at 2017 (NOV-DEC) Name of the Paper: Entrepreneurship Name of the Course: B.Com. (Prog.) CBCS Semester :V Duration: 3 hours Maximum Marks: 75 Attempt All questions. All questions carry equal marks. Q.1. (a) What is “Entrepreneurship”? Discuss the key elements of entrepreneurship. 75 (}) “Entrepreneur is the catalyst in the process of economic development.” Discuss this statement. 75 ‘Ans. (a) See Q. 1, Unit I. [Page 1 (H) See Q. 3, Unit I. [Page 6 Or (2) Define ‘Entrepreneur’. Briefly discuss the various determinants affecting the growth of entrepreneurship in an economy. 75 () What are the emerging challenges encountered by an entrepreneur? Briefly discuss in Indian context. 75 Ans. (a) An entrepreneur is an individual who instead of working as an employee runs his own business and assumes alll the risks and rewards of a given business venture, idea, good or service offered for sale, He is the one who sets up a business taking on financial risks in the hope of profit. He is the person who exercises initiative by organising a business venture to take profit of an opportunity and as a decision maker decides what, how and how much of a good or service will be produced. He is the one who supplies risk capital as a risk taker and keeps a watch on business activities. He can be a sole proprietor, a partner or the one who owns majority of shares in an incorporated venture. There are various factors that affect the growth of entrepreneurship in the economy. These are discussed below: () Capital. Capital is one of the most important factors of production that is Tequired for the purpose of establishing an enterprise. Increase in capital investment in viable projects results in increase in profits that help in accelerating the process of capital formation. Availability of capital allows an entrepreneur to bring together the other factors of production (land, labour, machines, etc.) and combine them to produce goods. Capital is thus, considered as a lubricant to the process of production. (i) Labour. Labour is another important factor that affects the growth of entrepreneurship in the economy. The quality as well as the quantity of labour can affect the process of entrepreneurship development. The problem of labour immobility can be solved by providing efficient infrastructural facilities like transportation and communication. Many of the developing nations are rich in the volume of labour due to massive Population. But mobility and flexibility of labour force encourages entrepreneurship in the country. Securing quality labour force is the toughest task before modern entrepreneurs. The potential benefits of low-cost labour are regulated by deleterious effects of labour immobility. (iit) Raw materials, Availability of raw materials is another factor affecting the emergence of entrepreneurship in the economy. An enterprise cannot 1 eae mr118 SHIVA DELHI UNIVERSITY SERIES I ist ii ce of adequate supP! ate , : exist in the ene supply of raw materials is peevily depen, re ae 7 eo ditions. The more favourable seg tions are, ¢ crore bel il for the raw material to have its affect on growt, a entrepreneurship in an economy. — influence the grow i ditions also il n Browth 4 (iv) Market. Market and its con der to claim success, mo, io ip i . In ore entrepreneurship in an economy. Se ett have latest knowledge about market and varioy, marketing techniques. The size and composition of mariet eon influence entrepreneurship in their own ways. In case an 1 a a enjoys monopoly in a particular product, he then becomes mor a luential, On the other hand, in the case of a competitive mar et he has to continuously come up with new techniques and innovations to compete itive market, an entrepreneur aims at boosting with his rivals. In a competi! t i ; up the demand for the goods produced by him. His main objective is to Thus size, composition lure away the customers from the competitors. 7 and nature of market influence entrepreneurship development in the economy. Infrastructure. Infrastructural facilities lay down the foundation of any business enterprise. Transportation and communication both help to enlarge the market and expanding the horizons of the business Infrastructural facilities allow an entrepreneur to carry out his business activities smoothly. Good roads, highways and communication facilities increase the efficiency of entrepreneurs and their business ventures Infrastructural facilities are an important economic factor that influences entrepreneurship development in the economy. No business can service in the absence of infrastructural facilities. ly of raw materials. It is the bas, Asie () (b) Emerging challenges encountered by entrepreneurs in India: (i) Bureaucracy. Bureaucracy means the ‘rule of the office’. In order to start- up a business in India there are large number of procedures to be followed. Moreover, there are large number of clearances to be taken by an entrepreneur before commencing the business. All these rules and regulations are established for the benefit of the people. But often such tules and regulations do not serve the purpose for which they wet established. Following these rules and tegulations requires lot of time, energy and effort on the Part of an entrepreneur. Since neW entrepreneurs have limited resources hence they find it extreme! difficult to divert tim ; dj issues. and attention to such time taking procedut®! (i Corruption. Often corruption hampers the growth of business within th cor as an a ae Teauied es to pay bribes to government officials ig prolong the licensing and cl _ Clearances. Government officials ™! bribes against their services, ae Procedure to be followed to rece’ to secure funding from banks, me entrepreneurs may have to pay bri i ” 8et approvals, evasion of tax etc. Dv? " Bovernment officials a lot money has t°AD ae ENTREPRENEURSHIP —2017 (NOV-DEC) 19 Entrepreneurs who refuse to bribe government officials may face further difficulties in commencing their business, (i) Labour. The productivity of labour in the country is relatively low. Though there is massive population in the country but the contribution of labour towards production is low as compared to other developed nations of the world. Also, India is a secular country that respects beliefs of every religion. Hence the number of working days are less on account of holidays like Holi, Diwali, Eid, Muharram, Mahavir Jayanti etc. Also there are holidays on various occasions of national importance. The labour available in the country is cheap but their productivity is just satisfactory. There is a shortage of skilled and semi-skilled labour in the country due to lack of training and vocational educational programmes. Laws related to labour in the country have to be followed by an entrepreneur. This can create problems in getting the work done through them. They may form unions and can go on strikes, lockouts etc. for their reasonable and unreasonable demands. Hence labour is one of the most important issues faced by Indian entrepreneurs and needs to be tackled effectively. (iv) Regional sentiments. Many businesses were not able to achieve success as they failed to take into consideration the sentiments of the local population and community. Entrepreneurs need to consider the sentiments of the community. This is the reason why many international food chains operating in India have changed their menu to avoid any objection. Often starting up businesses can pose a threat for existing local entrepreneurs. They may raise various issues that can create problems in starting up the enterprise. Setting up a business in a particular region can create pressure on the available resources. Local community can also have relevant issues related to air, noise or even water pollution. All such factors have to be taken into account before commencing business. Many entrepreneurs make goodwill gestures by doing charity, giving donations etc. in the region in which they intend to conduct business. But this can Taise the level of expectations of the community from the business. (2) Grey market and counterfeit goods. Grey market and counterfeit Zoods is not new in countries like India. Grey market allows flow of goods through a channel that is not authorised by an entrepreneur. Counterfeit goods are look alike or replicated goods that flow into the market through informal and unorganised sectors and channels. It is very common in electronics, jewellery, apparels, shoes etc. Often Customers intentionally buy replicated and pirated products a. Abey are available at comparatively lower prices. A new entrepreneur w a ie ee to create a brand image of his products needs {5 weg the probes oO | fake products andthe grey market Repicated products are Manufactured by many local manufactures. Though various laws and cts but the to suppress grey market products ee ee ea Hence an entrepreneur of a new ‘ Weise i un tom Faber sll exist aecanes stable strategy for tackling this problem,—= Pa 120 SHIVA DELHI UNIVERSITY SERIES Q. 2. (a) Describe MSMEs on the basis of investment. Discuss th challenges faced by MSMEs in India. a . me (b) Explain the role of Business Groups and Family Businesses jn Th isp economy. Pe Ans, ) MSMEs and challenges faced by MSMEs. See Q. 1 and Q. 3, Unit L , , Bes 25.95 (b) Business group or corporate group is a collection of parent and Subsidiary corporations that function as a single economic entity through a common sou? of control. The concept of a group is often used in tax law accounting ang company law to attribute one member of the group to another or the whole The group is considered as a conglomerate if the corporations are engaged in entirely different businesses. Corporate groups are usually formed through consolidatic, via mergers and acquisitions, although the concept of a group emphasizes on the instances in which the merged and acquired corporate entities remain in existence instead of instances in which they are dissolved by the parent The group may be owned by a holding company that may have no actual operations According to Leff, business group is a group of companies that does business in different markets under common administrative and financial control whose members are linked by relations of interpersonal trust on the basis of similar personal ethnic or commercial background. A business group can also be defined as a cluster of legally distinct firms having a common managerial relationship. The relationship between the firms ina group may be formal or informal. A family business is a commercial organisation in which decision making is influenced by multiple generations of a family related by blood or marriage. They are closely identified with the firm through leadership or ownership. Owne- manager entrepreneurial firms are not considered to be family businesses as they lack multi-generational dimension and family influence that create the unique dynamics of family businesses. In India, majority of businesses are in the dominant control of the families. It is often said that 90 per cent of the business in India is controlled by families. Many of the big corporate business houses likt Tatas, Ambani’s, Birlas, Godrej, Mahindra, Mittals, Bajaj, Jindals, etc. controlled by families. The role of family is quite important in countries lke India. There are many families who have separated and partitioned. Some si" families have succeeded and the separate branches have grown big. On the oth" hand, there are some cases in which separation has resulted in business failu and collapse. : Most of the family businesses in India are not very old. They came * existence after the independence of the country. Family businesses in Indi? ¢ often guided by their desire to create personal wealth, brand name, reputation and goodwill. Law of inheritance is one of the most common iar behind emergence of family business in India, The business run by a father his brothers or sisters is passed on to the next generation. In countries like x family business is the norm. The trend continues from one generation © other. In various cases professional teams are hired by big family busines> red i to run their empires. For example, Mr, Narayan Murthy of Infosys apport y known professional personality Mr. Vishal Sikka to lead the business OU". 10 him. Similarly, Mr. Cyrus Mistry was appointed as a head and succe™ im Various pa aeENTREPRENEURSHIP —2017 (NOV-DEC) 121 tan Tata to lead the Tata group. Family business still exists as a norm in ; for a large section of the society. In case families are able to properly Se esi di th ke their busi t their business an investment they can tal e their business venture to new “ahts, Due to massive globalisation, family businesses in the country are going regs a phase of transformation. Most of the family businesses now-a-days throug" sessional management and participation to be successful in the long run. Young generations of various family business are well educated and are exposed to global standards and situations. Professional management of family business lays down the foundation for future stability and growth. ‘The following points highlight the role of business groups and family pusinesses in Indian economy: 1, Addition to Gross Domestic Product (GDP). Business groups and family business generate income via organisation of production in various sectors of the economy. Thus, they increase the GDP of the country thereby leading to further economic development. 2, Adds to national income. Business groups and family businesses in the country are capable of generating new wealth in an economy. Through their business ventures they help in development of new markets within and outside the economy. Increased earnings and higher rate of employment contributed by them add on to the national income of the country. 3. Employment generation. Business groups and family businesses act as a source of employment for people with different abilities, skills and talents. Hence they act as a source of livelihood for many people. 4. Economic efficiency. They aim at improving the economic efficiency by producing greater volume of output from the same level of input. They ensure output is increased with the help of improved processes and operation. 5. Social Change. They are capable of bringing social change in the economy. They offer new and innovative goods and services by using advanced and modern techniques of production. They offer goods and services as per the needs and wants of the customers. 6. Community development. Business groups and family business also devote time and money for the purpose of community development. They often Part in various events and seminars which are held for the purpose of development of the community. 7 ation and new business. Business groups and family businesses are **Ponsible for innovation and creation of new business ventures in the economy. offer new and innovative goods and services to meet the unmet demand of members of the society. Promoting the spirit of exploration, experimentation and risk bearing. ae 8roups and family businesses allow people to break away from the f traditions and beliefs that retard growth. They challenge the established Of life and willingly take risk to convert their ideas into a reality. They are Of taking risks and have an urge to create something new for the economy. Or ang) Discuss the various opportunities which are available for MSMEs in () Discuss the managerial role of entrepreneurs to their business. 75= SHIVA DELHI UNIVERSITY SERIES Ans. (a) Micro, Small and Medium Enterprises (MSMEs) have Substantial, contributed to the economic development of our country. The MSME sect, fs India occupies the second position next alone to agriculture in term, employment generation. This sector accounts for about 95% of the industria) uunits, 45% of manufacturing output, 40% of exports total exports of the coun MSMEs have greater opportunities to grow as ancillary industries to unjeay, higher industrial growth. MSMEs being less capital intensive and more employment-friendly have easier access to raw materials, subsidies and ofp, incentives under cluster programs. The country has huge growth Potential tp create and enhance the capacity of enterprises both in the manufacturing and service sector by using the available resources. There are huge opportunities fo, the MSMEs to grow as ancillary industries to unleash greater industri. growth.Development of the sector is therefore extremely important as it holds the key to inclusive growth and plays a pivotal role in holistic development of the country. The MSME sector has the potentialities to emerge as the backbone of Indian economy and to continue as an engine of growth provided an environment. friendly policy framework and enabling infrastructural support are made available for its functional operations. MSMEs in India consistently feed the domestic and the international value chain as manufacturers, suppliers, distributors, retailers, contractors and service provider by accounting for a substantial segment of our industrial units. This sector has been performing appreciably better than the overall rate of GDP (average 8% growth per annum) and the overall industrial output (measured by Index of Industrial Production-IIP). Availability of adequate financial resources, 2 supportive policy framework to address the areas like entrepreneurial skil development, a competent pool of human resources, application of latest technology and new innovations, adequate international market linkages and bilateral trade agreements etc. would make the Indian MSME sector globally competitive to address the emerging challenges and help ensure theit sustainability. The roadmap for MSME development should include a target for increase it the share of their contribution from the present 8% to 15% by 2020, a substantial increase in generation of employment avenues up to 50%, an enhancement in MSME contribution in the key public and private industry sector by meeting tht growing domestic demand, indigenization and important substitution am growth in foreign exports15. The recent ‘Make in India’ initiative by Government of India would make a substantial impact in the area of indigenization and would also attract sizable foreign investment, Similarly, the ‘Digital Indi# programed offers huge opportunities to MSMEs to participate in a big way in! Information and Communication Technology (ICT) sector. . (b) Managerial role of entrepreneurs to their business, Every entreprene™ has to manage people and resources, He has to coordinate the human a Physical resources engaged in the entrepreneurial venture. He has to take Varie' decisions regarding the structure and design of its organisation, Whether 0 °P for a formal or informal organisation ional of i Y Structure or to go for functional i. divisional structure is an important decision which every entreprene —A ENTREPRENEURSHIP —2017 (NOV-DEC) 123 “ posed to take. Often employees desire independence. On the other hand, $ rs want their organisation to be disciplined having clear authority responsibility relationship. Span of control, organisational climate, ssational culture etc. all influence the decision of an entrepreneur regarding ent structure. In the same manner the product line, product or service ‘offered etc. influence the decision of an entrepreneur whether to opt for a ional or organisational set up. For example, if an entrepreneur wants to jalise in one particular type of product or service, functional structure will be Tost suitable for him. On the other hand, in case of a multi-service ent reneurial ventures, divisional structure is most suitable. (Q.3. (a) Discuss various support systems available to Indian entrepreneurs on financial, marketing and technological assistances to run a business enterprise. 75 "4¥) Explain the role of Entrepreneur's Association in entrepreneurship stimulation. 75 ‘Ans. (a) Support systems provide various types of assistance to entrepreneurs in India. They provide financial, technical and marketing assistance to Indian entrepreneurs. I Finance is one of the essential requirements of an enterprise. In the absence of adequate funds, no business can be developed. In India, central and state governments are promoting number of financial institutions to bring in the industrial development in the country. Some of the important financial institutions that provide financial assistance to Indian entrepreneurs are mentioned below: ( Industrial Development Bank of India (IDBI). (ii) National Bank for Agriculture and Rural Development (NABARD). (iii) Export Import Bank of India. (iv) Small Industrial Development Bank of India (SIDBI). (2) Industrial Investment Bank of India (vi) Industrial Finance Corporation of India (IFCI). (vif) Industrial Credit and Investment Corporation of India (ICICI). (viii) Industrial Reconstruction Bank of India. (iz) Indian Banking System and Commercial Banks. (x) State Finance Corporations. (xi) Life Insurance Corporation of India (LIC). (xii) Unit Trust of India (UT!) Tl, Government at state and central level has introduced lots of measures to Support the growth and development of entrepreneurs. Government has set up a | umber of promoting agencies and institutions to help emerging and established , especially small and medium entrepreneurs. These institutions Support the entrepreneurs in respect of training, technical know-how, finance and marketing, Some of the important institutions are discussed below: = District Industries Centres (DICs). These centres were established in the year 1978 with a focus to provide integrated administrative support for Reemotion of emall scale industries in rural areas These centers act as a Chief coordinator in respect of various government departments and other agencies. DIC’s provide a single window interacting agency to the building entrepreneurs at district level.ma ‘SHIVA DELHI UNIVERSITY SERIES — Small Industries Development Organisation (SIDO). It is a po} making, coordinating and monitoring agency for the developer small scale entrepreneurs in the country. It coordinates with governmme st financial institutions and other agencies as well as organic ing small scale industries. a — The National Small Industries Corporation Ltd. (NSIC). NSIC was up in 1995 to support the growth of small scale industries in the court” Since then it has been assisting SSI through a number of schemes, Dues increased competition in past globalisation period, NSIC restructured i, activities from financing to promotion of marketing, = — Small Scale Industries Board (SSI). It is the apex advisory tod constituted to render advice to the government on all matters related ty the small scale sector. The range of development work in small scale sector includes various departments, ministries and several agencies of central/state governments. The SSI Board provides a platform for informed debate and facilitates coordination and institutional linkages — Industrial estates. It is an institutional measure to promote industrialisation in the country. An industrial estate is a place where the required facilities and factory accommodation are provided by the government to the entrepreneurs to establish their industries there, These _ Slates promote the growth of especialy small scale industries hadi and Village Industries Corporations (KVIC). It was established with the objective of providing employment, producing saleable artes and creating self reiarce the poor. Its wide range of activities foc de fain artisans, extension of assistance for procurement of ials, marketing of finished goods and arrangement for manufacturing and distribution of improved tools, equipments and ‘machinery to producers on concessional terms. echnical consultancy organisations. They were established with the Purpose of fulfiling the consultancy needs of the emerging and lished industrial units. These organisations were established in seven eighties in collaboration with state level financial and development institutions working for the cause of industri lopment in the country. They ai ere reen ih ali aim at creating a favourable Styagonment for the established and new units. These organisation Metprises in selection of the projects, credit syndication documentat oa Project reports, implementation of project and project (b) See Q. 13, Unit Il. - [Page 54 Write short notes Ca 75,78 (i) Private Equity ne Venture Capital (i) Business incubators. See ). 7, Unit (i) Private Equity. See Q. 9, er RR (ii) Venture capital. See Q.3, Unit i, [Page 47 [Page 49 [Page 4 ENTREPRENEURSHIP—2017 (NOV-DEC) 1s Q.4 Mr. X as an Entrepreneur is planning to start a new business. You are required to assist him by designing a model project report for the business. 15 ‘Ans. An entrepreneur seeking financial assistance for implementation of his/ her business idea is required to prepare a project report covering certain important aspects of the project. These aspects are mentioned below. ‘= Promoter's background /experience. = Product with capacity to be built up and processes involved — Project location. = Cost of the project and means of financing thereof — Technical arrangements = Market prospects and selling arrangements. — Environmental aspects. = Profitability projections and cash flows for the entire repayment period of financial assistance. Entrepreneurs seeking financial assistance need to submit a detailed business project report to a bank or a financial institution. Manufacturing related information is not required in case an entrepreneur intends to commence a non- ‘manufacturing project. An entrepreneur has to provide following documents/ information so that a bank or a financial institution can appraise or evaluate, his business proposal before providing financial assistance. Management Evaluation: () Memorandum and Articles of Association. Object, authorised and paid up share capitalj, promoter’s contribution, borrowing power, list of directors on the board, terms of appointment of directors. (i) Company as the promoter. Corporate plan of the company, projects promoted or implemented, banker's report on past dealing, details of 1p companies, operations, balance sheet and profit and loss account of promoter company. (i) New promoters. Educational backgroun family background, sources of income, details of p* bankers reference, income tax, wealth tax returns. (fo) Management and Organisation set up. Composition board, details of full time directors and their responsibilities, details of chief executives, organisational set up for existing details of functional executives, company, organisational set up for new company Technical feasibili nee (9 Technology and manufacturing process. Exist * of Belecsion of technology, competing technologies, details of licens technology, process flow chart and description (i) Location of the project. Locational advantage, avi" ® material and other utilities, infrastructure facilities, avatlaP® Fis a ils of (ii) Mee pastiony. List of machinery and equipment, details of suppliers, competitive evaluation of major equipment eee Docs cuaterial, utilities and manpower. Detalle of Tt Tt mat o ver estimates, suppliers, electricity and water supply, basis of manpow details of manpower. 4, any industrial experience, rsonal properties, technology, basis or of ., availability of raw a lity of labour,‘126 SHIVA DELHI UNIVERSITY SERIES (®) Contractors. Agreement with contractors detailing on know-hovy engineering, procurement, construction, financial soundness =v experience of contractors. (vi) Project monitoring and implementation. Mode of implementation details of monitoring team, detailed schedule of implementation. (©ii) Environmental aspects. Air, water and soil pollution, list of pollutant and hazardous substances, handling and disposal arrangements ‘compliance with national and international standards, clearances and ng objection certificates needed and obtained, safety arrangements agin Commercial viability: ( Existing and potential market demand and supply for the proposed product in respect of volume and pattern. (ii) Share of the proposed product of the company in the total market (itl) Selling price of the product and export potential. (Go) Buy-back arrangements. Financial epraisal (), Cost of the project. Cost of land and site develo . , pment, building, plan and machinery, technical know-how, miscellaneous fixed “asets engineering fees, races capital requirements, of ‘entrepreneur has to submit realistic estimates and reasonableness of the cost of the projec will be examined through various factors like - ae ae 7 period; inflation, agreements, quotations, etc Means of financing: Financing should be done though proper mix o 5 algae Sources of finance may include the following: * Unsecured loans from promoters * Term loans pores : subsidy /grant * Equity and interest free unsecured (i) Profitability projections, Past records Of fnoncat sor he * Fixed asset coverage ratio + Gross profit ratio * Operating profit ratio + Net profit ratio + Internal rate of tumover ‘+ Debt service coverage ratio + Earning per share ENTREPRENEURSHIP 2017 (NOV-DEC) 17 (jo) Economic viability. Bp Anentrepreneur has to take real value of input instead of the value accounted in financial analysis for the purpose y purpose of economic evaluation of the project. a * Social cost benefit should be carried out to ascertain the cost and benefits of the project to society and the economy + Economic analysis aims at evaluating the ability of the project to withstand international competition. Or How is the appraisal of a project report done by external agencies? Briefly discuss the parameters on which a project is appraised. 5 ‘Ans. Project appraisal is the performance review of the project that compares ‘actual performance with the projected performance. It is conducted most rately when the operations of a project have been established. Following are the main steps involved in the process of project appraisal: 1. Forecasting of the costs and benefits. Every project involyes costs and ‘benefits that extend over a period of time. Costs are incurred in the form of initial cash outlays on fixed assets and net current assets. Benefits are derived in form of cash generation from the operations of the project ‘over its duration. It also involves terminal cash inflows from the liquidation of the project at the end of the project's duration 2. Application of suitable investment criteria. It is concerned with ascertaining theiworth of a project. In this phase various investment criteria are used to compare the cost and benefits of the project. The investment criteria can be broadly categorized into cash flow criteria and non-discounted cash flow criteria. 3, Assessing the risk of the project. Costs and benefits associated with a ‘project are vulnerable to risk. There may be a great deal of variation in costs like project cost, material cost, energy cost, etc. Usually the real values of these costs are different from the estimated values. Thus, varia- tions in such factors can adversely affect the attractiveness of the project. 4, Estimation of the cost of capital. Cost of capital refers to the discount rate used for evaluating a project. It is usually measured as the weighted average cost of different sources of capital ‘employed in financing the project. The cost of a particular source of finance is defined as the rate of discount that equates the present value of the expected posttax payments to that source of finance, with net funds received from that source. 5. Valuation. The customary approach to project appraisal involves judging a project on the basis of its Net Present Value obpsoet By discounting the project's cash flow stream using an appropriate cost of capital. However, this approach has certain loopholes. Bre le, i to capture the value of real options inherent the projec ean Piconcides the overall corporate perspective. Capital investi wines be evaluated and assessed from the 0 verall_perspect Organisation. It involves evaluating Machinery, a inery, land and building, marketing progr ‘such an evaluation the economic ‘outlook, prospect a firm's investment in plant and mmes, etc. Therefore, in ts of industries inSERIES ENTREPRENEURSHIP~2017 (NOV-DEC) ns he nature of the project, risk associated with the project and the status of -a project from the marketing, tec opriateness of the financing pattern, The institutions /banks consider the I angles. The main issues concerned a wing in assessing the atrial Pete a x | are mentioned below: debt equity ratio norm of 1:1 -appaisal efforts are made to examine the Promoters must contribute a certain percentage of project cost. tio through ‘market surv Requirements related to stock exchange listing. en into consideration like promotional effort, ‘means and sources of the promoter and his capacity to contribute a facilities, etc. It also involves judging the onable share of the project finance, x of the key marketing personnel, onomic appraisal. Banks and financial institutions use social cost benefit “ appraisal carried out by financial lysis to appraise the project from economic as well as social point of view. Apart from calculating economic rate of return, effective rate of protection and ‘of domestic resources are taken into consideration. V. Managerial appraisal. Under managerial appraisal, resourcefulness of the moters is judged on the following basis: -() Prior experience of the promoters. (i) Progress achieved in organising various aspects of the project. | Skill with which the project is presented, erstanding of the project by the promoters is also assessed on the basis y of the project plan that includes the following — d and experienced people institution. The bank or the | ee Beem rrert for the purpoee of uation of the marketing programme. titment by promoters towards the project is also assessed in terms of the | seeks to assess the following: ms cost. While assessing the capital cost | erdied tothe proie. . ‘with which project objectives are pursued by the promoters. ber of the key technical and managerial personnel working on the project. rial competence The main motive behind managerial appraisal is to the project is in the hands of competent and efficient people. The people determines the extent of managerial competence. Such an Ips in ascertaining the competence of the people who are handling ical analysis, Environmental concerns have assumed a great deal of is is a must for projects having significant Saale’ power ‘pais, irrigation schemes, etc, Under project can cause to the y measures is also ogical analysis becomes important in projects that are related to "polluting, Pata like pharmaceuticals, chemicals, leather are the basic requirements to initiate a start up In an‘SHIVA DELHI UNIVERSITY SERIES 130 ‘Ans. (a) Following are the most important resources re, entrepreneur to startup a new venture a () Financial Resources: Financial resources are the 0st imp resources needed by an enrepreneur to start-up anew busines eo is the most important element while stating a business, Sing, tasnes involves ffret types of start-up costs including regigG* ‘business name, obtaining necessary licences, printing business cards 8 many other soch expenses. Financial resources are needed at ea every stage of the business start up. There are various sources of finan that can be used by an entrepreneur. A mixture of debt and equity - generally used by an enirepreneur to meet the financial needs q,* business. Apart fom owners equity, funds can be arranges fia financial institutions, friends, relatives, investors etc. (i Human Resources. Human resources is considered important asset of any organisation. The success of an Organisation ig Bassively dependent on the skill talent and knowledge ofthe empion® Of the organisation. An organisation makes sure that it hires comyaye stilled “andl talenied “workers who can contribute toware i achievement ‘of organisational goals and objectives. Many big ‘organisations set up a separate human resources department to ensure that nly most suitable people are hited for filling the vacancies in tn organisation, Some organisations may hire staffing agencies, conssuae etc. for this purpose. mired by 8S the mo ic er. By acquiring the industry, business and other concemed fot an entrepreneur prepares himself to take smarter dneee : ee ith the concerned industry. Small Sdministrations and an entrepreneur's local chamber of fo) canmnetce Provide relevant information, (0) Physical Resources. physical Tequired by business are concerned with ee telephone line, information systems wysical resources involve huge cost. They a Costly and hence an ent ; oss triste before buying irepreneur must realistically assess vendors, partners or employes: Hracts, deliverables, deadlines and contract terms ENTREPRENEURSHIP—2017 (NOV-DEC) 3 jtions while ensuring customer satisfacti t administration required to negotiate cts are often expensive to train and ret ed with negotiating the terms and conditions in contracte we ensuring, compliance with the terms and conditions as well as documenting and agreeing onary changes or amendments that may arise during its implementeree jBeetion: Contract management simply means the process of systematically an Icenlly managing contract creation, execution and analysis for the purpees aaximising financial and operational performance and minimising rie Following are some common commercial contracts: = Employment letters = Sales invoices = Purchase orders = Utility contracts = Intellectual property agreements = Contracts related to outsourcing and international trade. dk contract is a written or oral legally binding agreement between the parties identified in the agreement to fulfill the terms and conditions mentioned in the Sgeement. An important requirement forthe enforcement ofa contract amongat other things is the condition that the parties to the contract accept the terms of the concerned contract. From business point of view contracts can be of the following types: > Sales contract. Itis a contract between a company (seller) and a customer Jn which the company agrees to sell products or services and. the customer in turn is obliged to pay for the products or services bought = Purchase contract. It is a contract between a company and a supplier Who promises to sell products or services within agreed terms and Conditions. The company in return is obligated to acknowledge the goods Or services and pay for liability created = Partnership agreement. It is an agreement that formally establishes the terms and conditions of a partnership between two legal entities in such a manner that they regard each other as partners in a commercial agreement. Of contract management includes the following business disciplines: Authorizing and negotiation Baseline management Commitment management munication management Contract visibility and awareness Document management Growth management Contract compliance and governance Or {@) What are the common startup problems faced by new business in India? 3 fr gatising is the key to entrepreneurial success.” Comment, aes (a) See Q.2, ' ii (by) Organising EY ie “efined as a process that it ies korlepenistion PINS by clarifying jobs and working relationships and effectively deploying ion. The personnel invoh Support and manage effective tain. Contract management is ved in Areas2018 (NOV-DEC) Name of the Paper : Entrepreneurship Name of the Course : B.Com. (Prog.) CBCS Semester iv Duration: 3 Hours Attempt all the questions. AU questions carry equal marks. 1. (a) What do your mean by Intrapreneurship? How does it differ from Entrepreneurship? 75 (®) “Entrepreneurs respond to the society’s problems in a creative wa Justify this statement by citing contemporary example. ‘Ans. (a) See Q. 6, Unit I (6) See Q. 5, Unit I There are various contemporary entrepreneurs who have responded to the secety’s problems in a creative way. For example, Ishan Gupta founded Edukart tohelp people attaining their education and to have a stable career. Edukart is a huge platform with a plethora of online and distance learning courses available ‘on it which are affiliated to reputed universities and institutions some of them are designed by the Edukart team as well. Its main aim is to introduce more fledbility in the Indian education system. Sagar Daryani and Binod Kr. Homagai are innovative entrepreneurs who founded Wow! Momo foods Pvt. Ltd. having ver 1900 employees and a revenue of over %20 crore per month. The company iS a quick service food chain serving large variants of innovative momos and Tibetan cuisine in a dine-in, delivery and take away format. They even have a 132 ‘SHIVA DELHI UNIVERSITY SERIES resources for attainment of identified and desired results. Organising coo human efforts and physical resources and integrates both into a Fininet —— aaa eetain desped objectives. Organising plays a vital role in the suecce ny entrepreneurial venture. One of the most important ways. that gy can stay on track is by staying organised. Organising allows on Cuucpreneur to structure, integrate, coordinate task goals and activities © fesources in order to attain objectives. Organised entrepreneurs are able + ‘optimally utilise the available resources and can facilitate growth anj diversification. Other managerial functions cannot be properly executed by an entrepreneur in the absence of organising. Organising helps in smooth, functioning of business enterprise in accordance with the dynamic business environment. It helps in growth and survival of an enterprise and enables ito ‘meet various challenges. Following points highlight the importance of organising in the context of entrepreneurship: (9 Specialisation. Proper division of work by an entrepreneur gives him the benefits of specialisation. It means that the efficiency of the entire ___ business enterprise is enhanced when the right man is put on the right job (i) Clarity. Organising helps in establishing working relationship within the enterprise and clearly defines the lines of communication and also specifies who is to report to whom. This helps an entrepreneur in easy __ fixing of responsibility and authority. : (Gi) Optimum utilisation of resources, Another benefit of organising to an entrepreneur is_opfimum utilisation of resources. An entrepreneur Maximum ma 75 [Page 11 [Page 10 Ein etiect ing can fully and efficiently utilise all human, Physical and financial resources. Proper allocation of jobs helps in dessert as a momo, called chocolate momo. The company is headquartered in avoiding overlapping of work and ensures optimum use of resources Kolkata and is operational in Delhi, Bangalore, Chennai, Kochi and Pune. Sachin Bhatia, Rahul Kumar and Hitesh Dhingra are co-founders of Trulymadly and lifestyle entrepreneurial venture that Matchmakers Pvt. Ltd. It is a dating fess a trustworthy and exciting platform for the young Indian millennials to meet new people. It promises 100% verified profiles to its users. The app’s compatibility matching algorithm also shortlists high! compatible matches and makes finding great people to hangout with a lot easier for users. The company Ses a proprietary tool that uses trust based scores to verify its use*s. Ghandu Suhoni, Poorna Nayak, and Mandeep Makkar founded Amigobulls The. The company offers investment advice news to stock market inveslors inthe igh a patent pending video generation technology. The startp I 1 ®Patent for a technology, which allows any user to create and upro‘d Tee About a stock, This is particularly helpful for bloggers. The stay © AAT Frgent in the US and will be taurching in India and the UK markets in the ne ture, ? without any wastage. (iv) Adaptation to changes. Organising allows business enterprises to adjust to the changes occurring in the environment in which it operates. Through organising an entrepreneur can suitably modify the organisational structure and various inter-relationships existing within the enterprise. (v) Effective Ee ‘Organising increases the administrative : an entrepreneur as it results in specialisation that brings ee in administration. Moreover, igang clarifies centres of authority and power and hence leads to proper execution of work. wraerBanised enterprise clearly describes jobs and related duties tv! @ in avoiding duplication of work. Er ansion and growth. Organising facilitates growth and diversificac® ey enterprise. It allows an entrepreneur to take up new challenges Product lines and also new geographical territories, etc. for tH Petes cree ee pret. f ‘evelopment of personnel. No entrepreneur can grow in the abser¢ since nant skilled team under him. Organising creates structure © a pertaining terprise. This structure provides the basis for assigning Various functions efficiently. Effective delegation allot to assign jobs to thei is 7 developins thei Asten Jobs to their subordinates thereby toes c 75475215 Write short notes on any 10: (9 Technopreneurship {t) International Entrepreneurship i) Ecopreneurship 133= SHIVA DELHI UNIVERSITY SERIES ip. See Q. 8, Unit I. — ee Q.13, Unit L Pages paaetores ip. See Q. 11, Unit L me ae ‘as per the MSMED Act, 2006. Discuss fae es benefits available to MSMEs. e ; 75 {@) Discuss the roles and functions of managers in a small business, 7 ‘Ans. (a) See Q. 1, Unit I. 75 (Page a5 available to MSMEs: (@ The credit fund scheme for micro and small enterprises (CCS) ya, introduced by the Indian government to provide collateral free cred, the micro and small enterprises. Both the existing and the new enterprises are eligible to be cov the scheme. (@) Enterprises that have MSME registration certificate can avail 50% subsiy for patent registration by making application to concerned ministry (G2) MSME enterprises can avail benefit of 1% exemption on interest rac and overdraft. G2) MSME enterprises are eligible for Industrial promotion subsidy as may be prescribed by the government in this behalf. (=) MSME enterprises are protected by the. Ministry of micro, small and medium enterprises. The Ministry gives protection to MSMEs agains clay in payments from buyers and right of interest on delayed payment through conciliation, arbitration and settlement of dispute be done in ‘minimum time. _ (e)) MSMEs can availl concession on electricity bill by making application to _, Hsctticity department along with MSME registration ceric ste (9) MSMEs can claim reimbursement of ISO certification expenses by making pplication to the concemed authority. tance of Management in a small business: oriented. It helps in achieving group goals by providing a common efficiency. Management aims at reducing the cost ani od ccheductivity by better planning, organizing, stafing ered under ENTREPRENEURSHIP —2018 (NOV-DEC) and sections that constitute it. Managem of a sound organization which helps in af the society. It provides good quality goods and services soem employment opportunities, adopts new technologies for ue betterment of the people. ‘ Functions of Management in a small business: Gi Planning, Planning is deciding in advance what is to be done. It is the primary function performed by every manager and is the besie oft other functions. Itinwolves the selection of objectives, polices, proceduies land programmes. Planning helps in predicting future probleme aa preparing contingency plans to effectively deal with them se wed anon they occur. B Organizing, Organizing is the process of identifying and grouping the work to be performed by defining and delegating authority and responsibility and establishing relationships. Under organizing tasks are grouped into manageable departments or work units and authority and responsibility relationships are established within the organizational Rierarchy. Organizing aims at accomplishment of work and boosts up the efficiency of operations. It helps in promoting effectiveness of results % Staffing, Staffing is a managerial function of hiring and developing the required number of employees to fill in various positions in the ‘organization. The main purpose of staffing is to find the right man for the right job atthe right time. This managerial function is also known as Human Resource Function. It involves recruitment, selection, training and development of personnel. 4. Directing. Directing is the actuating function of management. It includes those activities which are designed to encourage a subordinate to work effectively and efficiently. It involves leading, influencing and motivating employees to perform the tasks assigned to them ing are the key elements of directing: @ Supervision (®) Motivation (c) Leadership (@ Communication §. Controlling. Controlling is monitoring what is being accomplished by evaluating the performance and if need be, applying corrective measures So that the performance takes place according to the Plan. It involves establishment of standards, measuring actual performance, comparing it With the standards and taking corrective action in case any deviation is 1s rent helps in the development the growth and development © Coordination. Coordination is the process by which a manager synchroniz = the activities of different departments and individuals Working in these departments towards the achievement of a common Boal. It is the force that binds all the functions of management. It is Considered as the essence of management. Orsca eS 136 SHIVA DELHI UNIVERSITY SERIES (2) What are business groups? Describe the characteristics of yy, ess (©) Discuss the values, business philosophy and behavioural orientatgg 7° any two contemporary family businesses in India. mune Ans. (a) According to Leff, business group is a group of companies thay ce business indifferent markets under common administrative and finaneiah 1° ‘whose members are linked by relations of interpersonal trust on the bon”! similar personal ethnic or commercial background. A business group co be defined as a cluster of legally distinct firms having a common manaye? Telationship. The relationship between the firms in a group may be font al 0 Characteristics of business groups (corporations/corporate groups): — Itis easier fora business group to acquire debt and equity. group is not restricted by the financial resources of a few o, sell shares to new investors and larger entities can issue bor a significant amount of debt financing, — A business group pays income tax on its earnings. If it dividend to its investors, the investors must p. dividends received. It results in double taxation. = A business group can theoretically operate” forever. Conversely the ‘owners can decide to terminate the group. — Liabilities incurred by ‘corporate groups are not transferred to the shareholders. Instead anyone trying to enforce a liability may or pursue the corporate entity for satisfaction. — Ownership in a business groups is based on number of shares owned Buying or selling of these shares shifts the ownership of a corporate group to a different investor. — Owners of business groups hire professional managers to handle the affairs of the business. Owners/Investors usually are not actively engaged in the managerial activities. — A business group is considered as a separate operating and legal entity It operates separately from its owners. (6) (9 Bajaj group. Bajaj group is one of the most successful family businesses in India. The Bajaj group is also considered as one of the largest family businesses in the country. Bajaj group is an Indian conglomerate founded by Jamnalal Bajaj in Mumbai 1926. It is one of the largest conglomerates based in Mumbai. Maharashtra. The group comprises 37 companies and its flagship company Bajaj auto is ranked as world’s fourth largest two wheeler and three wheeler manufacturer. Some of the notable companies are Bajaj Auto Ltd., Bajaj Finserv Lid., Hercules Hoists Ltd., Bajaj Electricals, Mukand Ltd., Bajaj Hindustan Ltd and Bajaj Holdings and Investment Ltd. The group has involvement in various industries that include automobiles (2 and 3 wheelers), home appliances, iron and steel, Insurance, travel and finance. The Bajaj group of companies was founded by Sri Jamnalal Bajaj. Other important family members include Kamalnaya" Bajaj (1915-72) and Ramkrishna Bajaj (1924-1994). Rahul Bajaj is the chairman and managing director of the Bajaj group. He is the grandson of Jamnalal 8: aS a business ywners. It can nds to obtain also pays a ay income tax on the nly ENTREPRENEURSHIP —201g (NOV-DEG) : 7 = Values. Bajaj is one of the oldest, lan c + largest and most s, businesses in India. The main focus of Bajaj has boos co scett! amily The business gives utmost valu, n its customers, : e to its customers, communities it serves and the business has Lane car atan ge ‘on developing a Strong growth mentality and a positive outlook to its werk Te The company is known for taking measured risks wad eel differentiate through its products meine = Business Philosophy. Bajaj group believes that the true and full measure of growth, sucess and Prog ety ee 4 Or conventional economic indices. It is best reflected in the defen that the business and industry make to the lives of people, Thee Its social investments, Bajaj group addresses the needs of communites residing in the vicinity of its facilities, taking sustainable init the areas of health, education, environment conservation, infrastrctine and community development and in response to natural calamities It, goodwill resonates in the two single words that live in the collective consciousness of Indians ‘Hamara Bajaj’ = Behavioural orientation. Integrated development of society thro: participatory approaches that sets benchmarks and standards for others to emulate for sustainable development. It was the profound conviction of Jamnalal Bajaj that the wealth of a business enterprise was bequeathed to itas a sacred trust by society. With this inspiration, the Bajaj group has been striving to bring change in the lives of people in various regions of the country. les to atives in (i Godrej group. The Godrej group is one of the most popular family businesses in India. The Godrej group is an Indian conglomerate headquartered in Mumbai, Maharastra, managed and largely owned by The Godrej family. It was founded by Ardeshir Godrej and Pirojsha Burjorji Godrej in 1897. It operates in sectors as diverse as real estate, consumer products, industrial engineering, appliances, furniture, security and agricultural products. The Godre) group can tebroadly divided into two major holding companies, working independently: Godrej Industries Ltd. and Godrej and Boyce. Other eae fe is of Godrej group include Adi Godrej, Nadir Godrej and Jamshyd Godre s The Godrej family is one ofthe richest in India; wth an estimated net worth of $i2billion as of 2014. Adi Godrej was declared as the 6" Forbes Magazine. Godrej's mission is to operate 2 ne’ ‘8n the Godrej brand and corporate image of reliability and in richest Indian in 2017 by -w business which capit sgrity. Its goal is to its customers both in India and abroad. = Values. Godre is a strong financial performer ill and image which it has been enjoying for over a centlry HOt in trusts that invest in the environment health and eco Snore als fllows a strategy of ‘shared ves 50a anual rowthand inclusive and greener india. Godre) targets 15% BN soup aims at massive employment generation for Indian y Aims at maintaining its century now. —————SHIVA DELHI UNIVERSITY SERIES training one million urban and rural youth in employable s Godre} as one of the country’s oldest and most responsible hnas always been at the forefront of responsible philanthy Thus the group is committed to promoting a greener and India through a ‘Shared Value’ approach. ~ Business Philosophy. The business philosophy of Godrej ‘Godin every home and work place’. The group aimed <) at quality of if everyday everywhere, The business philosophy ths is based on integrity, trust and to serve and respect the envjn ee) Goxire} has always been an integral part of millions of people ce" enriching it in more ways than they can imagine. Today, cq" shining example of enduring ideals in a changing world, a = Behavioural orientation. Godre} aims at creating a more employ, ; workforce, building a greener India and innovating for good neyo products. Godrej believes in giving back to the communities tere” teen buying its goods and services. Apart from earning fa mon? the group uses an integrated approach towards building susthinan, ‘communities around the area of its operations based on the commm 5 needs in the area of education, health and sanitation. The gree at providing quality goods and services to the general public ain reasonable prices. The group is trying to create a culture of stant and innovative thinking in business. The group's leadership is fons looking and is) gaining confidence by stepping into new and het Potential businesses. This is the reason why the Godrej group gives of freedom to its employees to think innovatively. Q.5. (a) Whatarethe functions of Small Industrial Development Organisai (SIDO)? Brey discuss the different services offered by SIDO. 75 o hat do you mean By private equity Funds? How does it iter tum Ans. (a) Small Industries Development Organisation (SIDO) is an ape and nodal agency for formulating, coordinating and Fisiisine the poles Programmes for promotion and development of small scale industries, Its the ills by 2995 ‘Onglomerates, TOPY in Indis, more aa yeaa las" aotine seee for the development of small scale (b) ‘Toco-ordinate the programmes and polici a Policies of various state governments (0 To maintain a proper liaison with the related central ministries, planning @ Semmission, stale governments, financial institutions ete. ‘coordinate the programmes for the development of industrial estates ENTREPRENEURSHIP — 2018 (NOV. DEQ) Functions relating to Industrial development: a fa) To reserve items for production by small scale industries fo set up industrial units in order to enc. Beets ncn CN pe btn T import substitution. s that can promote (@) To render required support for the de To provide necessary guidanc encourage small scale industries to Stores Purchase Programme IL Functions relating to extension: {@) To provide assistance in technical process, production suitable machinery and preparing factory lay-out and {#) To provide training and consulting servicesto increase of small scale industries. (0) To provide marketing assistance to small scale industries so that they can ‘conveniently sell their products. (@ To render assistance in economic investigation scale industries. SIDO provides services to small Industry by implementing a broad programme of activities and services including the following: — Entrepreneurship development = Testing centers = Extension services = Tool room services = Research and Development (R & D) services = Consultancy services = Policy development (WA private equity fund is a collective investment scheme used for making investments in various equity securities according to one of the investment associated with private equity. Private firms raise fund from institutions, Wealthy individuals and then invest that money in buying and selling businesses. After raising a specific target amount, a fund will close to new investors. Each fund is liquidated, selling all its businesses, within a period of not more than ten ‘years. velopment of ancillary units market advice and assistance to actively take part in Government planning, selecting design the competitiveness and information to small Basis Private equity funds Venture capital funds 1 Private equity refers to the | Venture capital refers to Meaning [Preach agrnaei| panne sal bones those firms which are not _ | by the investors seeking publicly listed on any stock | high growth potential exchange, 2 Stage of Later stage Tnitial stage Investment 3.Anvestment —_| Few companies. lamas made in al