Management Programme

ASSIGNMENT
FIRST SEMESTER
(January to June)
2020

MS- 93: Management of New and Small Enterprises

School of Management Studies

INDIRA GANDHI NATIONAL OPEN UNIVERSITY
MAIDAN GARHI, NEW DELHI – 110 068
 ASSIGNMENT

Course Code : MS - 93
Course Title : Management of New and Small Enterprises
Assignment Code : MS-93/TMA/SEM - I /2020
Coverage : All Blocks

Note : Attempt all the questions and submit this assignment to the coordinator of your study
center on or before 30th April, 2020.

1. Explain the role of entrepreneurship in the development of Micro, Small and Medium
Enterprises (MSME). How has entrepreneurship contributed in economic development?
The Government of India has enacted the Micro, Small and Medium Enterprises Development
(MSMED) Act, 2006 in terms of which the definition of micro, small and medium enterprises is as
under:
 Enterprises engaged in the manufacture or production, processing or preservation of goods as
specified below:
o A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs.
25 lakh;
o A small enterprise is an enterprise where the investment in plant and machinery is more than Rs.
25 lakh but does not exceed Rs. 5 crore;
o A medium enterprise is an enterprise where the investment in plant and machinery is more than
Rs.5 crore but does not exceed Rs.10 crore.
In case of the above enterprises, investment in plant and machinery is the original cost excluding
land and building and the items specified by the Ministry of Small Scale Industries vide
its notification No.S.O.1722(E) dated October 5, 2006 .
 Enterprises engaged in providing or rendering of services and whose investment in equipment
(original cost excluding land and building and furniture, fittings and other items not directly
related to the service rendered or as may be notified under the MSMED Act, 2006 are specified
below.
o A micro enterprise is an enterprise where the investment in equipment does not exceed Rs. 10
lakh;
o A small enterprise is an enterprise where the investment in equipment is more than Rs.10 lakh but
does not exceed Rs. 2 crore;
o A medium enterprise is an enterprise where the investment in equipment is more than Rs. 2 crore
but does not exceed Rs. 5 crore.
Economic development essentially means a process of upward change whereby the real per capita
income of a country increases over a period of time. Entrepreneur plays a vital role in economic
development. Entrepreneurs serve as the catalysts in the process of industrialization and
economic growth. Technical progress alone cannot lead to economic development, unless
technological breakthroughs are put to economic use by entrepreneurs.
It is the entrepreneur who organizes and puts to use capital, labour and technology. Accordingly,
“development does not occur spontaneously as a natural consequence when economic conditions
in some sense are right. A catalyst is needed and this requires entrepreneurial activity to a
considerable extent, the diversity of activities that characterizes rich countries can be attributed to
the supply of entrepreneurs.”

The entrepreneur is the key to the creation of new enterprises that energize the economy and
rejuvenate the established enterprises that make up the economic structure.

Entrepreneurs initiate and sustain the process of economic development in the following ways:
1. Capital Formation:
Entrepreneurs mobilize the idle savings of the public through the issues of industrial securities.
Investment of public savings in industry results in productive utilization of national resources. Rate
of capital formation increases which is essential for rapid economic growth. Thus, an entrepreneur
is the creator of wealth.

2. Improvement in Per Capita Income:

Entrepreneurs locate and exploit opportunities. They convert the latent and idle resources like
land, labour and capital into national income and wealth in the form of goods and services. They
help to increase net national product and per capita income in the country, which are important
yardsticks for measuring economic growth.

3. Generation of Employment:
Entrepreneurs generate employment both directly and indirectly. Directly, self-employment as an
entrepreneur offers the best way for independent and honorable life. Indirectly, by setting up
large and small scale business units they offer jobs to millions. Thus, entrepreneurship helps to
reduce the unemployment problem in the country.

4. Balanced Regional Development:

Entrepreneurs in the public and private sectors help to remove regional disparities in economic
development. They set up industries in backward areas to avail various concessions and subsidies
offered by the central and state governments.

Public sector steel plants and private sector industries by Modis, Tatas, Birlas and others have put
the hitherto unknown places on the international map.

5. Improvement in Living Standards:

Entrepreneurs set up industries which remove scarcity of essential commodities and introduce
new products. Production of goods on mass scale and manufacture of handicrafts, etc., in the
small scale sector help to improve the standards of life of a common man. These offer goods at
lower costs and increase variety in consumption.

6. Economic Independence:
Entrepreneurship is essential for national self-reliance. Industrialists help to manufacture
indigenous substitutes of hitherto imported products thereby reducing dependence on foreign
countries. Businessmen also export goods and services on a large scale and thereby earn the
scarce foreign exchange for the country.

Such import substitution and export promotion help to ensure the economic independence of the
country without which political independence has little meaning.

7. Backward and Forward Linkages:

An entrepreneur initiates change which has a chain reaction. Setting up of an enterprise has
several backward and forward linkages. For example- the establishment of a steel plant generates
several ancillary units and expands the demand for iron ore, coal, etc.

These are backward linkages. By increasing the supply of steel, the plant facilitates the growth of
machine building, tube making, utensil manufacturing and such other units.

Entrepreneurs create an atmosphere of enthusiasm and convey a sense of purpose. They give an
organization its momentum. Entrepreneurial behavior is critical to the long term vitality of every
economy. The practice of entrepreneurship is as important to established firms as it is to new
ones.

Role of Entrepreneurs in Economic Development of India

Economic development essentially means a process of upward change where by the per capita
income of a country increases over a long period of time.
The economic history of the presently developed countries like America, Germany, and Japan
leads to support the fact that the economy is an effect for which entrepreneurship is the cause.
The crucial role played by the entrepreneurs in the development of the western countries has
made the people of under-developed countries too much conscious of the significance of
entrepreneurship for economic development.
Now people have begun to realise that for achieving the goal of economic development, it is
necessary to increase entrepreneurship both qualitatively and quantitatively in the country. It is
only active and enthusiastic entrepreneurs who fully explore the potentialities of the country’s
available resources land, tech., capital, material etc.
The role of entrepreneurship in economic development varies from economy to economy
depending upon its material resources, industrial climate and the responsiveness of the political
system to the entrepreneurial function. The entrepreneurs contribute more in favourable
opportunity conditions.
1. In underdeveloped/developing regions, due to lack of funds and skilled labour, the atmosphere
is less conducive for innovative entrepreneurs.
2. Under the conditions of paucity of funds and the problem of imperfect market, the
entrepreneurs are bound to launch their enterprises on a small scale. Also initiator entrepreneurs
are preferred in such regions. Thus, initiation of innovations introduced in developed regions on a
massive scale bring about rapid economic-development in underdeveloped/developing regions.
3. Further India aims at decentralized industrial structure to reduce regional imbalances in levels
of economic development.
4. Generation of employment

2. What is market demand analysis? Explain the elements or variables which determine
market demand.
The analysis of demand theory is very much important in the business decision. Demand analysis
helps firm forecast the market which is of importance in the modern business activities. It helps to
design the appropriate pricing policy.

In the present global market, it is not at all possible for a firm to exist without adequate
knowledge on consumer behavior. Consumer behaviour informs determines demand for a
commodity in the market. The importance of demand analysis is below.

1) Pricing Policy:
The importance of demand analysis in business decision is that it helps firms design their
pricing policy. Firm can choose either to lower or raise a product’s price by observing trend of
consumer demand for that product. Producers can’t fix price for their products without first
understanding the market demand for them.
2) Investment Policy:
Demand analysis helps firm adopt appropriate investment policy. Based on the nature of
demand for a particular product in a particular market, firms can make their investment decisions.
3) Market forecast:
Demand analysis helps business firms in their investment decisions, based on the prevailing
response of consumers towards a particular commodity, firm can foresee the demand. This in turn
helps them in investing on an appropriate industry.

Demand is the number of goods that the customers are ready and able to buy at several prices
during a given time frame. The association between price and quantity demanded is also called
a Demand curve. Preferences and choices, which are the basics of demand, can be depicted as the
functions of cost, odds, benefit and other variables.
The amount of a good that the customer picks up modestly, relies on the cost of the commodity,
the cost of other commodities, the customer’s earnings and his or her tastes and proclivity. The
amount of a commodity that a customer is ready to purchase and is able to manage and afford,
provided prices of goods and customer’s tastes and preferences are known as demand for the
commodity.
In our daily life, we often see that a consumer’s preferences for product change according to their
preferences, income, and the prices of the goods or prices of other goods.
Here, the demand of a product can be defined as the quantity of a product that a consumer is
eager to purchase, can afford at a given price, and is according to his/her preferences and taste.
Whenever there is a change in any of those variables than the demand and supply of a product
starts changing.

Types of Demand:

 Market or Individual Demand- Here, the individual demand is defined as the demand for
products or services by an individual consumer. And the market demand can be defined as
a demand for a product made by a bunch of consumers who buy that product. Therefore,
the market demand is a collective demand of each individual’s demand.
 Director Derived Demand: The direct demand is defined when goods manufactured is
related to the demand for another product is known as the derived demand. For example;
the demand for a silk yarn is the result of the demand for silk cloth. However, direct
demand for goods can be defined when the demand for a product is independent. For
example, there is an autonomous demand for cotton cloth.
 Price Demand- The price demand refers to the number of goods or services an individual is
eager to buy at a given price.
 Income Demand- The income demand means the eagerness of a person to buy a definite
quantity at a given income level.
 Cross Demand: This is one of the important types of demand where the demand of a
product is not subject to its own price, but the price of other similar products is known as
the cross demand.

3. Explain the tax structure applicable to sole proprietorship, partnership and company’s
form of business organization.

The most common forms of business are sole proprietorship, partnership, corporation and S
corporation. A more recent development to these forms of business is the limited liability
company (LLC) and the limited liability partnership (LLP). Because each business form comes with
different tax consequences, you will want to make your selection wisely and choose the structure
that most closely matches your business's needs.

If you decide to start your business as a sole proprietorship but later decide to take on partners,
you can reorganize as a partnership or other entity. If you do this, be sure you notify the IRS as
well as your state tax agency.

Sole Proprietorship
The simplest structure is the sole proprietorship, which usually involves just one individual who
owns and operates the enterprise. If you intend to work alone, this structure may be the way to
go.

The tax aspects of a sole proprietorship are appealing because the expenses and your income from
the business are included on your personal income tax return, Form 1040. Your profits and losses
are recorded on a form called Schedule C, which is filed with your 1040. The "bottom-line amount"
from Schedule C is then transferred to your personal tax return. This is especially attractive
because business losses you suffer may offset the income you have earned from your other
sources.

As a sole proprietor, you must also file a Schedule SE with Form 1040. You use Schedule SE to
calculate how much self-employment tax you owe. In addition to paying annual self-employment
taxes, you must make estimated tax payments if you expect to owe at least $1,000 in federal taxes
for the year after deducting your withholding and credits, and your withholding will be less than
the smaller of: 1) 90 percent of the tax to be shown on your current year tax return or 2) 100
percent of your previous year's tax liability.

The federal government permits you to pay estimated taxes in four equal amounts throughout the
year on the 15th of April, June, September and January. With a sole proprietorship, your business
earnings are taxed only once, unlike other business structures. Another big plus is that you will
have complete control over your business--you make all the decisions.

There are a few disadvantages to consider, however. Selecting the sole proprietorship business
structure means you are personally responsible for your company's liabilities. As a result, you are
placing your assets at risk, and they could be seized to satisfy a business debt or a legal claim filed
against you.

Raising money for a sole proprietorship can also be difficult. Banks and other financing sources
may be reluctant to make business loans to sole proprietorships. In most cases, you will have to
depend on your financing sources, such as savings, home equity or family loans.

Partnership
If your business will be owned and operated by several individuals, you'll want to take a look at
structuring your business as a partnership. Partnerships come in two varieties: general
partnerships and limited partnerships. In a general partnership, the partners manage the company
and assume responsibility for the partnership's debts and other obligations. A limited partnership
has both general and limited partners. The general partners own and operate the business and
assume liability for the partnership, while the limited partners serve as investors only; they have
no control over the company and are not subject to the same liabilities as the general partners.

Unless you expect to have many passive investors, limited partnerships are generally not the best
choice for a new business because of all the required filings and administrative complexities. If you
have two or more partners who want to be actively involved, a general partnership would be
much easier to form.

One of the major advantages of a partnership is the tax treatment it enjoys. A partnership does
not pay tax on its income but "passes through" any profits or losses to the individual partners. At
tax time, the partnership must file a tax return (Form 1065) that reports its income and loss to the
IRS. In addition, each partner reports his or her share of income and loss on Schedule K-1 of Form
1065.

Personal liability is a major concern if you use a general partnership to structure your business.
Like sole proprietors, general partners are personally liable for the partnership's obligations and
debts. Each general partner can act on behalf of the partnership, take out loans and make
decisions that will affect and be binding on all the partners (if the partnership agreement permits).
Keep in mind that partnerships are also more expensive to establish than sole proprietorships
because they require more legal and accounting services.

Corporation
The corporate structure is more complex and expensive than most other business structures. A
corporation is an independent legal entity, separate from its owners, and as such, it requires
complying with more regulations and tax requirements.

The biggest benefit for a business owner who decides to incorporate is the liability protection he
or she receives. A corporation's debt is not considered that of its owners, so if you organize your
business as a corporation, you are not putting your personal assets at risk. A corporation also can
retain some of its profits without the owner paying tax on them.

Another plus is the ability of a corporation to raise money. A corporation can sell stock, either
common or preferred, to raise funds. Corporations also continue indefinitely, even if one of the
shareholders dies, sells the shares or becomes disabled. The corporate structure, however, comes
with a number of downsides. A major one is higher costs. Corporations are formed under the laws
of each state with its own set of regulations. You will probably need the assistance of an attorney
to guide you. In addition, because a corporation must follow more complex rules and regulations
than a partnership or sole proprietorship, it requires more accounting and tax preparation
services.

Another drawback to forming a corporation: Owners of the corporation pay a double tax on the
business's earnings. Not only are corporations subject to corporate income tax at both the federal
and state levels, but any earnings distributed to shareholders in the form of dividends are taxed at
individual tax rates on their personal income tax returns.

4. List and discuss the factors which explain plant location.

The leading factors affecting plant location are as follows: 1. Selection of Region 2. Township
Selection 3. Question of Urban and Rural Area 4. Location of a Factory in a Big City 5. Location of
an Industry in Small Town 6. The Sub-urban Location for a Factory 7. Site Selection 8. Current
Trends in Pant Location 9. Appropriate Site Selection 10. The Design of Factory Plant Building.

1. Selection of Region:
The selection of a region or area in which plant is to be installed requires the consideration of
the following:
Availability of Raw Materials:
Proximity of sources of raw materials is the obvious explanation of the location of majority of
sugar mills in Uttar Pradesh. This means that the raw material should be available within the
economical distance. Easy availability of supplies required for maintenance and operation of the
plant should also be considered.

Proximity to Markets:
Cost of distribution is an important item in the overhead expenses. So it will be advantageous to
be near to the center of demand for finished products. Importance of this is fully realized if the
material required for the manufacturing of products are not bulk and fright charges are small.

Consumer industries like cycles, sewing machines, radio televisions and other luxury goods etc. are
set up near the marketing centers whereas producer industries like steel mills are located near the
vicinity of raw material.

For this purpose market analysis should be carried out keeping in view the following points:
(a) Market trend and competition regarding product to be manufactured.

(b) Industrial market

(c) Consumer habits and income

(d) Population

(e) Scope of export to neighbouring countries.

Transport Facilities:
Since freight charges of raw materials and finished goods enter into the cost of production,
therefore transportation facilities are becoming the governing factor in economic location of the
plant. Depending upon the volume of the raw materials and finished products, a suitable method
of transportation like rail, road, water transportation (through river, canals or sea) and air
transport is selected and accordingly plant location is decided. Important consideration should be
that the cost of transportation should remain fairly small in comparison to the total cost of
production.

Availability of Power, Fuel or Gas:

Because of the wide spread use of electrical power the availability of fuel or gas has not remained
a deciding factor in most of the cases for plant location. The location of thermal power plants (like
Bokaro Thermal Plant) and steel plants near coal fields are for cutting down cost of the fuel
transportation. The reliability of continuous supply of these facilities is an important factor.

Water Supply:
Water is required for processing as in chemical, sugar and paper industries and is also used for
drinking and sanitary purposes. Investigation for quality and probable source of supply is
important, since the cost of treating water is substantial so the chemical properties like hardness,
alkalinity and acidity.

Presence of dissolved gases and organic material etc. should be thoroughly investigated. In case of
water supply form an external source such as municipality, dependability of the source, pumping
and storage capacity for present and future demands should be found out.

Disposal Facility for Waste Products:

Thorough study should be made regarding disposal of water like effluents, solids, chemicals and
other waste products likely to be produced during the production process.

5. Define family business. What is the negative and positive side of family business?
A family business is a commercial organization in which decision-making is influenced by
multiple generations of a family, related by blood or marriage or adoption, who has both the
ability to influence the vision of the business and the willingness to use this ability to pursue
distinctive goals. They are closely identified with the firm through leadership or ownership.
Owner-manager entrepreneurial firms are not considered to be family businesses because
they lack the multi-generational dimension and family influence that create the unique
dynamics and relationships of family businesses.
Family business is the oldest and most common model of economic organization. The vast
majority of businesses throughout the world—from corner shops to multinational publicly listed
organizations with hundreds of thousands of employees—can be considered family
businesses. Based on research of the Forbes 400 richest Americans, 44% of the Forbes 400
member fortunes were derived by being a member of or in association with a family business.
The economic prevalence and importance of this kind of business are often underestimated.
Throughout most of the 20th century, academics and economists were intrigued by a newer,
“improved” model: large publicly traded companies run in an apparently rational, bureaucratic
manner by well trained “organization men.” Entrepreneurial and family firms, with their specific
management models and complicated psychological processes, often fell short by comparison.
Privately owned or family-controlled enterprises are not always easy to study. In many cases, they
are not subject to financial reporting requirements, and little information is made public about
financial performance. Ownership may be distributed through trusts or holding companies, and
family members themselves may not be fully informed about the ownership structure of their
enterprise. However, as the 21st-century global economic model replaces the old industrial model,
government policy makers, economists, and academics turn to entrepreneurial and family
enterprises as a prime source of wealth creation and employment.
In some countries, many of the largest publicly listed firms are family-owned. A firm is said to be
family-owned if a person is the controlling shareholder; that is, a person (rather than a state,
corporation, management trust, or mutual fund) can garner enough shares to assure at least 20%
of the voting rights and the highest percentage of voting rights in comparison to other
shareholders.
Some of the world's largest family-run businesses are Walmart (United States), Samsung
Group (Korea) and Tata Group (India).

Congresswoman Pelosi greets employees of McRoskey Mattress Company, a family-owned, San

Francisco mattress manufacturer founded in 1899.
The "Global Family Business Index"comprises the largest 500 family firms around the globe. In this
index—published for a first time in 2015 by Center for Family Business University of St.
Gallen and EY—for a privately held firm, a firm is classified as a family firm in case a family controls
more than 50% of the voting rights. For a publicly listed firm, a firm is classified as a family firm in
case the family holds at least 32% of the voting rights.
Family owned businesses account for over 30% of companies with sales over $1 billion.
In a family business, two or more members within the management team are drawn from the
owning family. Family businesses can have owners who are not family members. Family
businesses may also be managed by individuals who are not members of the family. However,
family members are often involved in the operations of their family business in some capacity and,
in smaller companies, usually one or more family members are the senior officers and managers.
In India, many businesses that are now public companies were once family businesses.
Family participation as managers and/or owners of a business can strengthen the company
because family members are often loyal and dedicated to the family enterprise. However, family
participation as managers and/or owners of a business can present unique problems because the
dynamics of the family system and the dynamics of the business systems are often not in balance.

6. Write short notes on the following:

(a) Industrial Policy statement of 1991

The New Industrial Policy of 1991 comes at the center of economic reforms that launched
during the early 1990s. All the later reform measures were derived out of the new
industrial policy. The Policy has brought comprehensive changes in economic regulation in
the country. As the name suggests, these reform measures were made in different areas
related to the industrial sector.

As part of the policy, the role of public sector has been redefined. A dedicated reform
policy for the public sector including the disinvestment programme were launched under
the NIP 1991. Private sector has given welcome in major industries that were previously
reserved for the public sector.

Similarly, foreign investment has given welcome under the policy. But the most important
reform measure of the new industrial policy was that it ended the practice of industrial
licensing in India. Industrial licensing represented red tapism.

Because of the large scale changes, the Industrial Policy of 1991 or the new industrial
policy represents a major change from the early policy of 1956.

The new policy contained policy directions for reforms and thus for LPG (Liberalisation,
Privatisation and Globalisation). It enlarged the scope of private sector participation to
almost all industrial sectors except three (modified). Simultaneously, the policy has given
welcome to foreign investment and foreign technology. Since 1991, the country’s policy
on foreign investment is gradually evolving through the introduction of liberalization
measures in a phasewise manner.

Perhaps, the most welcome change under the new industrial policy was the abolition of
the practice of industrial licensing. The1991 policy has limited industrial licensing to less
than fifteen sectors. It means that to start an industry, one has to go for license and
waiting only in the case of these few selected industries. This has ended t he era of license
raj or red tapism in the country. The 1991 industrial policy contained the root of the
liberalization, privatization and globalization drive made in the country in the later period.
The policy has brought changes in the following aspects of industrial regulation:

1. Industrial delicensing

2. Deregulation of the industrial sector

3. Public sector policy (dereservation and reform of PSEs)

4. Abolition of MRTP Act

5. Foreign investment policy and foreign technology policy.

1. Industrial delicensing policy or the end of red tapism: the most important part of the
new industrial policy of 1991 was the end of the industrial licensing or the license raj or
red tapism. Under the industrial licensing policies, private sector firms have to secure
licenses to start an industry. This has created long delays in the start up of industries. The
industrial policy of 1991 has almost abandoned the industrial licensing system. It has
reduced industrial licensing to fifteen sectors. Now only 13 sector need licen se for starting
an industrial operation.
2. Dereservation of the industrial sector– Previously, the public sector has given
reservation especially in the capital goods and key industries. Under industrial
deregulation, most of the industrial sectors was opened to the private sector as well.
Previously, most of the industrial sectors were reserved to the public sector. Under the

new industrial policy, only three sectors- atomic energy, mining and railways will continue
as reserved for public sector. All other sectors have been opened for private sector
participation.

3. Reforms related to the Public sector enterprises: reforms in the public sector were
aimed at enhancing efficiency and competitiveness of the sector. The government
identified strategic and priority areas for the public sector to concentrate. Similarly, loss
making PSUs were sold to the private sector. The government has adopted disinvestment
policy for the restructuring of the public sector in the country. at the same time autonomy
has been given to PSU boards for efficient functioning.

4. Foreign investment policy: another major feature of the economic reform measure was
it has given welcome to foreign investment and foreign technology. This measure has
enhanced the industrial competition and improved business environment in the country.
Foreign investment including FDI and FPI were allowed. Similarly, loan capital has also
introduced in the country to attract foreign capital.

5. Abolition of MRTP Act: The New Industrial Policy of 1991 has abolished the Monopoly
and Restricted Trade Practice Act. In 2010, the Competition Commission has emerged as
the watchdog in monitoring competitive practices in the economy.

The industrial policy of 1991 is the big reform introduced in Indian economy since
independence. The policy caused big changes including emergence of a strong and
competitive private sector and a sizable number of foreign companies in India.

(b) Break even analysis

A break-even analysis is a financial tool which helps you to determine at what stage your
company, or a new service or a product, will be profitable. In other words, it’s a financial
calculation for determining the number of products or services a company should sell to cover its
costs (particularly fixed costs). Break-even is a situation where you are neither making money nor
losing money, but all your costs have been covered.
Break-even analysis is useful in studying the relation between the variable cost, fixed cost and
revenue. Generally, a company with low fixed costs will have a low break-even point of sale. For
an example, a company has a fixed cost of Rs.0 (zero) will automatically have broken even upon
the first sale of its product.

Components of Break Even Analysis

Fixed costs
Fixed costs are also called as the overhead cost. These overhead costs occur after the decision to
start an economic activity is taken and these costs are directly related to the level of production,
but not the quantity of production. Fixed costs include (but are not limited to) interest, taxes,
salaries, rent, depreciation costs, labour costs, energy costs etc. These costs are fixed no matter
how much you sell.

Variable costs
Variable costs are costs that will increase or decrease in direct relation to the production volume.
These cost include cost of raw material, packaging cost, fuel and other costs that are directly
related to the production.

Calculation of Break-Even Analysis

The basic formula for break-even analysis is driven by dividing the total fixed costs of production
by the contribution per unit (price per unit less the variable costs).

For an example:
Variable costs per unit: Rs. 400 Sale price per unit: Rs. 600 Desired profits: Rs. 4,00,000 Total fixed
costs: Rs. 10,00,000 First we need to calculate the break-even point per unit, so we will divide the
Rs.10,00,000 of fixed costs by the Rs. 200 which is the contribution per unit (Rs. 600 – Rs. 200).
Break Even Point = Rs. 10,00,000/ Rs. 200 = 5000 units Next, this number of units can be shown in
rupees by multiplying the 5,000 units with the selling price of Rs. 600 per unit. We get Break Even
Sales at 5000 units x Rs. 600 = Rs. 30,00,000. (Break-even point in rupees)

(c) Marketing mix

The 4Cs marketing model was developed by Robert F. Lauterborn in 1990. It is a modification of
the 4Ps model.

It is not a basic part of the marketing mix definition, but rather an extension.

Here are the components of this marketing model:

 Cost – According to Lauterborn, price is not the only cost incurred when purchasing a
product. Cost of conscience or opportunity cost is also part of the cost of product
ownership.

 Consumer Wants and Needs – A company should only sell a product that addresses
consumer demand. So, marketers and business researchers should carefully study the
consumer wants and needs.

 Communication – According to Lauterborn, “promotion” is manipulative while

communication is “cooperative”. Marketers should aim to create an open dialogue with
potential clients based on their needs and wants.
  Convenience – The product should be readily available to the consumers. Marketers
should strategically place the products in several visible distribution points.
Whether you are using the 4Ps, the 7Ps, or the 4Cs, your marketing mix plan plays a vital role.

It is important to devise a plan that balances profit, client satisfaction, brand recognition, and
product availability.

It is also extremely important to consider the overall “how” aspect that will ultimately determine
your success or failure.

By understanding the basic concept of the marketing mix and it's extensions, you will be sure to
achieve financial success whether it is your own business or whether you are assisting in your
workplace's business success.