Business Idea 

Business Idea Topics:

» Introduction to Business Idea
» Creative Process
» Methods of Idea Generation
» Screening of business Ideas
» Importance of Idea Screening
» Government Support To Entrepreneurs
» Institutional Support System
Introduction to Business Idea
Every new business, new product or service and new marketing approach has started with
an idea. Generating new ideas can be a very burdensome task. Putting them into practice
can be much harder. Once an idea strikes, a person has to fill in all the details of what he
wants to achieve and how he is going to achieve it.

A good idea is nothing more than a tool in the hands of an entrepreneur. Finding a good
idea is the first step in the task of converting an entrepreneur’s creativity into an
opportunity.

The importance of the idea is often over-rated, usually at the expense of under-
emphasizing the need for products or services, or both, which can be sold in enough
quantity to real customers.

Further, the new business that simply bursts from a flash of brilliance is rare. What is
usually necessary is a series of trial – and – error iterations, or repetitions, before a crude
and promising product or service fits with what the customer is willing to pay for. For
example, Howard Had made forty different metal skis before he finally made the model
that worked consistently. With surprising frequency, major businesses are built around
totally different products than those originally envisioned.

There are three major hurdles to overcome before any idea can come to fruition:
1) Identify a problem,
2) Idea generation,
3) Idea selection.

Categories of Idea Selection

The idea selection usually centers around the following broad categories:

1) Product where the entrepreneur has firsthand manufacturing experience.

2) Product where the entrepreneur has the marketing work experience with the particular
product.
3) Product which is perceived as highly profitable.

4) Product where government has banned imports.

5) Product where the export demand is high and with good margins.

6) The raw material requirement of an existing nearby big unit.

7) The location advantage of raw material/ other resources.

8) The products encouraged by the government agencies.

9) Products on which government declares subsidies, incentives, other industrial/

financial benefits.

10) Products where there is demand growth.

While discussing about generation of ideas for the new enterprise, the project stages are
to be discussed. The district phases are:

1) Pre- project phase which consist of idea stage, concept stage, product development
stage and test marketing stage and

2) Commercialization phase and product life cycle which includes introduction phase,
growth phase, maturity phase and decline phase.

Any project goes through pre-project detailed above, wherein the evaluation is made at
each stage and only stage- wise dimensional and poses problems. It is necessary to
examine and analyze the nature and extent of problem and to choose the best of the ideas.

Idea Generation
Idea generation stage is the first step in any entrepreneurial activity. As many as new
product ideas are developed in idea stage. Impractical ideas are dropped. Ideas which
employ the maximum of available resources be taken up for further evaluation. The ideas
should take care of customer requirements.

• Type of need
• Timing of need
• Competitive way to satisfy the need
• Perceived benefits and risks
• Price versus performance
• Market size and potential
• Payment capacities of customer
• How you meet the competition from existing or substitute product/s?

Business idea generation is a search for opportunities for new avenues of growth in
business. As per peter Drucker the opportunities are of three types:
1) Additive Opportunities: Here better and intense utilization of existing resources is
called for from the decision makers. This also means changes in production and
marketing strategies.

2) Complementary Opportunities: Bring new ideas in existing products or bring in value

addition or changes desired in the market. Here character of business is likely to change
the risk in business increases.

3) Breakthrough Opportunities: New product, new areas, new technologies bring in

fundamental ideas. Breakthrough changes structure, strategies and business character. The
element of risk is the highest and is combined with highest gains in case of success.

The following steps are involved in searching and selecting business idea:

1) Creating business ideas.

2) Study and process the ideas.
3) Select the best idea.

The ideas are generated from various sources and put for preliminary evaluation and
testing. Once the business ideas are generated, study, screening and testing of these ideas
is done based on the entrepreneur’s own experience or with the help of experts in the
field.

Creativity and Innovation in Idea Generation

The terms creativity and innovation are often used to mean the same thing, but each has a
unique connotation. Creativity is “the ability to bring something new into existence. This
definition emphasizes the “ability,” not the “activity,” of bringing something new into
existence. A person may therefore conceive of something new and envision how it will be
useful, but not necessarily take the necessary action to make it a reality. Innovation is the
process of doing new things. This distinction is important. Ideas have little value until
they are converted into new products, services, or processes. Innovation, therefore, is the
transformation of creative ideas into useful applications, but creativity is a prerequisite to
innovation.

Creativity is the ability to bring something new into existence. Innovation is the
translation of an idea into application, which has a commercial value. Creativity is a
prerequisite for innovation. It can be develops new alternatives and offers innovative
solutions.

This can be done by:

1) Adding Product Features: A job which is hard to do can be made easier for example
electric mixers and grinders have dramatically reduced the labour expended in Indian
Kitchens. Another example is that of the Courier service which has almost threatened the
functioning of the Indian Postal Service.

2) Cutting Cost: The entrepreneur can change the expensive product for example the
prices of computers and cell phones have come down drastically,
3) Simplifying operations: Through creative distribution and financing for example these
days’ loans for washing machines, televisions are given by the seller many a times.

Creative Process
Clearly, action by itself has no meaning; it is of little value to simply “do things” without
having inspiration and direction. Entrepreneurs need ideas to purse and ideas seldom
materialize accidentally.

Ideas usually evolve through a creative process whereby imaginative people germinate
ideas, nurture them, and develop them successfully. A model of the creative process is
shown in figure:

Incubation: Ve
Idea Generation: The Preparation: Conscious Illumination:
Subconscious Applic
seeding stage of a new   search for knowledge     Recognition of idea  
assimilation of prove
idea Recognition Rationalization as being feasible
information Fantasizing V

Stages in the Creative Process

Various labels have been applied to stages in the creative process, but most social
scientists agree on five stages that we label as idea germination, preparation, incubation,
illumination, and verification. In each stage, a creative individual behaves differently to
move an idea from the seed stage of germination to verification, behavior varies greatly
among individuals and their ideas:

1) Idea Germination: The germination stage is a seeding process. It is not like planning
seed as a farmer does to grow com, but more like the natural seeding that occurs when
pollinated flower seeds, scattered by the wind, find fertile ground to take root. Exactly
how an idea is germinated is a mystery; it is not something that can be examined under a
microscope. However, most creative ideas can be traced to an individual’s interest in or
curiosity about a specific problem or area of study.

2) Preparation: Once a seed of curiosity has taken as a focused idea, creative people
embark on a conscious search for answers. If it is a problem they are trying to solve, then
they begin an intellectual journey, seeking information about the problem and how others
have tried to resolve it. If it is an idea for a new product or service, the business
equivalent is market research. Inventors will set up laboratory experiments, designers will
begin Engineering new product ideas, and marketers will study consumer buying habits.

3) Incubation: Individuals sometimes concentrate intensely on an idea, but, more often,

they simply allow ideas time to grow without intentional effort. We all have heard about
the brilliant, sudden “flashes” of genius, but few great ideas come from thunderbolts of
insight. Most evolve in the minds of creative people while they go about other activities.
The idea, once seeded and given substance though preparation, is rut on a back burner;
the subconscious mind is allowed time to assimilate information.

4) Illumination: The fourth stage, illumination, occurs when the idea resurfaces as a
realistic creation. The fixable of the thunderbolt is captured in this moment of
illumination-even though the often long and frustrating years of preparation and
incubation have been forgotten.

Illumination may be triggered by an opportune incident.

The important point is that most creative people go through many cycles of preparation
and incubation searching for that incident as a catalyst to give their idea full meaning.
When a cycle of creative behavior does not result in a catalytic event, the cycle is
repeated until the idea blossoms or dis. This stag is critical for entrepreneurs because
ideas by themselves, have little meaning.

5) Verification: An idea once illuminated in the mind of an individual still has little
meaning until verified as realistic and useful.

Entrepreneurial effort is essential to translate an illuminated idea into a verified, realistic

and useful application. Verification is the development stage of refining knowledge into
application. This is often tedious and requires perseverance by an individual committed to
finding a way to “harvest” the practical results of his or her creation. During this stage,
many ideas fall by the wayside as they prove to be impossible or to have little value.
More often, a good idea has already been developed, or the aspiring entrepreneur finds
that competitors already exist. Inventors quite often come to this harsh conclusion when
they seek to patient their products only to discover similar inventions registered.

Components of the Creative Process

The creative process has three district components:

1) Motivation: Initial motivation which provides stimulus for processing information and
exploring alternative solutions.

2) Skills in the Task domain: The extent of the knowledge, talents and technical skills of
the entrepreneur will help in his search for solutions, pin pointing an idea and verifying
the idea.

3) Skills in Creative thinking: These will help him to visualize different solutions,
generating a number of alternatives, se divergent uses of a single idea etc. to come up
with a workable idea or plan.

Elements of the Good Idea Generation Process

It seems incongruous that good idea generation can be a process or that a process may
lead to insight. However, it you examine the behavior of people who regularly generate
good ideas- such as creative in advertising you will find that common patterns of
behavior do emerge and it is possible to make insight more likely.

Some elements of the good idea generation process are:

1) Creativity is often triggered by the need to solve a problem: People who generate good
ideas tend to clearly identify the problem through a tangible process. They will look at a
problem from various perspectives, create multiple definitions of it and ask many others
to contribute to the precise nature and basic qualities of the problem as they see it.

2) Problems require intense investigation: People who generate good ideas intensely
investigate the problem using various knowledge bases and information sources. This
allows frame breaking, reduces path dependency and parochialism and allows the
intellectual cross- pollination that gets people thinking in new directions.

3) Forced productivity: People who come up with good ideas force themselves to produce
ideas without evaluating those ideas. They will separate creative from critical thinking
and simply bash out ideas using a variety of techniques. Common methods involve
linking to diverse objects and concepts, vertical and lateral thinking techniques. They will
regularly maximize the size and quality of their idea pool. This patterns the mind into
seeking answers and triggers cognitive activity at multiple levels.

4) Seek stimuli: People who think of good ideas seek out stimuli from novel, diverse and
numerous sources. The range of stimuli is infinite and this tends to suit people who have
or benefit from a lifelong interest and curiosity in many subjects.

5) Constant conscious thought: People who generate good ideas constantly think about
the problem at all times. Often they describe themselves as incapable of thinking of
anything else, no matter what distractions may be present. Hence the common occurrence
of descriptions such as “obsessed,” “single- minded” ”preoccupied,” “compulsive,” “
consumed,” “captivated,” “infatuated,” “absorbed,” “immersed,” “possessed,” “hooked”
and so forth.

6) Engagement in rest and unrelated activities: People who generate good ideas will allow
for rest and engagement in unrelated activities, which allow unconscious processes to
take over. It is at this point that insight is common in something completely unrelated.

7) Incubation: Following intense cognitive activity, it may be that the problem is set
aside. A solution may present itself at any point thereafter.

Sources of Idea Generation

1) Consumers: A new venture or an existing organization have to constantly update and
meet the requirements of the customer in view of the fact that customer is the fountain
head of business and he is the one who keeps it going.

Interaction with the customers and observation of, customer reacting gives choices of
ideas for new opportunities.

Data and consumer requirements, consumer complaints, preferences be studied and

catalogued in a systematic manner to arrive at qualitative data for decision making.
Surveys are conducted initially for a limited number of products and targeted section of
consumers to enable an entrepreneur to limit the range of products. The consumer surveys
will be able to give data of availability of similar products in the market, competition in
the market, popularity of the products, substitution that are being used and what a
consumer expects from a range of products.

Changing tastes of consumers has brought in fast foods. For example, Noodles were
introduced in India in early 80’s nestle targeted school children of class I to IV and
distributed free samples. These children built up the noodle taste and market in India.

2) Existing Companies: The products manufactured by the existing companies give a

broad view of the competition, the volume of market, price trends and demand patterns.
The existing company data also gives the profitable line of business, the scare areas and
the best manufacturing trends of the product. The analysis of the printed catalogues,
annual reports give an idea of demand pattern, segment-wise profitability and strategies
being adopted by the industry for marketing their products.

Development in other nations regarding thee consumer trends, consumer behavior and
fashion statements generates ideas to know the “in things” in the market. It is well known
that the products as on date that sell in developed countries become the products of
tomorrow in development nations. An entrepreneur hence has to keep in touch with the
developments in the markets in developed nations. Entrepreneur visits foreign countries,
foreign companies and their markets to search new products, services, processes and
trends.

The study existing companies has considerable influence on the generation and selection
of ideas:

i) Export potential
ii) The Government Incentives
iii) High profit areas
iv) Products where demands exceed supply
v) Scarce areas where demand is good
vi) Ideas for new products or services where government incentives and subsidies are
readily available.

The new ideas are generated from the input requirements of various existing companies,
and especially so, if they are imported items. New ideas are also generated from
observation of the nature of competition, the attitude of the competitors regarding
particular products or certain market areas and comparing the price positioning and
quality of similar products.

3) Existing Products and Services: Detailed observation and analysis of market

requirements of the existing products germinate new business ideas in the area of:

i) Products which give specific advantages to customers,

ii) Products with value addition,
iii) Products with value addition,
iv) Product for which government extends consider growth areas and extends industrial
facilities and incentives,
v) Products where imports and banned or restricted by government policies,
vi) Products where manufacturing raw- materials are readily available such as mining and
metallurgical units,
vii) Products where large infrastructure is made available by the mother unit for the
ancillary or in case of service units the industrial parks are developed for specific
products. The example is that of software parks, export zones and the like.

Business ideas can be generated from creative approach to the existing products such as
review of the product designs, applying stat of technologies for manufacture, use of new
materials and adding value to the end users or customers.

Evolution of new products and services is one of the business functions and be organized
effectively for growth of new ideas.

The automobiles selling companies taking up service contracts. Oil companies adding
new fuel additives or lubricants like Balmer Lawrie Lubricant, Indian Oil Corporation
and Hindustan Petroleum Company Limited Engine oils are examples in this category.

4) Substitutions; Use of new materials of construction, new processes alternate use of

items to new areas is called substitution.

i) Shortage of few raw materials leads to search for substitution materials.

Use of PVC pipes in electrical lines and water lines is common example of substitution.
In olden days there were cast spun pipes, then came thin walled pipes now taken over by
PVC pipes.

ii) Scarcity of imported materials, proprietary items, patented spares and components also
lead to substitution work. In developing country like India import substitution work yields
ideas for new equipment’s, new parts and new materials as business.

For example, poly Vinyl Chloride (PVC) doors, chairs, tables are substitution of wooden
materials. Aluminum cast parts in place of steel parts in two wheelers and automobiles.
Replacement of Gel Ink in ball point pens in place of thee conventional ink idea gave a
large business.

ii) Middleman: The different category of middlemen who provide useful ideas for new
projects can be categorized as under:

i) Contractors and Middlemen in the value Chain: they are involved with manufacturing,
handling, transportation, storage and allied activities connected with manufacturing and
are also in constant touch with the changes in market, further processing units and
customers. The generation of ideas from this segment will be helpful to supplement and
rationalize/ focus on few ideas.

ii) Media and Trade magazines: Print and electronic media have emerged as fertile
sources as fertile sources of project ideas. Television show the trends in consumer
preference fashion segments and life styles. The trade and professional magazines give
the details and statistics of growth areas of markets and investment opportunities. The
professional magazines also give the trends and developments in any particular field of
specialization.

iii) Research Institutes: regular research data, bulletins are good sources of information
for developing new project ideas. Correspondence with the research institutes or
correspondence and search for thee relevant data may crystallize useful project ideas.
Government research institutes and departments also publish industry data or periodical
changes in the economic structure of the society, trends of growth of economy which are
used for generation of new ideas.

iv) Technology Suppliers: In global markets consultants, market research agencies and
technology suppliers play an important role in providing ideas for new products, new
processes and data for sunrise products. The specialization and experience of global
markets and consumption patterns give consultants a better appreciation and generation of
new ideas.

iii) Channels of suppliers and marketers: The middlemen in marketing and purchases,
namely agents, distributors, whole-sellers, retailers, suppliers, quality assessors know the
pulse of markets. They provide valuable market information and intelligence in the fast
changing and turbulent business environment. They provide vital information and
intelligence in the changing and turbulent business environment. They provide vital
information broadly in the area of:

i) Sources of raw materials and price components

ii) Size and nature of demand for product and services
iii) Volume, cost, price relationships
iv) Substitution materials and comparison
v) Leading players and small players in the market for the range of products
vi) Degree of competition
vii) Demand supply position
viii) Sectorial growth patterns arid seasonal variations in demand
ix) Growth areas
x) Geographical distribution of demand and supply
xi) Data of existing competitors and product data
xii) Customer profiles and preferences
xiii) Emerging products and services

Advice of professional experts like dealers, commercial consultants, bank managers,

advertisers generate new business ideas. Systematic data collection from middlemen
gives new business ideas.

iv) Research and development: organization has to provide resources, necessary

infrastructure for generating new enthusiastic about the innovations.

Help is taken by large research and development establishment outside with collaborative
arrangements to search new business avenues.

With the globalization enough to merit more attention.

For example, Sony Walkman was a result of Sony research and Development of Sony
Corporation. It was integrated marketing team approach that developed Walkman.
Development of fiberglass components, glass coated valves are research and
Development idea examples.

v) Government policies: Government of India and all State Governments have sponsored
different organizations to help entrepreneurs in search, coordination and evaluation of
business ideas.

The five year plans, industry policy resolutions and incentive schemes from time to time
help an entrepreneur in choosing business ideas.

Government organizations also arrange industry trade fairs and exhibitions and arrange
theme seminars to attract industries and channelize the national resources for better
productivity. An entrepreneur gets chance to see the products that are displayed in the
exhibitions, get information about new product/ processes/ markets and discuss with
people from different organizations regarding:

i) Meeting buyers and sellers,

ii) Getting the feel of the market and assessing the trends regarding demand and supply
position of new products.
iii) The market competition in the area,
iv) Evaluating the criteria like quality, quality. Price and substitute materials available for
the product,
v) Develop personal contracts with different people involved in the product or its value
chain.

Methods of Idea Generation

It is also necessary that an entrepreneur uses several methods to generate and test new
ideas. The methods generally used are:

i) Focus groups
ii) Brainstorming
iii) Check list
iv) Problem inventory analysis
v) Synectics
vi) Mix of above methods

1) Focus Group: In this method a group of individuals discuss and provide information
in a structured format to arrive at new business ideas. A leader or a moderator sits with
group of people and discussions are held in a free frank manner regarding new ideas for
industries or services.

i) Leader acts as a moderator of creative thinking of focus group.

ii) The group generally consists of 10 to 14 participants and all members take part in the
discussions.
iii) The new ideas are directed towards market needs of today and needs of tomorrow.
iv) The groups consisting of end users generally give for new products.
v) The groups also give how the product should be marked, how should be packaged and
how the advertisement be made.

The data received from various groups may be analyzed on realistic basis or
quantitatively to short the new ideas.

Use: The method is generally used for choosing apparel designs, jewellery designs,
cosmetics, health care products and the like.

Applicability: For generating new ideas the method of discussion with focus groups is
less time consuming and a practical approach.

2) Brainstorming: Brainstorming is a group method for obtaining new ideas and

business solutions.

The groups are organized for sitting together and stimulate greater creativity by exchange
of mutual experiences and participating in the discussions. The brainstorming ideas are
canalized to a particular segment of product line or services. The method of conducting
brainstorming sessions are:

i) The group should be informed of the broad areas of the subject or area of discussions.
ii) The group should consist of people drawn from different streams of knowledge such as
marketing, production, quality control, planning, finance, costing, stores, handling,
taxation and the like. The group also should consist of different levels of officers,
supervisors from the organization.
iii) The brainstorming session should be held in a good place with ambience. So, that the
group coms open with their ideas.
iv) The member should have no inhibitions about their status in the organization or
department where they serve. The session should be frank and be fun. The brainstorming
sessions are held where no individual or group dominate the discussions and no boss-
subordinate relationships.
v) Day dreaming or wild ideas to be encouraged.
vi) There should not be any negative comments or criticism against any particular
individuals or groups or departments,
vii) The ideas of one can be improved by others but no repetition of ideas. Each
individual may be given a chance to three ideas and these ideas be recorded on a flip chart
or black board. All the ideas be recorded on the flip chart even if one idea is not practical
or ill-logical.

Based on the above broad ideas a general format can be evolved, wherein the
brainstorming sessions could bring greater number of ideas and hence chances of
emergence of more useful ideas.

Applicability: This method is extensively used for generating ideas for new product
packing and distribution.

Reserve Brainstorming: A method similar to brainstorming is used wherein criticism is

allowed for obtaining new ideas. In this method the focus is given on the negative aspects
such as, “ how the idea fails” or “why the product be changed.” By asking questions the
new ideas are generated by innovative thinking. The way of negating and generating
discussions over the problems is called Reserve Brainstorming.

3) Check List: The new ideas for the business are developed based on discussions on list
of related issues. A specific area of discussions is listed by entrepreneur and a list of
questions, suggestions and statements are developed for in-depth discussions and arrive at
a business idea. The type of questions for a particular product may be: i) Who uses the
product? How it is used? Why at all the item is used?
ii) What are the new ways of usage of the product?
iii) Can the product be modified for better value to the customers?
iv) What are substitutes available in the market? How they are competitive? Can we
combine the features to develop a new product?
v) Can a copied and improved product will add value?
vi) Can we modify?
vii) Can we change the shape, color, packing of the product? Can we make it larger,
smaller or increase frequency or add new ingredients?
viii) Can we bring a substitute product?
ix) Change processes, make it smaller or make it lighter?
x) Use different materials of construction, combine units, change appeal, change purpose,
bring more positive aspects that attract customers?
xi) What products are being used in other countries and why?
xii) What are the new emerging products in the particular product range?

4) Problem Inventory Analysis: It is a method of obtaining new ideas and solutions for
business by focusing on the problems. In this case the individuals are used similar to
focus groups for generating new business ideas. The group discusses a category of
products.

i) The group is given the problems that are commonly felt by consumers, dealers,
transporters and general public.
ii) The discussions are more focused and related to a particular product and problem
suggested by many on the particular product.
iii) The method may not give times new, entirely new, product ideas but it may add to the
value of the existing product.

In small business enterprise like small-scale industry or cottage industry the owner
himself does the problem inventory analysis by discussing with his close associates in the
organization. The problem inventory analysis also should take care of the discussions on
all the relevant and related aspects and see that the problem in one area does not become a
headache in other areas.

Gordon Method: When group members do not know the exact nature of the problem the
method of developing new ideas is called Golden Method. In the Golden method the
entrepreneur gives thee general concepts associated with the problem to the group who
respond by their suggestions. The actual problem is revealed to the group at the end of the
discussions. With further discussions and refinements the new ideas for business are
generated in the Gorden Method.
5) Synectics: Synectics is a creative method of generating new business ideas through
one of the four analogy mechanisms namely direct, personal, symbolic and fantasy. A
group related to a product work in two steps:

i) Familiarize with the product and thus removing the unknown elements of vagueness
about the products.

Stage 1
Problem Solution
Problem Analysis
Identify the elements of problems to families’ entities

Stage 2
Use of analogies
Speculation
Fore Fit
Solution
6) Mix of Above Methods: An entrepreneur may use one or two of the above discussed
methods for generating new business ideas. The product category, consumers
segmentation, time frame may force an entrepreneur to resort to the mix of the above
methods to seek new product ideas. The recent use of e-commerce and electronic
communication methods has the methods of seeking the new business ideas and
squeezing the time frames.

Any new business idea in e-commerce areas has two major components of internet—front
end and back end operations. Front end operations are mainly concerned with the
functionality of the website. The second and important stage is back end operation where
it is necessary that there should be seamless integration between customer orders,
distribution channels and manufacturing capabilities and make them flexible to handle the
specific requirements of the customers.

The challenge is the integration of front end and back end operations to maintain the
competitive advantage.

The existing companies when they go in for e-commerce as a new area of business
development face few problems such as:

I) The product type should help shipping to different geographical locations.

II) Web operation should bring substantial cost reductions as compared to the present
business.
III) Attracting customers to the new web-site.

When a Brick- and –mortar company takes up e-commerce it has to analyze and solve the
problems of cost benefit, synergy of combination of both type of marketing and resolve
channel conflicts between them.
Screening of business Ideas
The screening stage has two major purposes. The first is to eliminate ideas that are clearly
unworthy of further consideration and the second is to select from among the remainder
those with enough promise to warrant exploratory work by technical research. The object
is to eliminate unsound concepts prior to devoting resources to them.

Idea screening is the process of reviewing the available ideas in terms of their feasibility
and viability to know the profitability of ideas available.

Screening Ideas and Making Preliminary Investigations

Having a strong stream of ideas is a good starting point. The more the ideas that can be
generated the lower the cost per idea produced. Beyond this, the effectiveness of a
company in spotting good and bad ideas comes into play. The earlier it can discard ideas
that have no real potential, the better. For this reason there is value in having a screening
process for each idea that establishes it very quickly as good or bad. There are some
criteria that are fundamental and that can be applied first:

1) Company ability to make the offering,

2) Fit with company production capabilities or technical expertise,
3) Fit with company objectives and image,
4) Market sales and profit potential, and
5) Fit with current offerings and distribution channels.

This initial screening will remove the weakest ideas from further scrutiny in the most
efficient way. The remaining ideas can then be subjected to further screening. This
incorporates preliminary investigations of how customers will react to the offering and
how competitors will respond.

Feasibility of Business Idea

After choosing a business idea, test the idea to gain a sense of its feasibility .Some
business owners pick an idea and immediately move forward, but it is much better to
pause and spend some time scrutinizing the idea.

The proper sequence in thinking through the merits of a business idea and launching a
business is as follows:

1) Identifying a business idea,

2) Screening and testing thee idea to determine its initial feasibility,
3) Writing a business plan,
4) Launching the business.

Complete this process to avoid falling into the” everything about my idea is wonderful”
trap. All business ideas have strong and weak points, and everybody should be aware of
both before proceeding. In addition, studies have shown that prospective business owners
tend to overestimate their chances for success. As a result, one needs to gain an objective
assessment of its potential. There are four areas to be considered in testing the initial
feasibility of a business idea:

1) Product/ Service feasibility: Determine if the proposed product or service is desirable

and services a need in the description of the product or service and its benefits,
i) A description of the product or service and its benefits,
ii) The intended target market,
iii) A description of how the product or service will be sold,
iv) A brief description of the company’s initial management team.

After developing the statement, one should show it to ten to fifteen people who can
provide informed feedback. Attach a short survey to the statement that asks the
participants to:

I) Tell you the things they like about the product or service idea,
II) Provide suggestions for making it better,
III) Tell you whether they think the product or service idea is feasible , and
IV) Share additional comments or suggestions, tally, read, and evaluate all responses.

Instead of developing a formal concept statement, some prospective business owners

simply talk about their idea with people and gather informal feedback. Either approach is
valid as long as the feedback you obtain gives you a good sense of the feasibility and
desirability of your product or service idea and any areas in which it might need to be
tweaked or strengthened.

2) Industry/ Niche Market feasibility: The second area to explore is the industry of

which your business will be part of and the niche market you plan to go after. The most
attractive industries for new business have the following characteristics:
i) Are large and growing rather than small and shrinking,
ii) Are early rather than late in their lifecycles,
iii) Are important to their customers(by selling products or services that people “must
have” rather than “ would like to have”),
iv) Feature environmental trends moving in favor of the industry,
v) Have high rather than low operating margins.

You should also assess the attractiveness of the specific niche market that has planned to
target. An ideal market for a start-up is one that is large enough for the proposed business
but small enough to avoid attracting larger competitors.

Finding good information on your industry and niche market takes a little work. The best
place to start is to tap into the resources available at a university or large public library.
Industry trade journals and magazines also provide information. Talking to business
owners who are part of the industry that you have planned to enter is another option.

3) Organizational Feasibility: The third area to explore is whether the proposed

business has sufficient managerial know-how and expertise to be launched and
successfully managed. This task requires the people starting the business to be honest and
candid in their –assessments. The two most important factors are the passion that the
individuals have for the business and the extent to which the people involved understand
the industry in which the business will complete.

There are other people – related factors that have been linked with linked with start-up
success:
i) Relevant industry experience or prior business start-up experience,
ii) Experience and expertise in cash flow management,
iii) Access to mentors or people who can provide start-up advice,
iv) Level to creativity,
v) Undergraduate or graduate degree.

While you do not have to score high on each of these factors to be a successful business
owner, looking over this list. Combined with how passionate you are about the business
and how well you understand the industry in which the business will compete, should
give you a general sense of how prepared you are to start the proposed business.

You need to have a sense of how much it will cost to launch the proposed business.
Prepare a preliminary budget that lists the operating expenses and capital purchases
required to get the business up and running. After you arrive at a total figure, provide an
explanation of where the money will come from. If you expect the money to come from a
bank loan, from an investor or from friends and family, step back and consider how
realistic those options are.

It is also good to get a sense of a proposed business’s financial potential by comparing it

to similar, established businesses. Again, you will have to do some work to find the
information you need. If you identify a business that is similar to the one you want to
start, and the business is not likely to be a direct competitor, it is not inappropriate to
contact the owner or manager and ask about the business’s sales and income. Even if the
owner is only willing to talk in general terms (“our annual sales are in the $2 million
range and we are netting between $150,000 per year”), that information is better than
nothing. Internet searches are also helpful. If you are interested in starting a fitness center,
e.g., typing “fitness center sales and earnings” into the Google search bar results in links
to articles about fitness centers that discuss sales and earnings data.
Importance of Idea Screening
Minimize Risk while Maximizing return     Decide what is Important
       
   Screening Entrepreneurial Ideas   
       
Make Best Use of Limited Resources     Identify Strengths and Weakn

1) Minimize Risk while Maximizing Return: The first reason that idea screening is
important is that it forces the entrepreneur to decide what’s important in the
entrepreneurial venture. What are the goals of the entrepreneur in pursuing this venture?
Potential ideas should be evaluated against what’s important to the entrepreneur.

2) Decide What is Important: The second reason that idea screening is important is that
all ideas are not created equal. Some ideas that an entrepreneur comes up with; will have
better chances of success than others. By evaluating the strengths and weaknesses of each
idea, the entrepreneur is forced to identify and assess the strong and weak points. Think
again of a time when you made a major purchase.
3) Make Best Use of Limited Resources: The next reason for idea screening is
important has to do with the reality of limited resources. Most entrepreneurs have limited
amounts of money, time, people, or other resources that will be needed to pursue their
entrepreneurial ideas. By evaluating your entrepreneurial ideas, individual can make sure
his choice(s) make the best use of those limited resources.

4) Identify Strengths and Weaknesses of Ideas: Thee final reason why idea screening is
important has to do with the desire to minimize risk while maximizing return.

After generation of “brilliant” business ideas to keep business ideas in check, in all big
companies there is some sort of idea screening process. Most of the time, the problem
with ideas is that the ideas are brilliant but not very feasible in the real world.

Errors in Idea Screening

In screening ideas, the company must avoid two types of errors:

1) DROP Error: It occurs when the company rejects a good idea. IBM thought the
market for personal computers would be too small to operate.

2) GO Error: It occurs when the company permits a poor idea to move into development
and commercialization resulting into product failures. There could be 3 types of failures:

i) Absolute Product Failure: When the sales do not cover variable cost and the company
loses huge amount of money.

ii) Partial Product Failure: The sales cover all variable costs and some fixed costs and
company incurs a marginal loss.

iii) Relative Product Failure: The company makers a profit but not as expected by the
management.

Government Support To Entrepreneurs

Introduction to entrepreneurial Support
Entrepreneurship was potential to support economic growth and social cohesion; it is the
policy goal of many governments to develop a culture of entrepreneurial thinking. This
can be done in a number of ways; by integrating entrepreneurship into education systems,
legislating to encourage risk- taking and national campaigns.

Many of these initiatives have been brought together under the umbrella of global
entrepreneurship week, a worldwide celebration and promotion of youth
entrepreneurship. Various institution developed by government at different levels also
encourage entrepreneurship.

Sources of Entrepreneurial Support

Three sources of entrepreneurial support are:
1) Progressive Policies: They help entrepreneurial ventures.
2) Business Incubators: They are set-up to provide support to new firms in the early
stages.
3) Business Clusters: They are made-up of firms in the same industry in close proximity
to one another.

Policies
Governments across the world have realized the significance of small entrepreneurial
firms in the economics and social welfare of the nation. Even though the magnitude and
nature of the contribution of small enterprises continues to be debated, governments’
awareness of the role of new enterprises has grown appreciably.

In most advanced nations, the government has come-up with very progressive policies
encouraging small enterprises. In many developing and underdeveloped nations too, there
is a lot of policy- level support for new enterprises. Many times, these policies are backed
by financial and administrative support from many international agencies such as
UNIDO, UNDP, the World Bank and others. Public policies are those policies that use
government funds to directly or indirectly target new enterprises.

Types of policies
There are various entrepreneurship policies initiated throughout the world. These policies
are grouped according to their objectives. Entrepreneurship policies have a variety of
objectives. It must also be noted that many of these policies have more than one
objective, Sometimes, these complex combinations of objectives can seem to be
conflicting with each other.

1) Entrepreneurship Education: Entrepreneurial awareness has been included in the

curricula of a number of schools and colleges across the world. The objective is to foster
an entrepreneurial outlook among the children and the youth. In India, entrepreneurial
education has been included in the curricula of many business schools and engineering
colleges; but there have been no significant attempts to include it in school curricula.

2) Entrepreneurial Skills: policies aimed at developing entrepreneurial skills among

potential entrepreneurs have been adopted across the world. Initiatives have been reported
from Chile, Spain, Thailand, Australia, and many other countries. In India,
Entrepreneurship Development Institute of India (EDII) has been instrumental in rolling
out a number of long-term and short-term courses focused on entrepreneurial skills. Many
of these programmes are usually subsidized either by Small Industries Development Bank
of India (SIDBI) or by some government developments.

3) Access to debt: Lending to small scale industries is considered as priority sector

lending and banks have to achieve targets relating to loan disbursement to SMEs. Terms
and conditions are also relaxed to facilitate lending small amounts to very small
enterprises. Many private banks have realized that SMs might represent a very profitable
segment and are now coming-out with products designed specifically to fulfill the needs
of the small business borrower. The world over, there are examples of policies aimed at
encouraging banks to look at small enterprises.

4) Stimulating Innovation: Research and development has been the domain of large

firms, but governments across the globe have realized that stimulating R&D activities in
small organizations will encourage the rapid dissemination of technological advances.
5) Access to Equity: Investing in entrepreneurial ventures is a risky proposition. To
make the option more attractive, governments offer incentives for equity investments in
entrepreneurial ventures.

In India, to give a fillip to the availability of equity for new ventures, several venture
funds have ben set-up by some state Governments such as Andhra Pradesh and Orissa,
government bodies such as IDBI and by several public sector banks. The overall impact
of many of these initiatives has not been assessed.

6) Simplifying Administrative Burden: For an entrepreneur, there is an administrative

burden at the time of setting-up an enterprise as there are many procedures to b completed
and many licenses and permits to be procured. Many States such as Andhra Pradesh,
Orissa, Gujarat and Haryana have tried to establish an effective single- window clearance.

A single- window system becomes really effective when the following elements are put in
place:

i) Establishment of a nodal agency, which coordinates with all the relevant licensing and
approving bodies.
ii) A combined application form, which captures all the information needed by all
relevant agencies.
iii) A specified time limit given to the approving bodies for scrutiny and disposal of
application.
iv) A mechanism of granting deemed approval in the case of delays beyond the specified
time limits.
v) Clear demarcations of roles and responsibilities within the system.

7) Access to Markets: Marketing is an area of major concern to many new firms. There

have been some visionary policies in this respect. The Europartenariat was set-up by the
European Union (EU) to help SMEs across the community to meet and to meet and do
business with their counterparts elsewhere.

8) Encouragement to Weaker Sections: Entrepreneurial activity is often restricted to

certain socio- economic communities. This causes imbalance in distribution of income.
Some communities may exhibit- dangerously low levels of enterprise.

In India, generally, a number of concessions are available to economically backward

classes. Rural entrepreneurship programmes are undertaken to develop entrepreneurship
in under- developed rural pockets. Scheduled Castes and Scheduled Tribes Development
Finance Corporations (SCSTDFCs) have been set-up in a number of states.

Evaluating Policies
There are many entrepreneurship policies initiated by the governments of various
countries. While the governments have been fairly progressive in coming-up with
policies, their actual implementation and their effectiveness has not been regularly
assessed.
Business Incubation
Business incubators nurture entrepreneurial companies by providing them guidance and
support during their start-up period, when they are most vulnerable. They offer a range of
business development services to meet the needs of new ventures. The rational for
setting-up incubators lies in its capacity to increase the initiation, survival and growth of
new ventures.

Incubation Benefits
Incubators are found all over the world and their approach to venture development can be
summarized along the following dimensions;

1) Offering Space on Flexible Terms: Commercial real estate developers do not find it
attractive to lease small spaces to new clients. To make it commercially viable, per square
foot rates for small spaces are generally pegged at a higher level than the rates for larger
spaces.

2) Providing shared Office Services: Incubators make available shared services and
facilities such as printer, fax, photocopier, secretarial services, phone connection through
a PBX and conference room.

3) Presenting a Business Consulting Network: An entrepreneur is not expected to have all

the skills and expertise needed to start and run the business efficiently, but it is important
that the entrepreneur have access to consultants and other experts who have the skills and
knowledge.

4) Providing Opportunities to Develop Business Relations: One of the most important

contributions of incubators lies in providing an opportunity for entrepreneurs to interact
and develop business relationships.

The incubator can have a database of suppliers and service providers, which will be of
generic interest to a number of sectors, e.g., printers, website designers and transporters.
If the incubator is focused on a certain industry, they will have an opportunity to develop
a similar list of interest to a specific sector.

5) Facilitating Access to Capital: One of the most important activities of an incubator is to

get an entrepreneur in which the financiers. This process starts when thee consulting
network of thee incubator helps the entrepreneur to refine the business idea and make a
business plan.

Business Clusters

According to Doeringer and Terkla, a business cluster is a geographical concentration

of industries that gain performance advantages through co- location.

Everywhere, businesses tend to cluster together geographically in identifiable areas of

high concentration. Businesses find it advantageous to be near suppliers, customers or
even other firms producing similar goods. The proximity allows them to learn from each
other and to transact their business more efficiently.
Characteristics of Business Clusters

1) Well- developed and intense links with suppliers.

2) Formal and informal business networks.
3) Shared supporting infrastructure such as buildings and road connection.
4) A certain level of cooperation in spite of a high degree of rivalry and competition.

Identifying Clusters
There is no standardized way of identifying and describing a cluster, but various
economists and researchers have developed their own methodologies. Usually,
quantitative techniques such as input-output analysis are used to identify clusters.

Cluster Development
Once cluster have been identified, there is a lot of scope to develop the cluster by
providing it the right impetus. Many cluster- development activities of governments in the
Third World have been supported by international agencies such as UNIDO and the
World Bank.

Most of the cluster- development activities can be grouped as follows:

1) Supplier – buyer relationships can be forged by collecting and distributing information

about potential industry linkages. Also, there could be formal interactions in fairs and
exhibitions.
2) Common infrastructure can be supported by external agencies. For example, roads
could be built or a container terminal could be set-up, depending on the needs of the
cluster.
3) Providing skills training and education is a good means of supporting a cluster,
especially in the case of industries heavily dependent on specialized skills.
4) Industries in a cluster can be aided by providing marketing channels. Efforts can be
directed at enabling easy access to public procurement or at facilitating links with buyers
in the private sector.

Some of the well-known clusters in India are given below:

1) IT firms in Bangalore.
2) Diamond polishing in Surat.
3) Textiles in Tirupur.
4) Seafood processing in Kochi.
5) Call centers in Gurgaon/NCR.
6) Jute mills in Kolkata.

When entrepreneurs are starting-out in a business, it is advantageous to start it in an

identifiable cluster. The main advantage of setting-up a unit in a cluster is that it will
enable you to stay competitive while competing even with the large firms. A cluster is a
great way of getting some of the benefits of economies of scale without sacrificing the
responsiveness and flexibility of a small firm.
Institutional Support System
The term institutional support system generally refers to the economic environment of
industry and business comprising authorities and institutions whose decisions and
operational framework affect the level of business. These institutions include government
owned agencies statutory corporations and semiautonomous and organizations and
entrusted with sufficient powers to regulate and promote SSIs in specific areas of
activities.

Basically, institutional support system is necessary at three stages of enterprise

development. These are:

1) Inception or promotion of a business or industrial unit

2) Day to day management or routine management
3) Expansion and diversification

In Indian context, institutional support systems include two dimensions:

1) Support system developed by Central Government

2) Support system developed by State Governments

Institutions to assist SSI

Central Government Institutions   State Level Institutions

---SSI Board   ---DIC
    ---SFC
---SIDO   ---SSIDC
---NSIC   ---SIDC
---SIDI   ---TCO
---SISI   ---Industrial Estates
---Specialized Institutions   ---KVIC

Support System Developed by the Central Government

The Department of small scale industries was developed in 1991 under the Ministry of
industry. This department has been responsible for the development and monitoring of the
following support system:

1) SSI Board (Small Scale Industries Board): It was established in 1954 to provide
effective coordination and inter- institutional linkages for the benefits of small scale
sector. The Board being an apex body has been entrusted to play its advisory role in
solving the problems of small scale sector.

The Board has been constituted with the following members:

i) Union Industry minister   Chairman

ii) State Industry Ministers   Members
iii) Selected Members of Parliament   Members
iv) Secretaries of departments concerned   Members
v) Industry Associations   Members
vi) Elected Public Enterprises   Members
vii) Financial Institutions   Members
viii) Eminent Experts in the field   Members

2) SIDO (Small Industries Development Organization): This organization as the name

suggest is mainly created for development of various small-scale units in different areas.
SIDO is a nodal agency for identifying the needs of SSI units, coordinating and
monitoring the policies and programs for promotion of the small industries. It undertakes
various programs of training, consultancy, evaluation for needs of SSI and development
of industrial estates. All these functions are taken care with the Organization Structure of
27 offices, 31 SISI (Small Industries Service Institutes). 31 Extension Centers of SISI and
7 enters related to Production and Process Development.

The main functions performed by the SIDO in each of its three categories of functions are
as follows:

Functions Relating to CO-ordination

i) To evolve a national policy for the development of small scale industries,

ii) To co-ordinate the policies and programs of various State Governments,
iii) To maintain a proper liaison with the related Central Ministries, Planning
Commission, State Governments, Financial Institutions, etc., and
iv) To co-ordinate the programs for the development of industrial estates.

Functions Relating to Industrial Development

i) To reserve items for production by small – scale industries,

ii) To collect data on consumer items imported and then, encourage the setting of
industrial units to produce these items by giving co-ordinated assistance,
iii) To render required supported for the development of ancillary units and
iv) To encourage small scale industries to actively participate in Government Stores
Purchase Program by giving them necessary guidance, market advice and assistance.

Functions Relating to Extension

i) To make provision of technical services for improving technical, selecting appropriate

machinery, preparing factory lay-out and design,
ii) To provide consultancy and training services to strengthen the competitive ability of
small- scale industries,
iii) To render marketing assistance to small- scale industries to effectively sell their
products, and
iv) To provide assistance in economic investigation and information to small- scale
industries.

3) NSIC (National Small Industries Corporation Ltd.): NSIC was started by the Central
Government in 1955 with the objective of promoting and developing SSI units
throughout the country. It started with multiple objectives of helping SI units for: (a)
providing machinery on hire purchase, (b) assisting, marketing and exports, (c) enlisting
SSI units for tender participation in Government purchases, (d) organizing supply of raw-
materials, (c) training of personnel, and (f) assistance in modernization of the units.

The corporation’s head office is at Delhi and it has four regional offices at Delhi,
Mumbai, Chennai and Calcutta and eleven branch offices. It has one central liaison office
at Delhi and depots and sub-centers.

Functions of NSIC
i) Financial assistance by way of hire purchase scheme for purchase of local and imported
machinery.
ii) Provision of various equipment’s on lease basis.
iii) Assistance for marketing the produce in the country and also to help in exporting the
products of SSI units.
iv) Enlisting quality conscious good SSI units for sending enquiries of government stores
and purchase departments.
v) Training of workers in various trades required for I units.
vi) Assistance in up-gradation of technology, processes and modernization of plant and
machinery.
vii) To make bulk purchases of important raw- materials and distribute to SSI units at
reasonable rates. This avoids speculation and exploitation by the traders.
viii) To develop industrial estates and testing facilities in the industrial areas.

4) SIDBI (Small Industries Development Bank of India): Small Industries Development

Bank of India was established in 1990 as a development bank exclusively for the small-
scale industries. It is a Central government undertaking. The prime aim of SIDBI is to
promote and develop small industries by providing them the valuable factor of
production, finance, many institutions and commercial banks supply finance, both long-
term and short-term, to small entrepreneurs. SIDBI coordinates the work of all of them.

Financial Assistance Scheme of SIDBI

The main obstacles and problems in the growth of industrial units are the primary
infrastructure, unavailability of suitable market for selling the products, working capital
requirement and difficulties arising out of the delays in receiving the bills. Considering
these problems, the following provisions are included in the various schemes of SIDBI:

i) Loan assistance to the institutions providing market or marketing avenues to the small
entrepreneurs.
ii) Loan assistance to ancillary units and also for modernization and upgrading
technology.
iii) Loan assistance to institutions providing primary services and infrastructure and
developing the growth centers.
iv) Loan assistance to NSIC.
v) Loan assistance to private companies which function on rental basis or contract basis.

Nature of the Loan Assistance Scheme

i) Reference to SSIDCs which supply raw material to small units and provide them
market avenues.
ii) Bill discounting facility.
iii) Refinance for loan given by state level institutions and banks under the single window
system for fixed capital and working capital.
iv) Refinance of loan given to certified professionals and self-employed people for
businesses like small clinics and hospitals, nursing homes, development of tourism, etc.
v) Refinance for loan given, by banks and concerned institutions for new projects,
expansion and modernization of existing units, quality improvement and rehabilitation of
the units.

Similarly, SIDBI provides assistance to women entrepreneurs and ex-servicemen under

its various schemes.

5) SISI (Small Industries Service Institute): Small Industries Service Institute is a national
Level organization established by the Central government. At the state level, ISI
functions under the Director assisted by Deputy Directors.

Functions of SISI
i) Technical Information: SISI provides information about the supply and the availability
of raw materials. It gives technical information about the machines and equipment.
Technical know-how about the process of production, quality testing and standardization
of products, modernization and preparing product design are other services provided by
SISI.
ii) Workshop: SISI has a well- equipped workshop which provides services to
entrepreneurs at reasonable rates. Jobs related with machine shops, heat treatment,
hardness testing are carried out in these workshops. The main motive of the workshop
facility is to improve the quality of the products.
iii) Technical Training: SISI provides technical training to the workers employed in the
various industrial unite as well as thee entrepreneurs in order to improve standards of
quality and labor. In the extension centers of SISI, training is provided for machine shop
practice, milling, heat treatment, blueprint reading, etc.
iv) Economic Investigation Division: SISI collects and compiles statistical information
regarding various aspects concerned with the establishment and development of small
industries. Important aspects are demand and supply scenarios for different products,
investment, raw material etc. This division prepares review reports on the items reserved
for the small industry. The study of sick industries is also undertaken by this division. In
such studies, SISI tries to identify the causes of the sickness of the smooth working of
these units.
v) Export Promotion: SISI plays a significant role in the efforts regarding export
promotion. A special arrangement is made to provide information about exporting the
products. On behalf of the small entrepreneurs, SISI participants in international
exhibitions and promotes the products in the foreign markets.
vi) Modernization: SISI guides the entrepreneurs in the quality up gradation,
modernization and improvement of productivity.
vii) Development of the Market: SISI acts as a link between the tiny and the small
industries and thee medium and the large-scale industries. It provides information about
the products and the services of the small entrepreneurs to the requirements of the large
industries. Thus, it bridges the small industries with the large industries and tries to
develop the market. Many of the products manufactured by the small industries are
purchased by the large industries.
viii) Library: SISI has a huge collection of books, journals, magazines, newspaper
clippings etc. It provides valuable services to small entrepreneurs through its well-
equipped library. It has a collection of hundreds of project reports. Entrepreneurs can
these readymade project reports at reasonable rates.
ix) Exhibition: A permanent exhibition is arranged by SISI in its office premises. SISI
exhibits products manufactured by small entrepreneurs. The exhibition is free of cost.
Thus, SISI provides multifarious services to the small entrepreneurs.

6) Specialized Institutions: In addition to the above institutions, the Government has also
set-up the following specialized institutions to boost the growth of all types of small-scale
industries in the country.

i) Central Institute of Tool Design, Hyderabad: The central Government set-up this
Institute in 1968 with the help of UDP and ILO to help small-scale industries by
imparting specialized training to the personnel working in the design and manufacture of
tools, jigs, fixtures, dies and molds. The other functions performed by it are:
a) To offer consultancy and advisory services and assistance in the design and
development of tools.
b) To suggest proper measures to improve the standard of tools, tooling elements, jig
components, fixtures, dies, etc.
c) To offer the needed tool room facility.

A governing council which consists of representatives of the Government and industry is

constituted to look after the management of the Institute. The governing council is headed
by the Development Commissioner (SSI).

ii) Central Tool Room Trading Centers: In order to provide tool room services and
facilities in design, manufacture and training, the Government has set-up four tool room
training centers located at Bangalore, Kolkata, Ludhiana and New Delhi.

iii) Central Institute of Hand Tool, Jalandhar: This institute has been set-up with a view to
provide improved technology, raw materials, design and testing’s for handloom industry.
This is the only institute of its kind in the country located at Jalandhar.

iv) Institute for Design of Electrical Measuring Instruments (IDEM), Mumbai: This
institute has been set-up in 1969 with the assistance from UNDP. It was set-up to provide
technical consultancy services in the matters relating to design and development of
electrical and electronic instruments, tool designing and fabrication and training.

v) National Institute of Entrepreneurship and Small Business Development (NISEBUD) ,

New Delhi:

It is an apex national level institute of its Kind set-up at New Delhi in 1983. Its main
functions are to coordinate research and training in entrepreneurship development and to
impart specialized training to various categories of entrepreneurs. Besides, it also serves
as a forum for interaction and exchange of views between various agencies engaged in
activities relating to entrepreneurial development.
 vi) National Institute of Small Industries Extension Training (NISIET, Hyderabad: This
institute was set-up in 1956 to develop the required manpower for running small- scale
industries in the country. Accordingly , its main functions are:
 To impart training to the persons engaged in small- scale industries.
 To undertake research studies relating to development of small- scale
industries.
 To enter into agreement relating to consultancy services both with
national and international organizations to provide consultancy
services to small industries in the country.
The institute conducts courses in business management for the benefit of the
entrepreneurs and semi managerial personnel of small industries. It is located at
Hyderabad.

vii) Other Institutes: following are some of the important institutes set-up by the
Government for development of small- scale industries:
a) Electronic training and Service Institute, Nainital.
b) Central Machine Tools Limited, Bangalore.
c) Central Institute of Plastics Engineering and Tools, Madras.
d) Sports Goods and Leisure Time Equipment, Meerut.
e) National Institute of Foundry and Forging Technology, Ranchi.

Support System Developed by the State Government

Director of Industries is the highest authority at state level to execute the policies and
programs with regard to SSIs, medium and large scale enterprises. Director/
Commissioner is responsible for the overall supervision of support system developed for
the SSIs in the state. These support system are as follows:

1) Dic (District Industries Centers): Governments- both central and state, have in the
past taken a number of measures for the development of small and village industries, but
the actual achievements have been far below the expectations. Also the focus of attention
for industrial development was mainly on large cities and State capitals to the neglect of
district areas. In addition, multiplicity of institutions involved in small industries
development and complicated systems and procedures made the job of promoting the
industrial units an uphill task for small entrepreneurs. Hence, it was felt necessary to
establish a development agency, which could provide all services and facilities to village
and small industries under one roof. Accordingly, the DICs were established in May 1978
in order to cater to the needs of small units.

Each district has a DIC at its headquarters, the main responsibility of DID is to act as the
chief coordinator or multifunctional agency in respect of various Government
departments and other agencies. The prospective small entrepreneur would get all
assistance from DIC for setting up and running an industry in rural areas. Up to 1991
about 422 DICs have been set up throughout the country. These DICs have assisted more
than 1.5 lakh units generating employment for more than 10.3 lakh persons. The
metropolitan cities of Delhi, Bombay, Calcutta and Madras have been kept outside the
purview of the DIC.
Organizational Set up

Each DIC has one General Manager in the rank of Joint Director of Industries as the land
and seven manager each looking after a separate functional area as follows:

i) Manager (Economic Investigation)

ii) Manager (Machinery and equipment)
iii) Manager (Research, Extension and Equipment)
iv) Manager (Raw Materials)
v) Manager (Credit)
vi) Manager (Marketing)
vii) Manager (KVIC and RAP)

The General Manager has to provide an effective leadership and coordination. Hence, the
success of the centre largely depends upon the functioning of General Manager and his
team of managers and other personnel.

Functions of DIC

i) Identification of Entrepreneurs: DIC develops new entrepreneurs by conducting

entrepreneurial motivation programmes throughout the district especially in panchayat
Union Headquarters and small towns.

ii) Selection of Projects: DIC offers technical advice to new entrepreneurs for the
selection of projects suitable to them.

iii) Provisional registration under SSI: After the selection of projects, entrepreneurs are
issued with provisional Registration which is essential for obtaining assistance from thee
financial institutions.

iv) Purchase of Fixed Assets: DIC sponsors the loan applications to TIIC, SIDCO and
banks for the purchase of land and buildings and sanctions margin money under Rural
Industries Project Loan Scheme payable to other financial agencies for the purchase of
plant and machinery.

v) Clearances from Various Departments: It takes the initiatives to get clearances from
various departments and takes up measures to get speedy power connection.

vi) Assistance to Raw Material Supplies: It makes necessary recommendations to the

concerned raw materials suppliers and issues the required certificates for the import of
raw materials and machinery wherever necessary.

vii) Assistance to Village Artisans and Handicrafts: DIC arrange for the financial
assistance with the lead bank or nationalized banks of the respective areas.

viii) Interest- Free ales Tax Loan: SSI units set up in rural areas can get IFST (interest
free sales tax) Loan up to a maximum limit of 8% of the total fixed assets from SIDCO>
BUT the sanction order from the same is being issued by DIC. The DIC also recommends
the SSI units to NSIC for registration for Government Purchase Programme.

ix) Subsidy Schemes: DIC gives training to rural entrepreneurs and also assists other units
giving training to small entrepreneurs.

District Industries Centres are supposed to provide pre-investment and post-investment

assistance to entrepreneurs under one roof. These centres have done commendable work
in the promotion of small industries, development of entrepreneurship and generation of
self-employment. But much is still desired to be done to make the DIC really one-window
service. Steps should be taken to strengthen and suitably restructure the district industries
centres for playing a leading role in district level industrial development.

2) SFC (State Financial Corporations): The State Financial Corporation Act was

passed by the Government of India in 1951 with a view to provide financial assistance to
small and medium scale industries which were beyond the scope of IFCI. According to
this Act, a state Government is empowered to establish a financial corporation to operate
within the State.

Functions of SFC
The main function of the SFCs is to provide loans to small and medium scale industries
engaged in the manufacture, preservation or processing of goods , mining, hotel industry,
generation or distribution of power, transportation, fishing, assembling, repairing or
package articles with the aid of power, etc. State Financial Corporation is authorized to
grand financial assistance in the following forms:

i) Granting of loans or advances to industrial concerns repayable within a period not

exceeding twenty years.
ii) Subscribing to the debenture of industrial concerns repayable within a period not
exceeding twenty years.
iii) Guaranteeing loans raised by industrial concerns repayable within a period not
exceeding twenty years.
iv) Underwriting the issue of stock, shares, bonds or debentures by the industrial concerns
subject to their being disposed off within seven years.
v) Guaranteeing deferred payments due from any industrial concern in connection with
purchase of capital goods in India.
vi) Acting as an agent of the Central Government or Stat Government or the Industrial
Finance Corporation of India in respect of any business with an industrial concern in
respect of loans sanctioned to them.

3) SSIDC (State small Industries Development Corporations): Under the Companies

Act, SSIDC were started in 1956 in all the states under the Companies Act. These State
Government undertakings take care of the growth and development needs of village
industries, tiny industries and small industries. Different states give focus and importance
to different industries based on the raw- material and skill availability in their states.

Functions of SSIDC
i) Assist for procurement of machineries on hire purchase scheme.
ii) Assist in marketing of the products.
iii) Keep stock of vital and scares raw-materials and distribute to small industries.
iv) Develop industrial sheds, estates and godowns for use of small industries.

4) SIDC (State Industrial Development Corporations): The State Industrial

Development Corporations (SIDCs) act as catalyst for promotion and development of
medium and large enterprises in their respective states. In tandem with changing business
environment, SIDCs are making efforts to diversify their activities to cover a range of
services and schemes and have entered into the areas of equipment leasing, merchant
banking, venture capital and mutual funds.

The State Industrial Development Corporations (SIDCs) Incorporated under the

Companies Act as wholly- owned undertakings of State Governments for promotion and
development of medium and large industries in respective states, provide financial
assistance in the form of rupee loans, underwriting/ direct subscriptions to
shares/debentures, guarantees, inter-corporate deposits, and also opens letters of credit on
behalf of its borrowers. They are also involved in setting up of medium and large
industrial projects in the Joint sector/ assisted sector in collaboration with private
entrepreneurs or wholly-owned subsidiaries.

In order to accelerate industrial development various states have set up Industrial

Development Corporations. Andhra Pradesh and Bihar were the first stats to set up such
corporations in 1960. Most of the states have set up institution at present.

Functions of SIDC
i) Grant of financial assistance.
ii) Promotion and management of industrial concerns.
iii) Provision of industrial sheds or plots.
iv) Promotional activities such as identification of project idea, selection and training of
entrepreneur, provision of technical assistance during project implementation.
v) Providing risk capital to entrepreneur by way of equity participation and seed capital
assistance.

5) TCO (Technical Consultancy Organization): Technical Consultancy Organization

plays a crucial role in the industrialization process of the State. The TCOs are
organizations established by the state governments. The Primary objective of the TCO is
to furnish industrial and technical consultancy to the entrepreneurs. The TCO is
sponsored by national and state level financial institutions and banks like ICICI, IDBI
IFCI, SFC, SIDC, SSIDC, commercial banks, etc.

Functions of TCO

i) Identification of potential entrepreneurs among different target groups as rural poor,

women, minorities, SCs, STs, etc.
ii) Identification of area specific viable manufacturing and servicing activities.
iii) Extending candidate specific hand-holding support right from project identification,
securing financial assistance, accessing market through guidance and monitoring during
project implementation and commercial operation.
iv) Capacity building of other support providers.

6) Industrial Estates: developing countries require institutional arrangements for their

rapid industrialization and balanced growth. One such institutional measure is industrial
estates. The term ‘industrial estate’ is called by different names, e.g., industrial estates.
The term ‘industrial estate’ is called by different names, e.g., industrial park, industrial
park, industrial zone, industrial region, industrial city, industrial area, Industrial
Township, etc.

An industrial estate has been defined as a method of “organizing, housing and servicing
industry, a planned clustering of industrial enterprises offering standard factory buildings
erected in advance of demand and a variety of services and facilities to the occupants.”

The main features of an industrial estate are as follows:

i) It is a tract of land sub-divided and developed into factory plots or sheds.
ii) It provides several common facilities or infrastructural amenities such as water, power,
transport, tool room, training, bank, post-office, repairs and maintenance etc., to the
occupants.
iii) It is designed as a tool of industrialization and balanced regional development.
iv) It is a planned clustering of industrial units.
v) It may be developed in urban, semi- urban or rural areas.
vi) It may be large, medium and small.
vii) It may be set-up by the Government or by cooperatives or by private agencies.

TYPES OF INDUSTRIAL ESTATES Industrial states may be classified into the

following categories:

i) General Purpose or Composite Industrial Estates: Such an industrial estate provides

accommodation to all types of small-scale industries. It consists of a wide variety and
range of industrial units. Most of the industrial estates in India are of this type. ii) Special
Purpose Industrial estates: This type of industrial estate is particularly constructed for
specified groups of entrepreneurs, e.g., technically qualified persons, craftsmen or
artisans, etc. For example, industrial estates for artisans and technical have been set-up at
Hyderabad. iii) Ancillary Industrial Estates: Such as industrial estate houses
manufacturing units, which produce, parts and components for a large industrial unit. It is
generally set-up near the parent unit. iv) Functional Industrial Estates: Such as
industrial estate consists of industrial units manufacturing the same product. Such estates
have been set-up for leather goods, electronics, sports-goods, food preservation, ceramics,
etc. v) Flatted Factory Estates: These are multi-storey buildings constructed in big
cities, to provide space to industrial units manufacturing light weight goods with the help
of simple machine tools. They help to conserve space.

7) Khadi and Village Industries Commission (KVIC): As per the provisions of a

Special Parliamentary Act 1956, the Government has established Khadi and Village
Industries Commission.

Objectives of KVIC
i) To preserve the traditional arts and crafts in India.
ii) To equip the artisans and craftsmen to take-up the challenges of the modern market.
iii)To promote the handicrafts, khadi, village and cottage industry by facilitating them
with the necessary inputs like raw materials, equipment’s, capital, etc.
iv) To develop a market for these products.
v) To introduce thee products even in the international market.

To achieve these objectives, the following schemes are provided by KVIC>

i) Financial assistance for purchase of land, building, workshop, shed machinery and
equipment at 4% rate of interest.
ii) Working capital provision.
iii) Equity capital.
iv) Loan provision for purchase of raw materials.
v) Marketing avenues and selling centers for the products of artisans and craftsmen.
vi) Subsides for the registered societies of artisans and craftsmen belonging to scheduled
castes, scheduled tribes, ex-servicemen, women, etc.