ENTREPRENEURIALSHIP DEVELOPMENT

Prof. J M Ovasdi

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Evolution of the concept
‡ Entrepreneur a French word for an organizer of musical or other entertainments ‡ It was also used for military expeditions and civil engineering aspects ‡ In the 18th century the term was used in economic aspects also ‡ Richard Cantillon, an Irishman, living in France, introduced the term entrepreneur as his unique risk-bearing function in economics.
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Entrepreneur as a Risk-Bearer
‡ Richard Cantillon defined entrepreneur as a agent who buys factorof productions at certain prices in order to combine them into a product with a view to selling it at uncertain prices in future. ‡ Uncertainty a risk which cannot be insured against and is incalculable ‡ A risk can be reduced through the insurance principle, where the distribution of outcome in a group of instances is known ‡ Uncertainty is the risk which cannot be calculated
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services j m ovasdi 4 . organization & supervision ‡ Innovator -.Entrepreneur as an Innovator ‡ Organizer coordination of the factors of production. new process ‡ Inventor & innovator inventor is one who discovers new methods and new materials.new product. Innovator utilizes inventions and discoveries in order to make new combination of products. new source of raw material. new technology new market.

Characteristics of an entrepreneur ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Risk-bearer Hard work Desire for high achievement Highly optimistic Independence Foresight Good organizer Good judge of persons Innovative Leadership j m ovasdi 5 .

j m ovasdi . Experience preferred 6 Qualifications Professional qualifications and experience not necessary.Difference between an entrepreneur and a manager Points Motive Status Riskbearing Rewards Innovation Entrepreneur To start a venture for personal gratification Owner of the enterprise Assumes all risks & uncertainty of the business Though uncertain gets all the profit Change-agent. strategist Manager Provide her services to an entrepreneur A servant of entrepreneur No risk except punishment for non-performance Fixed salary and bonus for exceptional services Executes the plans of the entrepreneur Professional qualifications necessary.

j m ovasdi 7 .Functions of an entrepreneur ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Idea scanning and ideation Determination of the business objectives Product analysis and market research Determination of form of ownership/organization Promotional formalities for business set up Raising necessary funds Procuring machines and material Recruitment of workers Undertaking the business operations .

Gulshan Kumar Buyers who take over companies Life-timers family business extensions Intrapreneurs (from within) managers starting independent business ventures j m ovasdi 8 .duplicating Fabian least risk taker.new products/services.Types of entrepreneurs ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Innovating. new markets Imitative -. follower of successful people Drone lack of adaptation to environmental changes Solo operators self with a few employees Active partners joint venture with active participation Inventors research & innovation Challengers Karsan Bhai.

Difference between entrepreneur and intrapreneur Difference Dependency Entrepreneur Independent in his operations Raises funds himself Intrapreneur Dependent on the entrepreneur the owner Funds are not raised by her Raising of funds Risk Operation Bears the complete risk Bears partial risk Operates from outside She operates from not an employee within the organization j m ovasdi 9 .

financial and material resources necessary to bring a project to fruition ‡ It is the purposeful activity of an individual or a group of associated individuals. and through the communicative and management skills to mobilize human. the management of risk-taking appropriate to the opportunity. maintain or increase profit by production or distribution j m ovasdi 10 .Entrepreneurship ‡ What an entrepreneur does is entrepreneurship ‡ It is an attempt to create value through recognition of business opportunity. undertaken to initiate.

Entrepreneur & Entrepreneurship Entrepreneur ‡Person ‡Organizer ‡Innovator ‡Risk-bearer ‡Motivator ‡Creator ‡Visualizer ‡Leader ‡imitator Entrepreneur ship ‡Process ‡Organization ‡Innovation ‡Risk-bearing ‡Motivation ‡Creation ‡Vision ‡Leadership ‡imitation j m ovasdi 11 .

J M Ovasdi j m ovasdi 12 .GROWTH OF ENTREPRENEURSHIP IN INDIA Prof.

carpets. Industrial revolution of Europe and North America killed the entrepreneurship of the rest of the world ‡ Indian textile. that is. gems. spices were traded world-over ‡ Indian entrepreneurs catered to all the needs of the common man and the nobility ‡ The surplus was exported by traders j m ovasdi 13 .Pre-independence ‡ Till about 1750. prior to the Industrial Revolution India & China had over 40 % share of the world trade.

British Rule & IR ‡ Indian entrepreneurship suffered because of the decline of the Royal patronage ‡ East-India company rule they purchased raw material from India and after making cloth in England imported to India and other colonies ‡ The British rulers did not allow industries to be set up in India for fear of competition with British industries ‡ Daily need goods for the common man continued to be manufactured by the local artisans j m ovasdi 14 .

Other Factors ‡ Imposition of heavy duties on the import of the Indian goods in England ‡ Mass-manufactured low priced goods killed Indian craftsmanship ‡ Indian Railways were built to help British trade ‡ The Indian nobility who were the patrons of Indian crafts became crazy about foreign goods ‡ Indian craftsmen failed to adapt to the changing tastes and needs of the people. j m ovasdi 15 .

Attempts at Revival of Entrepreneurship
‡ Parsi community became the pioneers of entrepreneurship in India ‡ They set up a number of factories in and around Bombay to meet the needs of the British companies ship building, steel making, gunpowder in the second half of 19th century. ‡ Ranchodlal Chotalal set up a modern textile factory in Ahmedabad in 1861. Parsis set up a number of textile mills in Bombay ‡ In 1915 there were 96 textile mills 41 of Parsis, 23 by Hindus and 10 by Muslim entrepreneurs ‡ First major steel mill by set up by Jamshedji Tata in 1911. ‡ The dominant trading communities of Jains and Marwaries entered the scene after first World War.
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After the first World War
‡ Managing Agencies --In 1936 Dwarkanath Tagore set up the first joint-stock company Carr, Tagore & Co. for managing the steam tugs/boats ‡ After the First WW and more so during the II WW the British government encouraged the Indian entrepreneurs to set up factories to fill up the gap in production by British companies ‡ At this stage the traditional trading communities of India emerged as the big entrepreneurs Birlas, Modi, Bajaj, Mafatlal, Kirloskar, Chettiars
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After Independence
‡ After getting political independence, the Government of India focused on economic growth ‡ Government took a number of initiatives to put economy on the fast track ‡ Five Year Plans were designed and implemented for all round development in urban & rural sectors, big and small business ‡ Infrastructure like electric power, roads, railways, telephones etc needed immediate attention
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and land to potential entrepreneurs ‡ Special concessions were granted for setting up small industrial units in backward areas to remove the regional imbalances in development j m ovasdi 19 . technical know-how. markets.Development of SME ‡ From third Five Year Plan (1962-67) special emphasis was accorded to develop small-scale industries ‡ Various incentives & concessions were given in the form of capital.

619 in 1966 to 190.727 in 1970 an increase of 17.Institutional Support to SMEs ‡ To facilitate the new entrepreneurs several institutions were set up like ‡ Directorate of Industries ‡ Financial Corporations ‡ Small-scale Industries Corporations ‡ Small Industries Service Institutes As a result of these initiatives the number of small-scale industries increased from 121.000 units in four years j m ovasdi 20 .

1991 ‡ Since exports were much lower than the demand of imports emphasis was laid on encouraging importsubstitution to save foreign exchange to develop entrepreneurship and technical skills of the workers ‡ Heavy industries were set up as Public Sector Undertakings (PSU) ‡ Technology was imported for setting up big and small industries ‡ Automatically SMEs emerged to feed the heavy industries ‡ However the quota-permit industrial policy was a mistake.Comments on the Trade and Industrial Policies from 1947 . j m ovasdi 21 .

j m ovasdi 22 . They had no though for entrepreneurship. capital & labour. ‡ What causes economic development ‡ The classical economists like Adam Smith.Role of Entrepreneurs in Economic Development ‡ Economic development means a process of upward change whereby the real per capita income of a country increases over a long period of time. and David Ricardo the rate of capital formation was the most important factor of economic development save more and invest in production of goods & services ‡ It depends on the personal interest & initiative of an individual where to invest & earn profit & create wealth ‡ Ricardo identified 3 factors of production machinery.

and Karsanbhai defeated the multinational HUL in detergent business by introducing Nirma ‡ Infosys was launched by six co-workers who sold the ornaments of their wives to raise Rs.Role of Entrepreneurship ‡ The emergence of USA. Japan. Gulshan Kumar revolutionized the audiocassette business with T-series. 1 Lakh. world over had started as small enterprises ‡ In India. and Russia as great economic powers in the 20th century was due to the spirit of entrepreneurship of small innovator investors who were the drivers of great economic development ‡ Most of the big businesses. j m ovasdi 23 .

j m ovasdi 24 . roads and other means of communication ‡ In India.Role of Entrepreneurship ‡ There are certain barriers for entrepreneurs in underdeveloped regions ‡ Paucity of funds ‡ Lack of skilled labor ‡ Non-existence of minimum social and economic overheads ‡ Lack of infrastructural amenities electricity. largest number of entrepreneurs have been imitators rather than innovators great scope for duplicate/unbranded goods produced by jugad methodology.

Role of Entrepreneurship
‡ Entrepreneurship promotes capital formation by mobilizing the idle saving of the public ‡ Provides immediate large-scale employment ‡ Promotes balanced regional development ‡ Helps reduce the concentration of economic power ‡ Stimulates the equitable distribution of wealth, income and even political power in the interest of the country ‡ Encourages effective resource mobilization of capital & skill which might otherwise remain unutilized and idle ‡ It includes backward & forward linkages which stimulate the process of economic development ‡ It promotes country s export trade (40% in India)
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Reasons for Growth of Entrepreneurship
‡ The Global Entrepreneurship Monitor report in 2007 observed high incidence of entrepreneurship throughout the world, particularly in China, India, Thailand. ‡ Industry structure post-capitalist society. Shift from capital intensive to knowledge intensive industry inspired by IT revolution. Ideas and not infrastructure are important ‡ Deregulation and Privatization China in 1980s, Russia, Eastern Europe and India in 1990s ‡ Growth of Services Sector- largest number of opportunities in this sector for entrepreneurs and jobs
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Reasons for Growth of Entrepreneurship
‡ Government Incentives & Subsidies ‡ Entrepreneurial Education (EDP) universities and technical institutes ‡ Rajiv Gandhi Udyami Mitra Yojana (RGUMY) ‡ Increasing flow of Information ‡ Easier Access to Resources ‡ Return on Innovation IPR is a major boost to entrepreneurs willing to take risk ‡ High regards for Self-employment formerly government jobs were the first priority ‡ Acceptance of Ex- Entrepreneurs in jobs even after their failed ventures.
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a noted economist who served as the Ambassador of the US in India. ‡ Starting a business in India is not an easy task. Funds may be available but there are lot of hurdles to be crossed before the business starts functioning. ‡ India is not considered to be business-friendly ‡ Major issues involved are the following j m ovasdi 28 .Doing Business in India -.Some Issues ‡ John Galbraith. had called India the chaos that works .

There are too many rules to be complied with for starting a business. not only in bureaucracy and politics but in many other fields. Businessmen frequently use bribe and other methods to get the government clearances ‡ Corruption is a way of life. j m ovasdi 29 .Doing Business in India -. bureaucracy refers to the rule of the office . Too many clearances to be obtained.Some Issues ‡ Bureaucracy bureau is a French word meaning office and the Greek suffix kratos. So. ‡ Bureaucracy in India is very rule-minded . means power or rule.

Doing Business in India -- Some Issues
‡ Tribe of Middle-men acting as consultants they help and also cheat the businessmen for getting licenses and loans. ‡ Grey market and Counterfeit Goods grey market is the flow of goods through unauthorized channels (smuggling) to evade taxes. It creates problems for the manufacturers and the customers. Counterfeit goods are a substandard copy of the original. Also known as piracy. Pirated/counterfeit music and film CDs/DVDs are more in demand than the original products. ‡ Social Capital personal relationship pehchan connection, with the powerful people is more important than the quality of the product.

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Doing Business in India -- Some Issues
‡ The Doing Business report is published annually by the World Bank. About 178 countries are ranked and India s rank if 120 (2008 report). ‡ For enforcing contracts India s position is 177. the courts take too much time in deciding business related disputes ‡ Even for closing a business it is very difficult ‡ That is the reason for insufficient FDI in India. China gets 10 times more FDI than India.
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Why Start a Business
Dream come true Thrill of being your own boss Self esteem from job seeker to job giver No restraints on your innovative ideas Money is the most common reason for starting a business ‡ Exponential growth possible as against a timebound career ‡ Creating a successful business is an insurance cover and training opportunity for the next generation ‡ ‡ ‡ ‡ ‡
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Disadvantages You are alone You are the risk-bearer You can t blame others for bad decisions All losses are yours Work may not be satisfying Long hours at the establishment unlike employees ‡ Lack of success will affect self-esteem ‡ Difficult to exit from a failed business ‡ An employee may get a new jobs in a couple of months but starting a new business may take years. ‡ ‡ ‡ ‡ ‡ ‡ j m ovasdi 33 .

Creativity.Entrepreneurial Characteristics & Skills ‡ Most common characteristics of entrepreneurs across the world 1. Commitment and determination 2. ambiguity. Opportunity obsession 4. and uncertainty 5. j m ovasdi 34 . leadership 3. Tolerance of risk. self-reliance and ability to adapt 6. Motivation to excel and the skill to motivate subordinates to excel.

. Being a college graduate 7. 4.Demographic and Cultural Backgrounds Offspring of self-employed parents Being fired from more than one job Being an immigrant or a child of immigrants Previous employment in a firm with more than 100 people 5. 2. Being a widow. Being the eldest child in the family 6. 3. single parent without economic support j m ovasdi 35 1.

and Creativity Real-time strategy and decision making Comfort with change and chaos Teamwork Good judge of people Tolerance of imperfections Extremely efficient negotiator Good mastery of the basics of finance.Entrepreneurial Skills 1. accountancy. Craziness. 4. Curiosity. 7. 3. 2. 6. and communication skills j m ovasdi 36 . 5. 8. marketing.

Entrepreneurial Skills 9. Patience to start from the scratch 12. Comfortable with life style changes 10.Willing to break/bend/stretch laws 11. Willingness to learn j m ovasdi 37 . Dealing with failure 15. Comfortable with confrontations 14. Prepared to make enemies 13.

j m ovasdi 38 . ‡ Experienced few years experience in family business or as employee for some years Narayan Murthy and five colleagues launched Infosys at the age of 35 years with practically no resources ‡ Mature Ex-CEOs.Types of Entrepreneurs Classification based on the Timing of Venture Creation ‡ Early Starters with little or no full-time work experience. started his own venture by buying the Daewoo plant in India. and B V R Subbu. Normally the entrepreneur is from a business family. senior mangers taking VRS and starting their ventures Jagdish Khatter of MUL started his own venture. Ashok Soota and Subroto Bagchi quit Wipro to start Mindtreee.CEO of Hyundai India. An extreme case of an early starter is Suhas Gopinath who listed his company Globals Inc. in the USA because Indian laws do not permit a minor to run a company. the ex.

Sindhi. Chettiyar. Tatas. j m ovasdi 39 . and Singhanias are from these groups. Murugappas.Birlas. Wadias. Road-transport business is dominated by Punjabis. particularly Sikhs.Types of Entrepreneurs ‡ Based on Socio-cultural Variables ‡ First-generation Entrepreneurs Dhirubhai Ambani and Narayan Murthy ‡ Entrepreneurs from Business Families few socio-ethnic family groups have dominated the business scene in India Parsee. Gujarati.

Jagadish Khattar ‡ Ex IAS and the CMD of Maruti Udyog Limited has launched his new venture Carnation. Also they are planning to sell value added products and accessories like batteries. Carnation plans to pumps a whopping Rs1000 Cr for developing it s business model. service. tyres etc. lease and finance multi-branded cars. a network of multi-car sales and after sale service outlets. j m ovasdi 40 . ‡ Carnation planning to focus on sales.

and incorporated his company in the USA. ‡ Gopinath taught himself how to build websites and sold portals to bricks-and-mortar firms in the US.Suhas Gopinath ‡ Born in Bengaluru (1986). since Indian Laws do not permit minors to register a company.com at the age of 14. European Parliament and he has advised World Bank for the development of computer skills in Africa for generating employability in poor countries. ‡ Achievements ‡ He has received awards from his home state. j m ovasdi 41 . making him the world's youngest CEO at that time. Suhas launched a web site called CoolHindustan.

MINISTRY OF MICRO. namely. Small & Medium Industries ‡ Ministry of Agro and Rural Industries (Krishi Evam Gramin Udyog Mantralaya) and Ministry of Small Scale Industries (Laghu Udyog Mantralaya) have been merged into a single Ministry. SMALL AND MEDIUM ENTERPRISES (SUKSHMA LAGHU AUR MADHYAM UDYAM MANTRALAYA) since May 2007 j m ovasdi 42 .Micro.

Micro. j m ovasdi 43 . Small & Medium Enterprises .The Engine of inclusive growth & development ‡ Worldwide. the micro small and medium enterprises (MSMEs) have been accepted as the engine of economic growth and for promoting equitable development. ‡ The labour intensity of the MSME sector is much higher than that of the large enterprises. ‡ The major advantage of the sector is its employment potential at low capital cost.

Engines of Economic Development ‡ The MSMEs constitute over 90% of total enterprises in most of the economies and are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports. In recent years the MSME sector has consistently registered higher growth rate compared to the overall industrial sector. With its agility and dynamism. j m ovasdi 44 . In India too. the sector has shown admirable innovativeness and adaptability to survive the recent economic downturn and recession. the MSMEs play a pivotal role in the overall industrial economy of the country.

‡ In India too. ‡ In recent years the MSME sector has consistently registered higher growth rate compared to the overall industrial sector. j m ovasdi 45 . the sector has shown admirable innovativeness and adaptability to survive the recent economic downturn and recession.MSME Importance ‡ The MSMEs constitute over 90% of total enterprises in most of the economies and are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports. ‡ With its agility and dynamism. the MSMEs play a pivotal role in the overall industrial economy of the country.

7 million (about 6 crore) persons spread over 26.Importance of MSME ‡ As per available statistics (4th Census of MSME Sector).6 crore) enterprises. ‡ It is estimated that in terms of value.1 million (2. this sector employs an estimated 59. j m ovasdi 46 . MSME sector accounts for about 45% of the manufacturing output and around 40% of the total export of the country.

five crore or ‡ A medium enterprise. where the investment in plant and machinery does not exceed Rs 25 lakh ‡ A small enterprise. where the investment in plant and machinery is more than five crore rupees but does not exceed ten crore rupees j m ovasdi 47 . where the investment in plant and machinery is more than twenty five lakh rupees but does not exceed Rs.Definitions of MSMEs Production ‡ A micro enterprise.

Definitions of MSMEs Services ‡ In the case of the enterprises engaged in providing or rendering of services. where the investment in equipment is more than two crore rupees but does not exceed five crore rupees j m ovasdi 48 . where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees. or ‡ A medium enterprise. where the investment in equipment does not exceed ten lakh rupees. ‡ A small enterprise. as ‡ A micro enterprise.

it is hereby clarified that in calculating the investment in plant and machinery. the cost of pollution control. shall be excluded. industrial safety devices and such other items as may be specified. research and development. by notification. j m ovasdi 49 .Clarification regarding investment limits ‡ For the removal of doubt.

through the selected lead agencies i. in the establishment and management of the new enterprise. j m ovasdi 50 .RAJIV GANDHI UDYAMI MITRA YOJANA ‡ (A Scheme of Promotion and Handholding of Micro and Small Enterprises ) ‡ The objective of Rajiv Gandhi Udyami Mitra Yojana (RGUMY) is to provide handholding support and assistance to the potential first generation entrepreneurs. in dealing with various procedural and legal hurdles and in completion of various formalities required for setting up and running of the enterprise. who have already successfully completed EDP/SDP/ESDP or vocational training from ITIs. 'Udyami Mitras'.e.

micro and small enterprises (MSEs) are recognized as an important/constituent of the national economies. Recognizing the importance of micro and small enterprises. employment and creation of entrepreneurial base. exports. contributing significantly to employment expansion and poverty alleviation. j m ovasdi 51 .Background ‡ World over. the Central and State Governments have been implementing several schemes and programmes for promotion and development of these enterprises. which constitute an important segment of Indian economy in terms of their contribution to country s industrial production.

‡ The small scale industries in India. In terms of employment generation. spatially widespread and employment-oriented economic growth. j m ovasdi 52 . have a long history of promoting inclusive. this segment is next only to agriculture. collectively referred as micro and small enterprises (MSEs). including the tiny or micro industries and service/business entities.

particularly. the first generation entrepreneurs.EDP. national and state level Entrepreneurship Development Institutes (EDIs). j m ovasdi 53 . ‡ Entrepreneurship Development Programmes (EDPs) of various durations are being organized on regular basis by a number of organizations e. national and state level Industrial Development Corporations. Banks and other training institutions/agencies in private and public sector etc. to create new entrepreneurs by cultivating their latent qualities of entrepreneurship and enlightening them on various aspects necessary for setting up micro and small enterprises.. Small and Medium Enterprises Development Institutes (MSMEDIs) [earlier known as Small Industries Service Institutes (SISIs)].g. Micro.Entrepreneur Development Program ‡ Entrepreneurship development and training is one of the key elements for development and promotion of micro and small enterprises.

in terms of actual setting up and successful running of enterprises. various Industrial Training Institutes (ITIs).EDP. ‡ However. skill development programmes (SDPs) and entrepreneurship-cum-skill development programmes (ESDPs). other private training institutions are also organizing vocational training (VT) programmes. by the EDP/SDP/ESDP trained entrepreneurs. there are still wide spread variations in the success rate. j m ovasdi 54 .Entrepreneur Development Program ‡ Besides.

EDP. particularly during the initial stages of setting up and managing their enterprises. In order to bridge the gap between the aspirations of the potential entrepreneurs and the ground realties. generally face difficulties in availing full benefits under available schemes of the Governments / financial institutions. j m ovasdi 55 .Entrepreneur Development Program ‡ It has been observed that entrepreneurs particularly new entrepreneurs. tie-up with buyers and sellers etc. ‡ In selection of appropriate technology. completing and complying with various formalities and legal requirements under various laws/regulations. there is a need to support and nurture the potential first generation as well as existing entrepreneurs by giving them handholding support.

in the establishment and management of the new enterprise. To provide handholding support and assistance to the potential first generation entrepreneurs.Objectives of Rajiv Gandhi Udyami Mitra Yojana (RGUMY) 1. who have already successfully completed or undergoing Entrepreneurship Development Training Programme (EDP) / Skill Development Training Programme (SDP)/ Entrepreneurship cum Skill Development Training Programme (ESDP) /Vocation Training Programmes (VT). in dealing with various procedural and legal hurdles and in completion of various formalities required for setting up and running of the enterprise. j m ovasdi 56 .e. 'Udyami Mitras'. through the selected lead agencies i.

support. to guide them regarding various promotional schemes of the Government.Objectives 2. guidance and assistance to first generation entrepreneurs as well as other existing entrepreneurs through an Udyami Helpline (a Call Centre for MSMEs). j m ovasdi 57 . To provide information. procedural formalities required for setting up and running of the enterprise and help them in accessing Bank credit etc.

ii.e. Existing national level Entrepreneurship Development Institutions (EDIs).e. j m ovasdi 58 . iii. Small and Medium Enterprises Development Institutes (MSMEDIs)/ Branch MSMEDIs. Micro.g. Udyami Mitra: i. Udyami Mitras for rendering assistance and handholding support to the potential first generation entrepreneurs.Udyami Mitras ‡ Eligibility ‡ Under RGUMY. Following agencies/ organizations can be appointed as the lead agency i. financial assistance would be provided to the selected lead agencies i. National Small Industries Corporation (NSIC) and State Industrial Development Corporations etc. Central/ State Government public sector enterprises (PSEs) involved in promotion and development of MSEs e.

v. Capable associations of MSEs/SSIs. j m ovasdi 59 . vii. vi. viii.Udyami Mitras iv. Other organizations/training institutions/NGOs etc. Khadi and Village Industries Commission (KVIC). Special Purpose Vehicles (SPVs) set up for cluster development involved in entrepreneurship development. involved in entrepreneurship development/ skill development. Selected State level EDIs and Entrepreneurship Development Centers (EDCs) in public or private sectors.

j m ovasdi 60 . technology providers. Udyami Mitras would be expected to render assistance and handholding support for following services: ‡ Networking. District Industries Centers (DICs).Role and Responsibilities of Udyami Mitras ‡ The selected lead agencies i. coordinating and follow up with various Government departments/ agencies/ organizations and regulatory agencies on the one hand and with support agencies like Banks/financial institutions. infrastructure providers on the other hand.e. to help the first generation entrepreneurs in setting up their enterprise.

‡ c) Filing of Memorandum (as prescribed under MSMED Act 2006).Role and Responsibilities of Udyami Mitras ‡ Udyami Mitras are expected to help the first generation entrepreneurs in: ‡ a) Identification of suitable project/product/enterprise and preparation of bankable project report for the same ‡ b) Creation of the proprietorship firm/ partnership firm/ Company/ Society/ Self Help Group (SHG) etc. j m ovasdi 61 .

by networking with respective agencies e) Assistance and support in establishment of work shed/office. j m ovasdi 62 . g) Selection of appropriate technology and installation of plant and machinery/office equipment etc. admissible capital subsidy/ assistance under various schemes of the Central /State Government and other agencies/organizations/financial institutions/ Banks etc. f) Sanction of Power load/connection.Role and Responsibilities of Udyami Mitras d) Accessing bank loans.

. ‡ h) obtaining various registrations/ licenses/ j m ovasdi 63 . ‡ j) Sanction of working capital loan from the banks. ‡ k) Arranging tie up with raw material suppliers.Role and Responsibilities of Udyami Mitras clearances / No Objection Certificates (NOCs) etc. ‡ i) Allotment of Income Tax Permanent Account Number (PAN) and Service Tax/ Sales Tax/ VAT registration etc. from the concerned regulatory agencies/ Government departments/ local bodies/ Municipal authorities etc.

Role and Responsibilities of Udyami Mitras l) Preparation and implementation of marketing strategy for the product/ service and market development. (ii) Once the enterprise has been successfully set up. financial and operational problems. j m ovasdi 64 . and m) Establishing linkage with a mentor for providing guidance in future n) Creation of web page and email identity. the Udyami Mitras would also monitor and follow up on the functioning of the enterprise for a further period of minimum 6 months and provide help in overcoming various managerial.

Small and Medium Enterprise The main steps involve in setting up a Micro. Small & Medium Enterprise are as below :‡ (a) Project Selection ‡ (b) Technology and Machinery (c) Arranging Finance (d) Unit Development (e) Filing of Entrepreneurs Memorandum (f) Approvals (g) Clearances (h) Quality Certification j m ovasdi 65 .Setting up a Micro.

and institutional financial help have created room for women entrepreneurs. SHG.Women Entrepreneurs ‡ Traditionally. ‡ Empowerment of women through higher education. Indian women had their position restricted to the house-hold and lack of education and opportunities Abla nari ‡ Social stigma for working women. j m ovasdi 66 . clerks. nurses. receptionists etc. ‡ Limited career opportunities school teachers.

OPPORTUNITY. j m ovasdi 67 . ‡ If one can see an opportunity to provide a product or service in a manner to generate sufficient surplus. then one way is to start up a MSME unit. and improve quality of life of people. This can generate ideas about products and services that can make things easier.Setting up a new unit is a big challenge. ‡ The overriding reason for anyone to think of establishing a MSME unit can be summarised in one word . This is all the more true if one believes in the maxim. "Small is Beautiful" ‡ Opportunities emerge out of ideas that one comes across by thinking about lives of friends and neighbours.

initiate it.Women Entrepreneurs ‡ The GoI has defined women entrepreneurs based on women participation in equity and employment of a business enterprise ‡ Enterprise owned and controlled by women having a minimum financial interest of 51 % of the capital and giving at least 51 % employment generated in the enterprise to women ‡ Women Entrepreneurs are those who think of a business enterprise. organize. combine the factors of production. j m ovasdi 68 . operate the enterprise and undertake risks and handle economic uncertainty involved in running a business enterprise.

Supervision & leadership Internal assessment test profile of at least two women entrepreneurs j m ovasdi 69 . administration and control 5.Functions of Women Entrepreneurs ‡ Frederick Harbison five functions 1. Exploration of the prospects of starting a new business enterprise 2. Coordination. Undertaking risks of economic outcome uncertainty 3. Introduction of innovations or imitation of innovations 4.

Growth of Women Entrepreneurs ‡ In India Women Entrepreneurs is a new phenomenon ‡ Traditionally women entry into business is traced to an extension of their kitchen activities ‡ 3 Ps Pickle. and energy. independently. entertainment. More Es -education. event management j m ovasdi 70 . electronics. Powder and Pappad ‡ Push factor that compel women to take up their own business to tide over their economic difficulties and responsibilities ‡ Pull factors imply factors which encourage women to start an occupation or venture with an urge to do something. ‡ With women professional education 3 Ps have become 3 Es Engineering.

Women Entrepreneurs ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Examples Solar cookers in Gujarat Small foundaries in Maharashtra TV capacitors in Orissa Famous Indian Women Entrepreneurs Sumati Morarji Shipping Corporation Yamutai Kirloskar Mahila Udyog Neena Malhotra Exports Shahnaz Huaasain Beauty Clinics and Personal care products Kiran Mazumdar Shaw Bio-Technology j m ovasdi 71 .

She founded Biocon India with a capital of Rs. Kiran Mazumdar-Shaw. and (most importantly) women entrepreneurs were still a rarity. who became India's richest woman in 2004 (an estimated Rs. Kiran Mazumdar Shaw ‡ Entrepreneur Dr.000 in her garage in 1978 .2..100 crore US$480 million). Today.Dr.10. her company is the biggest biopharmaceutical firm in the country.on three counts biotechnology was then a new word. the company lacked assets. was educated at the Bishop Cotton Girls School and Mount Carmel College in Bangalore. Her application for loans were turned down by banks then . j m ovasdi 72 . Chairman & Managing Director of Biocon Ltd.the initial operation was to extract an enzyme from papaya.

At the 6th Indian Telly Awards 2006. j m ovasdi 73 . which started airing on STAR Plus in 2000. creative head of Balajji Telefilms. after her most famous venture 'Kyunki Saas Bhi Kabhi Bahu Thi'. Ekta dominates Indian television with shows in multichannels. is the daughter of actor Jeetendra. She has been synonymous with the rage of soap operas on Indian TV. she bagged the Hall of Fame award for her contributions to Indian TV. and sister of actor Tushar Kapoor.Ekta Kapoor ‡ Ekta Kapoor.

is currently the director of the Centre. and publisher of the fortnightly magazine. was awarded the Padma Shri by the Government of India in 2005. who has been with the India-based Centre for Science and Environment since 1982. an environmentalist and political activist as well as a major proponent of the Green concept of sustainable development. ‡ Narain. 'Down to Earth'. and the director of the Society for Environmental Communications.Sunita Narain ‡ Sunita Narain. j m ovasdi 74 .

The family members and the society are reluctant to stand beside their entrepreneurial growth. devoting enough time to perform all their responsibilities in priority. To a certain extent.Major constraints faced by Indian Women Entrepreneurs a) Lack of confidence In general. Only few women are able to manage both home and business efficiently. j m ovasdi 75 . women lack confidence in their strength and competence. this situation is changing among Indian women and yet to face a tremendous change to increase the rate of growth in entrepreneurship. b) Socio-cultural barriers Women s family and personal obligations are sometimes a great barrier for succeeding in business career.

financial assistance from public and private institutions and also the environment suitable for women to establish business units. attitude to take up risk and behavior towards the business society by shouldering the social responsibilities. Other factors are family support. They are not fully aware of the changing market conditions and hence can effectively utilize the services of media and internet. d) Motivational factors Self motivation can be realized through a mind set for a successful business.Constraints Stiff competition in the market and lack of mobility of women make the dependence of women entrepreneurs on middleman indispensable. Government policies. c) Market-oriented risks j m ovasdi 76 . Many business women find it difficult to capture the market and make their products popular.

loans. j m ovasdi 77 . f) Awareness about the financial assistance Various institutions in the financial sector extend their maximum support in the form of incentives.Constraints e) Knowledge in Business Administration Women must be educated and trained constantly to acquire the skills and knowledge in all the functional areas of business management. schemes etc. This can facilitate women to excel in decision making process and develop a good business network. Even then every woman entrepreneur may not be aware of all the assistance provided by the institutions. So the sincere efforts taken towards women entrepreneurs may not reach the entrepreneurs in rural and backward areas.

Overcoming Constraints g) Exposure to the training programs . based on duration. institutions. rural and young entrepreneurs who want to set up a small and medium scale unit on their own. In spite of the mushrooming growth of associations. and the schemes from the government side. women are not enterprising and dynamic to optimize the resources in the form of reserves. Such programs are really useful to new. j m ovasdi 78 . assets mankind or business volunteers. h) Identifying the available resources Women are hesitant to find out the access to cater their needs in the financial and marketing areas.Training programs and workshops for every type of entrepreneur is available through the social and welfare associations. skill and the purpose of the training program.

technically sound and professionally qualified women should be encouraged for managing their own business. trained and used for various types of industries to increase the productivity in the industrial sector.Over coming Constraints ‡ Highly educated. ‡ A desirable environment is necessary for every woman to inculcate entrepreneurial values and involve greatly in business dealings j m ovasdi 79 . ‡ The unexplored talents of young women can be identified. rather than dependent on wage employment outlets.

Emerging Business Opportunities for Women ‡ Eco-friendly technology Bio-technology IT enabled enterprises Event Management Tourism Industry Telecommunication Plastic materials j m ovasdi 80 .

Emerging Business Opportunities for Women Vermiculture Mineral water Sericulture Floriculture Herbal & health care Food. fruits & vegetable processing j m ovasdi 81 .

mentoring. Newsletters.Women Empowerment for Sustainable Development ‡ Empowering women entrepreneurs is essential for achieving the goals of sustainable development and the bottlenecks hindering their growth must be eradicated to entitle full participation in the business. j m ovasdi 82 . trade fairs and exhibitions also can be a source for entrepreneurial development. ‡ Apart from training programs.

promoting entrepreneurship among women is certainly a short-cut to rapid economic growth and development. ‡ Henceforth. ‡ Let us try to eliminate all forms of gender discrimination and thus allow women to be an entrepreneur at par with men. the desired outcomes of the business are quickly achieved and more of remunerative business opportunities are found. j m ovasdi 83 .Empowerment for Sustainable Development ‡ As a result.

Project Identification and Selection J M OVASDI j m ovasdi 84 .

friends and any other support agency. ‡ Based on these factors select a project.Ideation & Project ‡ An entrepreneur chooses an idea. j m ovasdi 85 . an opportunity to start her enterprise ‡ Business Environment scanning is done to make the choice like ‡ What are the unfulfilled needs of the customers ‡ How to fulfill their needs ‡ What are your strengths and weaknesses ‡ Are you confident of the support of your family.

What is a Project ‡ The very foundation of an enterprise is a project ‡ It is a distinct mission to achieve and a clear termination point ‡ It is a set of activities involved in using resources to gain benefits. Specific objective what do you what to achieve 3. j m ovasdi 86 . A course of action definite plan 2. Every project has three basic attributes 1. Definite time perspective Procedure project identification and project selection.

Study magazines . friends etc.Identification & Selection ‡ Idea Generation is done through internal & external sources 1. concessions and incentives etc. j m ovasdi 87 . Success stories of known entrepreneurs. Knowledge of potential customers 2. Watching emerging trends 3. Meeting government agencies. Knowledge about government policy. Scope for good copying of existing products 4. Udhyami Mitras 8. 6. Visiting fairs and exhibitions 7. journals 5.

‡ There may be technical problems ‡ Considering all the opportunities. j m ovasdi 88 . and constraints the final selection is made. ‡ Then a project report is made. It is the most important step if we have to apply for a loan.Selection ‡ After collecting data and information about various opportunities we have to make a short list of choices according to our strengths & weaknesses ‡ We have to list the requirement of financial investment and other resources ‡ Some projects may be very beneficial but require resources that are not easy to get.

their specific capabilities and professional. product design.Contents of a Project Report ‡ A good project report should have the following contents 1. advantages to be offered by the product over its substitutes j m ovasdi 89 . experience etc i) Industry profile in which the project will fall ii) Organizational structure of the enterprise iii) Product details product utility. technical qualifications. product range. General Information bio-data of the single or multiple promoters.

water ‡ ii) pollution control requirements sewage system. skilled labor. utilities like power. sewage treatment plant requirements ‡ Iii) Communication system facilities available and required ‡ Transport facilities existing. expected j m ovasdi 90 .Contents of a Project Report Project Description ‡ i) Site ‡ Physical infrastructure ‡ Availability of raw material.

cost & sources of supply ‡ Capacity of the plant and the number of shifts proposed ‡ Technology selected ‡ R & D proposed research & development activities proposed to be undertaken in future j m ovasdi 91 .Contents of a Project Report ‡ Production process period of conversion of raw material into finished goods ‡ Machines & equipment complete list.

Contents of Project Report ‡ Market potential 1. Demand & supply position how the gap between the two will be filled up 2. Expected price of the production per unit ‡ Marketing Strategy arrangements for selling the products ‡ After-sales Service state the execution procedure ‡ Transportation what facilities are available or will be required j m ovasdi 92 .

margin for working capital ‡ The present probable sources of finance should be included in the project report ‡ Sources should indicate the owner s funds together with funds raised to be raised from financial institutions and banks. machinery. plant. j m ovasdi 93 . preliminary expenses.Contents of Project Report ‡ Capital Costs and Sources of Finance estimates of capital items like land & buildings. installation costs.

financial. technical.Project Appraisal Every industrial project involves risk Project appraisal is a process to reduce the risk Ex-ante analysis for proposed project Post-ante analysis is for the executed project Project appraisal is a cost & benefit analysis of different aspects of the project to adjudge its viability ‡ Economic. managerial and social aspects are analyzed ‡ Project appraisal is done by financial institutions to assess its credit worthiness before extending finance to a project. They also get it evaluated by other agencies ‡ Sometimes the scope and contents of the project are modified after the appraisal & evaluation ‡ ‡ ‡ ‡ ‡ j m ovasdi 94 . market.

decline 4. Technical feasibility 5. Financial analysis most important exercise fixed & working capital 3. Methods used are management economics . maturity. expenses and probable profits 2. anticipated sales. Market analysis no profit if goods are not sold. level of utilization. saturation. Life Cycle Segmentation analysis introduction. sales experience. opinion poll. Economic analysis requirement of raw material. growth.Methods of Project Appraisal 1. demand forecasting though survey. Managerial competence j m ovasdi 95 . vicarious method selling the goods through dealers on test basis.

Financing of Enterprise J M Ovasdi j m ovasdi 96 .

Labour 3. Capital 4.Need for Financial Planning ‡ Production is the outcome of five factors 1. Availability of these factors in right proportion is needed for success. Entrepreneurship 5. Land 2. j m ovasdi 97 . Organization These are mutually dependent on each other.

Need for Financial Planning ‡ Finance is the lubricant to the process of production. ‡ Make an assessment 1. short-term. ‡ Whoever has the gold makes the rule. How much money is needed 2. ‡ It is the life blood of enterprise. long term (over five years) j m ovasdi 98 . Where will it come from 3. When does the money need to be available in two forms fixed and working capital.

Priority to internal resources External sources ‡ Help from family and friends ‡ Loans from banks /non-banking financial institutions (NBFC) ‡ Loans from State Financial Corporations j m ovasdi 99 .Entrepreneurial Finance ‡ Entrepreneurs raise funds to start their business though various sources like internal & external Internal sources ‡ Self-generated funds that can be spared from the business. rents. property. plus savings. investments.

j m ovasdi 100 .Entrepreneurial Finance ‡ RBI has identified lending to MSMEs as one of the priority sector advances ‡ MSMEs may get loans up to Rs 25 lakhs without collateral ‡ RBI has fixed time limits for dealing with a loan application from MSMEs ‡ The lender organization studies the business plan of the applicant and get it reviewed by experts. ‡ Series of meetings are held between the lender and the borrower before loans are granted.

Government Initiatives for Promoting MSMEs J M OVASDI j m ovasdi 101 .

MSMI MINISTRY ‡ Ministry of Micro. in order to enable them to meet their changing needs. spread all over the country. institutional and support measures. ‡ Small Industries Development Bank of India (SIDBI) has developed various financing schemes. j m ovasdi 102 . and has evolved several policies. Small and Medium Scale Industries is primarily responsible for promotion and development of SMEs in India.

DSIR) has evolved several measures and programs for technological assistance and development and transfer of technologies for SMEs. DBT. have also recently announced initiatives for technical assistance in various firms j m ovasdi 103 . Department of Food Processing and Department of Handicrafts etc. ‡ Some of the economic ministries such as Ministry of Textiles.MSMI MINISTRY ‡ Ministry of Science and Technology (DST.

New initiatives to promote MSMEs ‡ Some of the measures and new initiatives to promote SMEs include: ‡ SME development fund ‡ A specialized stock exchange for SMEs ‡ Encouragement for patenting and ISO Certification ‡ SME venture capital fund ‡ National Commission for Small Industries (informal sectors) ‡ SME development bill ‡ Credit Rating Agency ‡ Promoting special venture capital companies and risk financing companies for SMEs ‡ Improve the working of credit guarantee and export promotion institutions j m ovasdi 104 .

EOUs(export oriented units).New initiatives ‡ Progressively reduce protection measures and simplify implementation policies and control mechanisms ‡ SME Development Centres at SIDBI and IIFT ‡ Considering liberalizing FDI in SMEs and encouraging their linkages with TNCs and large companies ‡ Promoting industrial growth centres/clusters. district industry centres. business incubators and business parks ‡ Market assistance and export promotion ‡ National Small Industries Corporation ‡ Small Industries Development Organization ‡ Limited Liability Partnership Bill 2006 j m ovasdi 105 .

Technology business incubators Software technology parks S&T Entrepreneurship Development Board Techno-preneur Promotion Program j m ovasdi 106 .Technology Support Initiatives ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Proto-typing and product development centres Design. toys. handicrafts. engineering and development centres Small industries and services institutes Tool rooms Specialized development centres with international assistance in areas such as electronics. etc.

fiscal incentives. custom duty exemptions.Technology Support Initiatives ‡ Consultancy Development Program ‡ Tax incentives. Information and Forecasting Assessment Council (TIFAC) ‡ Innovation centres. grants & other financing mechanisms ‡ In-house R&D recognition scheme for industry ‡ National Innovation Foundation ‡ Technology Development Board ‡ Technology. entrepreneurship development institutes j m ovasdi 107 .

Technology Support Initiatives ‡ National Institutions for specific industries such as fashion design. packaging. glass and ceramics etc. ‡ Small Industries Information and Resource Centre Networks (SENET) ‡ S&T Parks ‡ Technical Consultancy Organizations (TCOs) ‡ Technology Up gradation Fund ‡ The Asia and Pacific Centre for Transfer of Technology j m ovasdi 108 .

disabling rules and regulations j m ovasdi 109 . the need for ensuring the competitiveness of small scale sector as it would help in overall growth of manufacturing sector as also the national economy. The strategy report has identified the following important impediments.National Manufacturing Competitiveness Council (NMCC) ‡ NMCC has also recognized in its national strategy for manufacturing announced in March 2006. communication ) ‡ Lack of R&D linkages no tie up ‡ Marketing constraints. among others: ‡ Access to timely and adequate credit ‡ Technological obsolescence (old technology) ‡ Infrastructural bottlenecks (power.

(National Manufacturing Competitiveness Council. Another important recommendation relates to setting up a Global Technology Acquisition Fund to enable Indian industry to acquire very high technology intensive companies abroad.National Strategy for Manufacturing ‡ The National Strategy for Manufacturing has recognized the need for a focused project on advance technology products and has recommended the constitution of a special group to study the potential for manufacture and export of such products. 2006) j m ovasdi 110 . It has also recommended the establishment of technology parks around institutions of higher technological learning on the lines of those existing in USA.

j m ovasdi 111 . ‡ New and innovative approach to cluster development should be adopted. small scale sector should be encouraged as breeding ground of innovation and technology development where it becomes the technology sources for large companies. ‡ Towards this. government must incentivise technology development in SMEs to enhance their competitiveness.National Strategy for Manufacturing ‡ The strategy suggests a cluster approach for improving the manufacturing competence. ‡ Further.

j m ovasdi 112 . resulting in continuous improvement and value addition for existing products.National Strategy for Manufacturing ‡ A National Manufacturing Competitiveness Program (NMCP) is being developed which includes objectives to support SMEs. ‡ Emphasis is also laid down to enable SMEs to be competitive through quality management standards and quality technology tools. ‡ A Design Clinic approach is suggested to bring Indian manufacturing sector and design expertise on to a common platform and to provide expert advice and cost effective solution. These are only some of the strategies among those suggested in the Report.

j m ovasdi 113 . ‡ The areas for support include lean manufacturing. encouraging patents and so on.000 firms in more than 500 SME Clusters. increasing number of tool rooms. technology and quality up gradation. The thrust of the plan is towards technology infusion.NMCC Funds ‡ NMCC seems to have prepared Rs. 1. ‡ This aims to benefit over 10. ICT.000 crore National Manufacturing Competitiveness Program for small and medium enterprises jointly with Ministry of Small Scale Industries.

‡ Various studies have shown that ICT and technology levels are higher in internationalized SMEs in sectors such as food processing. ICT. auto components. compared to non-exporting or domestic SMEs. leather. garments etc. training and ICT encouragement. to engineering. skills up-gradation.( Agarwal 2005.NMCC Funds ‡ National Knowledge Commission has also identified SMEs as a thrust sector for education. 1b) j m ovasdi 114 .

Federation of Indian Chamber of Commerce and Industry (FICCI). ‡ However. PHD Chamber of Commerce. have evolved various program towards technological capability building and enhancing competitiveness of SMEs. Confederation of Indian Industry(CII). etc.Private Sector Initiatives ‡ There are a few national level associations and several state level associations for promotion of SMEs. ‡ Public-Private Partnership (PPP) Projects are also being recently evolved for sustainable support to SMEs in some areas such as food processing and handicrafts. the expertise and capabilities to provide effective technology related services are generally limited. ‡ Federation of Small and Medium Enterprises (FISME). and World Assembly of Small and Medium Enterprises (WASME). j m ovasdi 115 .

‡ Ministry of Small Industries and Development Commissioner. pro-type development. National Institutes of Technology and CSIR Research Laboratories. ‡ However. facilities all over the country spread up to district levels.. have a wide network of technical. j m ovasdi 116 . access to these facilities are generally not easy. testing etc. and often lack the business needs of entrepreneurs. But. training.Academic and R&D Organizations ‡ Some of the engineering and technical institutions such as IITs. these facilities need to be modernized and tuned to emerging needs. There are very limited start-up enterprises based on technologies or intellectual property from academic and R&D institutions. design. are also providing R&D and technology related support facilities and services to the SMEs including training and skill development programs.

for internationalization.Foreign Tie Ups and FDI ‡ Internationalization of SMEs usually refers to the SMEs engaged in international businesses. capabilities. ‡ Most countries are aiming at attracting larger FDI which poses challenges and provide opportunities to SMEs. have developed cooperation. ‡ The domestic policies therefore need to be finely tuned to take full advantage of FDI and international aid/support measures or loans. linkages and networks with foreign companies and institutions. the SMEs need to be growth oriented and forward looking. ‡ FDI is considered to be an important channel for internationalization. ‡ Imports and exports tend to enhance the efficiencies. besides catalyzing technology flows and investments. j m ovasdi 117 . partnerships. However. with innovative capacities. competitiveness and vision of SMEs.

j m ovasdi 118 .SME Global Survey ‡ A survey of over 8000 SMEs in Europe in 2003 revealed that internationalization spurs growth and competitiveness (http://ec. Access to know-how is a frequent motive for going abroad. Further the study point to three elements as crucial for developing holistic measures with regard to internationalization. ‡ The study has revealed that smaller countries with small domestic markets are more internationalized.eu).europa. ‡ The foreign supply relationships are the most common forms of internationalization while exporting is the next and some establish foreign subsidies and branches.

in order to be effective. A policy measure should consider providing some practical tasks to support the manager.Problems Current Issues ‡ SMEs managers often have limited time and management skills. j m ovasdi 119 . need to focus on the experience of the entrepreneur and on developing his/her qualifications in a broad sense. The studies suggest that policy measures. especially in the case of SMEs with low international experience. targeted support. for instance. ‡ Moreover. ‡ Studies indicate that SMEs often need specific. assistance in identifying an appropriate foreign business partner for a joint venture or collaboration. Such customized support comprises. recent studies indicate that SMEs awareness of support measures is low due to the measures traditional focus on export activities.

Problems Current Issues ‡ Internationalization is more than just exporting. need to encompass all the different approaches to internationalization and the support to include a wide range of international activities. Such diverse international activities may integrate different business functions (i. j m ovasdi 120 . production and marketing) and thus involve elements across the entire value chain. Policy measures.e. ‡ Foreign partnerships. foreign investments and cross boarder clustering represent new viable ways to strengthen the international business strategies of SMEs. whether general or companyspecific. R&D.

though the degree of liberalization may vary.Problems Current Issues ‡ Most developing countries have adopted or are adopting a liberalized FDI regime in various sectors of development. Limited studies are available (UNCTAD 1998) related to FDI flows to SMEs. specially in developing countries. for SMEs in India and other select countries. j m ovasdi 121 . based on the FDI approvals of the government. in general. several countries have opened up to 100% FDI while in some it is restricted. (Agarwal. ‡ A study of technology financing through FDI. ‡ In case of SMEs. say up to 24% in India. 2005) was carried out in 2004-05 at IIFT.

j m ovasdi 122 . The extent of amounts and the number of approvals vary from sector to sector.0% of total approvals while the amounts were about 2% of the total amount approval.Problems Current Issues ‡ This study indicated that FDI approvals for SMEs accounted for about 6. ‡ One can infer that FDI approvals were mainly perhaps intended to internationalize markets and technologies rather than investments.

j m ovasdi 123 . strategies and modes of implementation to encourage and support SMEs for their growth. ‡ The government are also evolving policies. capacity building and international competitiveness.Discussions ‡ A quick analysis of various studies and data indicates that SMEs are going through a transition phase and are generally restructuring their strategies and capabilities to remain competitive and grow in the emerging world trade environment. ‡ The issues and strategies vary with the level of development and priorities in national economies.

and access to market information. Singapore and Taiwan have been able to adopt and implement new policies and measures to promote and support SMEs more successfully than many other countries. ‡ Foreign Direct Investments (FDI). networking and technical tie ups are being encouraged to facilitate access to newer technologies. Innovation. j m ovasdi 124 . ICT applications.Discussions ‡ Some of the countries such as Republic of Korea. technology. productivity and quality. strengthening technological and management capabilities. and sharing of risks in financing and development. though inter-related. are the thrust areas. are assuming greater significance for competitiveness in manufacturing and businesses. Creation of training and skill up gradation facilities.

Discussions ‡ In India. remain much below than desired. j m ovasdi 125 . effective implementation of policies and delivery of results to the satisfaction of the SMEs. ‡ There is a need to critically review the existing policies and mechanisms. though there are a large number of institutional mechanisms and support measures available and concerns shown by the government. to assess the constraints and gaps in delivering the desired outputs.

productivity and quality among other factors. ‡ The technology support programmes are largely implemented from Delhi or the capitals of the states and the awareness about programmes and fiscal incentives available is limited among SMEs. j m ovasdi 126 . acquisition and induction of new technologies. technology development.Discussions ‡ For example. there are overlapping agencies and programmes for development of technologies and technological assistance to the SMEs. but the SMEs continue to be weak in R&D.

‡ Proposals of NMCC are praiseworthy. but the implementation mechanisms are not clear. j m ovasdi 127 . ‡ What is needed perhaps is a strong innovation & technology development policy with legal instruments for implementation. and also the focused targets likely to be achieved.Discussions . Hopefully these proposals will not be just an addition to the existing set of support measures. clearly meeting the needs of SMEs at different stages of their development. without effective monitoring and assessment mechanisms for the intended results.

Discussions . ‡ Digital divide has been an area of concern but at the same time offers opportunities for SMEs. ‡ National Knowledge Commission has been generally active in evolving strategies for education and skill up gradation. ‡ National Small Industries Commission is engaged in evolving policy instruments and mechanisms to utilize and support SMEs. j m ovasdi 128 . and employment or entrepreneurship opportunities in ICT and other areas.

besides marketing information and incentives for training and skills development. ‡ Differentiated policies and mechanisms are needed for SMEs in different sectors. need easier access to new or modern technologies abroad. j m ovasdi 129 . including technology finance.Needs of MSMEs ‡ Access to Latest Technologies --Most SMEs. precision instruments and so on. leather textiles. the technological needs of SMEs in traditional sectors such as food processing. pharma. toys etc. would be different than those in new and advanced technological areas such as microelectricals. stages of their development. ‡ For example. nature of operations. technology support facilities and easier access to finance.

‡ The R&D expenditure and technological capacities of most of the SMEs would continue to be limited because of their inherent constraints in the resources and vision. j m ovasdi 130 . the SMEs have enormous potential for innovations and incremental development.Needs of MSMEs ‡ Strategies --There is a need to have short term and long term strategies for enhancing competitiveness of SMEs in one broad based strategy. ‡ The support structures should recognize this fact. ‡ However. which need to be nurtured for production of new goods and services at competitive costs.

across the society. ‡ Such policies should lead to wider dispersal of economic benefits. capacity building. trade. technology and society need to be interdependent. education. ‡ Economic. and utilization of resources. creating employment. etc.Innovations --IT & Auto Parts ‡ The IT and auto-component SMEs are examples of the successes through innovations. j m ovasdi 131 .

‡ The analysis of FDI data for SMEs in India tend to show that some SMEs are internationalizing or willing to internationalize through various types of collaborations through FDI route since the amounts involved are small. differently than those of domestic oriented companies or stagnating companies. j m ovasdi 132 .Innovations --IT & Auto Parts ‡ The SMEs development project should recognize the needs of internationalizing companies or those who have the potential to internationalize.

the technological preparedness of SMEs need to be studied and support mechanisms evolved to overcome the gaps or constraints being faced or likely to be faced by them in the international businesses. Free Trade Agreements(FTAs) and bilateral or special economic cooperation agreements.Globalization and SMEs ‡ In the context of WTO and other emerging trade mechanisms including Regional Trade Agreements(RTAs). j m ovasdi 133 .

j m ovasdi 134 . Preparedness of SMEs for WTO is still another issue. development and evolving measures for enhancing competitiveness in export markets. the harmonization of definition of SMEs in India.Globalization and SMEs ‡ In view of the wide variations in definitions of SMEs in various economies. with those in developed or advanced developing countries would facilitate international assistance for technology transfer. Innovations and trade agreements are likely to be the thrust areas in near future.

All the companies profiled were in the below-Rs 100 million-turnover bracket during the previous fiscal year. provides insights into 244 IT companies involved in providing software and hardware products and services. surpassing 43 percent growth rate posted for the last two years (2006-7) ‡ The study titled 'Emerging IT SMEs of India 2007'. j m ovasdi 135 . ITEs & BPO SMEs becoming Global ‡ January 2008 Survey report of Dun & Bradstreet ‡ The small and medium enterprises (SMEs) in the Indian IT space are confident of achieving 65 percent growth in the next two years.IT.

will be significant in terms of deciding future industry growth. ITEs & BPO SMEs becoming Global ‡ The study notes that close to 53 percent of companies faced moderate problems in acquiring funding and 43 percent felt the proposed withdrawal of tax sops for the IT. j m ovasdi 136 . BPO industry by 2009. ITEs (IT enabled call centres).IT.

IT. ‡ The overseas presence of 28 percent of the sample audience encapsulated the changing trend in the SMEs' perspective. 18 percent and 17. from which these 244 companies operate. respectively. Companies with Rs 10-50 million turnover accounted for almost 50 percent of the profiled companies. which are now willing to cross borders to pursue growth. Ites & BPO SMEs ‡ Of the 437 locations.6 percent of the profiled companies were operating from these two cities. Bangalore and Mumbai emerged as the top locations for operations. j m ovasdi 137 .

This indicates that there is huge growth opportunity in the market and IT adoption is rapid within the SME space. j m ovasdi 138 .IT. Ites & BPO SMEs ‡ IT SMEs in India are growing at a rate of about 30 percent YoY. ‡ The government seems to be the biggest adopter of technology and has been one of the key drivers for the growth of IT SMEs in India.

which made it possible for them to achieve the following objectives: ‡ High contribution to domestic production ‡ Significant export earnings ‡ Low investment requirements j m ovasdi 139 . SMEs in India met the expectations of the Government in this respect.Success of SMEs in India ‡ It can be observed that by and large. ‡ SMEs developed in a manner.

Success of SMEs in India ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Operational flexibility Location wise mobility Low intensive imports Capacities to develop appropriate indigenous technology Import substitution Contribution towards defense production Technology oriented industries Competitiveness in domestic and export markets j m ovasdi 140 .

which are: ‡ Low Capital base ‡ Concentration of functions in one / two persons ‡ Inadequate exposure to international environment ‡ Inability to face impact of WTO regime ‡ Inadequate contribution towards R & D ‡ Lack of professionalism ‡ In spite of these limitations.Limitations of SMEs ‡ At the same time one has to understand the limitations of SMEs. ‡ SMEs have been established in almost all-major sectors in the Indian industry such as: j m ovasdi 141 . the SMEs have made significant contribution towards ‡ technological development and exports.

Electricals. Electronics Electro-medical equipment Textiles and Garments Leather and leather goods Meat products Bio-engineering Sports goods Plastics products Computer Software.Reach of SMEs ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Food Processing Agricultural Inputs Chemicals & Pharmaceuticals Engineering. etc. j m ovasdi 142 .

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