for financial support from the World Bank for raising interest.
U
Definitions of Business Incubation

There are multiple definitions framed for this particular term but for now, let’s take a
look at some of the major definitions of business incubation:
ity
According to Sherman and Chappell, “Business incubator as an economic

development tool primarily designed to help create and new businesses in a
community. Business incubators help emerging businesses by providing various
support services, such as assistance in developing business and marketing plans,
building management teams, obtaining capital, and access to a range of more special
m
ized professional services. They also provide flexible space, shared equipment, and
administrative services”.
Gulf has stated that “A business incubator may be defined as an organization

)A
which offers a range of business development services and access to small space
on flexible terms, to meet the needs of new firms. The package of services offered
by a business incubator is designed to enhance the success and growth rates of new
enterprises thus maximizing their impact on economic development”.
(c
Difference between incubators and accelerators

It is necessary to note that incubators work differently from accelerators.
Despite having similar characteristics, some points make them different from each
Notes
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other. One such point is that they both function in different ways and have different
goals from each other.
in
Incubators focus on the companies/ start-ups that are just starting to develop
whereas accelerators take those companies/start-ups into consideration that are an
established business model and need to accelerate their time into the market.
nl
Services of an incubator firm
An incubator firm can be a non-profit or profit entity. It can assist by the following
O
methods:
1. They help with business basics

2. Provide networking activities
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3. They help by giving marketing assistance
4. Help in market research
5. Incubators help with financial as well as accounting management
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6. Assist with bank loans and guarantee programs
7. Incubators also help with presentation skills and a link to higher education
resources r
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8. Through relationships with financial partners, providing access to financial
capital.
9. Providing access to information and research resources with the help of
government entities and universities that are local.
ni
10. Providing access to experienced consultants from business and executives

from the management level.
U
Providing access to experienced consultants from business and executives from

the management level.
Characteristics of an incubator firm

ity
Some characteristics comprise components of the most successful incubators firm.

These characteristics are simple yet effective and have implications for each.
The following are the characteristics of the most successful incubators firm:
m
Effective management team: The crucial term “team” is the basis for any
incubator firm to work. The principles need to cooperate and agree on the directions
of the company. There should be an ability to recognize the weaknesses in the team
)A
of management. And what is more important is that there should be a willingness to do

work on those shortcomings or weaknesses.
Appreciating one’s employees, treating them with respect also increases the firm’s
shot at success. It helps to build a dedicated staff.
(c
Understanding market and competitions: Entrepreneurs who are mesmerized

by their products or services may fail to articulate that their competitors might be

way ahead of them in the process of development and other stages. The failure to
Notes
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recognize and realize that the entire market may not be so enamored as they are can
open their paths to obstacles that they don’t even realize they have in the path of their
organization’s success.
in
Many incubator managers get bullish on using marketing plans that would help
their clients identify their market strengths, weaknesses, and their competitors.
nl
There should be effective market research that focuses intensely on market niches
and the strategies, trends, and problems related to those.
Adequate financing: The success of any start-up is directly proportional to the
O
funding. In some cases, it might turn out to be the deciding factor hence firms need to
raise additional capital in the nascent stage of their development.
The mistake that some start-ups commit is thinking that their products will sell
ty
continuously and the cash will flow in.
Well, those who have adequate capital can bridge the problem of cash flows. The
firms will tend to move faster towards graduation if they have adequate finance.
si
Well researched business plan: According to Rubenstein, “Without a preliminary
business plan, start-ups would be better off not starting up,”
r
Without a plan, a company doesn’t have the clarity on which way is up and where
ve
their primary focus should be. The need for a basic plan is obvious but the outline
does not need to be volumes thick. Instead, a good business plan should include an
executive summary, an introduction designed to tempt the reader to dig further on the
topic.
ni
The opening lines should be written in such a manner that the reader is cap-
motivated by the opportunity and interested in reading more. The supplementary
material often included in business plans – such as market surveys, expert opinions,
U
and industry overviews should be included as appendices, limiting the business plan
itself to not more than eight-ten pages.
A well-developed business plan also helps a firm get a grip on many of the other
ity
characteristics such as focus, marketing, and cash flow projections.
Open to change, information, and advice: There should be a network of

knowledgeable people, service providers, advisors, and other entrepreneurs to keep on
top of best practices in every area of business. The narrowing down of uncertainty and
m
reducing risk by good logic and information research helps a lot.
The willingness to listen to experts and revising the strategy to improve and work
on their weaknesses is essential. Being open to change, listening to expert opinions
)A
and advice, and revising the structure accordingly will help boost the operations as well
as management of the incubated firms.
Types of business incubators

Even though the term “ business incubators” refers to a commercial place offered
(c
to new ventures, some incubators specialize in a specific industry.
Here are the types of business incubators you should about:

1. Virtual business incubators: Virtual business incubators are also known as

Notes
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online business incubators. They offer support for start-ups that need capital.
They advise us to actualize the business concepts of those start-ups. Most
incubator organizations have switched to the virtual business model due to one
in
of its many benefits. For example, for the traditional company incubator model,
you are required to set up a physical shop at the site of the incubator’s location.
On the other hand, the virtual incubation model allows the versatility to garner
nl
the advice and the other resources but still maintain their offices/warehouses
away from the location of the incubator.
2. Medical incubators: The incubators that play a key role in the startup economy
O
are the medical incubators. They offer new medical device companies the
resources, direction, information, and finances necessary to start bringing
their product concepts to life. They are the center of a network that comprises
healthcare startups, healthcare systems, and venture capital. In today’s era,
ty
healthcare incubators are driving innovations in the medical industry. Their
services are not only beneficial to the healthcare startups that focus on
healthcare services but also to medical technology. Medical incubators aim to
si
boost the performance of healthcare companies by cultivating entrepreneurship,
creating jobs, facilitating the growth of healthcare-centered services, and
commercializing medical technology.
3. r
Public incubators: Public or social incubators aim to offer social entrepreneurs
ve
the essential resources to expand their businesses. It transforms the lives
of citizens through innovative approaches to solving social problems and
challenges. It combines the passion of accelerating a social mission with the
discipline of an entrepreneur. It addresses social challenges, alleviating levels
ni
of poverty, ensuring sustainable development, and providing employment

opportunities.
4. Kitchen incubators: Almost a decade ago, the incubator kitchen was a novel
U
concept but since the food industry has evolved drastically, it now enjoys access
to outstanding food services.
This evolution and change in the business trend have increased the number of
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food entrepreneurs who not only meet the consumer demand for local products
but also for those products that are unique. The kitchen incubators are also
known as culinary incubators. They are designed to offer a competitive edge to
small food businesses when they enter a local marketplace. They minimize the
risk of business failure by eliminating obstacles that are associated with a lack of
m
expert and specialized knowledge in the area of managing a commercial kitchen.
Effectiveness of business incubators

)A
By far we’ve come to the understanding that business incubators are intended
to support start-ups and entrepreneurial businesses by providing several services and
resources to the clients. There has been debate on the effectiveness of the business
incubation industry since the industry gained popularity, which was in the 1990s.
(c
But for now, there doesn’t exist a commonly agreed model in theory and in
practice to measure the effectiveness of business incubation in a simplified, structured,
and standardized way.

To identify and to analyze the critical dimensions of business incubation that

Notes
e
are compatible to measure the effectiveness of business incubation, the research
is conducted by a multi-method approach by combining desk research, interviews,
and case studies of five incubator organizations in the member states of GCC(Gulf
in
Cooperation Council)
From these findings, a model for measuring the effectiveness of business
nl
incubation is established. This model helps various people related to the organization
such as incubator managers, researchers, policy makers, stakeholders, and
government parties for successful implementation of the initiatives of business
incubation. Moreover, it increases the existing knowledge for academic literature
O
incubators and helps in the economic development of the nation.
But, a primary factor standing in the way of the development of business incubation
is disagreement about their effectiveness. There’s difficulty determining whether
ty
businesses would have succeeded without the assistance of incubators. Although,
incubators have produced several outcomes that are proven and can be considered
effective and desirable for a community.
si
They stimulate the recruitment of start-ups and businesses and support the efforts
of their job creation. By doing so, they promote the creation of fiscal revenues.
They provide access to various field experts and professional mentors who guide
r
the entrepreneurs on every step of their journey. This not only escalates the start-ups/
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businesses but also helps in product specialization and understanding the market far
better.
But to conclude whether business incubation is effective or not, it is necessary to
identify relevant factors to the model which can be applied to every business incubation
ni
for the measurement of effectiveness.

Thus, the discussion has drawn attention to four dimensions which were identified
as crucially significant factors to describe the effectiveness of business incubators,
U
namely: graduation of businesses incubated, the success of business incubated,

number of jobs created by incubation, and salaries paid by incubator clients.
These four dimensions lead to an effectiveness measurement model to measure
ity
the effectiveness of business incubators as they are useful in determining the

contribution of business incubators individually and as an industry.
This will influence the perpetual success and the lasting impact of the business
incubation industry and, thereby, of economies around the world.
m
Economic importance of incubators: Launchpads for a modern economy

Incubators are perceived to be a mainstay of economic development programs. By
)A
combining the entrepreneurial drive of a startup with resources usually available to new
ventures, they create value.
One of the primary objectives of business incubators is creating employment

opportunities in the local economy. Commercializing technologies is one of the
objectives of the same.
(c
The growth inclined, innovative businesses are put forth.

Let’s enhance our understanding of how business incubators function and their
Notes
e
impact on the development and growth of a developing nation.
Entrepreneurship is an essential factor that helps in employment generation,
in
poverty reduction, and a standard of living by uplifting them and acknowledging the
issues of society. Hence, entrepreneurship is an important tool for improving the living
standards of a nation and the well-being of society.
nl
Because there have been changes in the global economy resulting from
globalization, technology up-gradation, change in the market as well as demographic
trends call for the need to improve the overall growth and development of the nation.
O
An incubator is a way for the community to help entrepreneurs who are innovative
and have ingenious techniques that contribute to the betterment of society but do not
have adequate funding and resources to start their activities independently.
ty
Therefore, small business incubators are a way of boosting economic
development.
The incubators have been used in rejuvenating famished neighborhoods,
si
promoting scientific innovation, and helping entrepreneurs through interactions with
other businesses to expand their specialist knowledge.
r
The interest in incubators lies in the small businesses that play in most local
economies, for example, in the employment opportunities that they create and the
ve
innovation which is generated by them. Furthermore, small businesses can be
developed faster by upskilling, working on their model and strategies under the
guidance of experts.
ni
Incubators act as an aid to local entrepreneurs. They constitute the local economy
and are most likely to maintain their operational activities locally. In addition, supporting
the creation of small local businesses can help people engage young, fresh talent.
U
Small businesses play a pivotal role because they can generate employment for
residents. This development can further contribute to the creation of local and regional
economic capital.
ity
But one must keep in mind that substantial efforts must be made to ensure that the
companies created will not fail.
Just because of the unsystematic, uncertain risk of small business failure,

incubators should not be perceived as the basis of an economic development strategy.
m
It should rather be seen as a contribution of efforts to promote the development of

start-ups and small businesses of a given community as it accelerates the growth of
local industry and generates employment for people from different age groups of that
particular region.
)A
The installation of incubators is a method or way of promoting and encouraging the

creation of small businesses.
Giving them recognition in economic dynamism in terms of creation of job

opportunities, giving chance to the fresh talent and the development in the economically
(c
backward regions which need upliftment and standardization.

In this setting, complementary instruments can be used to promote local, regional

Notes
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and national economic development.
The university business incubators also play a very crucial role in fostering
in
entrepreneurial skills among students. The main objective of the university incubators
is to provide valuable services to young entrepreneurs by leveraging knowledge and
talent within the university and ensuring sustainable creation of value.
nl
It is also made sure that the provision of new opportunities to ensure local
customization of products, creation of new employment opportunities, lending
resources, and talent to boost the economy, and to link the deserving and talented
O
students to various industries for economic development.
At the core of business incubator initiatives lay the issue of commercialization

and transfer of technology. There is also a need to provide entrepreneurs with
ty
the requirements for starting up a successful business, like capital, training, and
empowerment of the minority groups
Hence, professional training should be given to meet the technical needs of the
si
labor market. Concerning the emergence of new start-ups, entrepreneurial training
should be given. Academic training in line with the government’s sectoral and regional
bets.
r
Focus on the creation of specialized university citadels with the provision of
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economic, socio-cultural, and financial services inherent in business development.
The creation of sectoral industrial parks should also be facilitated and to place
academic research at the service of development and economic growth, in particular
through its practical application to business and economic realities.
ni
In this respect, various advantages support the statement that incubators are
the launch pads of the economy. These advantages include-- the setting up of start-
U
ups, creating business opportunities, giving a standard and sustainable development

to the community, new products and services, and facilitating growth and expansion in
regional markets with increased effectiveness and efficiency, and business productivity.
An integrated national structure (incubators, technological, sectoral industrial

ity
parks, and specialized centers of universities) will have to be implemented with the
emergence of new, innovative, tangible, and creative ideas. Further, in improving the
competitiveness of established start-ups/ small businesses.
m
Hence, incubators act as a catalyst tool for either regional or national economic
development. It helps startups by providing their clients with services on a ‘one-stop-
shop basis and enabling overheads to be reduced by sharing costs.
)A
They significantly improve the survival and growth prospects of new start-ups.
Therefore, incubators can be termed launchpads for the modern economy of any
given nation, locality, or region.
(c
5.2.2 Unique benefits of Technology Business Incubators

Technology Business Incubators (TBIs) are a venture of universities, local

government, private players, and public research institutes to promote and brace a new
Notes
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technology-intensive enterprise.
In this type of incubation, the targeted audience or the target talent consists of
in
innovative, society-oriented, knowledge-intensive, and mostly technology-oriented
service sector enterprises.
One of the substantive elements of the incubation process is interactions with
nl
academic circles and public research.
TBIs try integrating innovative and enterprise policy. They also intercede into the
various processes of the learning-based economy. Their authoritative command is also
O
implemented with the active participation of the academic sphere, which gives it certain
unique characteristics.
For initiating technology-led and knowledge-driven enterprises, the need for
ty
instruments like TBI has been recognized by the world.
The studies conducted also suggest that such mechanisms help in the growth of
new technology-based enterprises. Moreover, they also help in improving their survival
si
rate essentially. TBIs also facilitate the rapid commercialization of research outputs.
Apart from providing a host of services to new enterprises and existing SMEs in
r
the region, TBIs also facilitate an atmosphere suitable for their survival and growth. The
substantial feature of the TBI program is that within 2-3 years, the tenant companies
ve
leave the incubator space.
TBIs are promoted to achieve the following objectives:
●● Facilitating and conducting various entrepreneurial information services for its

ni
promotion.
●● Promoting and developing high-end entrepreneurship
U
●● Creating jobs and services

●● Fostering the spirit of new entrepreneurs
●● Connecting agencies of support system, academic institutions
ity
●● Facilitating the transfer of technologies

●● Rapid commercialization of research and development
●● Acting as policy advisory body about entrepreneurship
m
These TBI are usually located near a source of technology and knowledge i.e.
around R&D Institutions/Academic
Institutions or have strong links with such institutions to ensure optimal use of the
)A
already existing expertise and
facilities thus keeping the cost of the TBI on the lower side. Locating TBIs in
such locations also reduces the time lag between technology development and its
commercialization.
(c
Further, the success of a TBI largely depends on its location and management
besides the quality of tenant enterprises.

These are the points to keep in mind while finalizing the location and management
Notes
e
of the TBI:
●● The research and development track record and subsequent commercialization
in
of output
●● Dedicated team of research and development persons
●● Facilities, infrastructure, and expertise available
nl
●● Industrial milieu in the region
●● Proximity to other academic and research and development institutions
O
Advantages/unique benefits of Technology Business Incubators
TBIs help in the finest possible financial technological assistant for the companies.
The reason behind the success of young businesses is the exceptional service of
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technology business incubators.
Joining hands with technology business incubators can help you succeed in lesser
time duration and expense assuredly.
si
Also known as innovation centers, business technology incubators enhance the
output and the employment rate.
r
They also ensure the mental and physical well-being of an employee and provide
ve
them with better working conditions/ environment altogether.
Management
As we are aware that operational assistance and management guidance plays a
ni
pivotal role in the success of companies, so apart from providing financial assistance,
the TBIs constantly guide the companies/start-ups for executing things according to the
modern and relevant to current/latest scenario.
U
For example, if you are involved in a Bio technological startup then clinical approval
procedure, drug development, and firsthand experience assistant are provided.
The valuable connection of a business incubator with start-up results in the

ity
expertise execution since different companies require different varieties of management

assistance regarding manpower, finance, communication, and operational expenses.
Synergy
m
Not only technological and financial assistance is provided by the TBIs but also
training programs and workshops.
The Incubators teach everything related to business management in a way that

)A
even after the link between the Incubator and the business breaks, there is no room for
shortcomings at all.
As a result of sharing ideologies and up-to-date training, better management skills

are automatically embedded within the businesses.
(c
TBIs can also help businesses to join marketing campaigns and development
initiatives related to the products they offer.

Though the companies don’t need to know who has been sponsoring it.
Notes
e
Startups can receive funding as a result of perpetual efforts made by the TBIs
despite residing in different geographical locations.
in
And, the people who are interested in investing are collected by the incubators for
funding the growing businesses.
nl
Economy
Since the technology business incubators are existing, they have been striving their
arms towards perfection in making the nation only better than what it used to be.
O
By creating job opportunities and giving wings to new companies/ start-ups, they
result in better infrastructure as well as a better overall financial state of the nation. After
all, long-lasting jobs for both graduates and undergraduates spontaneously push better
ty
economic growth.
A deeper understanding of the unique benefits of TBIs
si
TBI is potentially interconnected with facilities that may exist either alone or co-
operate in one locality.
They accommodate newly created enterprises as tenants and help them to grow
r
into fully-fledged businesses within 3-5 years. After this initial period, the mature
ve
businesses leave the TBI and move to the competitive market environment, eventually
freeing up space in the TBI for new innovative upcoming start-ups/ companies.
Let’s dive in deeper to understand the functioning and advantages of TBIs.

ni
- Small businesses will easily maintain the previously established exchange

with the knowledge base after moving from technology business incubators to
technology parks.
U
- TBIs may share unique equipment and information sources of research

organizations that are otherwise unavailable or unaffordable.
- They define and follow strategic targets.
ity
- They allow easy monitoring of the development and success of the start-ups/
companies.
- They allow easy continuation in further research and development of the
products and services.
m
- They cooperate with the research organizations after location, the clients finding
them practically at the same location.
- The close neighborhood helps to develop a more effective, efficient, and larger
)A
network at the national as well as international levels.

Companies associated with or probably servicing a graduated company remain
located close by.
Venture capital operators and business angels prefer involvement in fast-track

(c
businesses remaining in the area of their interest.

The first building block/foundation of longer-term technology parks being an

Notes
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incubator has a notable potential to contribute to the success of the parks by providing
clear evidence of business development at low cost and relatively fast.
in
The tenants could be relocated to the larger premises in the park as they graduate
from the incubator.
The park incubator linkage constitutes an interesting economic tool.
nl
The interaction between the two(technology parks and technology business
incubators) has the potential for significant synergy.
O
Though, practically this graduation does not occur so smoothly like butter as the
firms can stay in the incubator longer than expected just because they have nowhere to
go. They cannot survive under commercial real estate conditions.
ty
TBIs should provide the tenants, i.e. their clients with a broad range of facilities and
services.
In the TBIs, the incubator space, either in the form of offices, workshops,
si
laboratories or halls are available at a comparatively lower cost than usual.
After 3-5years, as the tenants graduate, the location of TBI near technology
parks or industrial estates would be useful to help them find permanent premises for
themselves. r
ve
The location of TBI near industrial estates or technology parks may be useful to
help tenants find permanent premises as they graduate (usually after 3-5 years).
Services, which may include secretarial support, internet, LAN (local area computer
ni
network), telephone fax, security services, access to office equipment, meeting rooms,
reception, and mailing facilities, conference facilities, exhibition space, and catering are
provided.
U
In addition to that, enterprise counseling, assistance to the detailed elaboration of

the business planning, access to marketing, legal, accounting, licensing, and financial
expertise is also given.
ity
There is also access to financial resources, early-stage financing, loans, and

grants.
Technology counseling and Research and Development services, that is,

providing access to research specialists, choosing innovative technologies, improving
m
productivity, quality control, maintenance, and matching with partners from the
universities and research organizations.
Networking services encourage business relations inside the TBI. They provide
)A
information on networking possibilities with business actors outside the TBI nationally
as well as globally.
The last and the most important point being technology parks.
Technology parks provide space to fully-fledged companies that do not need many
(c
of the nursery services provided to start-ups in TBIs.
However, a technology park should provide its clients with the following things:

- Good access possibilities, particularly adjacency of an international airport and

Notes
e
railway/ highway system.
- An excellent infrastructure, such as utilities, catering, data networks, conference,
in
and communication facilities.
- A reservoir of qualified labor power is represented by educated people with a
greater level of necessary skills.
nl
- Distinguished address, particularly a good image of the locality, good
landscaping, and proximity to leisure and recreation possibilities.
- Further development possibilities for future expansion, particularly reasonably
O
priced land or buildings.
- Financial incentive schemes for development (rent, mortgage, lease, loans).
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- Vicity of a research organization that can carry out cooperative research and
provide information sources.
- A research center or prestigious university can increase the reputation. It can
enhance the image of a university as an institution actively involved in converting
si
research findings into commercial products as well as getting involved in
technology transfer.
The real estate issue r

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There is a dilemma for TBI managers to choose between constructing a new
building or choosing to refurbish an old one.
Well, the answer depends on local geographical situations.

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The advantages of a new building are flexibility, optimal design, better location but
the major concern being the higher cost and sometimes, a suitable location for a new
building in the proximity of a knowledge source is difficult to find.
U
On the other hand, already renovated buildings may have some advantages as
well disadvantages. The advantages being a lower cost, shorter time needed to initiate
cooperation, and easier building and construction permission from the local authorities
ity
Performance indicators
Usually, the systematic evaluation of business incubator systems is absent.
However, this doesn’t mean that the performance of TBI shouldn’t be monitored
m
and evaluated regularly to determine the impact following the objectives pursued, to
establish the background for motivating and rewarding the management and to justify
the investments in the project.
)A
In the case of the technology-oriented incubators, the evaluation done will allow the
determination of the objective of the technology used or transferred to the established
enterprise.
Below are some performance indicators for evaluating and monitoring the
(c
performance:
For the category or level of Operational efficiency, the performance indicators

would be the number of inquiries for entry received by the TBIs. The tenant turnover
Notes
e
rate, number of new start-ups, and their subsequent failure rate are also the
performance indicators at this level.
in
The operating income, positive cash flow, expenditure incurred add the
performance indicators for the financial performance of technology-oriented incubators.
For the category or level of Research and Technology transfer, the performance
nl
indicators are the royalties paid to the shareholders, the value of achieved technology
transfer agreements, and the value of contracted research.
The turnover development in the tenant companies and the new job opportunities
O
created are the performance indicators for the business development.
Producing stable innovative start-ups or small businesses is the prime objective of

the TBIs.
ty
Thus, it makes the percentage of shattering start-ups, i.e. the failure rate the most
important performance indicator.
As per experience, it is shown that on average, TBIs increase the chances of
si
companies surviving and developing up to 90 percent.
At times, the necessity to cover the costs or to even survive may cause the
r
incubator to convert into a real-estate operation. This situation may arise in the
developing countries that have weak sources of knowledge and absolutely non-
ve
existence of underdeveloped state support programs.
In situations like these, one of the key tasks for incubator management is to keep a
balance between the incubation functions and economic survival.
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Risk and dangers associated

Risk is a part of any business venture. Thus, several categories of risks are
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associated with the incubator project.
Each project has its uncertainty, dangers that concern the enterprises.
However, some risks are quite general, and let’s discuss them in brief.
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The first and foremost risk is that promoters lose interest in the project. But how to
handle it?
Take frequent awareness actions, open doors, keep information days, and do
m
publicity of success stories.
The second type of risk is the low commerce results from technology transfer. You
can minimize the risk by cooperating with an agency that is licensed and experienced.
)A
You can do active marketing and international networking.
Another risk associated is the difficulty in financing start-ups. This risk can be
minimized by initiating a small seed fund that is operated by TBIs. Foreign investment,
as well as corporate venturing, can also be done.
(c
The risk of lack of premises for graduated tenants can be minimized by initiating
technology park projects.

The risk of becoming a real estate operation can be minimized by initiating

Notes
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government support programs for business incubators.
Applicability to developing conditions
in
The applicability of the technology business incubators’ model requires
modifications and considerable reconsideration.
nl
Due to the importance of the relationship between the incubator and knowledge
base, the nation should have a fair level of research activities that include the relevant
research infrastructure.
O
Though there is no such need to promote high-tech businesses, instead good tech
businesses dealing with technology that are corresponding to the levels of the world
should be emphasized.
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Many developing countries solve urgent nutrition problems while the
underdeveloped sector is represented by agriculture. The incubator projects that focus
on selected biotechnologies and food industries may be suitable for the development of
si
the county.
The non- standard business environment could be the reason for the incubation
period of business start-ups being longer than usual.
r
The necessity to cover the costs of operations of the incubator under the conditions
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where financial resources are limited may cause the conversion of the incubator into
a pure real estate business for the time being. In situations like these, one of the key
tasks of incubator management is to keep a balance between their functions and
economic survival.
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The applicability of technology-oriented business incubators and technology parks

concepts to the developing country conditions is limited to relatively more advanced
conditions.
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The analysis followed by a project inclined towards the country needs TBI as an
effective tool for economic development is feasibility analysis.
Technology business incubators and technology parks will be great tools that help
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in the stimulation of the entrepreneurial sector that is private and even in areas where
technology sources exist together
TBI in the first phase whereas TP in a second is adequate mechanisms to assist

in the startup and development of technology-intensive enterprises and ensuring
m
commercialization of available technologies.
General conclusion
)A
Technology business Incubators are recognized as competent instruments for the

speedy and successful development of innovative start-ups and companies to a fully-
fledged business in leading the economies.
The creation and successful development of small knowledge-intensive innovative

(c
companies with great interactive links to the research institutions is widely understood
as an effective tool for bridging the gap between the competitive world of business

and the creative world of science. Consequently, this puts the knowledge to work for
Notes
e
productive purposes and a case of technology transfer that is clear.
Some general conclusions are formulated for the TBIs:
in
The technology business incubators, generally called business incubators, help the
starting businesses with high growth potential to succeed.
nl
The survival rate of the companies that are in incubators is about 90 percent as
compared to 20 percent in a market environment that is standard.
TBIs are an effective tool for innovation, generating employment opportunities,
O
technology transfer, and local economic development.
TBIs combine several basic elements that are required for successful business
development like:
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- suitable infrastructure and space at affordable prices
- access to technology and sources of knowledge
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- a comprehensive range of advanced services
- networking
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- training and management
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- seed capital fund for early-stage financing
The space occupation in technology business incubators and technology parks is

not dependent on a company that is being involved in high technology.
ni
It is often driven based on consideration of income generation.
There was a survey conducted in the UK that showed 35% of space was occupied
by service companies— financial institutions, accountants, and insurance companies.
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The percentage is very high to justify the nature of such companies to the other tenants
in terms of services.
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5.2.3 Stages of Incubation at Technology Business Incubators
Establishing a Technology Business Incubator

Factors responsible for setting up a TBI
m
TBIs are usually located near Host Institution. A host institution is a source of
knowledge and technology in essence, somewhere around Academic Institutions
or Research and Development Institutions or it could be ensuring optimal use of the
)A
existing facilities and expertise by having strong links with such institutions.
In this way, it could be possible to maintain the cost of TBI as low as possible
yet maximising the output. Locating TBIs in such locations reduces the lag between
technology development and commercialization.
(c
As we are aware that the success of TBI majorly depends on its location and
management, these are the aspects relating to the host institution that is always kept in
mind while selecting the host institution or location of the TBIs:
Requirements
Notes
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- Research and development track record
- A devoted team of R&D individuals for the TBI at the location
in
- Commercialization of research and development output of the location/ host
institution
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- The industrial surrounding not only locally in the city but also adjacency to other
regions of the state
- Adjacency to other academic institutions that engage in the similar field
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- Availability of facilities, expertise, infrastructure within the host institution
- An experienced administrative staff that constitutes of both experienced
individuals as well as young members near the interactive end to strike the right
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balance between mentorship and collaboration for talent within the incubator
itself
Physical infrastructure requirements
si
One of the greatest advantages available to the talents in incubators is the physical
infrastructure and the relatively low cost that helps them concentrate the limited
resources they have for innovation and product development.
r
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Therefore, there are certain requirements in terms of physical infrastructure that
are essential before a TBI can be set up in a location. These are as follows;
- Telephone, internet and fax subscriptions, i.e. basically communication facilities

- A modern work space, in an independent and segregated area
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- Computing facilities, that comprise desktops, laptop systems, printers, etc.

- Information center, library, usually of the host institution
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- Important equipment that is required in the specific target area of operation for
the project
- Training and development, conference facilities so that domestic, as well as
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international AIDS and collaboration, can take place for both staff and the talent
at the incubator.
Then, once a TBI is set up, the selection of talent and the companies which will be
included in the technology business incubator is the most crucial factor in determining
m
the success of a TBI.
Pre Incubation Process

)A
The selection process and eligibility criteria for inclusion of talent in the TBI program
The talent that usually applies to the TBIs comes from a diverse background from
fresh graduates to the companies within a year of formation. That is why the selection
criteria need to be inclusive, open, and focused on its outlook of creating a sustainable
(c
knowledge economy.

This also applies to the incubators that are community-driven and perform their
Notes
e
services for free or low charge and for the commercial incubators that take a cut
inequity of the talent they incubate as a fee for their services.
in
The framework that is generally followed is:
1. Submission of Applications by Talent – The format of applications by the prospective
talents is in the format of an information-gathering form which is created by the
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incubator. The information required of the applying candidates is their name,
members of the company, business plan, letter of recommendations, any due
diligence information, registration, and financial documents when applicable.
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2. Pre Screening Application Review – Before forwarding to the Selection Panel
that chooses the talent, the background, and reference checks are conducted
by the incubators.
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Basic financial, academic, statutory checks along with validating recommendation
letters are done to ensure the authenticity of the applicants.
To gauge the feasibility of the product as well as the skill set of the team, most
si
incubators use this stage to verify the working MVP(minimum viable product)
and some incubators require this to be submitted as a part of the application.
3.
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Review of Applications by Selection Panel – Most of the TBIs have their Panel of
Experts who have the final call in selecting the talent that is being taken into the
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incubator. The Panel consists of experienced members from the industry such
as academicians, fellow entrepreneurs who have their fair share of experience
in both research capitalization and venture funding.
There is a split between the external industry experts and internal members of
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the incubator in terms of having a membership.

Some guidelines are given to the panel in making their decisions that are usually
unique to each TBI.
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They include research output requirements, focus area, available resources at

the TBI as well as the short and long-term goals of TBI.
ity
The Selection Panel generally chooses a shortlist of applicants, leaving further

finalization and final selection to the interview stage.
4. Interview with Expert Panel – The Panels in most TBIs also conduct interviews
with the individuals of the talent groups after shortlisting the candidates in the
process.
m
They measure the potential compatibility within the program of the TBI. They
discuss the long-term feasibility of the project, the terms under which talent will
)A
exist under incubator, and the responsibility of members of the talent group
under incubation.
It is the most crucial stage of the selection process as it is generally the suitable
situation for both parties to decide on common grounds of expectations and
compatibility from each other.
(c
5. Pre- Approval Intimation – Establishing a clear relationship between both parties

is done by informing the selected candidates about their duties, obligations, and

perks. A fair chance is also given to them to plan their integration. This way the
Notes
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candidates can compare the offers and prepare for the negotiations regarding
their next stage, including financial commitments, incubation goal requirements,
and equity distribution.
in
6. Negotiation of Terms of Incubation – Broad frameworks for a contract between
the talent and the TBI are created by the TBI. They have unique clauses which
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are the by-product of negotiations that take place between the TBI and the
talent. In this way, they can cater to the interests of all stakeholders on a case-
to-case basis. These terms keep the best interest in the mind of both parties.
The talent to have an active say on the financial, legal terms that will govern
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them.
This freedom ensures that there is an active role of the talent in the success of
the venture which helps in the long-term reputation of the incubator.
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7. Execution of Agreement – The procedures and methods that help the talent
settle and adjust into the incubator are included in this part.
The talent meets the faculty, administrative staff, and other initial introductions
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that take place.
The talents get acquainted with the functioning of the incubator and start
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the process of accelerated development within the timeline required by their
contracts.
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Incubation Process
Services provided by incubators

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Two kinds of aid are provided by every incubator to its talent.
The first kind of aid is physical, location-based resources such as office space,
conference rooms, communication facilities, library access, etc. These physical
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resources help talent to concentrate on the process of creating and promoting their
product without the worry of the physical upkeep of their company, which eventually
leads to increased outputs.
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The second kind of aid which is as important as the resources is business-oriented

aid. It includes fundraising, legal services, marketing support, and other kinds of help.
This is a unique advantage of industry-focused incubators as they are aware of

the key aspects in the industry that operate under, allowing direct access of talent to
m
mentorship and funding that would not be available to them outside the incubator.
These are very valuable as they let companies get through the first steps of their
existence by having adequate mentorship for any problem that they face on the way
)A
and by ensuring maximum concentration on the product development by the talent.
It serves as a great networking opportunity for any startup, where they can lead
long-lasting relationships that can prove to be helpful and fruitful by meeting people at
events organized by the incubator.
(c
Location-Based Physical Services:
●● Telephone, internet, and fax subscriptions and other communication facilities

●● A modern space in an independent area

Notes
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●● Computing facilities such as desktop, laptop systems, printers, etc
●● The equipment needed in the specific target area of operation for the project
in
●● Library and information center, which is of the host institution itself
●● To allow domestic as well as international aid, the training and conference
facilities are provided
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Business Oriented Services
The important business incubation services that are provided by the Technology
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Business on a largely uniform basis to be successful are as follows:
1. Business planning and training

2. Marketing assistant and the survey of market
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3. Technical assistance and organization management
4. Legal services
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5. Assistance in obtaining statutory approvals
6. Syndicating finances
7. r
Using facilities of the host institution at low/ nominal charges
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The procedure of Incubation
Operating Procedure
The relationship between the incubators and the talent is governed by the terms of
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association which also defines the procedure of operations between them.
The terms of conditions are traditionally open-ended with the deadlines of product
appraisal, certain minimum working hours, and limitations on conduct being the
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major portion of the terms that govern the talent of the incubator. These lay down the
schedule of incubation, limits on time, rights and obligations of both the parties, limits on
resources, and other operating criteria that is unique to each TBI.
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The schedule of obligation is usually from 18 to 24 months subject to renewal.
To allow one to know and see what these operating procedures in specific from
a sample TBI are and to understand how they function, a sample policy document is
attached to the same report in the 2nd appendix.
m
Many incubators provide resources to their talent and then follow a hands-off
approach. It allows the talent to approach the incubator for any that they might need.
)A
This works effectively and efficiently. Once they are informed about the resources
and aid available to them, they have the liberty to pick and choose from the ones they
require. It lets them exercise freedom in the process of development of the product
without any work schedule or standards being imposed on them.
Education & Learning

(c
All the incubators have some processes for not only education but also review.

For the education, their industry experts are called in and special classes are
Notes
e
arranged for them. They get to network with various venture capitalists at the organized
gatherings by the incubators.
in
The Incubators do so to mandate a learning curve for all the incubator talent. This
contributes to the creation of better products and services and bolsters the image/
reputation of the incubator in the industry.
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Appraisal & Review of Talent
A semi-annual review of the work carried out by the talent of the incubator is
mandatory for the process of review.
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This review is carried out by a committee.
The committee is generally a mixed staff of the selection committee members
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and the industry experts. The function of the committee is to gauge the progress of the
company against the objectives that they’ve set which were decided in the incubation
contract.
si
To determine this, apart from raw financial data such as product sales, etc, the
industry testimonials, product reviews, and live demos are used.
This helps in keeping a track of how the mutual goal of developing the company
r
is progressing by both the talent as well as the incubator. They also determine what
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can be done better to improve it. The evaluation of the quality and impact of business
assistance that is provided by the incubator is also done by the expert committee. The
suggestions of improvement are also given so that the incubator can serve its talent
better.
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Apart from the process of review, there are the components that are frequently
industry-related which serve as the dual purpose of helping talent adapt to the
operations within the industry. It also allows the incubator to get external opinions on
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the talents through these interactions.
Post Incubation Process

Graduating from an Incubator
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Graduating is the process of finishing the incubation process. There are different
criteria for gauging when talent can graduate from an incubator. Most incubators have
different criteria for gauging and on what that entails from both the incubator as well as
the talent.
m
Some of these criteria include self-sustenance in terms of revenue stream, expiry

of the period specified in terms of the agreement, selling the venture to a larger
)A
company, etc. These conditions have multi-facets, hence are known as multifaceted.
They ensure that the talent is adequately charged for the services it avails at the
incubator. For example, it is quite common for the talent to encash a certain amount of
equity for the incubator if a company is acquired straight out of the incubator. However,
if the talent is going mainstream by themselves, the terms of deferred encashment of
(c
equity and even free services are common to allow the company to survive their initial
years as an independent entity.

Post Incubation Obligations

Notes
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The talent that has graduated from and serves as the best representative of the
incubator methods to the industry making their opinion of the incubator very important,
in
post-incubation.
For this, the incubators often organize special programs that revolve around their
graduated talent. There are talks within the incubators, networking meets around the
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county on an annual basis.
In this way, the incubator is active in the industry and is networked. They follow up
on the performance of its talent which initiates mutual benefit of both the parties in the
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process.
Special considerations
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Certain aspects need to be necessarily kept in mind of the incubators that
are newly established and while being set up and also through the first few years of
operation. They must ensure they become relevant in the market as soon as possible
while attracting the right sort of talent for their crucial initial batches of incubation.
si
There are some factors suggested by the Centre for Innovation and
Entrepreneurship at the Indian Institute of Management which are as follows:
r
1. Hiring an Incubation Head: Whether, in the capacity of the Manager or a CEO,
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the incubator needs to hire a person who is passionate to work with startups
and is connected to the sectors on which it will focus. This person is generally
the key member as he or she will execute the operations of the incubator.
2. Choosing the operational sector: The incubator must decide the specific sectors
ni
it wants to address. This will help them to stay focussed and aligned to their
vision as well as attracting the right sort of talent.
3. Defining incubation model and incubators: The incubator must be clear about
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the incubation model it wants to work along with depending upon the services it
will provide and the strengths it can leverage upon. This will help the incubator
define whom they will call the incubatees. Some call the start-ups in which
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the incubator has invested as incubatees whereas some call incubators the
startups working in co-working space as incubatees.
4. Defining the vision and objectives: The vision that the incubator will be
embarking on must be decided by the Incubation Head in consultation with his
m
advisors. The setting up of the objectives will help to plan the activities and to
track progress in terms of the success achieved by the incubators in the coming
years.
)A
5. Deciding legal status: There must be clarity about the legal status it wants the
incubator Santa to hold. It will be dependent upon the objective as to whether
the incubator wants to be a ‘center’ of the host organization or will register itself
as a Sec. 8 Company under the Companies Act of 2013 in India or the Societies
Act in India. Attaining an understanding of the advantages and disadvantages
(c
of each of the forms of registration will help.

6. Creating networks: The incubator must establish a network that can help
Notes
e
startups to wade through challenges as the incubator cannot work in isolation.
Mapping the local ecosystem, connecting, collaborating with existing corporate,
regional, and industrial bodies, domain experts, academic institutions, investors
in
would be of immense value.
7. Services it wants to offer: Last but not the least, the incubator must have clarity
nl
about the services it wants to offer to its incubated startups. This depends on
the incubation model and will help the incubator in estimating its cost and setting
the right expectation from its startups.
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5.2.4 The Process of Incubation
Business Incubation as the name implies is the overall process involved in the
inception and growth of a new venture or a start-up with the help and support of either
ty
an individual or an organization. The entities, which help in hatching and growing the
new venture or start-up are known as business incubators. Before deciding to support
or invest funds in a new venture, they see its growth potential and weigh it against
si
all odds. To minimize the risk of capital, a high level of research is performed before
making the decision. In short, the goal of incubation is to help start-ups succeed in the
long run.
Definition r
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Though business incubation has been defined differently by the experts, the basic
concept and execution remain the same. Sherman and Chappell define business
incubators as an economic development tool primarily designed to help create and
grow new businesses in a community. They further elucidate the services of the
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business incubator to support emerging businesses with several services, such as

assistance in building management teams, developing business and marketing plans,
funds, professional services, shared equipment, and more.
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Importance of Business Incubation

Numerous start-ups work around a brilliant concept with a huge scope of scaling
ity
in the future. But these companies do not have much knowledge about modern
management practices to align their business operations which results in wastage of
funds. The primary role of business incubators is to help start-ups in the optimization
of funds. The localization involved in managing a business plays a significant role in
making the foundation strong and scaling it. Business incubators essentially perform
m
the same function. The business incubators target businesses with huge potential. They
help them in establishing their presence formally in the market. These start-ups might
require various types of support such as planning, training and development, research
)A
support, and so on.
Who are Business incubators?

Business incubators are specifically devised programs for helping startups to
innovate and grow by the provision of workspaces, mentorship, education, and access
(c
to investors for startups or sole entrepreneurs. These facilities enable the companies
and ideas to take shape while operating at a lower cost during the early stages of

business incubation. Incubators require a process of application to join and expect a

Notes
e
commitment for a specific period.
Types of Business Incubator
in
There are four major types of incubators in the market. These are the following:-
●● Corporate Incubators whose objective is to enhance the entrepreneurial spirit
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and help the start-up to keep up with others in the industry. They target internal
and external projects related to the activity of the company. The challenges are
the conflicts between the management regarding the objectives and management-
O
related decisions.
●● Private Investors and venture capital Incubators:- Their objective is to assist
the potential business model and then reap benefits in the future by selling the
shares. They target technology-based start-ups. The challenges they face are the
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quality and durability of the project.
●● Academic Incubators:- Their main objective is to offer new sources of finance,
supporting the entrepreneurial spirit and civic responsibility. Their targets are
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external projects and the projects internal to the institution before the creation of a
company.
●●
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Local Economic Development Incubators:- Their main objective is to bring
about economic development by supporting Small and Medium Enterprises
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and specific groups for the overall upliftment of the society. They target small,
handicraft, locally sourced business companies. The challenges that they face
are conflicts, governance risk, management quality, red-tapism, and long hours of
negotiation.
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Other types of incubators include Seed Accelerators who concentrate on early

startups, Public/Social Incubators who focus on public welfare projects, Kitchen
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Incubators who cater to the food industry start-ups, Medical Incubators who promote
medical devices, and biomaterial ventures, and Virtual Business Incubators whose
interest is online business projects.
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The motive of the business incubators

They look for great ideas and startups that can grow over a few years. Some focus
on helping build a business model while others seek a fully fleshed-out business plan
from applicants. Incubators tied to particular industries or academic programs look for
m
business ideas and growing companies that are in the same field. An incubator funded
by a hospital will look for start-ups in the medical or pharmaceutical industry. Common
incubator sectors include software development and professional services. Other
programs seek a general population of companies across many industries.
)A
Non-profit incubators serve particular groups like women entrepreneurs,

underserved populations, or university students. Others take applicants from across the
country or even internationally.
(c
Incubators vs Accelerators
Though used interchangeably, both the programs have different timeframes and

goals. Incubators help in a company’s growth and mostly assist it in the long term.
Notes
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They even take an equity stake in the assisted company.
Accelerators are mostly short-term programs just lasting a few months.
in
Companies expect an aggressive growth trajectory by infusion of funds from an
accelerator. This pressures the company to grow faster as the accelerators are
for a short period. With incubators, there is no such pressure to perform quickly and
nl
companies can grow at their own pace.
Difference between incubators and accelerators:- The incubators typically

follow a less rigid schedule and can be tailored to a business’s unique needs. These
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programs also offer the added benefits of educational programming and mentorship
and are more or less like training programs. The business incubation process can
hence change according to the needs of companies. Accelerators on the other
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The hand is funded by an existing company and follows a structured approach with
mentoring from the legacy company. They have a marked period and they focus mainly
on scaling up the company. Incubators, on the contrary, focus on innovations
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Stages of Business Incubation
Though Startups focus on rich ideas with great upscaling potential, they lack the
resources and funds for the successful execution of a project. So, they need the help
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of business incubators to perform efficiently and minimize losses. Some of the most
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common services offered by the business incubators include helping a start-up to start
basic operations and financial management and offering marketing and PR assistance
to new companies to set up a brand name.
The process of business incubation falls under three main categories.
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Support in providing physical facilities:-The incubation service provided

regarding the physical facility falls under this.
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Networking Facilities:- Once the physical facility processes are over, business
incubators help the start-ups with networking facilities to facilitate their growth and
development. As they have a strong network of influential people, business incubators
can connect the start-ups with the same to grow. Incubators bring credibility to the
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company which helps in procuring loans and other credit facilities from financial
institutions.
Support Facilities:-Once the business is up and running, the incubators offer
various support services to the businesses to run the business smoothly. Incubators
m
help with marketing research to ensure the success of start-ups. They also help the
start-ups in sorting their accounting books.
Often the start-ups lack the knowledge in creating an effective presentation to
)A
impress venture capitalists, private investors, and other fund-providing agencies.

With plenty of experience under their belt, business incubators help with that too.
Business incubators also act as mentors and advisors and assist start-ups in all sorts of
business-related issues.
(c
Pre-incubation
The preincubation stage mainly focuses on the ideation stage, where a potentially

innovative idea is provided with a co-working space. This refers to the phase
Notes
e
involving validating project ideas, company planning and creation, and the possibility
of developing possible business by analyzing technical and economic viability and
entrepreneur profile.
in
Incubation process
Business incubators are different from other business assistance programs in
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that they serve any company. Though entrepreneurs must apply for admission, the
acceptance criteria vary across programs. Mostly those with feasible business ideas
and a workable business plan are admitted. So it is difficult to compare the success
O
rates of incubated companies against general business survival statistics.
The core of any business incubation program is the value-added services it

provides to startup companies. Business Incubators also have virtual or affiliate clients
ty
which do not reside in the incubator facility. Affiliate clients are mostly home-based
companies or early-start-ups that have their premises. Virtual clients are too remote
from the facility to participate on-site, and so receive counseling and other assistance
electronically.
si
The duration spent by a company in an incubation program varies widely
depending upon the type of business and the entrepreneur’s level of business
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expertise. Projects with longer research and development cycles require more time in
an incubation program in comparison to manufacturing or service companies which
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produce immediate results.
Steps In Incubation Process

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●● Pre-application process
●● Admission and screening process
●● Interview and Selection
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●● Protection of Intellectual property

●● Seed loan and Infrastructure help
●● Common infrastructure through coworking spaces and peer networking
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●● Advisory service, technical support, and financial assistance through

networking platforms
●● Periodic review and assessment
●● Information submission and consideration
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●● Exit and after care

●● Conflicts of interests and maintenance in the confidentiality of information
)A
●● Disclaimer and Agreements
Pre-Application Process
●● Knowledge about the incubators to find out what they are looking for in a
particular project. Also helps in finding the various benefits offered by each
(c
incubator and identify what suits you

●● Have the necessary prerequisites ready before submitting the application

●● Do the necessary networking to even your odds using social media platforms
Notes
e
like LinkedIn
●● A good presentation which helps in pitching the product
in
How Does the Application Process Work?
To sign up for a business incubator, there is an application process which needs to
be accepted to get into an incubator program. Each business incubator has a unique
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application process which when compared to startup accelerators is less competitive.
The application process consists of:-
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Application:- Filling up the application form is the first step. Answering questions
about the business and experience of promoters makes the incubator understand the
viability of the project. It is good to
add a business plan too.
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Interview: These are brief video calls to understand the background and
experience of promoters. This step helps incubators in understanding the project better.
si
Receive a decision: The notification time frame can vary. Generally, it is pretty
short, taking just a few weeks for an incubator to make an acceptance decision. If
you’re interested in financial aid, you can apply after getting accepted.
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Local Economic Development Incubators
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Goal Non-profit
Main Activity Generalists
Objectives Job creation, Re-industrialisation/revitalization, Economic
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development Support to particular target groups or industries,

Development of SMEs and clusters
Target Small commercial craft or service companies, In some cases, high-
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tech companies
Offering Hosting and shared services, Administrative assistance, Consulting,
Entrepreneurial simulation games
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Eventually: Coaching – training – networking and Access to financing

Key Problems Durability, Quality of management and services provided,
Governance, risk of conflicts about the objectives, bureaucratic red-
tape, time spent in negotiating with different partners
m
Trends Regular development, Increasing territorial coverage

And Development of social entrepreneurship
)A
Academic and Scientific Incubators
Goal Non-profit
Main Activity High Tech
Objectives Commercialization of technologies, Development of
(c
entrepreneurial spirit, Civic responsibility, Image, New sources

of finance

Target Projects internal to the institution before company creation,

Notes
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External projects
Offering Concept testing, Technical advice, and support,
in
Intellectual property advice, Seed capital, Basic management
advice, Entrepreneurial simulation games
Eventually: Access to business angels, venture capitalists,
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and corporate investors, Access to innovation ecosystems and
industrial networks, Strategic advice, Coaching and Hosting
Key Problems Legitimate inside the institution, Legal status, governance,
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independence, and operational flexibility, Income sources,
Management quality; Lack of business coaching expertise,
Access to external resources and network
Trends Rapid development under the aegis of public programs
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Corporate Incubators
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Goal For Profit
Main Activity Radical Innovation
Objectives To develop intrapreneurial spirit among employees, Monitoring,
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business models, and new markets, Profits
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Target Internal and external projects, generally related to the activity of the
company
Offering Financial resources, Prototype, and market testing, Access to
commercial markets, Entrepreneurial simulation games
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Eventually: Long-term strategic partnership, Access to multiple

competencies
Key Problems The strategic position of the incubator for the corporate structure,
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Management independence and ability to mobilize internal resources,

Durability of the mission of the incubator, Conflicts about the objectives
between the owners / the managers of start-ups and the corporation
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Trends Testing of the concept in numerous companies, Likely to develop
Private Investor Incubators
Goal For-profit
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Main Activity Radical Innovation

Objectives Profits by selling stock from a portfolio of companies allowing risks to
be spread
)A
Target Radical-innovation high-risk-high-return start-ups, Lean startups

Offering Venture management and strategy advice, Entrepreneurial simulation
games, Supply of one or several types of financing and search of
complementary financing, Personal networks
(c
Eventually: Hosting and administrative assistance, Legal services, public

relations, recruiting, etc...

K e y Sourcing of top-quality projects, Level and conditions of the incubator

Notes
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Problems payment in comparison with provided services, Valorisation of the
incubator's participation at the entry and the liquidation, and Durability
in
of the incubator
Trends Rapid development under the aegis of public programs
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Process of Raising Investment Capital
It is less common to see incubators helping raise investment capital like
accelerators. Accelerators provide seed investments in exchange for equity. But
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Incubators with a similar business model can help with that. as they can be a useful
resource for startups looking to raise investment capital.
The three main ways through which an incubator can help are
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Cost savings:- Low-cost coworking spaces and access to mentors help in saving
money and investing.
Networking enabling sourcing funds:- Direct contact with angel investors,
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venture capitalists, and other investors are obtained through incubator programs. These
programs and their coaches can introduce these critical funding sources.
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Pitch practice:- Through the mentorship provided by incubator coaches, the
business plan is honed to appeal to investors. They teach how to deliver a convincing
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pitch and use business practices that investors want to see which lets them leave an
incubator with a company worth investing in.
Business Development and advisory services for Start-ups and SMEs

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●● Providing business support like training and advisory services provided to

individual businesses on a demand-driven basis
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●● Alignment with other service providers

●● Focused on building capacity
●● Acts as the primary service provider
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Operational support for SMEs and start-ups with high growth potential
●● An integrated mix of intensive strategic and operational support provided to
entrepreneurs and businesses selected for their growth potential
●● Helps in managing risk and building competitiveness through early, high-risk
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growth stages
●● Support typically ends when clients reach particular milestones
●● Linking with educational or research institutions
)A
Technology and Science parks

●● Focus is emerging or established technology businesses, but may target
specific industries
(c
●● Helps relatively mature businesses to accelerate their growth

●● Helps to source future clients

●● Usually linked to universities and Research and Development centers

Notes
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●● It may be linked to national, cluster-driven development strategies
Advantages of a Business Incubator
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Saving on rent: An incubator usually offers a coworking space at a low cost.
These programs allow you to save on operating expenses while you grow your
business.
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Training and Development: Many incubators give access to a network of
mentors, coaches, and educational programming geared toward business innovation.
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Mentors may include entrepreneurs, accountants, HR professionals, angel investors,
lawyers, researchers, and more.
Fund Avenues:- An incubator often gives you close contact with venture capitalists
who may want to fund your ideas. Acceptance into a reputable program can impress
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investors and serve as proof of your skills and drive.
Peer Networking:- While incubators allow sharing office space with fellow
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innovators. Coworking spaces for startups like shared resources and utilities reduce
extra costs. Being in a prime location helps in easy access to the market and partners
with other companies.
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Improve focus:- Incubators offer a structured work environment. Whether you
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have daily workshops or scheduled work time, you can establish good work habits to
get your business off the ground.
Downsides of Incubators
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Though they give a lot of benefits, there are a lot of downsides too.
Time commitment:- Programmes are not time-bound like accelerators which

makes the projects lag. Still, this is useful for companies that need time to grow.
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Limited access:- The selection process is rigorous especially for higher reputation
projects owing to the large pool of applicants. Incubators have varying degrees of
selectivity which restricts access to prestigious programs.
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Rigid schedule:- For some companies, incubators can detract from the demands
of running a business. Programs often require strict attendance at training, workshops,
and social activities. While distracting for some, this education can be invaluable to
many others.
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5.2.5 Special Considerations for Nascent Incubator

The creation of any new business is a process emanating from people who want to
)A
follow their passion and make a change in the society where they live. In a third-world
country like India, this mindset could bring huge change and revolutionize the whole
mechanics of economic development. Starting a new business had never been an easy
task. There is always the issue of how to raise the capital or how to apply your idea
to earn a potential return from the market. There is also a lot of societal pressure that
(c
a new entrepreneur has to face especially if he/she is the bread-winner of the family
which restraints them from pursuing their dream.

Nascent Entrepreneur
Notes
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Any new project starts with an idea. It could either randomly pop up or could
be borne from brainstorming sessions in companies or academic institutions/
in
universities. The creation of a venture from an idea has essentially 4 stages- The
Ideation/conception phase, the Gestation phase, the Nascent/ Infancy phase, and the
Adolescence/Graduation phase. It is akin to biological creation and likewise, there are
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three transitions.
The first transition starts with the commitment of time and resources to the new
venture by one or more individuals. When they start this venture independently, they
O
could be called nascent entrepreneurs. When an existing business sponsors them,
they are called nascent intrapreneurs. This stage is mostly driven by passion and
the entrepreneurs could have unrealistic expectations about the performance of their
product in the market.
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The second transition starts when the gestation phase is over. We can see that at
this stage, the entrepreneurs would either have abandoned their project due to various
challenges they faced or they could have started their operations. The abandonment
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of a project could be related to the birth of a still-born and maybe this was the result of
the demotivation of entrepreneurs or they could not face the challenges successfully or
their realization that the project is not feasible. On the contrary, the survival of firms that
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started their operations could be attributed to a good business plan and the feasibility
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studies which they did before committing to the new business. This is similar to the
successful birth of a newborn amidst complications.
The third transition is the stage of growth from an infant or nascent firm to an
adolescent. In other words, the successful establishment of a firm from an unknown
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nascent entity battling all challenges, crossing all barriers and establishing a name in
the industry in the process. This is not a cakewalk and requires a lot of support. This is
where a foster father (business incubator) has to play a huge role.
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How helpful have incubators been in making a start-up successful? Or what are the
special considerations for nascent incubation? Let us learn about it in the coming topics.
Nascent Incubators
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A nascent incubator is a collaborative program either in association with a company

or academic body/ governmental institutions/civic bodies designed to help nascent
ventures succeed in the long run. In addition to solving the most common issues in
running a start-up like workspaces, seed capital, mentoring, and training, they provide a
m
lot of support facilities to make a start-up develop into an established business. Nascent
incubators are hence the key drivers of the growth of start-ups.
The success of a newly established incubator depends upon its relevance. The
)A
relevancy of newly established incubators or nascent incubators depends on a lot of

factors. The crucial point for the success of a nascent incubator lies in pooling out the
right idea and the right talents who could make that idea a success.
(c
Common services provided by Nascent Incubators

●● Foundation of understanding the market and business processes

●● Provision of ample networking opportunities through influence in the market

Notes
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●● Marketing research and assistance
●● Provision of high-speed Internet
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●● Assistance in laying the foundations of accounting/financial management
●● Access to bank loans, other funds, and guarantee programs through various
networking channels
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●● Training in the development of presentation skills
●● Connections to elite research organizations and access to their resources
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●● Connections to strategic partners
●● Access to angel investors or venture capital
●● Integrated business training programs
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●● Advisory boards and mentors
●● Management team identification
●● Help with business etiquette
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●● Technology commercialization assistance
●● Help with regulatory compliance
●● Intellectual property management and legal support
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Identification of the Right Talent
The entrepreneur is a challenger who ought to bring radical innovation to the
market. He could bring into market revolutionizing ideas and could change even the
structure of businesses like Bill Gates or Steve Jobs. The transformation of an idea into
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reality depends much on the personality traits of an entrepreneur. During the application
process for incubation, this factor plays a lot in the acceptance of the application and
being selected for a particular program.
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The incubator analyses whether the personality traits of the entrepreneur are in line
with his project. The marketability of the proposal is analyzed through the presented
business plan and feasibility studies. If a new entrepreneur has a great idea but lacks
the knowledge about creating a business plan and feasibility studies, he should be
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educated in the same especially if he has the leadership traits coupled with the ability
to inspire and motivate in addition to his accountability and motivation. This is where the
pre-incubation phase deserves mention.
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Special Considerations
●● Performing a SWOT analysis in leveraging the key strengths and identifying
opportunities
)A
●● Intellectual Protection Rights

●● Selection of the Incubation head
●● Defining the vision and objectives
●● Selection of right operational sector in line with the vision of the incubator
(c
●● Selection of the right incubation model for leveraging the strengths

●● Defining the kind of incubatees needed for the project

●● Deciding the legal status

Notes
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●● Finding Programs and Funds
●● Setting up proper accounting systems
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●● Creating networks
●● Services it wants to provide
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Pre- Incubation Phase
For the success of any nascent incubator program, this phase deserves mention.
Without a proper plan or execution framework, no nascent incubators can succeed.
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This starts with the ideation phase where brainstorming sessions are conducted
to identify the opportunities. Workshops are conducted by academic institutions to
promote innovation amongst students. Government or civic bodies conduct workshops
starting from the Grassroot level to identify the talents who reside in rural areas and
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who have seldom access to knowledge or resources to start with. Corporate entities try
to find innovative strategies to bring profitability to an existing business or introduce a
new product or concept to revolutionize the market.
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SWOT Analysis
Having understood the area needing development, the private/public nascent
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incubator should perform a SWOT analysis to find out its strengths that could help with
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the project and how those strengths could be effectively leveraged for the success of
the project. Not just strengths, its weakness should also be understood that could come
in the way of the success of the project. Steps should be identified to not make those
weaknesses hinder the successful completion of the project.
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Opportunity identification gives a better idea in helping understand the business

plan of the project. The viability of the project is the first thing that needs to be
considered. Will it help the incubator to meet its goals? Does it have adequate funds for
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it? When will be the break-even? Is this project meeting market demand? These things
also help in identifying the underlying threats and bottlenecks for the project.
A model Strength and weakness analysis will be like this.

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Strengths Weaknesses
Clear Mission and Vision Space constraints for business expansion
Human Resource Potential Location constraints to start-ups
Availability Of Coworking spaces Limit in financing the entire project
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Strong brand or community Image Lack of Exhibitions and trade fairs

Tie-ups with research institutions and Lack of Specialized Seminars
)A
financiers
Wide coverage of services Lack of state-of-the-art facilities
Once it is finalized to go along with the project, the first thing that the nascent
incubator needs are the following: -
(c
Protection Of Intellectual Property Rights

Incubators should assist the inventors, innovators, and entrepreneurs mainly in the
protection of intellectual property. Awareness about patents should be provided to them

Notes
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especially if the invention is about a marketable idea. Market research helps to identify
the market potentialities of the idea. The technical and marketing information about
the invention should be readily made available to the inventor by the incubator. The
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necessity of international patenting should also be stated if the product or idea is meant
for international marketing. Before deciding the entry into international markets, market
evaluation should necessarily be undertaken. Patenting helps in preventing the conflicts
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in future between the incubator and the inventor.
If the invention is done by a group of experts in the host company, the company
should evaluate the market potential of the product. If the results are satisfactory, then
O
no hesitation should be taken in the establishment of nascent incubators to make the
idea a marketable product. In doing so, the company should necessarily take patents
and maintain confidentiality in the technical and marketing information. It will be wiser to
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have a contract with the inventors to avoid future legal complications.
Selection Of Incubation Head

The first step for success in any business is an effective leader who could make
si
things happen; Who could motivate his team and drive it to a path of success; Who
could inspire the incubatees, do not succumb to pressure, and succinctly lays out
plans for the success of the business is vital. Other prerequisites are he should be
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passionate about his work and should be connected with the sectors on which
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the incubation is focused. He/she should have an impeccable track record and
an exceptional level of expertise in the sector as he is the Key member who will be
executing operations on behalf of the private/public entity that is undertaking the
incubation process.
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Defining its vision and objectives

This is the most important consideration that any incubator has to make before
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kick starting any incubation process. To lay down this, the incubation head will have a
consultation with the advisory board who is interested in the project. Defining the vision
helps in identifying the strategic goals and aligning activities in tune with that.
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Objectives break down the vision into activities whose progress could be tracked
by laying out achievable milestones which could be monitored and reviewed.
“The Incubation Centre will serve as an active knowledge and resource catalyst for
the development of promising entrepreneurs and incubate and accelerate their early-
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stage organizations from ideation to marketplace success. The University’s involvement

will ensure the right kind of advice and insight for its success. The Incubation Centre will
be a star-tup hub offering expert mentorship, the infrastructure of co-working spaces,
and full-spectrum business resources including hiring assistance, legal assistance, and
)A
seed money” ----- Vision statement of Atal Incubation Centre
Selection of Right Operational Sector

The most important consideration that a nascent incubator has to make is deciding
(c
the right operational sector. It will be hazardous if the vision conflicts with the operating
sector. A project meant to address the productivity issues of farmers should not focus
on the textile sector or automobile sector. Strict consideration should be there to focus
on the vision of the project and strategies should be laid out to ensure that the project
Notes
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meets its vision.
One more thing that needs to be considered is attracting the right talent for the
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project deliverables. The talents should have sufficient background in the addressed
sectors and a goal-seeking behavior who want to bring change to the existing
processes laying their mark on it.
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Selection of the Right Incubation Model
Strictly defining both the incubation model and also the incubatees has a lot
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to do with the success of nascent incubators. Defining the incubation model will help
the incubators in setting their priorities, identifying the steps to be taken to meet those
objectives, and the services it can offer to the incubatees leveraging upon its strengths
Who are incubatees? There could be various definitions. But it mainly depends
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upon the area of functioning of the incubator. The start-ups working in a coworking
space are mainly referred to as incubators, but they could also include the start-ups
upon which the incubator is invested.
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Deciding legal status
Deciding its legal status for the project is of prime importance to avoid conflicts of
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interest in the future. The incubator should have clarity about the legal status that it
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wants in the long run. Should it be just an innovative center for the host or does it want
to establish itself as a company, as per the rules of the country? A clear understanding
of the pros and cons associated with each form of registration will help a lot in
streamlining the future operations
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Finding programs and funds

Coworking spaces will help the incubator reduce a lot of costs as the workspace
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and resources are shared. In this scenario what needs to be considered the most is
optimal utilization of resources provided. For this, a good strategic plan needs to be
launched which keeps the activities of incubatees on track with the objectives of the
host of the incubator.
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However, things change completely if incubators want to work with start-ups that
have no connection with having a coworking space. Aggressive scouting for good start-
ups should be considered in this case and steps should be taken to attract it with the
right incubator program which could make it an established entity.
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Setting up a proper accounting system

At the start of any business, there will just be one person to take care of the
)A
accounts and finance sections. Legal assistance is sought from time to time to meet
with existing business frameworks. It is mandatory that there should be a compliance
department to handle accounting and legal issues. Not to mention the procurement
of funds. Transparent and reliable practices are necessary for the sustenance of any
company in the long run.
(c
So, as the business grows it is recommended to have a good compliance

department that takes care of the accounting, legal, and finance of the firm. If things are

sorted out from the beginning itself, it will prevent a lot of issues from rising in the future
Notes
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thanks to the inefficient business practices used in the past. It could even play a role in
drawing potential investors taking equity stakes in the company.
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Creating networks
No business can thrive without interdependence. To face the challenges in
business, you should have contacts with the right people who could help you with it.
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Coworking spaces are the foundation in establishing networks. Peer networking plays
a huge role in sharing projects and even getting new ones. Incubators, being influential
people, have a lot of connections in different walks of life. The training and development
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programs could map the experts and link them to your business.
Connecting and collaborating with research institutions, industrial experts,

corporate entities, venture capitalists, banks, domain experts, regional authorities,
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regulators and banks are of immense value for success in the projects. Virtual networks
also help a lot along with affiliate networks as it helps in understanding the best industry
practices and global trends.
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Trade associations and NGOs are also a lot useful especially in spreading the word
about the business. Social media networks are another area. Platforms like LinkedIn
help in getting in touch with the industry experts and familiarize with global practices.
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The success of a business mainly depends upon networking skills in the long run.
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Services it wants to provide
There should be clarity in expression about the services that the incubator wants to
provide to its start-ups to avoid the conflicts in future. This could prevent the incubatee
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from setting unrealistic expectations about the services provided by the incubator. The
services provided by the incubator mostly stem from the defined incubation model
which leverages its key competencies and strengths for the success of the start-up.
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A clear understanding of the services to be provided will help the incubator in

estimating the various costs involved in the incubation process. Optimal allocation of
funds is an essential factor for the long-term success of an incubator.
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Incentives for nascent incubators

●● Setup Grant
●● Recurring expense grant
●● Rental Reimbursements
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●● Investment subsidies
●● Stamp duty/registration fee reimbursement
)A
●● Land Allotment
●● Infrastructure, mentoring, and operational allowances
●● Financial assistance and Subsidies for mature projects
5.2.6 Centre for Innovation, Incubation, and Entrepreneurship (CIIE)

(c
The Centre for Innovation, Incubation, and Entrepreneurship (CIIE) is a non-profit

organization dedicated to the advancement of innovativeness. It is a stepping stone to
assisting knowledge-driven businesses in their growth, demonstrate and thrive under

Notes
e
the supervision of a scientific organization. It also makes quick decisions possible.
Commercialization of an advanced and powerful technology-based product.
in
Founded in 2002 at the Indian Institute of Management (Ahmedabad) as a training
and research center point, CIIE’s incubation and financing exercises gained traction
in 2007 with the establishment of a committed infrastructure with assistance from IIM
nl
Ahmedabad, the Government of India, as well as the Gujarat Government, and an
independent portfolio institution.
Besides incubating and making investments in around fifty innovative high-
O
tech undertakings, CIIE also has cultured numerous proposals to enhance India’s
entrepreneurial ecosystem by supplying mentorship, economic, and awareness
components. Researchers understand that getting a business off the ground requires
far more than initial stage vulnerability capital – researchers facilitate the majority about
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what a businessperson could necessitate using intrusion and ecosphere intervention
strategies.
The CITY’s primary strategy is to generate successful firms which will consider
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leaving the curriculum commercially feasible and self-sufficient. Such “graduates’’ of
new ventures create jobs, commercialize technological advances, and help strengthen
financial systems. new ventures are an advantage both from commercial and technical
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guidance, but from official association with the incubator, and encouraging society
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with a business ecosystem, direct access to business owners, and instantaneous
networking and promotional possibilities with the other tenant businesses.
CIIE could very well build on previous perceptions to strengthen entrepreneurial

ventures while also serving to organize and encourage technology operations at the
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research center.
CIIE strives to nourish advanced technologies and knowledge-based enterprises

via one ‘s start-up process by making provision and assistance to entrepreneurs sustain
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in a saturated market and attain a phase in which his\her enterprises can be scaled up
quite far. The CIIE seeks to create and pool resources such as area and infrastructural
facilities, access to corporate support programs, mentorships, teaching initiatives to
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promote start-up companies’ abilities, and initial financing. The context of assistance
is wide-ranging, and it includes technology solutions formed entirely at the Research
center or partially via collaborative efforts with other organizations, and exterior setup
by which IIT (ISM) people take part as advisors or tutors. CIIE is indeed especially
interested in initiatives that have a major social and tactical influence such as:
m
●● The centers established not for profit

●● Training and awareness programs in entrepreneurship
)A
●● Technology incubation process

●● Marketable activities, soft skill development workshops, case studies,
innovation, and technology detention centers, and so forth.
●● Boosting Persons, Start-ups, and MSMEs to Innovate.
(c
●● Initiative for Technology Commercialization

The main objectives of CIIE:

Notes
e
Following are the objectives of CIIE:
1. New Enterprise Formation with the help of incubation as well as a variety
in
of many other services in the fields of Nuclear Engineering, Petrochemical
Engineering, Social-ecological systems Sciences, Geosciences, Information
and Communication Technology (ICT), Bioengineering, Food Science,
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Agricultural sectors, and Related industries.
2. Innovation commercialization aims to provide a required channel for rapid
innovation. commercialization of key technologies in research institutes to
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achieve enterprise customers.
3. Constantly interacting and connectivity among educational, research and
development, industrial, and global corporations.
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4. TBI aims at contributing through the provision of services to its prospective
entrepreneurs as well as established innovation preferred Small and medium-
sized enterprises.
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5. Generating effective and efficient jobs and services, as well as encouraging the
entrepreneurship
Main activities at CIIE: r

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Following are a few of the major activities that take place at CIIE:
1. fostering collaboration between industries and universities via collaborative

research developments and professional services coursework
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2. Incubating initial innovation entrepreneurial endeavors.

3. Inspiring and facilitating the orientation of Research and development activities
with prospective industry requirements.
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4. Recognizing technology solutions that have market viability.

5. Development of infrastructure facilities and support networks for entrepreneurship
development exercises.
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6. Support and enable the culture of entrepreneurship.

7. Promote intellectual capital, innovative thinking, and an enterprising spirit.
8. Enable networking with integrated tools for the incubate companies, such as
m
advisors, professionals, experts, and mentors.

9. Promoting the implementation of skilled and deserving employees and
encouraging investigators to advance expertly inside of organizations via part-
)A
time masters and doctoral programs.
Services offered by CIIE and designated as value-added:

Experts and faculty members from the institution counsel, mentor, and provide
technical and business advice to start-ups enterprises in CIIE. Researchers would
(c
facilitate start-ups with three levels of professional help. CIIE would also serve as a new
house for those other encouraging initiatives that have assisted business owners and
inventors who have come to the CIIE institute. CIIE, in collaboration with sponsoring
agencies and different IIM and IIT departments, assists inventors.

Notes
e
The existence of a grouping of affiliated schemes, as listed below, has aided the
development of the CIIE ecosystem
in
●● Technical assistance such as development and stimulation, design, testing,
and so on.
●● Financial assistance such as giving support as seed financing, financing
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innovation, refinement, as well as marketing and commercialization.
●● Mentoring and training
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●● Providing legal advice with the assistance of IP rights.
●● Assisting in marketing strategy preparation such as product development
strategy, business intelligence, and architecture.
●● Collaboration with Research Centres for information sharing and daily
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interactions.
Operating model at CIIE:
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CIIE is positioned to bridge the gap between educational institutions and societal
and technological entities. Multiple institutes and departments can collaborate and
operate with the help of the framework. Around an administrative level, CIIE is primarily
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in charge of cultivating new businesses and recognizing favorable pre-corporation
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prospects.
Eligible members at CIIE:

●● Eligible institutes and individuals:
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●● The admission and enrolment to CIIE are open for the following persons or
institutes:
●● Research and development partners
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●● Faculty members of different departments of IIM and IIT, and any other
institute faculty members.
●● Industrial alliances
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●● Undergraduate, postgraduate, PDF, and JRF students as well as the

members of the staff
●● Former students at different institutes.
Broad areas:
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Following are the different sectors covered by the CIIE institute:
●● Earth System Scientific methods such as Mining, Petroleum, Excavating,

)A
Geo-Physics, and so on.

●● Nutrition, Farming, and Affiliated Industries Information and Communications
Technologies
●● Virtual and augmented, advanced analytics, computer graphics, and
(c
acknowledgment, cloud services Intelligent, energy-efficient, and compounds

●● Affordable Healthcare, Illnesses Premature Recognition, Drug Discovery, and
development Sewage treatment Governance Natural Electronic parts, Natural

Microelectronic Clean Energy, Sustainable Energy, Renewable Power, Non-

Notes
e
Renewable Energy Sources.
Incubation program:
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The main area of working at CIIE is its incubation programs which are based on
various aspects and focus on the enterprises which are knowledge and technology-
driven. Following are the distinct categories at which the incubation program operates:
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Type 1:
Enterprises in the type one group are projects undertaken by one or even
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more participants of the university staff, graduates, or former students of IIT and
other institutes, or some other innovation awareness organization which can be
both legislature or non-government to assess an innovative technological idea for
commercialization, upgrade a research lab demonstrated principle, and establishing a
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technological incubator.
Type 2
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A traditional enterprise inside this bracket is a technology-based newly setup
corporation encouraged with a first-generation business owner seeking Research
and innovation collaboration with institutes or firms to assess the latest information
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technology concept for commercialization, upgrading an experimentally demonstrated
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theory, and establish a new tech business entity.
Type 3
An enterprise in this bracket is an innovative component of such an established
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micro-business, a trade organization, or a Research and innovation corporation that

wishes to get connected technological functionality with the help of CIIE. Before
enrolment to CIIE, all applicants who fall into one of the subgroups are assessed by the
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CIIE review committee.
Supports provided and incubation process:

Over an independent circumstance ground, incubate enterprises could be provided
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co-working space as well as infrastructural facilities at CIIE upon enrolment. Based

on the stage of the venture, incubates could pertain for separate commercial space at
different registered institutes of CIIE at various locations, Furthermore, CIIE might very
well actively promote incubates with a range of varied factors, such as:
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●● Business support services: As a part of business support services, CIIE aids

enterprises in financial reporting, tax, secretary of the company, legitimate,
and intellectual property internal experts with no or reduced fees, Approval
)A
to access research laboratories of institutes of different branches, workshop

amenities, and machinery.
●● Meetings: CIIE helps to conduct meetings with the investors who can help
in seed funding such as Venture capital firms, as well as other banking
institutions through skills training workshops and seminars. It also helps in
(c
conducting meetings with other professionals and students.

●● Workshops: The institute conducts training workshops to develop and

Notes
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enhance the skills required for a successful business.
●● Mentorship: CIIE acts like a mentor to small and emerging businesses and
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assists them in future business operations that can help them meet their
business objectives and goals.
●● Shared resources: CIIE provides resources required in the business on
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a shared basis such as library and laboratory facilities, fax and scanning
machines, infrastructural facilities such as meeting and conference rooms with
all the required equipment.
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Entrepreneurship awareness drive:
Entrepreneurship Awareness Drive is a CIIE initiative that identifies and motivates
young people to become business owners. A participatory session is planned which
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is known as Entrepreneur Awareness Camp. The seminars are cleverly designed to
instill an enterprising spirit ranging from fundamental to mature. The pieces of training
include follow:
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●● Exploring enterprising spirit: One of the most important components of an
effective start-up is interaction ability; it aids in interacting with customers
and steering suggestions in the appropriate path. The training focuses on
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improving presentation skills while also introducing company terminology.
The session would provide understanding into market research, which
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can mean the difference in being a multimillionaire. Nowadays at the age
of globalization, it is essential to stay connected on a foundational sense
to launch a profitable business, which is where great marketing capabilities
come into play.
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●● Performing entrepreneurial thinking: Such a session is designed to develop

well-groomed aspirants into blossoming entrepreneurs.
●● The session might very well explain the responsibility of the government in
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new business enterprises. It would include numerous government regulatory

frameworks for the growth of small businesses. Awareness of it can be
advantageous for the growth stage as well as protecting the company from
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unauthorized components. An interactive meeting with entrepreneurial

ventures is also planned, that can aid in understanding their public persona.
Participants can gain knowledge from the speaker’s experiences and skills.
●● Understanding entrepreneurship: Such a session is designed to engage
applicants inside an informal discussion in which they will have opportunities
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to practice their business acumen. The participants would be provided the

chance to demonstrate his\her abilities in building a positive strategic plan
under the supervision of a skilled professional. A business plan is a foundation
)A
for creative ventures as well as being critical for putting thoughts into action
in a positive way. Laying thoughts on paper and investigating and collecting
information regarding rivals as well as the industry, is extremely for new
business owners.
(c
Examples of CIIE initiatives:

Start-up Oasis: CIIE has started an initiative named Start-up oasis with

the support and assistance of the Rajasthan Government’s Industrial Promotion

Notes
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Organization. The main intention of the setup was to develop a platform in Rajasthan
for small business owners. The setup supports the firms that are operating as social
enterprises or enterprises that are promoting to preserve the ecosystem. It provides
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knowledge sessions and workshops for the students who are desired to become an
entrepreneur. It also provides incubation programs with three to 12 months of training
and mentoring. The organization also aids in terms of seed financing with stimulus
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funds for the growth and development of products or services of the start-up business.
The operation started in the year 2014 and continues to assist new businesses.
IIMVARICKS: Researchers at IIM generated IN MAvericks as a framework to spark
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entrepreneurial ventures on the IIMA premises, with the help of IIMA former students.
IIMAvericks assists a two-year mentoring programs scholarship for graduating IIMA
educators and designed to motivate and encourage individuals to entrepreneurialism
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by partly offsetting his\her preliminary start-up obstacles. IIMAvericks furthermore
provides apprenticeship chances for students to conduct research and develop new
plans. The initiative has supported many alumni and current students in the past year
by developing and enhancing their entrepreneurial abilities and skills.
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Centre of Excellence: The Department of Science and Technology of the
Government of India has assisted CIIE in becoming a National Centre of Excellence
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for profound and challenging technological incubation, acceleration, and investigations
in regions like biomedical research, medical technologies, Automation, and machine
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learning, artificial intelligence, and financial technology. It is the only institute that
has received a designation from the Indian government as a center assisting new
businesses with new and established technological services. The CIIE also works very
strongly with the government in the field of innovation growth programs.
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Bharat inclusion initiative: CIIE also works very closely with Bharat inclusion
initiative which is a technology-driven firm. Bharat inclusion initiative conducts and
supports research designed to determine and pursue innovative technological use
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instances for improving the financial wellbeing of the nation’s poor and marginalized
sections. CIIE has provided support to the organization in terms of funds and other
facilities.
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Help India Breathe: With the collaboration with Oxygen for India, CIIE has started,
an initiative named help India breathe under which, the institute has provided oxygen
cylinders across the nations and helped those who were in bad need of the same
during the tough times due to pandemic covid 19. With this initiative, the institute helped
many people fighting with the covid disease and needed oxygens on an urgent basis.
m
NAARM: National Academy of Agricultural Research Management is an initiative

by CIIE which is a food and agricultural business. The business is set up with the
)A
collaboration with IDEA. The project’s goal is to boost, inculcate, and put the money
in inventive initial start-up companies with the possibilities to scale and compete in
the food and agribusiness sectors. Identified businesses would then receive intensive
knowledge transfer, mentorships, and consulting assistance. The start-up enterprises
which are selected get assistance from CIIE as initial capital of up to rupees thirty lacs.
(c
The institution recognized that the support provided to agriculturally based businesses
in India is limited and the investors hesitate to invest in such businesses.

accelerator: The Accelerator program is a residential initiative for innovators on the

Notes
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Internet and Cell phone domains. The program is intended to prepare digital business
owners in India to create established, incredibly talented, and profitable businesses.
The accelerator is a project of the Centre for Advancements, Incubation, and Free
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enterprise. The Indian Institute of Management Ahmedabad (IIMA) established CIIE
to nurture technology entrepreneurial development in the country. They are a group of
people who are deeply prepared to assist innovative solutions and micro-entrepreneurs
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in commercializing their ideas. Researchers understand that this requires far more than
initial stage investment money to have a business off the ground; we facilitate most of
what business owners could necessitate via start-up money, incubation, mentorships,
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tutoring, sharing of knowledge, and recommended practice investigations.
Razorpay: Razorpay provides merchants, universities, online shopping, as well

as other businesses a quick, priced, and safeguard manner to recognize as well as
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allocate funds fees digitally, have a comprehensive bank account, and obtain funding
from banks. It has assistance from IIT Roorkee as a part of the CIIE institute initiative. It
also got assistance from the start-up oasis organization of CIIE.
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Kure: iKure was founded in the year 2010 with the assistance and support of CIIE.
It is a social enterprise that tries to meet the healthcare needs of the rural section of
India. The organization is actively working towards improving the health facilities and
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eliminating diseases. CIIE provides technological and innovative assistance to iKure.
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Apart from the above-mentioned examples, numerous other start-up businesses
got the advantage with the CIIE in various terms such as mentorship, seed financing,
research activities, and so on. The CIIE institute focuses on the betterment and
development of the ecosystem and promotes a business that focuses on environmental
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sustainability. The CIIE has expanded its operations in many cities of India such as
Jaipur, Ahmedabad, and many other cities. The institution is aimed to help more start-
up organizations in the coming time.
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1. __________ Incubators are also known as online business incubators that perform
and support start-up business that are in need of capital.
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2. _____________ refers to the incubator that aim to offer social entrepreneurs the
essential resources to expand their business.
3. _____________ are a venture of universities or local government that promote and
brace a new technology intensive enterprise.
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4. The pre incubation process will include___________ and _____________.

5. The incubators that provide financial supporting facilities To academic institution is
)A
known as______________
Summary
●● Types of incubators could include virtual business incubators, medical incubators,
public incubators and kitchen incubators.
(c
●● Incubator at as an aid for local entrepreneurs and provide financial and capital
assistance to the entrepreneurs.

●● Technology based incubators are highly technology intensive business

Notes
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organisations that encourage the use of technology in the operations.
●● The different types of incubators are corporate incubators, private investors,
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academic and local incubators.
Activity
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1. What is the motive of business incubators?
2. What could be different steps involved in incubation process?
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1. What is an incubator form briefly explain the services and characteristics of an
incubator firm?
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2. What are different incubators explain in brief?
3. What are technology based incubators also explain the advantages of technology
based incubators?
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4. What are the different stages of incubation at technology based incubators?
Glossary
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1. Incubators- it refers to a form that is engaged in the business operation of fostering
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early stage companies through different phases of development until the company
have enough financial and physical resources.
2. Pre- approval intimation- this refers to establishing a clear relationship between both
the parties by informing the selected candidates about the duties and the obligations.
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3. Nascent incubator- these are type of collaborative program either in association with
the company or academic body to help venture succeed and long run.
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Further readings
1. Book – technology based incubators in India.
Author- M H bala Subrahmanyam
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Answers
1. Virtual business
2. Public
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3. Technology based incubators.

4. Selection and eligibility criteria.
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5. Academic
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Unit - 5.3: Emergence and Growth of new Technology–

Notes
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Based Companies
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Objective
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●● To evaluate the technology based companies in the market.
●● Identify the changing role of companies and the using of technologies for improved
performance.
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5.3.1 Emerging Technologies
Technology leaders along with major Business houses across the world see
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themselves in a constant drive to foresee beyond the current time frames. They require
us to visualize the way continuous innovation & new technologies are shaping our daily
lives. The convergence of various technologies has enabled usable modules & devices
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to fit into common people’s daily needs. These leaders have started to recognize the
need to understand the complexities of design and the challenges thrown by these
innovations.
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Technological innovation is leading to a fast transformation in our business
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as well as our personal lives. The ability of our leaders along with the organizations
involved in this transformation have to keep in mind that the pace of innovation
must bring some advantage to drive new products & service requirements. This way
innovations are being driven to address the integration & modernization needs of the
existing technologies. The overall innovation should also address the financial value
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components for the industry along with the associated markets where they are creating
disruptions.
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The coming 10 years will see our experience more than what was achieved in the
last 50 years or more. The innovations in technology will redefine and reshape how
our business is conducted across the globe, the new order in the agriculture industry,
chemical & material sciences, nuclear energy, solar power, etc. will be re-invented in its
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new forms.
Emerging technologies or futuristic technologies can be visualized as highly fast,

impactful, innovative, disrupting existing setups. These technologies also possess a
degree of higher risk due to their shorter life cycles and shorter time to evaluate. The
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overall results of this entire innovation will be understood in the future. Today these
futuristics technologies are still emerging and have many uncertainties unexplored.
Emerging technologies are shaping up due to constant innovation and

)A
simultaneous convergence of different Real-time systems. The convergence is the

bringing together of a large amount of data from voice systems, remote sensors, and
the need for unmanned machines like Drones, power plants to be simultaneously
controlled.
(c
The emerging technologies play a crucial role in the competitive advantage of

various industry players and empower them to have market dominance with the fast
adaption of the new technologies

Many different technologies are foreseen to bring change & improve the way we
Notes
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will live our lives, travel, communicate & allow us to explore further into the areas which
were not possible due to lack of available interfaces for evaluation.
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Some of the key technologies which are sure to change humans lives in coming
times are
1) Autonomous vehicles
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2) Artificial Intelligence
3) Augmented reality
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4) Intelligent Automation
5) 3D Printing
6) Natural Language processing
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7) IoT
8) 5G
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9) Serverless Computing
10) Blockchain
11) Robotics
12) Biometrics
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13) Drones
14) Synthetic Biology & Alternate Proteins
15) Precision Agriculture
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16) Plastic recycling
These are the building blocks that each organization must consider to exploit &
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innovate their core business around. The above technologies will have a profound Local
& Global impact on the industry & people.
A. Autonomous vehicles: Increasing level of vehicle automation and availability of the

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infrastructure to support Autonomous vehicles is resulting in minimizing the need for

drivers in both commercial & consumer vehicles. While Autonomous vehicles are
becoming more and more reliable the need for a physical driver or human judgment
& interactions to control the vehicle.
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Some of the key features of the autonomous vehicle like Adaptive cruise control &
Lane departures are already being successfully used. Some of the new concepts like
predictive ride technology will enable us to understand the road conditions & help
adjust the vehicle to provide a fatigue-free journey.
)A
The autonomous vehicle provides a driverless experience while remaining in constant

vigil & contact with the external environment. The important enablers allowing the
functioning of autonomous vehicles are advanced sensors, Powerful connectivity
or networks that allow seamless data transfers, and high bandwidth on board trans
(c
receivers. All these technological components sync to allow the autonomous vehicle
to function in risk-free conditions.

Some of the recent innovations that are part of the new automobiles are
Notes
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Advanced driver assistance system,
Adaptive cruise control,
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Traffic Sign Indicator readers,
High beam assistants,
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Lane centering controls,
Glare High Beam,
Automatic Braking systems
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Pedestrian detectors
With a lot of focus on the automation done the researchers are laying a strong and
averred impetus on the passenger safety & have brought in warning systems to update
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the inhouse passengers & the far remote-control stations. The success of Autonomous
vehicles will increase the need for shared resources thus leading to new market
possibilities.
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While autonomous vehicles remaining connected to the remote backbone control
rooms need a high-end processing environment to process, update, analyse & warn
systems to enable the onboard logic to act swiftly. The constant connectivity leads to
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enormous data being generated. The advanced sensors & IoT devices shall allow a
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hassle-free journey for the occupants.
The fundamental blocks of Autonomous vehicles will be the
1) Advance Architecture The way the technology is designed for high-performance

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functionalities & capabilities integrating different domains. These different

domains are organized in a required hierarchy and supported by a high-speed
data connectivity backbone. Autonomous vehicles put a lot of focus on high
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capability networks.
2) Data connectivity over 4G or 5G Networks has availability over the entire path.
3) Backbone Infrastructure or External Environment -This provides access to V2V
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-Vehicle-to-Vehicle interactions, V2I -Vehicle to Infrastructure – i.e. Backbone

& V2E I.e. Vehicle to Everything else – Sign boards, third party applications,
mobile phones, etc.
4) Reliability This looks into the sustainability & reliability of the data under various
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environmental conditions
5) Safety This is very important to ensure the human & the goods are transferred
safely from one point to another
)A
6) Design The capacity building, future integrations, available sensors, Power-

efficient, modular design, and open protocols to allow different market players
to build the associated components.
B. Artificial intelligence: A stream of Science & Technology that deals with
(c
multiple streams like computer science, biological systems, language, numerical

or mathematical calculations, and the field of engineering are called Artificial
Intelligence. The main use of AI is to build computer systems or capabilities to handle

advanced areas such as learning, problems analysis & resolution & which can have
Notes
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self-learning algorithms. AI is a simulation of human capabilities & intelligence by
machines. The AI enables the machines to develop their capabilities by learning. AI
or Artificial intelligence was coined way back in 1956 but has become popular due to
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increasing data availability & processing mechanisms.
Types of AI
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a) Reactive Machines: Perceives & acts to the situations
b) Limited memory Stores & anticipates It has three sub types
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a. Reinforcement learning: Learns through Trial & Error
b. Long Short-Term Memory (LSTM): Analyses historic data to do
computations
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c. Evolutionary Generative Adversarial Networks (E-GAN) Evolves with time
c) Theory of mind: Although researchers have not reached this level. It is based on
the psychological chrematistics
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d) Self-awareness After the Theory of mind is established the Self-awareness will
be the level where AI will understand human behaviors
Importance of AI r
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AI helps or will facilitate
a) Repetitive learning through Data analysis & Discovery

b) Accumulates intelligence
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c) Adapts by progress learning

d) Analysis & deep Learning of systems
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e) Builds constant accuracy

f) Builds analytical conclusion over data compilations
Some of the real-time technologies in AI are

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a) Artificial Intelligence (AI) Adjustment to new inputs such as in computer games.

Used in self-driven cars etc. to analyze the data & understand the trends or
patterns.
b) Machine Learning: Based on data analysis and building analytical models.
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c) Deep Learning: Training computers to do humanly tasks

d) Natural Language Processing: It makes understanding of human language
)A
possible and also makes it possible to read text, speech, etc. & derive the
information out of it
e) Computer Vision: Computer Vision trains computers to interpret the external
world such as from digital cameras & images etc. and thus interpret what they
(c
see.

Some of the uses of AI are in the field of

Notes
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a) Retail
b) Healthcare
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c) Education
d) Banking
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e) Life sciences
f) Manufacturing
g) Public Sector
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h) Research
i) Stock trading -Automation
j) Customer service
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k) Speech recognition
How does AI work
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It works on the principle of reverse-engineering the human interactions & building
this as intelligence into the computers. It takes its inputs from
a) Machine Learning r
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b) Deep Learning
c) Neural Networks
d) Natural Language Processing
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e) Computer Vision
f) Cognitive Computing
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Types of Artificial Intelligence

a) Artificial Narrow Intelligence (ANI) – Single problem-solving capabilities
b) Artificial General Intelligence (AGI) – Solves carried problems & has human
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cognitive components
c) Artificial Super Intelligence (ASI) -futuristic and would have decision making
analysis, emotional & cognitive & rational capabilities
C. Augmented reality: The term Augmented reality (AR) means to have an interactive
m
experience of a physical or real-world environment. The physical objects that are

residing in the real world are enhanced by computer-driven perceptual information,
affecting our sensory capabilities like visual, auditory, haptic, somatosensory, and
)A
olfactory.
AR Helps us to visualize the physical world environments such as trees, animals,
buildings, people, etc.
Some of the examples of AR can be seen in fields of
(c
a) Navigation
b) Expedition

c) Surgery
Notes
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d) Military
e) Business like Architecture & Interior decoration etc.
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f) Sports etc.
AR has three main components
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a) Hardware – Processing components, Sensors, Inputs mechanism & out or
Display E.g as in a Smartphone & Head-mounted Glasses, etc.
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b) Software – Applications that drive the AR by overlapping the digital projection
over physical object 3D image
c) Remote ended servers – For storage of the data
AR has four main processes
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a) 3D Concept
b) 3D Designing
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c) Integration
d) AR Product Design
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D. Intelligent Automation IA- Intelligent Intelligence or cognitive automation combines
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the use of AI, Robotic Process Management (RPM) & Business Process Management
(BPM) to scale & enhance the decision-making mechanism.
It makes the process simpler & makes resources available & increases overall
efficiencies. Some examples of IA are in the field of Insurance, the Automobile
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Industry, or Pharmaceutical Research.

The Parts are
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a) AI – To analyses structured & unstructured Data

b) BPM – WorkFlow Automation
c) RPM -Automation of Processes or tasks e.g. Chatbots, Software Robots, Self-
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extraction data, etc.

Uses of IA are
a) Cost reduction increasing the workforce & improving production efficiency

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b) Increases accuracy, reliability & consistency in processes

c) Enhances customer experience
d) Helps to bring compliance
)A
E. 3D Printing – The process of creating physical 3-dimensional products from a Digital

Image is called 3D printing. 3D printing or additive manufacturing builds layer after
layer of the physical object by laying out deposit material as per the design. It helps
to recreate complex higher-order designs.
(c
Initially in 3D printing 3D model or an Object file is created

The second step is to prepare for Slicing for actual printing through slicing software.

The 3D model is sliced into a large number of layers to be fed into the 3D printer.
Notes
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3D printing will transform every industry in the coming times. One of the foremost
uses of 3D printers is rapid prototyping. This allows visualizing a physical prototype
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in a short duration
Some uses of 3D printing can be seen in
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a) Consumer products like Sportswear, Lens, Home & Office Furniture
b) industrial products Tools etc.
c) Dental products – Caps, Molds, etc.
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d) prosthetics
e) Architectural Design
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f) Archeological research Reconstructing fossils & ancient artifacts
g) Police by re constructing crime evidence in pathology
h) Entertainment media or movie props
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F. Natural language processing: Developing capabilities in computers to understand
the Human language. The human language is real-time spoken or written. It is built
on AI algorithms & has two main parts
a) Processing of Data
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This phase prepares the data for computers for analysis. The preparation
involves
●● Tokenization
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●● Stop word removal

●● Lemmatization and stemming
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●● Tagging Part-of-speech
b) Creating Algorithms Once the data is prepared the Algorithms based on
●● Rules-based system – uses definite Linguistics rules
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●● Machine learning-based system -Uses statistical methods.

G. Internet of Things (IoT) – IoT is a network of physical objects or things that are
connected or embedded with intelligent sensors, software & other algorithms & can
be connected with other devices for data exchange over the internet.
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IoT has become important & powerful as it allows the integration of common usage
objects like Kitchen appliances, Automobiles, Healthcare, etc.
Some of the factors that have made the IoT possible are
)A
a) Low cost & Low power sensors

b) Network Connectivity
c) Computing algorithms & platforms
(c
d) Machine Learning
IoT has extended its usage as Industrial Internet of things or IIoT by controlling the

sensors & using cloud computational techniques for smart manufacturing. Some of the
Notes
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uses of IIoT are
a) Warehouse monitoring
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b) Smart Manufacturing
c) Smart Cities
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d) Connectivity
e) Digital SCM
H. 5 Generation Mobile Technology or 5G
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5G mobile networks are required to work on multiple GB/Sec, high reliability & low
latency .5G will lead to transforming the
a) Cities and living places -Makes way for
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a. Efficient & Intelligent Data-driven Electric Grids
b. Connected Vehicles
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c. Healthcare & response systems
d. Drones’ delivery
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Remote Diagnostics
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b) Industrial places Visualizes
a. Efficient manufacturing
b. Automation
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c. Improves inputs from Agriculture & other resources buy data monitoring
c) Enhance Human experience
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a. Brings VR & AI into real-time applications

b. Smart educational programs at remote stations
c. Virtual Meetings
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I. Serverless Computing Providing services on a user base without having users

warring for the infrastructure. Address scalability, availability & reliability. It allows
the searchers, software developers to use & pay mechanism. Serverless Computing
also provides database storage capabilities. Cloud computing technologies are a
form of serverless computing. Users can access services on IaaS, SaaS, or PaaS
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basis.
J. Blockchain A system of recording the transactions in digital ledge making it
)A
impossible to illegally decode, hack. The digital ledger replicates in the system
making the transactions secure. The key components are Digital Ledger technology.
The features DLT are
a. It is programmable
(c
b. Secure
c. Distributed

d. Anonymous
Notes
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e. Immutable
f. Time Stamped
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g. Unanimous
K. Robotics – A field of science where programmable machines are built to assist
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humans or copy human functions to improve or facilitate the human activities
5.3.2 New Technology-based Companies
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Technology has played a vital role in different sectors of India’s development in
the last 20 to 25 years. Defense and space technology, manufacturing industries,
information technology, and communication sectors are the few important regions
which have incorporated modern technology in various stages of their developments
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and functioning. . There is a high change in consumer products which are available in
the Indian market. The majority of the products are imported. And some of the quality
products are manufactured locally by multinational corporations based in India. Do you
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think that these tremendous changes in India are considered India a technologically
advanced country? Or is these technological changes made a greater change in our
social process in our society? Or did the arrival of these modern developments restrict
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certain polished sections of society with a small down effect on the knowledge bases
of technology developments and growth? The development of modern technologies
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and the diffusion of technologies in societies are interrelated to each other. A recent
study shows that India is emerging as a larger consumer of technology products that
as a producer and innovator of modern technology. Since the independence of India
from British rule, the government of India has supported and promoted science and
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technology through its various programs of national policy. Science policy resolution in
1958 was firstly adopted by India only.it states that apart from the spirit of the individual,
the key to national prosperity lies in a modern age by combining the three factors raw
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material, capital, and technology .among the three factors, technology is the most
important factor because the creation and adoption of new modern scientific techniques
eliminate the deficiency of natural resources and thereby reduces the capital demands.
But technology cannot grow in an independent process. As a result, the government
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of India had set up an initiative for technical and science educational and research
institutes along with a large number of laboratories. Due to the core competence and
spread of innovations in a large area of the country and to make India a self-dependent
nation and advanced nation, a policy was introduced in 1983 called the technology
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policy statement. This policy statement gives the right direction for the growth and
development of the technology and acquisition of technology from outside.
Does the emergence of new technologies create a new marketplace or opportunity

)A
for the development of innovative startups? Shortly we can say that many startup firms
and businesses are being developed in many technological fields of business and even
in many innovative fields also. Many of the quickly developing firms, their ventures’
base for their business development is on new technologies, innovation, management,
and products. Most of the new startups build their business projects by using new
(c
market niches along with connecting with the development of new technologies
including the internet, information technology, etc.

New technologies are developing day by day. Internet of things, cloud computing,
Notes
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and artificial intelligence 5G are the emerging technologies around us.
Internet of things is a network connection of physical devices or home appliances
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which are embedded on software and hardware connectivity, which reduces the human
efforts on particular projects .Nowadays the frontier technologies such as artificial
intelligence, robotics, gene-editing are playing a bigger role in the development of the
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country.
Modern technologies bring tremendous benefits to the lives of poor people. The
growth of modern technologies is influenced in many areas of industry or business-
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like health, agriculture, education, developments, manufacturing, and other highly
innovative areas. The emergence of new technology not only leads to the development
of company growth but also affects the lives of common people. New technologies
like artificial intelligence, robotics will destroy the jobs of a common man and lead to
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a jobless situation for common people. But these modern technologies are essential
for the sustainable development of the country. Low and middle-income developing
countries cannot afford the new change in modern technologies.
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Economic growth is mainly based on productivity, capital, and labor. All these
factors face a big challenge while technologies change in the business. As technology
plays a role in productivity growth. And new technologies will produce the outcomes
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within a quick period. Technology has also had a major effect on labor markets.
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Technological changes that have not delivered a full potential in economic growth and
productivity. It leads to income inequality and massive job loss due to automation.
The new technologies have a high impact on the economic growth of the company.
Nowadays, all the startups, as well as established companies, are under modern
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technologies. They use modern development strategies to establish their company

project in all areas. High modern technologies are essential in every company to
compete with their competitors. So in every phase of the project, new ideas and
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new technologies are implemented by owners to get the required output results. The
company should grow along with new technologies. Then only they can build a stand-
out position from other emerging companies.
ity
Nowadays everything is digitalized. Online digital marketing trends are waved

everywhere. All can happen with a single click. As technology increases, the lifestyle
also increases day by day. Everything can be done with a click on your mobile.
Everything will reach in front of your home. All are made by these modern technologies
and trends. So, the current trend in modern technology determines the growth of
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a business. Nowadays, even education is also through modern technology. Even

agriculture departments also use modernized weapons and products to get high
efficient outcomes.
)A
New Technology-Based Companies-
1. Civil cops-
Civil cops are a company founded by Ashish Sharma that is engaged in building
(c
civic tech products. The main aim of the company is to connect to the citizens of
India to connect and improve their efficiency. The major objective of the company is

to collaborate with the citizens of India for public service delivery and execution. This
Notes
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company was started in April 2017 that makes use of artificial intelligence and data on
how to solve problems and find faster and more efficient results for the citizens. The
major objective of this startup is to understand the problems of the citizens of India and
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convey the problems to the government.
This startup provides a digital platform to the citizens to reach the government
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representatives at a click. This startup has artificial intelligence chatbots and voice
assistants to make it easier for the citizens of the country to convey their problems to
the government. This startup also provides public data and workflow automation to the
citizens and handles complaints. The problem of the citizens is being transferred to
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different departments according to the parameter of the problem.
This startup is working with the government to improve the functioning of transport
departments by making optimum utilization of artificial intelligence to provide secure
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transport systems. Civil cops also provide a women’s safety product for the safety of
women at the time of travel.
The civil cop is a new startup in the market and is providing better services to
si
the citizens of India by solving the problems and communicating the problems to the
government. This is making it very easy for the citizens don’t get their problems solved
in a cost-effective and very easy manner.
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2. Sunroof:-
The sunroof is a company that provides rooftop solar systems to the customer. The
major objective of the company is to provide a home tech experience to the customers
and connectivity of the solar panels with the internet, virtual reality, and image
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processing. This makes it very easier for the customers to control every appliance of
the home through artificial intelligence and the internet.
The application provides the consumers to upload the image of the rooftop to design
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a better solar rooftop system. When the image is being uploaded the app will help the
consumer in finding optimal system size, the inclination of solar panels, and positioning
of the solar panels. This is based on the electricity requirement of the consumer. This
system is very effective because it saves 100% of the electricity for the consumers and
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the consumer can even sell the excess electricity and can earn on a monthly basis.
The consumer can monitor the system through the internet. Through the
distribution box installed on the solar panel, it makes it easier for the consumer to
measure the net production of solar energy from the panels. This way the consumer
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can measure the rooftop panels and the other sustainability functions.
This with the performance of the solar panels can easily be measured by the
consumer and the consumer can even evaluate the net production of energy from the
)A
panels at regular intervals.
3. My gate:-
The company was founded in 2016 by Vijay Arisetty and Shreyans Daga. The
(c
major objective of the company is to provide an automatic solution to the consumers to

manage the deliveries, visitors, payment, and daily staff.

The company has partner brands with swiggy and Zomato. The major objective
Notes
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of the companies is to make use of technology to save the time and effort of different
people for daily activities. An individual will have to communicate with different people
on a daily basis such as security personnel and any kind of visitor. The application
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had made it easier for the delivery boys and other visitors of an individual to locate the
address of the person.
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It is a self-check application that helps the security guards and other individuals
to identify the person and outside visitors in a community or a society. The application
works on artificial intelligence and the internet that makes it easier for the user to self-
check and enable fast evaluation of information.
O
4. Happay-
This is an application that has been found by Anshul Rai the major objective of
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the startup business is to manage the expenses of companies. Start a business
organization makes use of artificial intelligence, the internet, and machine learning to
help businesses manage their expenses and various other claims. The application for
that helps in cost-saving and boosts time and achieves certain sets of objectives to get
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a rich insight about the business spending.
The owner of the business can have a single view over the white expenditure of the
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company and this is very cost-effective and easy and managed to keep an eye over the
business expenses.
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The company has created a partnership with HDFC Bank to come up with prepaid
card-linked travel and various other expense management solutions for different
organizations. This is for helping the business organization track the business travel
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expenditure, travel expense claims implementation of various travel policies, and have
an eye over the various travel expenditures in a single place.
The companies are collaborating with different other organizations to make it

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easier for the business organizations to manage their expenses in a very cost-effective
and easy manner. The future goal of the business is to launch new technologies and
collaborate with strategic partnership firms to expand the business and deliver this new
concept of expense management in the business.
ity
The objective of the business organization was to reduce the time of business
organizations and entrepreneurs over different expenses of the business. This has
made it very easy for the business organization to keep a check over different expenses
of the company and manage necessary expenses of the company. The company has
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the objective of increasing its partnership with the different business organizations
and delivers the business idea and uses the application in different cooperative
organizations.
)A
5. Shoes on loose-
This is a start-up business started by Mohit Poddar that provides experimental
travel startup delivery to the company. It even provides end-to-end solutions to the
(c
users and helps in fixing all the problems related to travel expenses and experiences
of consumers and the major objective of the company is to make a person’s traveling
experience hassle-free.

The company is acting as an intermediary platform for the customer and the traveling
Notes
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partner. The company can get the contact details of various customers and can directly
handle the queries of the customers. This becomes very convenient for the customers
and for the other business organization to directly interact and contact each other.
in
It provides international packages to the consumers to different locations such as
Singapore and Maldives. Company one encourages referral programs that are making
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it easier for the consumers and the company for increasing the revenue and growth of
the business.
The company is working on an application in which the company will connect
O
with different vendors and operation teams. The company has the sole authority over
managing the supply chain and all the different requirements for traveling. This makes
it very easier for the customer to travel and get higher satisfaction as compared to other
business organizations.
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6. Rezo -
It is a technology-based business organization that works on artificial intelligence.
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The major objective of the business entrepreneur is to solve the problems of the
consumers. There are different types of consumers but at times it might be possible that
different sets of consumers have saved problems. The service provider might get sick of
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answering similar types of questions of the consumers.
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This business organization provides similar types of solutions to similar types of
problems. The business organization books on feedback mechanisms and various
algorithms that help in getting answers to a certain set of problems. This is helping the
business organization reduce the problem of answering similar questions.
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The application provides quick responses to the different various problems of the
customers and also in rescheduling the problems if unsolved. The business application
also provides the services of messaging the problem to the company. It helps increase
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customer service and helps in providing a more personalized and better experience to
the consumers.
5.3.3 Intrapreneurship
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A new class of Leadership is emerging in the organizations that are creating a

huge difference in the way the business, innovation & customer experience is handled.
These new types of leaders are demonstrating a disruptive and strategic intent to look
m
at the existing & new areas within the business premise. Their way of carrying has a
transparent and cohesive way of moving the business ahead. These new classes of
leaders are called Intrapreneurs.
)A
Risk-taking abilities and moving into areas that are reluctantly explored within the
organization have led to a new way of thinking about the work we do in the business
environments. The internal leaders motivate & guide their managers enabling them to
take complete ownership of the areas they are working on. This includes giving them
control to decide and act as required by the task.
(c
The fundamental nature of an employee to be an Intrapreneurs is self-motivation,

proactiveness. Ability to think differently from the accepted convention & resolve the
Notes
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problems in innovative ways. Intrapreneurs because of their inherent nature to act fast
behave as Entrepreneurs within the business setup.
in
The transformation happening due to this new approach is yielding results by
increased innovation, higher productivity, excellent customer experience. This also
helps organizations to cultivate a new set of future leaders for higher roles in the
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coming times. This eventually creates a new workforce environment, lean process &
elimination of unnecessary controls.
Individuals who are ready to embrace the Intrapreneurs in their roles are getting
O
an opportunity to work as Entrepreneurs within the existing organizations while working
for their existing employer. They look for business problems and create new solutions &
markets.
ty
The traditional managers & Intrapreneurs differ in their approach to the problems.
The former is risk-averse, process-driven, follows convention, and uses historic data to
plan things. These leaders need time to evaluate. There is low innovation in the way the
new solutions are offered.
si
Intrapreneurs are risk-takers who have a mindset opposite to conventional leaders.
They have the capabilities to test the new ideas & avoid a lot of analysis from the older
r
experiences. This set of leaders try to work through the complexities & come up with
some innovative way to resolve the problem.
ve
Intrapreneurs develop a competitive environment within the existing business.
Even though the new leaders are working for some businesses, the learning from this
process makes them suitable to lead bigger corporate roles.
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Key traits of Intrapreneurs
The challenge
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a) The conventional decisions

b) Practices & Process
c) Internal organizational barriers
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Bring innovations in
a) Handling complexity
b) High optimization of existing resources
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c) Build new process

d) Co-exist with customers & business agencies and partners
)A
e) Keep the workforce motivated
The Intrapreneurs are also termed, corporate Entrepreneurs. They help to

innovate, build & renovate the business process & performance. the basic difference
between the two is that Intrapreneurs exist within the organizations whereas the
(c
Entrepreneurs are the actual leader of their companies

It becomes very important to understand the basic nature of the Intrapreneurs and
Notes
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how organizations can develop their existing workforce in new Intrapreneurs or leaders.
An intrapreneur is not a specific role category within organizations These
in
exist in organizations that are large, smaller or can be present in functional setups.
Intrapreneurs are not defined as professional or as a discipline. This means the need
of having structured training and future development is not present. Intrapreneurs are
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present & visibility of their contributions to the performance of organizations and the
business environment is not measurable.
Types of Intrapreneurs
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The nature of the classification of Intrapreneurs can be done as
a) As Creator, They want to improve the existing ways of conducting business

and change the existing process for better performance. They love to innovate
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keeping a bigger picture in mind Lean structure & often get bored and want to
move to the next idea. They seldom want to implement these ideas
b) Intrapreneurs as Doers work with ideas. They strive to achieve results while
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remaining focused on core tasks. These see a big picture but are interested
in details. Act highly responsible & effective communicators and they do Try to
bring change by changing the order.
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c) Intrapreneurs as Implementers are high in the execution of new plans. These
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leaders know to organize the resources & use them to get the things done
They know how to get things done. Remain Goal focused while being excellent
negotiators. These leaders are ready to work in high-pressure Lead with
motivation and bring everyone together to achieve the results
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Framework of Intrapreneurship
Intrapreneur framework can be understood as to exist at
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a) Entity or Organization Point -Drive by the firm

b) Group or Team Level -Driven by competition in the workgroup
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c) Employee Individual-level is driven by inherent qualities as a leader & risk-

taking capacity.
The reason for Intrapreneurship is more of a structured approach by the firm to

cultivate, promote & build corporate entrepreneurial resources within the organization.
m
The importance of Intrapreneurship can be understood as it is linked with the

profitability, growth & performance of firms. The activities included in the process
of Intrapreneurship are to identify the new opportunities & use them for the firm’s
)A
advantage. This can also be starting a new project or activity within the Firm or renewal
of the existing products or services
Intrapreneur works on entrepreneurial activities in an existing firm. Identify the

need to change that is not recognized by peers & colleagues. Intrapreneurs make
(c
them happen for employing organizations. These contribute towards the better or new
product for the organization.

Developing & Encouraging Intrapreneurs

Notes
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Strong leaders promote entrepreneurial thinking & encouraging the leaders to
act as Intrapreneurs. It requires the whole organization to imbibe a strong culture to
in
promote the Intrapreneurship
Some of the measure’s organizations can take to develop a strong environment for
Intrapreneurship are
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a) Build adequate organizational climate, focus, and culture. Developing corporate
Entrepreneurs or Intrapreneurs can result in a competitive advantage for
the organizations. For successful implementation of such programs top
O
management involvement & support is very important. The support can come
directly from the leaders or associated processes like HR & coworkers.
The organization needs to have an open culture, not risk-averse, and
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promote participation. The strategic policies of organizations must support
the Intrapreneurs culture. Employees should be allowed to make decisions in
support of innovations. The Organizational internal environments must support
open culture.
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b) Lean organization Structures: These promote empowerment & risk-taking.
Remove delays in approval & ensure the leadership is directly getting involved
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in decision making thus eliminating bureaucracy.
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c) Flexible in Job Description: This allows employees to venture into the new
areas within the organization
d) Creative Teams: These ensure the reward mechanism is well defined. Every
employee should have access to the Creative cells for ensuring the participation
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is transparent.
e) Have a Venture Capital Fund: To support innovation testing ideas and
implementing them needs funds. Leaders must set aside venture funds to allow
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such activities. This can eventually help increase the companies profit due to
such activities
f) Competencies Building: A regular training must be imparted in areas of general
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management, technology & networking to help build competencies

g) Business Management: The Intrapreneurs must be trained how to handle the
activity independently, must have adequate financial knowledge, Marketing
know-how & Quality related aspects.
m
h) Develop Leadership Skills: The Senior management can act as coaches &
ensure the required leadership skills are built so that they can collaborate with
the internal & external stakeholders
)A
i) Networking: Networking becomes very important to demonstrate the results to

the potential sponsors. It provides an understanding to help to understand the
needs so that the innovation is directed towards the actual requirements
j) Teamwork – Innovation among organizations cannot be visualized by individuals
(c
alone. It needs a well-celebrated team to support the idea generation, refinement

& implementation strategy.

k) Relationship Management: Building Relationships among the stakeholders will

Notes
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nurture & harness a strong bond to approve the ideas & create trust among the
partners
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l) Reward Offerings: Due to the inherent risk in the Intrapreneurship the
organization must factor in a respectable degree of direct or indirect financial
rewards. This process ensures that the efforts and the success is adequately
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rewarded by the organizations. Organizations must come up with an incentive
system to compensate and attract talented employees.
m) Escalation or grievances: while a lot of factors lead towards the growth and
O
development of the Intrapreneurship within the organization but a grievances
mechanism must also be set to ensure that any problems faced by these
intrapreneurs are addressed
The above discusses factors will ensure mature and effective talent management &
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enhance organizational productivity
The below are factors by which organizations get benefited by the process of
Intrapreneurship
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a) Growth: Intrapreneurship promotes the entrepreneurial thinking mindset.
Develops infrastructure & culture supporting growth.
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b) Innovation: Promotes innovation within organizations making new products
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possible
c) Leadership Develops new leaders who can see in future & take necessary
steps to achieve the results
d) Change Intrapreneurship promotes changes and creating new processes or
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improving the existing ones

e) Engagement – Intrapreneurship promotes & increase employee engagement
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with & customers
Intrapreneurship future: The current trends show that new companies are founded
to develop & support innovations, create products and bring them to the customer for
use. Disrupt by introducing the new offerings. As the business houses are shifting their
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emphasis on innovation, we need strong leaders within the organizational steps. These
intrapreneurs will become the essential lifeblood of these organizations. The power
of innovation is having yielded enormous power to organizations like Apple, Amazon,
Google
m
Intrapreneurship offers a platform for these leaders to fulfill their vision. Minimizing
the risk and also providing use of the resources within the organization.
)A

1. __________ is increasing level of vehicle automation and availability of the
infrastructure to support that could include both commercial and consumer vehicles.
2. The stream of science and technology that deals with multiple streams like computer
(c
science, language and field of engineering is called___________.

3. ____________ means to have an interactive experience of a physical or real world

Notes
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environment.
4. A_____________ is a system of recording the transaction in digital ledge making it
in
impossible to illegally decode or hack.
Summary
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●● The role of technology in the Indian market have increased because the Indian
market is now giving tough competition to other international business organisation
and it is very important for the companies to adopt internet and virtual reality to
provide better quality of the products in the market.
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●● Technology make use of server less computing systems and robotics that have
replaced human actions and is providing major benefits to the business.
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Activity
1. Observe around and enlist different types of of technology based companies that is
making your life easier.
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1. What are different types of artificial intelligence and how can they help in business
development? r
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2. What are the different technology based companies in the market and how they are
getting the benefit of technology?
Glossary
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1. Reactive machines- these are the types of machines that act according to the
situations.
2. Prosthetic- it is changing the physical feature of an individual with the help of
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technology.
Further readings
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1. Book – the tech whisperer.

Author- Jaspreet Bindra.
Answers
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1. Autonomous vehicle
2. Artificial intelligence
3. Augmented reality
)A
4. Block chain
(c

Unit - 5.4: Corporate Entrepreneurship

Notes
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Objective
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●● To understand the concept of intrapreneurship.
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●● To evaluate Corporate Versus Intrapreneurial Culture.
●● To evaluate Climate of Intrapreneurship
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5.4.1 Corporate Versus Intrapreneur Culture
Organizational culture is the belief or the behaviors which the management
along with the employees exhibit in their daily interactions. It reflects the way how
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the environment is nurtured by the stakeholders. Organizational culture or corporate
culture reflects some vital characteristics such as the overall vision of the organization,
values that the business is striving for. This lays a strong basis of the mission, practices
si
& narrative these organizations hold for their people and the external environment.
This lays a strong foundation for the business to exist and meets its obligations. The
corporate culture acts as an ethical boundary for boundary managers and takes their
decision within these boundaries
r
ve
Every organization, irrespective of size be it big or small, has a culture. The
organizations are defined and viewed by external people buy this. It reflects identity to
the organization & gives an organization a definite personality. This Corporate culture
lays down the principles of how it interacts internally & with trade partners, vendors
suppliers, and customers. It makes me an inspiring employee. This culture reflects the
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productivity of workplaces thriving within the entity. It is very important to have a strong
company culture and determine how the company is moving ahead towards success. A
strong corporate culture reflects that the workplace is nurturing good & skilled people,
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has a fun environment, is resilient to challenges, possesses a clarity of purpose, and

remains committed to High performance.
Some of the key characteristics of corporate culture are it has embedded and
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agreed to have
●● Clear long-term Vision and Mission

●● Define a Code of Conduct
●● Nurture Teamwork & coloration
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●● Anticipate Change and Facing Challenges

●● Very clear Communication
)A
●● Happy & Thriving Workplace
Clear long-term Vision and Mission

Primarily a good corporate culture has a clear vision and mission. You know what
you want and how to get it. Usually, vision and mission are a phrase that gives your
(c
company and employee purpose. The purpose is not explicitly stated & to have a
clear vision and mission, managers need to align themselves with the mainstream to

understand it. Each employee understands what is their purpose, the role that they play,
Notes
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and what responsibility they shoulder. Employees who know what is their purpose and
adapt their decisions to that purpose. Having a clear vision and mission can also boost
understanding between supplies, business partners, and customers. Vision and mission
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are the basic, but most essential elements of identity in corporate culture.
Define a Code of Conduct.
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Apart from purpose, a code of conduct is a set of guidelines that are needed to
realize their goals. The code of conduct establishes the spirit of commitment and trust
within the organization. This guideline is communicated all over the company to build
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the proper behavior and mindsets that are needed to correspond to coworkers, handle
clients, interact with partners, and promote professional conduct.
Nurture Teamwork & coloration
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The corporate world is highly competitive; employees have to gain an advantage
over their peers to retain their positions or be promoted to a higher one. An organization
may have competitors, but it should not be. Strong corporate culture involves learning
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to work with each other in teams. Every employee in the organization and their team is
moving towards the same goal and they are on the same side. Unity is encouraged and
should be appreciated.
r
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Anticipate Change and Facing Challenges
When organizations face changes, employees tend to be distracted. It is usually
fear of the unknown and what change that would bring. This fear of uncertainty
incapacitates development and the ability to be flexible makes employees distracted
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from their vision and mission. Upholding a strong culture motivates to face these
challenges that seem to be difficult to win over; the resolve to realize the organization’s
vision is stronger than the fear of the uncertain. Managers and team leaders should
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give proper support to keep their employees on track despite the difficulties.
Very clear Communication

Through communication, employees get a clear understanding of what their
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organization is trying to achieve. It is a simple way for the organization to reach out and
listen to their employees’ voices regarding management, departments, and colleagues.
The feedback is received, productively, and with sensitivity to a variety of personalities,
temperaments, and cultures. This promotes a culture of sharing sentiments and knowledge;
m
the organization also promotes a culture that shows genuine care for its employees.
Happy & Thriving Workplace

)A
A healthy working environment demonstrates the corporate responsibility of their

employees. Not only should you have high standards on results, but you should also
have a high standard on your employees’ wellbeing. Not only through a physical
and mental aspect, but a strong corporate culture should also consider the thriving
working environment that enhances employees’ skills and talents. A healthy working
(c
environment motivates employees to work, be absent less often, and are more
motivated which is a win for everyone.

Various types of Corporate or organizational cultures

Notes
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We see four different types of organizational cultures existing emerge from the
present Values Framework.
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Clan culture – Have a friendly collaboration and mutual agreement working
environment. Just like large families’ internal leaders in the organization act as mentors.
People always come together by their traditions and loyalty. There is involvement
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and a higher focus on human resource development. People are caring and address
the needs of the customer. The rest of the organization supports it by promoting &
participating in a high-level consensus, and teamwork.
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Adhocracy culture – Lots of initiative behaviors between both leaders and
employees plus an appetite for employees plus risk-taking. Core values to succeed are
changing. Imputes are laid on the creation of new products or services. Management
promotes freedom and initiative.
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Market culture –Focused on business fast deliveries for getting work done, &
results. Lots of competitive atmospheres focused on goals and everyone is results-
oriented. winning and becoming leaders is the main thrust to penetrate the market and
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Hierarchy culture –Based on process and procedure, with a formalized and well-
defined work environment. Continuous monitoring. Everyone adheres to tried principles.
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Innovation is restricted Low cost; planning & execution is the core of the Vision of the
organization.
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As much as there are different types of corporate culture, they are all geared at
helping to achieve set goals through a clear vision. Indeed, some of the functions of
corporate cultures are to provide a sense of identity, define boundaries, and generate
commitment from members of the organization
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Intrapreneurs
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ity

m
)A
markets.
The traditional managers & Intrapreneurs differ in their approach to the problems.
The former is risk-averse, process-driven, follows convention, and uses historic data to
(c
plan things. These leaders need time to evaluate. There is low innovation in the way the
new solutions are offered.

Intrapreneurs are risk-takers who have a mindset opposite to conventional leaders.

Notes
e
They have the capabilities to test the new ideas & avoid a lot of analysis from the older
experiences. This set of leaders try to work through the complexities & come up with
some innovative ways to resolve the problem.
in
Intrapreneurs develop a competitive environment within the existing business.
Even though the new leaders are working for some businesses, the learning from this
nl
process makes them suitable to lead bigger corporate roles.
Understanding the difference between Corporate & Intrapreneur Culture
O
There is a major difference in many spheres & levels that affect the business
results. Each approach have a distinct opportunity plus some challenges
Basic Idea of Origin
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Intrapreneurship is a bold idea & has the potential to transform or drive the
business in a new way and may not be in sync with the fundamental business strategy
and priorities of the Entity –The idea is in the core canvas of the management’s
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perspective.
Corporate managers live in a culture that objectives along a well-conceived project

are shared with the managers by management. The project itself is a business goal for
the corporate environment. r
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Ownership
The way the employees see the ownership within the Corporate & Intrapreneurship
environments makes a difference in their outcomes. The complex tasks and
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complexities of the work process led to the narrowing down of Tasks into well-defined
job responsibilities and key result areas.
The very nature of the Job descriptions in the corporate environments makes tasks
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more process-specific and outcomes will be highly anticipated in terms of deliverables.

The individuals seldom get to maneuver from one process to another at will.
Whereas in the intrapreneur culture the idea is owned by the employee which
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further leads to the determination & quest of the mission for this idea.
They take ownership with responsibility for the conceived idea which they
advocate & bring it to life. This may be against the opinion or resistance of the rest of
the organization. Intrapreneur virtually manages his small entity with full responsibility,
m
seeks to have the freedom to operate and navigate it as an entrepreneur
Passion
)A
One of the major differences between the corporate culture & and intrapreneur
thinking apart from conceiving the idea & Ownership is the passion & excitement
to see the idea succeed by an intrapreneur. The value of passion about the idea
is very important as passion is needed to exist, persist, and lead changes against
the opinion & resistance along with many obstacles an Intrapreneur runs into. The
(c
critical resistance from the organization is a measure of the idea being evaluated. An
intrapreneur to make a difference shall take every measure to see it gets approval

from the management. He or she puts creativity and follows a definite strategy to see it
Notes
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succeeded
The Corporate manager seldom get an opportunity to own a task of passion
in
directly rather it is handed over to them by the management and the responsibility of
delivery lies with the managers
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Mandate
While Intrapreneur is a self-identified and self-assumed activity in the organization
it does not come with a formal mandate, nor does it have formal management support
O
and dedicated resources.
The positive side is that Intrapreneurs do not have to justify the idea to superior.
The bigger challenge is however to find allies and resources in a company without
formal support from management. Lack of formal authority and institutional support by
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leadership has a risk for the Intrapreneurs their idea.
The culture in a corporate environment is that there is a clear mandate and definite
si
support from leadership within the framework of organizational capabilities. The project
is well discussed & risk is asserted in the beginning before approving the project. The
scope is clear & it translates into limited resources and restricted freedom to navigate.
It has timelines & a group of people who keep on monitoring the overall progress of the
project. r
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The deliverables & expectations are listed for such projects and risk is periodically
evaluated. The laying of milestones brings the scope, time & cost perspective which
further decides the success or failure of the project.
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I simpler terms in corporate culture manager lead the specialized team and
persuade a preconceived mission obtained from its management
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Mindset and Results

The very nature of risk-taking capabilities ascertains that Intrapreneur does not
limit themselves to a formal framework, known organizational practices, or the existing
culture of the larger organizations. The quality of being capable to think outside the
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box & lead risky and disruptive ideas. They sometimes take unconventional or stealthy
approaches that help them to move ahead with the idea. Operating in the shadows
initially avoids drawing broader attention to the idea. Preventing premature exposure
to the ‘organizational immune-system.’ Once triggered, it tends to quickly put an end
m
to the unconventional idea and their champion. An experienced & skillful Intrapreneur
cautiously tests his idea, seeks help from experts and executive supporters also outside
the own business unit, and allows the idea to take shape, evolve, and mature before
taking the risk of exposure.
)A
This exposure comes with possible outcomes and the feasibility of the idea can
then be tested in a Real-time environment
Many times, the ideas do not get adequate support from the management
(c
perspective and the intrapreneur is required to terminate the implementation or go

ahead. This sometimes leads to the Intrapreneur leaving the organization to pursue the
idea in a different environment

Corporate managers operating in a different framework are constantly under the

Notes
e
scrutiny of the higher level within the organization. These upper layers can influence
the project scope or timelines, Priority or progress, or methodology & process. They can
extend or restrict the use of resources based on the larger priorities of the organization.
in
Managers who can leverage the available resources to their advantage within the larger
organization can be helpful & effective while implementation and scaling is done
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Benefits of Reward
Looking at the cultural perspective of the rewards between both Intrapreneurs and
Corporate Entrepreneurs. The latter may deliver a project and can get an immediate
O
reward for this in terms of monetary benefits or leading a new assignment bonus or
Elevation in his or Her ranks within the organization
At the same time Intrapreneur, always have a larger sense of accomplishment
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as they have driven their ideas to a different level of fulfillment. For these passionate
Intrapreneurs, persuading a great idea in his or her life span in an organization is a real
accomplishment against all obstacles they face in resistance to the organization.
si
Finally, the main difference between an intrapreneur & corporate culture is that
an intrapreneur works by their vision, and wants to explore it for the benefit of the
organization even against the resistance of an organization.
r
While Corporate Entrepreneur propagates by entrepreneurial techniques within
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an established organization, the approach they follow most often remains shackled by
institutional constraints. Therefore, these programs fall short to deliver the true potential
of entrepreneurship or intrapreneurship. Instead, the solutions tend to remain in the
more predictable space of incremental improvement that large organizations are more
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accustomed to and feel comfortable operating in.

While the average Corporate Entrepreneur is not an Intrapreneur by any means
and not an entrepreneur either. Corporate Entrepreneurship then resembles a non-
U
controversial, risk-free, and feel-good version of the intrapreneurial experience out

of the safe position as an appointed corporate cogwheel in a glorified project with a
marketing blast and a defined career path waiting at the end of the project.
ity

m

)A
(c

markets.
It is observed that entrepreneurs or managers working in corporations are not

Notes
e
able to become successful intrapreneurs. To become an intrapreneur is different than
to assign a project or task to individuals in an organization as we have in the case
of finance marketing or operation managers. Most of the time intrapreneurs are self-
in
initiated & self-selected which means they come up with an idea which they will develop
very often in their own time.
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To support such initiatives and risk-taking measures within an organization we
need to create the right climate for such individuals
Presence of Intrapreneurship sponsors
O
In large companies mostly innovations get lost in the inherent bureaucracy and
non-responsiveness of the leader in the organization. Ideas cannot be sufficiently
driven by intrapreneurs alone. A corporate culture conducive to intrapreneurship finds
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sponsors and champions within the organization to support the creative activities and
failures. They also plan flexibility to establish new objectives and directions as needed.
Usually in these organizations sponsors exist at all levels from top leadership to
Delivery managers to other intrapreneurs.
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Key roles of the sponsor are
●●
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Looking into financial area of other managers related to risk in these ventures,
at initial and further follow-up & evaluations
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●● Help in the allocation of resources & approvals for proposals in evaluation
meetings, and budget allocations
●● Creating a reward and incentive system for such initiatives
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●● Help resolve interdepartmental issues and proper allocations from various

sub-processes
High level of involvement of the main or main intrapreneur

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Very often in large companies, the main idea originator or the innovator is asked
to hand over the assignment to some other team or individual to work further on this
development project. It can also be the case that the idea has come for an employee
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working in some other process or department and the task could be suitable for another
departmental usage or industrial sector.
Most of the time due to lack of knowledge the original originator may be isolated
due to a lack of expertise and skills to understand the project lifecycle. Sometimes
m
removal of the original idea generator may see the project itself not reach its
completion. There is a strong need to involve the original idea or Intrapreneur who has
a vision and larger picture to be kept involved in the project. The innovation does not
)A
mature if the passion to drive it is lost
Also due to the fact single intrapreneurial teamwork on an idea from development
to market due to reluctance to have intrapreneurial teams driven by inventors or
researchers with or little commercial experience.
(c
In such conditions the inventor needs to become a binding member of the

intrapreneurial team, could see himself or herself in the role of technical leader, or

act as a consultant to the intrapreneurial management team while still working on the
Notes
e
development of the idea. The originator of the idea must have sufficient skills to become
the leader of the intrapreneurial team.
in
Staying together is also an important aspect if the intrapreneurial team stays
together throughout the project, even after commercialization. To handle any future
limitations of the idea is new to the market, then imitations will soon follow, often with
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significant improvements
The autonomy of the intrapreneurial team
O
A tendency to act as a self-made or self-boss, entrepreneurs want to have sole
control over the progress of their idea. In many cases. Intrapreneurship is reluctant
in large organizations as the authority to develop innovation is restricted by several
management levels in the hierarchy to that of the innovator thus has restricted access.
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Power to make decisions is needed by intrapreneurs to work within large organizations
and considerable authority to align the resources must be with them.
Crossing boundaries in the organization
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For developing an idea from the first requirement is the end commercialization, the
intrapreneur needs to cross several layers within the organization. Which may include:
●● r
inter-process boundaries, between e.g., Finance, research and development
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(R&D), and marketing
●● Divisional boundaries between various business units within the company
●● Organizational boundaries between the various hierarchy of levels of
management in the organization
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Managers in large companies are vertically driven, financially oriented, authority-

based processes. Intrapreneurship to be effective throughout the whole organization,
willing individuals in the intrapreneurial team, regardless of functional specialism,
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must modify the traditional boundaries between different parts of the organization to
encourage multidisciplinary teamwork and participation.
ity
Tolerance of risks, failures, and mistakes

Entrepreneurship is driven by inherent risk factors due to new ideas or innovation.
All the major large companies are risk-averse. Personal failure could be a major threat
to promotion and career-building in organizations, as managerial conservatism and
performance measurement inhibit intrapreneurship.
m
In contrast, many entrepreneurs in small firms see failure as a learning

experience, from which new products, services, and ventures can be developed.
)A
To foster an intrapreneurial climate, this tolerance towards risk and failure through
experimentation should be encouraged. When a large company wants to develop an
entrepreneurial culture, it has to establish an environment that allows mistakes and
failures in developing new innovative ideas. While this is in direct opposition to the
established promotion and career system of the traditional organization, without the
(c
opportunity to fail few if any corporate intrapreneurial ventures will be undertaken

Long-term philosophy towards success

Notes
e
There is a danger that the creation of internal corporate ventures, which are
externalized from the main functions of the company, could lead to considerable
in
problems. Whilst such decentralization may lead to researchers and product developers
becoming closer to the marketplace, it may lead to a focus on short-term market
performance, to ‘prove’ the success of the new venture. Therefore, a company must
nl
be prepared to establish a long-time horizon for evaluating the success of individual
ventures as well as the overall intrapreneurship programmed. An intrapreneurial climate
should not be established within an organization unless that company is willing to invest
money with no expectation of return for five to ten years. It is also important that ideas
O
are allowed to develop fully and that the resources allocated to such intrapore - neural
projects are not withdrawn before the idea has progressed to commercialization
Finding resources for ideas
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Although intrapreneurs will often work on their new ideas in their own time,
organizations need to make resources available to such individuals so that these
ideas reach the marketplace more quickly. This can be done by allocating either time
si
or funds to the intrapreneur. Often, if intrapreneurs cannot find time to make their
ideas marketable to the company, then those ideas will remain in the entrepreneur’s
head rather than becoming a marketable product, process, or service. Once the
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idea is of some value to the organization, then funds need to be made available to
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develop this idea to the point where it can be adopted by the organization. In many
companies, available resources are often committed to solving problems that have
immediate effects on the bottom line, rather than the development of new ideas. If
discretionary funds are not available, the intrapreneur may become frustrated to the
ni
point of abandoning the commercialization of the idea altogether. More worrying for the
company, the idea may be taken elsewhere to be developed by the intrapreneur, either
to a competing organization or a new small business.
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An effective reward system

Although the attainment of commercialization of their ideas is often sufficient,
the energy and effort expended by the intrapreneurial team in the creation of the
ity
new venture need to be appropriately rewarded (Breazeal, 1996). However, as

intrapreneurship is a relatively new phenomenon, many companies have yet to develop
an adequate reward system that is adequate in terms of pay and promotion.
As it examines the different policies that organizations can develop to reward

m
entrepreneurial staff. Their conclusions indicated that intrapreneurs should be paid

below or at the market rate, with a significant portion of the individual’s salary at risk in
the form of pay incentives, which should be linked to individual and corporate venture’s
)A
performance. Therefore, the fixed-package portion of an intrapreneur’s reward package

- salary and benefits - would be below. However, this should be compensated by some
benefits including the following.
Short-term variable pays benefits

(c
These include profit sharing, which can focus the entrepreneur’s attention on the
corporate venture’s financial goals. This can also strengthen team spirit within the

corporate venture, as all employees will receive a share of the profits proportional
Notes
e
to their salaries. It is important within corporate entrepreneurship that a new internal
venture does not imitate the reward policies of the corporation’s other traditional
business divisions, as these policies are usually designed for a complex bureaucracy
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and recognize the difference in pay scales according to an individual’s status in the
organization.
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Long-term variable pays benefits
Equity ownership is a means for rewarding intrapreneurs. As well as being an
excellent retention tool for the large organization (with employees likely to remain
O
within the venture as it develops), it also gives intrapreneurs a sense of ownership and
responsibility for their venture, distinguishing it from other projects that the intrapreneur
may have previously undertaken in a corporate capability for the large firm. In addition,
stock ownership may also create a greater entrepreneurial spirit within a corporate
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venture, as employees look for more innovations and opportunities that will increase the
profits (and stock value) of the venture.
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Education and health benefits
To pay for travel, tuition, and supplies for job-related education and training.
Entrepreneurial employees frequently, in the development of new ideas, discover
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gaps in their education and training and must develop new skills to continue to be
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productive and innovative. This is crucial in high-technology industries where corporate
entrepreneurship is prevalent. In addition, large firms initiating corporate venturing must
be aware of the changes that will occur in the working lifestyles of intrapreneurs - as
they assume ‘ownership’ for their ventures, their working hours will inevitably become
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longer and, as with entrepreneurs, the demands on their time will increase, as will the
stress of the job. As a result, many companies are providing benefits in the form of
health club memberships so that intrapreneurs can develop positive coping behaviors.
U
Therefore, pay policies within corporate ventures should recognize that individuals
assuming the role of intrapreneur should be treated differently from the rest of the
organization. However, this could cause potential problems in the development of the
intrapreneurial venture, especially in the attraction of staff from other divisions of the
ity
large firm. Indeed, corporate entrepreneurship should pay more attention to internal pay
equity than independent small firms, because if it is to attract employees from other
units of the large firm, it must be sensitive to the company’s reward packages, and may
have to match overall company pay and benefits levels, which may restrict its ability
m
to design policies that reward innovation and creativity. However, this problem can be
limited by:
●● Physically separating the corporate venture from the rest of the organization
)A
●● Convincing possible transferees that the risk of greater long-term reward may
be worth the short cut in pay
●● Refusing transfers from other divisions in the large organization.
The traditional reward within a corporate structure - promotion - is often not

(c
sufficient, as the motivation behind the development of the idea is often not career
advancement. More importantly, intrapreneurs seldom make good corporate managers,

as they rarely have the temperament for coping with the company’s structure. This may
Notes
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cause problems in the organization, especially with other corporate managers. have
developed a ‘dual promotion system’ where successful intrapreneurs can choose to be
promoted either on the technical or the management hierarchy of the business.
in
This recognizes the needs of those intrapreneurs who do not wish to achieve more
administrative responsibilities. Those intrapreneurs who wish to remain in technical
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development - and indeed are more valuable in the laboratory than in the office - are
given a higher rank but are not constrained to purely administrative positions. On the
other hand, some companies prefer to reward their intrapreneurs by giving them a
position of freedom within the organization to develop new ideas or even setting the
O
intrapreneur up in a separate venture with suitable equity as motivation for success.
5.4.3 Strategies for Growth
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Due to the fast-changing competitive environment business ecosystem for
organizations is changing and thus making it very difficult to have competitive
advantages over their competition. The factor for this is easy access to the available
si
resources. All organizations need a great deal of innovation to create and sustain
success and effectiveness. Thus, the need for having strategies for growth & to build
competitive advantages for organizations based on unique competence is speedily
increasing.
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It is very essential to have a corporate entrepreneurship strategy for the growth
of organizations. It enables organizations to form competitive advantages by taking
control of in-house intrapreneurship skills. Competitive advantage built on corporate
entrepreneurship strategy benefits organization plus it is not easy to clone this strategy
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as it is based on the unique strengths of the organization
It became a vital tool to have a strong corporate entrepreneurship strategy. It helps

to transform the organizations and fostering competitive advantage.
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The competitive advantage of organizations is strongly influenced by
●● Technological,
●● Social,
ity
●● Political,
●● Economic,
●● Legal, and
m
●● Global environmental conditions.
Creating new offerings like new products and services and technology is very
)A
important for all organizations. This all needs creativity and an entrepreneurial
perspective. Innovation is critical to forming competitive advantages in the business
environment. It means firms have to develop a corporate entrepreneurship strategy for
service. Thus, Corporate entrepreneurship becomes a predecessor of innovation.
Commercialization of corporate entrepreneurship and innovation is becoming

(c
a new growth and sustaining factor. Corporate entrepreneurship is being relooked.

New ventures for taking advantage of new opportunities in the external environment

and creating economic value are required. The main points of interest in strategic
Notes
e
management focus are the competitive advantage of firms and the main sources of
competitive advantage are resources such as knowledge, technology, employee skills,
and capabilities.
in
innovation process needs Individual and organizational entrepreneurial activities.
Organizations have to develop a corporate entrepreneurship strategy to lead in the
nl
market. This theoretical paper explores literature and is structured in the following
way. First, we explain the corporate entrepreneurship concept. Secondly, the strategic
management concept is presented in detail. This is followed by the integration of
corporate entrepreneurship and strategic management concepts. Then, prior models
O
are discussed and our model is proposed together with its comparison with the existing
models and approaches. Lastly, we conclude by including certain implications for
companies, managers, and employees.
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Corporate Entrepreneurship
As understood Strategy is a plan for a firm’s competitive position. Strategy is a
cohesive instrument between firms and their environments. Strategic management
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is aimed at analyzing the internal and external environments of the firms. Through
strategic management, organizations can have efficient use of resources through their
determined objectives and goals. According to at least need five key characteristics to
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help them handle the competition and create a competitive edge.
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These characteristics are
●● Flexibility,
●● Adaptability,
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●● Speed,
●● Aggressiveness,
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●● Innovativeness.
Thus, the success of firms is based on effective strategic management

implications. It also means Environment, Values, and Resources. The analysis
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provides a valuable strategic advantage to the firms. The environment dimension

presents opportunities and threats, the resources dimension presents strengths and
weaknesses, values dimension represents leadership and culture.
Firms can develop entrepreneurial behavior with Environment, Values, and

m
Resources analysis on both individual and organizational levels.
This can be listed as
1) Scanning intensity: Scanning intensity refers to the organizational activity of

)A
learning opportunities, and threats of a firm in its environment. This dimension

helps firms to be better at risk-taking and it also makes firms more proactive.
2) Planning flexibility: Planning flexibility refers to a firm’s adaptation to changing
environmental conditions. This dimension helps firms to restructure their short-
(c
term, medium-term, and long-term strategic plans.

3) Planning horizon: The planning horizon refers to managing the timing period for
Notes
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the future by the decision-makers of the firm.
4) Locus of planning: Locus of planning is about how deep employee involvement
in
within a firm is. The locus of planning can either be shallow or deep. A shallow
locus of planning refers to only top managers’ involvement in the planning
process. On the other hand, in the deep locus of planning perspectives that are
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gained from all levels of hierarchy are taken into consideration.
5) Control attributes: Control is an essential item that ensures that the firm’s
objectives and goals are attained. If these objectives and goals are not attained,
O
then corrective measures need to be taken. Two major forms of control are
strategic control and financial control. Strategic control measures a firm’s
performance in the market. Financial control measures are about the firm’s
financial goals such as low cost and high profit.
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Four Models
The Opportunist Model
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The business environment is based on opportunities. Without a definite designated
organizational ownership or resources, corporate entrepreneurship proceeds based
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on the efforts and chance of bold project champions people who toil against the odds,
creating new businesses often despite the corporation.
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The opportunist model works well only in trusting corporate cultures that are open
to experimentation and have diverse social networks behind the official hierarchy.
Without this type of environment, good ideas can easily fall through organizational
cracks or receive insufficient funding. Consequently, the opportunist approach is
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undependable for many companies. When organizations get serious about organic
growth, executives realize they need more than a diffused, ad hoc approach. As a result
of its past success with minimally invasive surgical procedures
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The Enabler Model

The basic premise of the enabler model is that employees across an organization
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will be willing to develop new concepts if they are given adequate support. Dedicating
resources and processes enables teams to pursue opportunities on their own insofar as
they fit the organization’s strategic frame. In the most evolved versions of the enabler
model, companies provide the following: clear criteria for selecting which opportunities
to pursue, application guidelines for funding, decision-making transparency, both
m
recruitment and retention of entrepreneurially-minded employees, and, perhaps above

all, active support from senior management.
)A
The Advocate Model

What about cases in which funding isn’t the issue? In the advocate model, a
company assigns organizational ownership for the creation of new businesses while
intentionally providing only modest budgets to the core group. Advocate organizations
(c
act as evangelists and innovation experts, facilitating corporate entrepreneurship in

conjunction with business units.

The Producer Model

Notes
e
A few companies pursue corporate entrepreneurship by establishing and
supporting formal organizations with significant dedicated funds or active influence over
in
business-unit funding. The objective is to encourage latent entrepreneurs. The producer
model also aims to protect emerging projects from internal issues & encourage cross-
unit collaboration, build potentially disruptive businesses and create pathways for
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executives to pursue careers outside their business units. The producer model has its s
share of challenges and risks & requires significant investments from many years.
Having a Right Model
O
Evolving from the opportunist model to any of the more deliberate forms of
corporate entrepreneurship typically begins with a mandate for growth and abroad,
clearly communicated vision. When a company’s vision for growth is too narrow, it will
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likely end up with just incremental concepts, whereas a broader vision helps everyone
think outside the proverbial box.
Three Deliberate Approaches to Corporate Entrepreneurship
si
In the opportunist model, corporate entrepreneurship proceeds (if it does at all)
based on the efforts of “project champions” who toil against the odds, creating new
r
businesses often despite the corporation. In the enabler, advocate, and producer
models, corporate entrepreneurship is actively managed but in different ways.
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Three Deliberate Approaches to Corporate Entrepreneurship
After the vision is defined a company needs to list its milestones and objectives.
ni
It means to seek corporatewide cultural transformation or renovation of particular

divisions to address either commoditization or disruptive threats?
Enabler programs can support efforts to enhance a company’s culture. When an

U
organization already enjoys substantial collaboration and ideation at the grassroots

level, the enabler model can provide clear channels for concepts to be considered
and funded. For companies seeking cultural transformation, enabler processes in
combination with new hiring criteria and staff development can result in several
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employees becoming effective change agents. The enabler model is particularly well-
suited to environments in which concept development and experimentation can be
pursued economically throughout the organization. In companies with self-managed
communities of practice and expert networks enabler programs can accelerate the
m
commercialization of ideas that arise from networks of knowledge workers.
For companies that want to accelerate the growth of established divisions, the
advocate model might be the best option. Because of the limited resources of this
)A
model, managers must tailor their initiatives to the interests of existing lines of business,
and employees have to collaborate intensively throughout the organization. This
enhances the potential fit of opportunities to a company’s operations, but also requires
leadership to ensure that projects do not become too incremental. Advocates exist
to help business units do what they can’t accomplish on their own but should pursue
(c
to remain vital and relevant. Moreover, the advocate model (as well as the producer
model) can prevent corporate entrepreneurship from becoming a casualty of powerful
business units or competing silos.
If a company seeks to conquer new growth domains, discover breakthrough

Notes
e
opportunities, or thwart potentially disruptive competition, then it should consider the
producer model. In general, business units are not likely to pursue disruptive concepts,
and they often face strong near-term pressures that discourage investments in new
in
growth platforms. The producer model helps overcome this, and it can provide the
necessary coordination for initiatives that involve complex technologies or require the
integration of certain capabilities across different business units.
nl
Concerning resources, the enabler model can generally be maintained in a
much leaner fashion than either the advocate or producer models. Simple processes
communicated company-wide, arbitrated by a senior team, and managed with limited
O
staff (sometimes just a single person) can suffice. The dedicated team and capital
required by the producer model make it a more resource-intensive choice, but even the
advocate model tends to require a significant commitment. Although advocates function
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without a large dedicated funding pool, they can require substantial investments in the
human capital and methodologies necessary to help bring new opportunities to fruition.
Working with Models
si
Organizations initiate with a smaller & trustworthy team with initial approval from
top leadership. The first step is to obtain mutual consensus from leadership related
r
to objectives and the way forward. Clear communication is important to build support
on the new initiative and also to avoid organizational stakeholders from taking a
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negative view of the corporate entrepreneurship threat to the company’s established
operations. New businesses activities need support from the entire organization
mainly at the launch and scaling. This communication is critical even after a corporate
entrepreneurship program is established
ni

1. Intrapreneur as________ work with Idea and strive to achieve the result with
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remaining focused on core task.

2. The fundamental nature of an employee to be and intrapreneur is__________.
3. The intrapreneurship have greater tolerance to risk and___________.
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Summary
●● Entrepreneurship is an emerging concept and a new class of leaders that have the
ability of taking the risk and moving into areas that are relatively explore within the
m
organization.
●● The intrapreneur are having a long-term philosophy towards the success and
always engaged in finding resources for new ideas.
)A
●● Self-motivation is one of the important factor that affect the intrapreneurship

activity.
Activity
(c
1. What could be different strategies for growth?

2. Explain the concept of corporate entrepreneurship?


Notes
e
1. How can strong intrapreneur be developed?
2. Provide a difference between corporate and intrapreneur culture?
in
3. What are the four models of entrepreneurship?
Glossary
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1. Enablers- these are the ones that enable changes and support adequate development
in the business.
O
2. Advocate- these are the ones that assign organizational ownership for the creation
of new business with the help of core group.
Further readings
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1. Book – intrapreneurship
Author- Kevin C. Desouza
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Answers
1. Doers.
2. Self-motivation
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3. Failure
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ity
m
)A
(c

Case study
Notes
e
One Mart is a company established in 2012. This company deals in providing
in
personalized and unique gift items to consumers. The major objective of the company
is to provide customer-centric products to the consumers and fulfill the requirements of
the customers. When the company was established it was limited to a local region and
was only engaged in providing customer-centric products to local customers.
nl
The company was operating from a local office that was being operated from
Ahmedabad. The company was providing its customer’s unique decorative items, gift
O
items, and personalized gifts to customers. The idea of giving personalized gifts to the
consumer was becoming very popular in the region. This encouraged the entrepreneur
to develop and expand the business to other regions of Ahmedabad. The company
started two more outlets of one mart at Ahmedabad.
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One Mart was giving its customers unique services and was also engaged in
providing the customers home delivery to the local region. In some places, the company
was providing installation of big gifts and decorative items. This gives customers a
si
reason to purchase and become loyal to the company.
Soon the company identifies the need of promoting and displaying its products
to other regions of the country. The entrepreneur wanted to expand the business to
r
various locations in the country. But the biggest challenge was that the entrepreneur
ve
did not want to delegate his responsibilities and was willing to provide personalized
gifts to various customers all over the country. The need for business expansion gave
entrepreneurs an idea of starting a website and an online shopping application for the
company.
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Initially, the company was only dealing in providing products to the customers and
was only responsible for providing after-sales services to the customers. But when the
company identified that customers can become innovators for the company they started
U
collaborating with different customers. The company started to make personalized gifts
ideas from customers that could fulfill the requirements of a large customer segment.
The major objective of involving the consumers in the business was to create customer
engagement and fulfill the requirements of a large customer segment through an online
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platform.
The entrepreneur analyzes the need for customer interaction in the business and
wants every employee of the company to focus on customer satisfaction and more
engagement of the customers. This could not be possible without the use of the internet
m
and technology. The company creates its customer loyalty and greater interaction with
the consumers through digital media and various social media platforms. The company
is engaged in targeting the consumers based on personalized messages and greetings
)A
on their special days. This is making consumers more delighted towards the company
and is also giving a reason to the consumers to purchase the product from the company
on their special days.
The company even provides after-sales services and it is now expanding the
(c
business by separating the production and delivery of the products. The entrepreneur
has the vision of collaborating with local suppliers and supply chain management so
that it becomes easier for the company to deliver the products and services to the

local market in an effective manner. By collaborating with different suppliers the major
Notes
e
objective of the entrepreneur is to focus on only products and services rather than
focusing on the delivery of the products.
in
For this reason, the company has collaborated with various delivery partners to
reduce the cost of delivery and maintain good relations with the customers. The delivery
partners have good relations and are more experienced in their services and could
nl
better handle the customer queries. For this, the company has outsourced its product
deliveries and is only handling the business products and services.
The goal of the company is not only to deliver personalized gifts and decorative
O
items to the consumers but the company is also planning to launch its business
products with the brand name. This will help the business organization in expanding the
business and increase the revenue of the company.
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The company is using various types of technologies in the business such as
sensor-based product delivery and digital assistance for easy handling of the queries.
The company is also planning to involve highly automatic robots in the business
for easy management of the work in the company and management of the product
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deliveries. The need for market and high competition is encouraging one Mart to work
with highly automatic and specialized technologies.
r
Artificial is being included in the business for easy flow of products and services
and solving of the business queries. Artificial intelligence is also making it easier
ve
for business organizations to communicate and engage with customers on a digital
platform. The use of automatic packaging systems through digitalized packaging
technologies is making it easier for the business to maintain the quality of the packaging
and deliver similar types of products to the customers every time.
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The market requirement has encouraged one Mart to implement various

technologies and make the business function very easy. Different technologies are
being used by the business to handle the product and the company’s even planning to
U
include automatic small delivery cars to make the delivery of the products secure and
very easy.
Implementation of unique and advanced technology in the business will increase

ity
the revenue and growth of one Mart’s future. The market is full of competition and one
Mart is engaged with providing better quality and specialized products to the consumers
with maximum use of technology to make the business functioning easier and safer.
1. What are the various technology-enabled trends adopted by one Mart for
m
marketing the product and engaging the consumers?

2. What are the different emerging new technologies adopted by one Mart to get
a competitive advantage in the market and increase customer engagement?
)A
(c

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SLM Review Committee

Ms. Nitika Khanna

Ms. Mona Chaudhary

1.4.2 Innovation and Entrepreneurship

1.5.2 Growth of Entrepreneurship

1.5.5 Ten steps to become an entrepreneur

Module -2: Evaluating Entrepreneurial Options and Startup Opportunities 106

2.1.3 Methods for Identifying New Project Ideas

2.6.6 External Sources of Finance

2.6.9 Venture Capital

3.1 Financial Projections

3.1.3 Steps to making financial projections for your new business

3.2.1 Importance of a business plan

4.1.1 Entrepreneurial challenges as an individual

4.1.4 Entrepreneurial Motivation

4.1.7 Measures to improve morale

4.2.2 Sole Proprietorship and its features

4.2.5 Advantages and disadvantages of Joint Hindu Family Business

4.2.9 Types of cooperative Societies

5.1.6 Technology intelligence : opportunites and threats

5.2.2 Unique Benefis of TBI

5.2.5 Special Considerations for Nascent Incubators

5.3.2 New Technology based companies

5.4.1 Corporate Versus Intrapreneurial Culture

Module -1: Introduction

1.3.2 Types of Entrepreneurs

1.4.2 Innovation and Entrepreneurship

1.5.1 Importance of Entrepreneurship

1.5.3 Entrepreneurial Culture

Amity Directorate of Distance & Online Education

Unit - 1.1: Concept of Entrepreneurship

●● Explain the concept of entrepreneurship.

Entrepreneurship involves a complicated process for making optimum utilization

The major objective of any entrepreneur is to be involved in risk-taking activities so

Entrepreneurship includes the risk of an entrepreneur to make a profit and

generation activities in the market. An entrepreneur or an individual is not only

Amity Directorate of Distance & Online Education

of a product, however, as an entrepreneur, but the individual is also responsible towards

●● Profit motive- The major objective of starting a business in the market is to

to resources for production. A balanced allocation of resources must be done by

Amity Directorate of Distance & Online Education

Need for entrepreneurship

●● Dream- It is the dream of many people to start a business and to develop

demands of the customers in the market. The company is established to

●● Become a market leader- The entrepreneur must have an objective of

of a country. When a country encourages international business through

countries’ cultures encourages and improves the living standard of a country.

1.1.2- Scope of entrepreneurship

Amity Directorate of Distance & Online Education

●● Desire to grow in the future- The need for entrepreneurial activity is

a newly established business with a highly customer-centric organization will

entrepreneur brings an idea that promotes environmental change and does

1.1.3 Entrepreneurial mindset

Amity Directorate of Distance & Online Education

adopt it as a positive opportunity.

An entrepreneurial mindset will include the educational qualification and the

An entrepreneurial mindset constitutes a specific set of beliefs and thoughts that an

●● The mindset should always focus on achieving the objectives of the

entrepreneurial learning experience can be developed.

Ways to Develop an entrepreneurial mindset

●● Be positive- In a world full of competition, the entrepreneur will fear loss