GLOBALIZATION AND THE

EMERGING BUSINESS /
ENTREPRENEURIAL
ENVIRONMENT
GLOBALIZATION AND THE EMERGING
BUSINESS / ENTREPRENEURIAL
ENVIRONMENT

The international monetary fund defines

globalization as “the growing economic
interdependence of countries world wide
through increasing volume and a variety
of cross border transactions in goods
and services and of international capital
flows and also through the more rapid
and wide spread diffusion of technology”.
Features of Globalization
1. Expansion possibilities of business throughout
the world.
2. Differences between domestic and foreign
markets are erased.
3. Buying and selling product and service from /
to any nation of the world.
4. Establishment of production and distribution
facilities based upon feasibility and economic
considerations at optimum location anywhere in
the world instead of considering national
considerations.
Features of Globalization
5. Product planning and development are
dependent on market conditions of the whole
world.
6. Optimizing raw material sourcing from
entire world.
7. Global orientations in strategies,
organizational structure, culture and managerial
expertise.
8. Viewing entire globe as a single market.
Factors influencing globalization
1. Dismantling of barriers to
international economic transactions.
2. Over capacity and over production.
3. Technological developments.
4. Emerging forms of industrial
organizations.
5. Political factors
6. The intellectual revolution
Globalization Strategy for
Enterprise
a) Which product line or product lines
should be used for launching into global
Markets?
b) Which markets should be chosen for
entry?
c) Which optimal mode should be used
for market entry?
d) How rapidly should the enterprise
expand globally?
Indian Government Measures Towards
Globalization
1. Scrapping the restrictive laws such as foreign
exchange and regulation act (FERA) 1973. The foreign
exchange management act (FEMA) has been passed by
removing the classes which restricted the entry of
multinational companies (MNCs)
2. Allowing Indian companies to collaborate with
foreign companies in the form of foreign joint ventures
(FJVs) and there by many Indian companies have
started their FJVs.
3. Reduction of import tariff to 15 percent on the
advice of world bank.
4. Replacing import license with tariffs.
5. Reducing and removing some import duties.
Indian Government Measures Towards
Globalization
6. Removing export subsidies.
7. Replacing license of export with duties.
8. Imposing low, flat tax on the export income.
9. Changing the policy related to export oriented units and export
processing zones.
10. Liberalizing the inflow of foreign direct investments.
11. Providing incentives to MNCs & NRIs for investing in India.
12. Encouraging foreign institutional investors (FIIs) to invest
in India.
13. Allowing Indian mutual funds to invest in foreign equity.
14. Allowing rupee to determine its own exchange rate in the
international market without an official intervention.
15. Full Convertibility of rupee in the current account.
Areas of Concern in Indian Economy with respect to
globalization

1. The technology gaps of several years. The difficulty in

securing technology transfers from the developed countries.
2. Lack of Infrastructure
3. Difficult to implement true privatization policies in the light
of political interventions.
4. Indian products and services are rated inferior in terms of
price, quality, delivery schedules, etc.
5. High cost economy
6. The market access in the developed countries is very
difficult as they are protected by tariff and non tariff barriers.
7. Unstable political economy of India. The coalition
governments are not suitable for rapid progress.
8. Limited share in world export.
Globalization and India
For India, a good balance of payment position and the
earning of foreign exchange are major reasons for
globalization. Indian consumer’s preference has changed due
to impact’s of mass communication tools. Thus Indian
Industries have also globalized their operations so as to
satisfy consumer’s preferences. Due to liberalization
policies initiated by India since 1991, many multinational
companies have started their operations in India. The
Indian industries and new enterprises face stiff
competition from multinational companies. This has resulted
in improvement in their performance and ultimately
benefiting the consumers. Globalization helps domestic
companies to acquire and update their technology, be cost
effective and ward of future competitive threat.
MANAGING AN
ENTERPRISE
Entrepreneurs start an enterprise
and manage it effectively so as to
make it a successful enterprise.
In general managing an enterprise
consists of following different
stages/ phases.
MANAGING AN
ENTERPRISE
 Identify an Opportunity
This is a crucial step both for a new enterprise as well as for
existing organization. Identification of opportunity at appropriate
time provides competitive advantage over competitors. It helps
to increase profit margins. Identification of opportunity and
evaluation is a difficult task.
Majority of good business opportunities do not immediately
emerge just by chance. They are found out due to alertness of
entrepreneur or by adopting procedures specifically to generate
ideas viz research and development, analyzing competitors, from
supply chain members or using idea generating techniques. 
 MANAGING AN
ENTERPRISE
 The assessment of opportunity can be evaluated by finding
answers to following questions.
1) Which market need will be satisfied by the offering?
2) Which social conditions underlie this market need?
3) Which market research data can be associated with this
market need?
4) Whether any patents might be available to fulfill this need?
5) What is the national and international structure of
competition for the concerned need
MANAGING AN
ENTERPRISE
 Evaluating and Establishing Vision
After identifying the opportunities, an entrepreneur lays
down a vision to convert these opportunities into a
realizable product. Each opportunity is carefully screened
and evaluated so as to assess whether the specific product or
service when conceptualized from a particular idea has
profitable returns in comparison to resources required.
The evaluation criteria looks at length of opportunity, its
real and perceived value, its risk and return, its match with
personal skills and goals of entrepreneur, its uniqueness or
differential advantage in its competitive environment.
 MANAGING AN
ENTERPRISE
 Persuade Others
No individual can work in isolation. Thus, entrepreneurs also need help and advice
from many other people. Success of a business depends upon getting the right people
involved.
Gather Resources
After successfully communicating the vision and persuading others, the stage of
starting the project is reached. Here first of all resources of different kind are
gathered. In general resources required for an enterprise can be classified in to four
categories.
1 Financial
One of the most important considerations for any new enterprise is its financial
structure. It can be a sole enterprise, partnership, private company, public company,
co-operative firms. After selecting any suitable structure the next questions of
finding some sources of finance which include own capital, informal investors
(family and friends), public flotation, and government. etc.
MANAGING AN
ENTERPRISE
 2 Operating resources

This consists of physical items like office building, land and

machinery, various raw materials etc.
3 Human resources
This covers labours, skilled operators and professional managers.
4 Creating new venture/ developing business plan

The next step is organizing all these resources effectively and

creating / establishing a new venture.
 MANAGING AN
ENTERPRISE
 Business Plan
A business plan is prepared by entrepreneur. It is a written
document which describes all the necessary internal and external
elements involved in starting a new enterprise. It is integration of
major functional plans of the enterprise i.e. marketing, finance,
production, human resources etc. It addresses short term and long
term decision making for initial years of operation. Business plan
is required by potential investors, suppliers, and even consumers.
The business plan is used by different persons such as investors,
suppliers, customers etc. Each of them will read and interpret the
plan from their own perspective. Thus while preparing the
business plan; the entrepreneur must address all the issues
affecting all different stakeholders.
MANAGING AN
ENTERPRISE
  Reasons for failure of business plan

1. Unreasonable goal setting by entrepreneur

2. Non measurable goals
3. Lack of full commitment from the entrepreneur
4. lack of experience on the part of entrepreneur in planned
business
5. Entrepreneur lacks sense of potential threats or weaknesses
6. Lack of establishment of customer needs for the proposed
product or service
MANAGING AN
ENTERPRISE
  Manage the enterprise

It is necessary to examine and solve operational

problems of the growing enterprise. This calls for
implementing management style and structure as well
as determining key variables of success. A control
system needs to be established so as to identify the
problems and resolve it quickly.
 MANAGING AN
ENTERPRISE
   Change / Adapt with time
As business environment change, entrepreneur needs to adopt new policies/
strategies so as to succeed and remain competitive.
Both the central and state governments frame rules and regulations for the operation
of a business. The rules framed by other local bodies like municipal corporations are
also binding on business. A large number of laws have been enacted for ensuring fair
trade practices and fair competition, protecting the interests of consumers,
employees, protecting improvement and collect tax from the business enterprises.
The rules are not common for all the enterprises. They are enterprise specific. Thus it
is the responsibility of the management of concerned enterprise that they enforce all
the legal rules framed by the government for their enterprise.
Thus entrepreneurs are required to remain watchful and keep themselves informed of
latest standing orders that serve to control, regulate and guide their business activity.
In this regard the aspects of form & ownership, industrial license, registration of
project scheme, protection of environment, construction of factory shed, trade
license, employee welfare, consumer rights etc are some of the important aspects to
be considered by entrepreneur.
 MANAGING AN
ENTERPRISE
  Type of Ownership
This is one of the basic procedural needs. There are different types of
ownership models ranging from sole proprietorship, different kinds
of partnership, joint stock company, co-operatives etc.
Sole proprietorship
In a sole proprietorship, individual is the sole owner of a business
and there is no other form of business organization, such as a
corporation, used as a vehicle to carry on the business. All benefits
from the operation of the business accrue to the sole proprietor. At
the same time, all obligations associated with the business are also
the personal responsibility of the sole proprietor. Thus, all income or
losses of the business are attributable to, and taxed at the rate
applicable to, and all assets of the business are owned by, the sole
proprietor.
 MANAGING AN
ENTERPRISE
  Patrnership

The term "partnership" has changed over the years, as business

people have come to add new features to the old business form.
These new partnership types are intended to help mitigate the
liability issues with partnerships. The three most used partnership
types are: General partnership, limited partnership, limited liability
partnership.
MANAGING AN
ENTERPRISE
1 General partnership
A general partnership is a partnership with only general partners. Each
general partner takes part in the management of the business, and also takes
responsibility for the liabilities of the business. If one partner is sued, all
partners are held liable. General partnerships are the least desirable for this
reason.
2 Limited partnership
A limited partnership includes both general partners and limited partners.
A limited Partner does not participate in the day-to-day management of the
partnership and his/her liability is limited. In many cases, the limited
partners are merely investors who do not wish to participate in the
partnership other than to provide an investment and to receive a share of the
profits.
 MANAGING AN
ENTERPRISE
3 Limited Liability partnerships

A limited liability partnership (LLP) is different from a limited

partnership or a general partnership, but is closer to a Limited
Liability company (LLC). In the LLP, all partners have limited
liability. An LLP combines characteristics of partnerships and
corporations. As in a corporation, all partners in an LLP have
limited liability, from errors, omissions, negligence,
incompetence, or malpractice committed by other partners or by
employees. Of course, any partners involved in wrongful or
negligent acts are still personally liable, but other partners are
protected from liability for those acts.
 MANAGING AN
ENTERPRISE
3 Limited Liability partnerships

A limited liability partnership (LLP) is different from a limited

partnership or a general partnership, but is closer to a Limited
Liability company (LLC). In the LLP, all partners have limited
liability. An LLP combines characteristics of partnerships and
corporations. As in a corporation, all partners in an LLP have
limited liability, from errors, omissions, negligence,
incompetence, or malpractice committed by other partners or by
employees. Of course, any partners involved in wrongful or
negligent acts are still personally liable, but other partners are
protected from liability for those acts.
MANAGING AN
ENTERPRISE
Joint stock company
A company form of business organisation is known as a Joint Stock Company which is
a voluntary association of persons who usually contribute capital to carry on a
particular type of business. The business is thus established by law and can be dissolved
only by law. Those who contribute capital become members of the company. Joint Stock
Company has a legal existence separate from its members. This implies that even if its
members die, the company remains in existence. Joint stock company generally requires
huge capital investment, which is contributed by its members. The total capital of a joint
stock company is called share capital and it is divided into a number of units called shares.
Thus, every member has some shares in the business depending upon the amount of capital
contributed by him. Hence, members are also called shareholders. 
A joint stock company form of business organisation is found to be suitable where the
volume of business is large and huge financial resources are needed and for businesses
which involve heavy risks . Members of a joint stock company have limited liability, thus
it is possible to raise capital from the public with ease. Again, for business activities which
require public support and confidence, joint stock form is preferred as it has a separate
legal status. Certain types of businesses, like production of pharmaceuticals, machine
manufacturing, information technology, iron and steel, aluminum, fertilisers, cement, etc.,
are generally organised in the form of joint stock company.
MANAGING AN
ENTERPRISE
Joint stock company
A company form of business organisation is known as a Joint Stock Company which is
a voluntary association of persons who usually contribute capital to carry on a
particular type of business. The business is thus established by law and can be dissolved
only by law. Those who contribute capital become members of the company. Joint Stock
Company has a legal existence separate from its members. This implies that even if its
members die, the company remains in existence. Joint stock company generally requires
huge capital investment, which is contributed by its members. The total capital of a joint
stock company is called share capital and it is divided into a number of units called shares.
Thus, every member has some shares in the business depending upon the amount of capital
contributed by him. Hence, members are also called shareholders. 
A joint stock company form of business organisation is found to be suitable where the
volume of business is large and huge financial resources are needed and for businesses
which involve heavy risks . Members of a joint stock company have limited liability, thus
it is possible to raise capital from the public with ease. Again, for business activities which
require public support and confidence, joint stock form is preferred as it has a separate
legal status. Certain types of businesses, like production of pharmaceuticals, machine
manufacturing, information technology, iron and steel, aluminum, fertilisers, cement, etc.,
are generally organised in the form of joint stock company.
MANAGING AN
ENTERPRISE
Cooperatives
Cooperative models serve a useful role of awakening consciousness and
showing that there is an alternative way to organize economic activity.
However, successful models are few and far between in an environment
hostile to cooperatives. For cooperatives to develop on any scale, changes are
needed in society's values, political support, and the economic system.
Principles of cooperative enterprise
Cooperatives are firms that are controlled and owned by their members, who
are the workers. cooperatives find affinity with the following principles:
1. Membership is open and voluntary.
2. There is democratic control at all levels of the enterprise, on the basis of
one member, one vote.
3. Interest paid on share capital is limited.
4. Some part of cooperatives' surpluses is devoted to member’s education.
5. Cooperatives cooperate among themselves.
MANAGING AN
ENTERPRISE
 Factors to be Considered While Choosing a Particular Type
of Ownership
Nature of business, minimum output to achieve economies of
production, minimum turnover to make business commercially
viable, requirement of specialized and skilled personnel,
requirement of capital, return on investment, extent of financial
support in the form of loan available from external sources,
liability of equity, Ease of formation – registration and
associated financial burden, tax benefits and concessions, grants
and subsidies from government, and control over management.
PLANNING
Planning is deciding in advance what to do, how to
do, when to do, and who to do it.
Planning bridges the gap from where we are to where
we want to go. It makes it possible for things to
occur which would not otherwise happen.
Planning can be defined as setting objectives for a
given time period, formulating various courses of
action to achieve them and then selecting the best
alternative from among the various courses of
actions available.
Importance of Planning
1. Planning provides directions: By
stating in advance how the work is to
be done planning provides direction
for action. Planning ensures that the
goals and objectives are clearly
stated so that they act as a guide for
deciding what action should be taken
and in which direction.
Importance of Planning
2. Planning reduces the risk of uncertainity:
Planning is an activity which enables a manager to
look ahead, anticipate change, consider the impact
of change and develop appropriate responses.
3. Planning reduces overlapping and wasteful
activities: Planning serves as the basis of
coordinating the activities and efforts of
different departments and individuals whereby
useless and redundant activities are mentioned.
Importance of Planning
4. Planning promotes innovative ideas: Planning is the
first function of management. Managers get the
opportunity to develop new ideas and new ideas can
take the shape of concrete plans.
5. Planning facilities decision making: Under planning
targets are laid down. The manager has to evaluate
each alternative and select the most viable option.
6. Planning establishes standards for controlling:
Planning provides the standards against which the
actual performance can be measured and evaluated.
Control is blind without planning. Thus planning provides
the basis for control.
Features of Planning
1. Planning focuses on achieving objectives:
Organisations are setup with a general purpose in
view. Planning makes these goals specific and
state activities to be undertaken to achieve the
goals.
2. Planning is a primary function: Planning lays
down the base for all other functions of
management. All other functions are performed
within the framework of the plans drawn.
Features of Planning
3. Planning is pervasive: It is required at all levels of
management as well as in all departments of the
organisations. But the scope of planning differs at
different levels and among different departments.
4. Planning is continuous: A plan is framed , it is
implemented and is followed by another plan and so
on. This is a planning cycle.
5. Planning is futuristic: It involves looking ahead
and preparing for the future. Through forecasting,
future events and conditions are anticipated and plans
are drawn accordingly
Features of Planning
6. Planning involves decision making:
Planning involves thorough examination and
evaluation of each alternative course of action
and choosing the most appropriate one.
7. Planning is a mental exercise: Planning
requires application of mind involving
foresight, intelligent imagination and sound
judgement. It is an intellectual activity of
thinking rather than doing
Budget
G.A.Welsh states,“a budget is a written plan
covering projected activities of a firm for a
definite time period.”
Budget can be defined as a financial and / or
quantitative statement prepared and
approved prior to a defined period of time of
the policy to be pursued during that period
for the purpose of attaining a given objective
Budget
• It is mainly a forecasting and controlling device.
• It is prepared in advance before the actual
operation of the company or project.  
• It is in connection with adefinite future period.
• Before implementation, it is to be approved by the
management.
• It also shows capital to be employed during the
period
Objectives of Budget
Planning: A set of targets/goals is often essential to lead and
focus individual and group actions. Planning not only
motivates the employees but also improves overall decision
making.
Directing: Business is very complex and requires more formal
direction and coordination. Once the budgets are in place they
can be used to direct and coordinate operations in order to
achieve the stated targets.
Controlling: The actual performance can be compared with the
planned targets. This provides prompt feedback about
performance. budget also prevents unplanned adhoc
expenditure.
Budgetary Control
It is a process in which budget is set and
actual is compared with budget to analyse
variances.
Advantages of Budgetary
Control System
Enables the managers/ administrators to conduct activities in
efficient manner
Provides yardstick for measuring and evaluating the performance
of individuals and their departments.
Reveals the deviations, from the budget by comparing with
actuals; Helps in prompt review process.
Creates suitable conditions for the implementation of standard
costing system.
Acts as systematic base for framing future policies and targets.
Inculcates the feeling of cost consciousness and goal orientation.
Leads to effective utilization of various resources, as the
activities are planned and executed effectively.
Monitoring
Monitoring is the routine assessment (e.g.
daily/monthly/ quarterly) of information or
indicators of ongoing activities.
Monitoring is recoding Whether right thing is being
delivered to the right people at the right time in a
right way (process)”.
Monitoring is continuous prosess help project staff
to know how things are going, as well as giving
early warning of possible problems and difficulties.
Evaluation
It is an periodic assessment of an ongoing or
recently completed project relevance,
performance, efficiency, & impact (both
expected and unexpected) in relation to stated
objectives.
It will provide evidence of why targets and
outcomes are or are not being achieved and
addresses issues of causality.
IMPORTANCE OF MONITORING AND
EVALUATION
1. Provide constant feedback on the extent to which the projects
are achieving their goals.
2. Identify potential problems at an early stage and propose
possible solutions.
3. Monitor the accessibility of the project to all sectors of the
target population.
4. Monitor the efficiency with which the different components of
the project are being implemented and suggest improvements.
5. Evaluate the extent to which the project is able to achieve its
general objectives.
6. Provide guidelines for the planning of future projects.
IMPORTANCE OF MONITORING AND
EVALUATION
7. Influence sector assistance strategy. Relevant
analysis from project and policy evaluation can
highlight the outcomes of previous interventions, and
the strengths and weaknesses of their
implementation.
8.Improve project design.
9.Show need for mid-course corrections. A reliable
flow of information during implementation enables
managers to keep track of progress and adjust
operations to take account of experience
FOLLOW UP & MANAGING
COMPETITION
Follow-up refers to responding to business queries, inquiries,
and complaints if your business is relative new. Many
businesses fail soon after they are launched only because they
didn’t offer good customer support along with their products
and services.
• Every customer has unique needs and as a smart entrepreneur,
it’s your job to find out what customers expect from your
products as well as your company.
• Happy and satisfied customers are your biggest asset - and
often they are also the ones that promote your business in
incredible ways by referring your products and services to
others in their social circle.
FOLLOW UP & MANAGING
COMPETITION
Managing competition is a process of gathering
information on who competitors are, what they are
doing, and how their actions will affect your
organization.
Principles of managing competition:
Spot early opportunities.
Develop a deeper understanding of the customer -
national and international .
Keep track of the competitors.
Identify current trends which would shape the future.
ENTREPRENEURSHIP DEVELOPMENT
PROGRAMMES (EDPs)

Enterpreneurship devlopment programme means a

programme designed to help a person in
strengthing his enterpreneurial motive and in
acquiring skill and capabilities necessary for
playing his enterpreneurial role effectively.
In other word a EDP is primarily concernred with
devloping and motivating enterpreneurial talent
and growing him to be an effective enterpreneur.
EDP has an important role to play in solving the
unemployment problem.
Objectives of EDPs
a) Accelerating industrial development by enlarging
the supply of entrepreneurs.
b) Developing entrepreneurial qualities and
motivating the prospective entrepreneurs to achieve
the goal.
c) Enhancing the growth of small-and medium-scale
enterprise sectors which offer better potential for
employment generation and dispersal of industrial
unit.
Objectives of EDPs
d) Providing productive self-employment avenues to
a large number of educated and low educated young
men and women coming out of schools and colleges.
e) Improving performance of small-and medium-
scale industries by the supply of carefully-selected
and trained entrepreneurs and diversifying sources of
entrepreneurship.
f) Enterprise development in rural and no-industry
areas where local entrepreneurship is not really
available and entrepreneurs from nearby towns are
not easily lured
CONTRACT FARMING   
Contract farming is defined as a system for
the production and supply of
agricultural/horticultural produce under
forward contracts between
producers/suppliers and buyers.
The essence of such an arrangement is the
commitment of the producer/ seller to
provide an agricultural commodity of a certain
type, quality, at a time and a price, and in the
quantity required by a known and committed
buyer.
SALIENT FEATURES OF CONTRACT
FARMING
 The industry or the prospective buyer enters into a
contract with the farmer
The industry promises to buy the farmer’s produce
The farmer harvests and delivers to the contractor, a
quantum of produce, based upon anticipated yield and
contracted acreage
Price and other terms and conditions are pre-negotiated
between the farmer and the buyer. The buyer supplies
the required farm inputs at the required time. Sponsors
may also provide land preparation, field cultivation and
harvesting as well as free training and extension.
SALIENT FEATURES OF CONTRACT
FARMING
 Farmers will not cultivate and diversity into new
crops unless they know they can sell their crop, and
traders or processors will not invest in ventures
unless they are assumed that the required
commodities can be consistently produced. Contract
farming offers a potential solution to this situation
by providing market guarantees to the farmers and
assuring supply to the purchases.
Contract farming usually allows farmers access to
some form of credit to finance production inputs. In
most cases it is the sponsors who advance credit
through their managers.
ADVANTAGES AND DISADVANTAGES OF
CONTRACT FARMING
FOR FARMERS
Advantages
Inputs can be provided by agribusiness firms, thereby reducing
the uncertainties associated with input availability, quality and
costs.
Services, such as mechanization and transportation, can be
provided by agribusiness firms.
Technological assistance can be offered by the contracting firm,
favoring the production of higher valued, often riskier crops and
livestock.
A related benefit is the facilitation of the conversion path from
subsistence to commercial farming.
ADVANTAGES AND DISADVANTAGES OF
CONTRACT FARMING
FOR FARMERS
Advantages
A market outlet is secured for the contracted
production, such that the uncertainty and the
transaction costs involved in the search for markets
are reduced. Small-scale farmers in particular benefit
from the reduction of marketing risks, as they often
have more limited market access
The uncertainty about sales price is often reduced,
since contracts typically specify at the beginning of
the growing cycle the prices to be paid at product
delivery.
ADVANTAGES AND DISADVANTAGES OF
CONTRACT FARMING
FOR FARMERS
Advantages
Access to credit is enhanced.
Contract farming can open up new markets, which would
otherwise be unavailable to small farmers.
With a buyer in sight, the reliance of farmers on middlemen
is almost eliminated
The farmers acquire lot of new skills, both technical and
managerial, through Contract farming. He learns record
keeping, efficient use of farm resources, improved methods
of applying chemicals and fertilizers, appreciation of the
importance of quality and the characteristics and demands
of export markets.
ADVANTAGES AND DISADVANTAGES OF
CONTRACT FARMING
FOR FARMERS
Disadvantages
The dependency on a prescribed technology package
makes farmers vulnerable to output and productivity
manipulation by agribusiness firms.
Delivery schedules might be set by firms so as to
influence prices paid to farmers.
Firms might intentionally avoid transparency in the
price determination mechanism of the contract,
utilizing complex formulas or quantity and quality
measurements not well understood by farmers.
ADVANTAGES AND DISADVANTAGES OF
CONTRACT FARMING
FOR FARMERS
Disadvantages
Farmers lose flexibility in enterprise choice.
Long term contracts might lead to gradually decreasing
real prices received by farmers.
Farmers may lose linkages with former transaction
partners.
Farmers may abandon traditional cultivation methods
and products.
The risks that are normally associated with
monoculture practices are increased.
The risk of indebtedness grows
ADVANTAGES AND DISADVANTAGES OF
CONTRACT FARMING
FOR AGRIBUSINESS FIRMS
Advantages
Greater regularity of agricultural product supplies to
the firm is ensured.
Greater conformity to desirable product quality
attributes and to safety standards is promoted.
Access to land is facilitated.
Input costs per unit are reduced due to economies of
scale.
Access to agricultural credit and eventual financial
incentives and subsidies is facilitated.
 ADVANTAGES AND DISADVANTAGES OF
CONTRACT FARMING
FOR AGRIBUSINESS FIRMS
Advantages
Labour costs are reduced.
Expansion and contraction of production is facilitated.
Without fixed assets in land or specialized housing for
animals, for instance, agribusiness firms have greater
flexibility to expand or reduce operations.
Contract farming offers access to crop production from land
that would not otherwise be available to a company, with the
additional advantage that it does not have to purchase it.
Scarce resources of the company can then be put to better
use.
For high value, labour intensive agricultural enterprises,
managerial efficiency in farming may be favoured.
 ADVANTAGES AND DISADVANTAGES OF
CONTRACT FARMING
FOR AGRIBUSINESS FIRMS
Disadvantages
Risk of contractual hold-ups. Just as a firm may be
prone to renege on contractual terms when market
conditions change, a farmer may be compelled to sell all,
or part of his or her production, to a third party, when
prices are perceived to be higher outside the
contractual bond.
Transaction costs of dealing with large numbers of
farmers are high.
Risk of misuse or deviation of supplied inputs and of
final products.
Loss of flexibility to seek alternative supply sources.
 ADVANTAGES TO GOVERNMENT
The government has been trying hard so far, to promote
private sector participation in providing extension
services by involving the corporate sector either
through contract farming or cooperative farming. It will
help the government in solving problems of food
sufficiency, increasing disposable income of small
farmers in particular, increasing funds availability to
farmers enabling them to use better farm inputs and
will lead to adoption of latest agricultural technologies
because of effective percolation due to services
provided by private sector industry. This will lead to
overall growth and development of Indian farming
community..
What is Joint Venture?
A joint venture abbreviated as JV is a type of
business arrangement in which more than two or two
parties agree to pool their resources for the purpose
of fulfilling a specific task which can be a new
project or any business activity.
Maruti Ltd. Company of India and Suzuki Ltd. of
Japan got into a joint venture to introduce Maruti
Suzuki India Ltd. in the Indian market
Between Idea and Vodafone mobile network
companies to enhance their mobile network services.
Salient Features of Joint
Venture
Agreement: Two or more firms come to an
agreement, to undertake a business, for a
definite purpose and are bound by it.
Joint Control: There exist a joint control of
the co-venturers over business assets,
operations, administration and even the
venture.
Pooling of resources and expertise: Firms
pool their resources like capital, manpower,
technical know-how, and expertise, which
helps in large-scale production.
Salient Features of Joint
Venture
Sharing of profit and loss: The co-venturers agree to
share the profits and losses of the business in an
agreed ratio. The computation of the profit and loss is
usually done at the end of the venture, however, when
it continues for the long duration, the profit and loss
is calculated annually.
Access to advanced technology: By entering into joint
venture firms get access to various techniques of
production, marketing and doing business, which
decreases the overall cost and also improves quality.
Dissolution: Once the term or purpose of the joint
venture is complete, the agreement comes to an end,
and the accounts of the covertures, are settled, as and
when it is dissolved.
Objectives of Joint Venture

To enter foreign market and even new

or emerging market.
To reduce the risk factor for heavy
investment.
To make optimum utilisation of
resources.
To gain economies of scale.
To achieve synergy.
Advantages of Joint
Venture 
Access to new markets and enlarge their audience.  
Increased the capacity
Sharing of risks and costs on a wide surface basis. 
Access to new knowledge and expertise in business
which includes specialized staffing necessity. 
Access to higher resources, for example the
technology and the finance
Joint venture partner's help in providing a huge pool
of resources together.
 Disadvantages of Joint
Venture 
The communication between partners is not great as
they belong to different societal classes. 
The partners expect different things from the joint
venture, their interest may clash. 
The expertise and investment level may not match well.
Work and Resources are not distributed equally.
Different cultures and management styles may create
barriers to the organization.
The contractual limitations may pose risk to a partner's
core business operations.
Public-private partnership (PPP)

Public-private partnership (PPP) is a funding model for a public

infrastructure project such as a new telecommunications system,
airport or power plant. The public partner is represented by the
government at a local, state and/or national level. The private
partner can be a privately-owned business, public corporation or
consortium of businesses with a specific area of expertise.
PPP is a broad term that can be applied to anything from a
simple, short term management contract (with or without
investment requirements) to a long-term contract that includes
funding, planning, building, operation, maintenance and
divestiture. PPP arrangements are useful for large projects that
require highly-skilled workers and a significant cash outlay to get
started.
Key Features of Public Private
Partnership
It involves sharing and transferring risks and rewards between the public
sector and the partners. 
Such partnerships attempt to utilize multi-sectoral and multi-disciplinary
expertise to structure, finance, and deliver desired policy outcomes that are of
public interest. 
PPP delivers high-quality infrastructure in the shortest possible time.
Public and Private Sector each retain their own identity. They collaborate on
the basis of a clear division of tasks and risks. 
PPP is about creating, nurturing, and sustaining an effective relationship
between the Government and the private sector.
Achieving improved value for money by utilizing the innovative
capabilities and skills to deliver performance improvements and efficiency
savings. 
Designed to maximize the use of Private Sector Skills. 
PPP transaction facilitates smooth technology transfer.
PPP models
Design-Build (DB): The private-sector partner
designs and builds the infrastructure to meet the
public-sector partner's specifications, often for a
fixed price. The private-sector partner assumes
all risk.
Operation & Maintenance Contract (O & M):
The private-sector partner, under contract,
operates a publicly-owned asset for a specific
period of time. The public partner retains
ownership of the assets.
PPP models
Design-Build-Finance-Operate (DBFO): The private-
sector partner designs, finances and constructs a new
infrastructure component and operates/maintains it
under a long-term lease. The private-sector partner
transfers the infrastructure component to the public-
sector partner when the lease is up.
Build-Own-Operate (BOO): The private-sector partner
finances, builds, owns and operates the infrastructure
component in perpetuity. The public-sector partner's
constraints are stated in the original agreement and
through on-going regulatory authority
PPP models
Build-Own-Operate-Transfer (BOOT): The private-sector
partner is granted authorization to finance, design, build and
operate an infrastructure component (and to charge user fees)
for a specific period of time, after which ownership is
transferred back to the public-sector partner.
Buy-Build-Operate (BBO): This publicly-owned asset is
legally transferred to a private-sector partner for a designated
period of time.
Build-lease-operate-transfer (BLOT): The private-sector
partner designs, finances and builds a facility on leased public
land. The private-sector partner operates the facility for the
duration of the land lease. When the lease expires, assets are
transferred to the public-sector partner.
PPP models
Operation License: The private-sector partner is
granted a license or other expression of legal
permission to operate a public service, usually for a
specified term. (This model is often used in IT
projects.)

Finance Only: The private-sector partner, usually a

financial services company, funds the infrastructure
component and charges the public-sector partner
interest for use of the funds.
Advantages of Public Private
Partnership
Private-sector technology and innovation help provide better
public services through improved operational efficiency
The public sector provides incentives for the private sector
to deliver projects on time and within budget
Deliver capital projects faster  Make better use of assets
In addition, creating economic diversification makes the
country more competitive in facilitating its infrastructure
base and boosting associated construction, equipment,
support services, and other businesses
Improve cost-effectiveness
Reduce public sector risk
Risks Involved in Public Private
Partnership
Physical infrastructures such as roads or railways involve
construction risks.
A private partner typically bears the burden in case of any
fault.
The private partner faces availability risk if it cannot
provide the service promised.
Demand risk occurs when there are fewer users than
expected for the service or infrastructure, such as toll roads,
bridges or tunnels.
Lack of managerial experience and transparency
Risks Involved in Public Private
Partnership
Political interference
Inadequate resources
 Inexperienced personnel for project appraisal
 If the public partner agreed to pay a minimum fee no
matter the demand, that partner bears the risk.
 Social and political consequences such as the transfer of
a civil servant into the private sector
 Renegotiation of the assets due to the long-term nature
of the projects.
Agricultural engineering
industry
The agricultural machinery
industry or agricultural engineering
industry is the part of the industry,
that produces and
maintain tractors, agricultural
machinery and agricultural
implements. This branch is considered
to be part of the machinery industry.
 Agricultural machinery
The agricultural machinery industry produces agricultural machinery,
machinery used in the operation of agricultural areas and farms.
Main types are:
Tractors and power.
Machinery for tillage or soil cultivation.
Machinery for planting, seeding, fertilizing, pest control, irrigation.
Machinery for harvesting, haymaking, and post-harvest, such as produce
sorters, and machinery for loading
Machinery for milking
Other agricultural machinery, for example grinder mixers, wool presses
and windmills.
In developed countries overall the largest segment of agricultural
equipment sales is tractors.
Agricultural machinery
manufacturers
Agricultural machinery manufacturers exist in sizes from
small and medium business to multinationals. James &
Akrasanee (1988) stipulated that those forms have different
production management, and can be classified into three
groups:
The first group consists of those workshops with limited and
simple equipment. Despite their flexibility, the production
management system is very rare in this case.
The second group includes those with certain degrees of
division of labour within the plant. They do organize some
plant layout, but not in a fully systematic manner.
The last group constitutes those with clear production lines
and division of labour.
Agricultural machinery
associations
Some of the more important agricultural machinery associations
are:
Agricultural Engineers Association (AEA): British trade
association which represents manufacturers and importers of
agricultural machinery and outdoor equipment.
Agrievolution: global network of agricultural machinery
associations. 
Association of Equipment Manufacturers (AEM): American
association which represents manufacturers of agricultural
machinery. 
CEMA: European association representing the agricultural
machinery industry in Europe. 
Mechanical Engineering Industry Association(VDMA): German
manufacturers' association which represents manufacturers of
agricultural machinery.
 Indian Agricultural Equipment Market:
Industry Trends
The Indian agricultural equipment market reached a value of
INR 954.3 Billion in 2020.
Over the last few years, there has been a considerable progress in
agriculture mechanization. A significant proportion of farmers in
the country have already started moving from using animate
sources to mechanical equipments to power their farming activities.
Mechanical equipments for various farm operations like tillage,
sowing, irrigation, plant protection and threshing, etc., are generally
being used by the farming community. As a result of increasing farm
mechanization trends, the agricultural equipment market has
witnessed strong growth in the past few years. This market is
currently being driven by a number of factors such as easy
availability of credit, government incentives, increasing agricultural
productivity, emergence of contract farming, increasing rural
incomes, etc.
Indian Agricultural
Equipment Market Drivers:
Labour Shortage: Labour shortage has been a major reason
that has driven farmers towards farm mechanization. Large
scale migration from rural to urban areas and a number of
rural employment schemes have created a labour shortage in
rural areas.
For instance, the National Rural Employment Guarantee
Agency (NREGA) has had in many places a ripple effect -
labour shortage leading to farm mechanization. The
implementation of this scheme has significantly reduced the
inflow of seasonal migrant labourers from Bihar and UP to
states like Haryana and Punjab during the crucial sowing and
transplantation season. As a result, the demand for farm
machines in these states has witnessed a significant increase
Indian Agricultural
Equipment Market Drivers:
Ease of Financing: In recent years, a number of banks and
microfinance institutions have been set all across rural India.
This has provided farmers an easy availability of credit to
purchase farm machinery.
Government Incentives: Incentives in the form of subsidies,
low import duties on agricultural machinery and easy financing
schemes by the Indian government has also been a major
driver of the farm equipments market in India.
Rising incomes: As a result of strong economic growth and
agricultural productivity, the income levels of rural households
have been continuously increasing over the last few years.
Rising incomes have enabled farmers to significantly increase
their spending on agriculture mechanization
Indian Agricultural
Equipment Market Drivers:
Large Untapped Market: Despite strong growth in recent
years, the penetration of tractors and a number of related
equipments still remains relatively low. This is expected to
leave a lot of room for future growth.
Emergence of Contract Farming: The emergence of
contract farming is also expected to give a strong boost to
the agricultural equipments market in India. We expect
contract farming to enable farmers to get the benefit of
technology, training and financing with the contractor’s
support. This is expected to facilitate the adoption of
mechanized farming practices.
 Progress of Farm
Mechanization in India
The progress of agricultural mechanization has been closely linked
with the overall development in production agriculture. Till 1950, very
few farmers possessed prime movers like tractors, engines and
motors. Heavy agricultural tractors and machinery were imported by
government organizations mainly for land reclamation and development
of large government farms.      
The picture changed quickly during the early sixties with the
introduction of high yielding varieties of wheat and other crops which
needed irrigation facilities. The progressive farmers soon realized
that the traditional water lifts, which were driven by draught animals
or operated manually, could not meet the water requirement of the
high yielding varieties of different crops. Lift irrigation was,
therefore, quickly mechanized through the use of electric motor or
diesel engine powered pumps.
 Progress of Farm
Mechanization in India
The rising production of foodgrains resulting from the extending
area under high yielding varieties could not be handled within the
normal harvesting and threshing periods. The farmers in North
India suffered heavy losses as a result of damage to harvested
wheat during the late sixties and early seventies because the
threshing of increased wheat production could not be completed
before the onset of pre-monsoon rains.
Large scale adoption of threshers operated by electric motors,
engines and tractors that followed in early seventies onwards was
a result of the need to complete threshing operation quickly.
Then came the extensive use of tractors for primary tillage and
transport and the use of tractor powered or self-propelled
harvesting equipment.
 Production - Indian
Scenario
The productivity of farms depends greatly on the availability and judicious
use of farm power by the farmers. Agricultural implements and machines
enable the farmers to employ the power judiciously for production purposes.
Agricultural machines increase productivity of land and labour by meeting
timeliness of farm operations and increase work out-put per unit time.
Besides its paramount contribution to the multiple cropping and
diversification of agriculture, mechanization also enables efficient utilization
of inputs such as seeds, fertilizers and irrigation water.
The production of irrigation pumps and diesel engines started during 1930s.
The manufacture of tractors and power tillers started in 1960. Since then by
the virtue of its inherent edge over the conventional means of farming,
agricultural mechanization has been gaining popularity. The increased use of
farm machines found expansion of cropped area and cropping intensity and
also helped in diversification of agriculture from conventional crops to
commercial crops.
 Production - Indian
Scenario
The manufacture of agricultural machinery in the country is carried
out by village artisans, tiny units, small- scale industries and the
State Agro-Industrial Development Corporations.
Production of tractors, motors, engines and process equipment is
the domain of the organized sector.
The traditional artisans and small-scale industries rely upon own
experience; user's feedback and government owned research and
development institutions for technological support and operate
from their backyards or on road side establishments without
regular utility services. Medium and large-scale industries operate
in their own premises with sound infrastructure, usually forming a
part of an industrial estate, wellestablished manufacturing and
marketing facilities and employ skilled manpower.
 Production - Indian
Scenario
Diesel engines, electric motors, irrigation pumps, sprayers and dusters,
land development machinery, tractors, spare parts, power tillers, post
harvest and processing machinery and dairy equipments are produced in
this sector. They have professional marketing network of dealers and
provide effective after sales service. They also have in-house research
and development facilities or have joint ventures with advanced countries
for technology upgradation. India is recognized, the world over, as a leader
in the manufacture of agricultural equipment and machinery such as
tractors, combine harvesters, plant protection equipment, drip irrigation
and micro-sprinkler. Sizeable quantities of farm implements are exported
to Africa, Middle East, Asia, South America and other countries.
With increased cropping intensity, farmers have supplemented or largely
replaced animate power with tractors, power tillers, diesel engines and
electric motors.