MARKING SCHEME

ENTREPRENEURSHIP
2018
S.no Questions and Answers Marks
1. Give the meaning of an entrepreneur? 1
Ans. Entrepreneur is anyone who always searches for an opportunity. 1
(Any other suitable definition)
2. State the liability of a partner? 1
Ans. Unlimited liability 1
3. What is meant by ‘integrative negotiations’? 1
Ans. Integrative negotiations are commonly referred to as ―win-win. In this 1
type of negotiation, each side is working towards a solution where
everyone wins something.
4. Differentiate between Sales Budget and Marketing Budget? 1
Ans. Sales budget is an estimate of future sales, often broken down into both ½+½
units and currency. It is used to create company sales goals.
Marketing budget is an estimate of the funds needed for promotion,
advertising, and public relations in order to market the product or
service.
5. Deepak Industries is a sugar unit in U.P. Due to various factors it started 1
running into losses and was declared a sick unit by the State Confederation
of Industries. It had assets and probability to revive if financial assistance
could be made available.
Name the financial organization can help Deepak Industries in this situation
knowing well that it cannot furnish any collateral security against loan
sanctioned?
Ans. Industrial Investment Bank of India Ltd. (IIBI) 1
6. ‘Safe Wheelers’ is an upcoming cab service. The promoters knew that they 2
are entering a highly competitive market. They gathered information on
existing cab services and changing customer preferences and incorporated
those observations into their operations. In order to reach the customers
promptly, they developed an app to book, track and trace the cab 24*7. To
create an environment of trust all drivers were divided into two shifts, 6am –
6pm for female drivers and 6pm-6am for male drivers. GPS systems were
installed in order to monitor their movements. The fare payment was either
by an e-wallet or through the ‘Safe Wheelers’ Smart Card. As soon as the
services were launched, they were a grand success.
Identify and explain the concept that helped the company to succeed.

[1]
Ans. Environment Scanning 1+1
Careful monitoring of an organization's internal and external
environment for detecting early signs of opportunities and threats that
may influence its current and future plans.
7. Give any two points of distinction between ‘Basic Idea’ and ‘Post Scanning 2
Idea’.
Ans. Basic Idea Post Scanning Idea 1+1
While the initial spotting of the development of ideas after
ideas (i.e., basic idea) is of a scanning the environment (i.e., post
random nature scanning) idea is a more purposeful
activity.
Basic Idea is an experiential Post scanning idea is a strategic
process process.
Has to undergo the vigorous Also undergone the process
process
(Any two) (Marks to be given only for correct difference)
8. Rajiv and Ramesh entered into a verbal agreement to form a firm. They 2
agreed to share it’s profits. Their business was running smoothly. One day a
dispute arose between Rajiv and Ramesh regarding the profit sharing ratio.
Rajiv decided to move the court and enforce his rights against the firm and
Ramesh.
Will Rajiv succeed? Give reasons in support of your answer.
Ans. No, Because the firm is not registered and the partners of an 1+1
unregistered firm cannot enforce their rights against the firm and other
partners.
9. Various approaches may be used by a company to promote its products. One 2
of them is the use of mass media methods by designing a promotion strategy
that aims at establishing brand identity.
Identify and explain this approach.
Ans. Above the line- 1+1
These promotions use mass media methods. This type of promotion
focuses on advertising to a large audience. It includes conventional
media like print, online, television and cinema advertising. The activities
include advertisements in the press. They also produce online banner
advertisements, place advertisements on billboards and use their website
to meet the needs of their consumers.
10. State any four powers of Securities and Exchange Board of India. 2
Ans. For the discharge of its functions efficiently, SEBI has been vested with ½×4=
the following powers: 2
1. To approve by-laws of stock exchanges, SEBI
2. To enquire the stock exchange to amend their by-laws.
3. Inspect the books of accounts and call for periodical returns from

[2]
 recognized stock exchanges.
4. Inspect the books of accounts of financial intermediaries.
5. Compel certain companies to list their shares in one or more stocks
exchanges.
6. Levy fees and other charges on the intermediaries for performing its
functions.
7. Grant license to any person for the purpose of dealing in certain
areas.
8. Delegate powers exercisable by it.
9. Prosecute and judge directly the violation of certain provisions of the
Companies Act.
10. Power to impose monetary penalties.
(Any four)
11. While assessing the market, an entrepreneur has to prepare details on four 3
factors one of them being ‘project innovation and change’. Explain briefly
the other three.
Ans. Selection of a product or service will depend upon many factors. While 1x3
assessing the market, an
entrepreneur has to prepare details on the following lines:
1. Demand
The demand assessment will be based on the size of market being
targeted, i.e., local markets, market at state level or
national/international market. It will also involve a study of the target
groups of consumers, their preferences, tastes and other related
variables.
2. Supply and nature of competition
While assessing market, supply position is also studied by
entrepreneurs. By supply position what is meant is the complete picture
of quantities of the product made available in the market by all the
existing players. It should take into account future supplies from
possible entrants in the field.
3. Cost and price of product
It is important to determine the cost of the product and its comparison
with available products in the market. Cost variable of competitors in
terms of transportation delays, wastage, storage etc., have to be studied
to spot cost advantage. This will influence the delivery mechanism of the
identified product or service.
12. Bhoomika started a pottery unit employing differently abled people to make 3
and sell sculptors made of clay. She also made sure that the material she used
is easily decomposable. During the months of September and October she
increased the scale of production as the festival of Diwali was round the
corner.
Identify the component of business environment at a macro level that is
[3]
 reflected in the above situation.
Also identify any two values communicated by Bhoomika by her working.
Ans. Ecological Environment. 1+2
Values:
i. Social Responsibility
ii. Concern for the society
iii. Respecting differences
(Any two or other suitable value relating to the question)
13. Picturising ahead every step in a long series of separate operations, each step 3
to be taken in the right place, of the right degree and at the right time. Each
operation is to be done by maximum efficiency. This is the objective of one
of the components of a business plan.
(a) Identify the component
(b)There are three situations before the venture under this component.
Explain briefly those three situations.
Ans. (a) Production plan ½+
(b) Most likely there are three situations before the venture viz. 2½
a) No manufacturing involved: If the new venture does not include any
manufacturing function, say it’s a trading firm or a service provider,
then this section will stand eliminated from the plan.
b) Partial manufacturing: If some or all the manufacturing process is to
be subcontracted or outsourced, then the production plan should
describe:
i) Name and location of subcontractor(s)
ii) Reasons for their selection
iii) Cost and time involved
iv) Any contracts that have been completed etc.
In such cases, a clear mention of what entrepreneur intends to do
himself and what he plans to get it done from outside is required.
c) Complete Manufacturing: If the manufacturing is to be carried out in
whole by the entrepreneur, he/she will need to describe:
i) the physical plant layout,
ii) the machinery and equipment required to perform the
manufacturing operations,
iii) raw materials and suppliers names, addresses, terms and conditions,
iv) cost of manufacturing
v) any future capital equipment required etc.
14. a. What is a ‘Business Plan’? 3
b. State any one importance of writing a business plan for each of the given
interest groups:
i. Investors
ii. Entrepreneur

[4]
Ans. a. The business plan is a comprehensively written down document 1+1+1
prepared by the entrepreneur describing formally all the relevant
external and internal elements involved in starting a new venture.
b. i. Investors:
as the investors/lenders focus on the four Cs of credit : character, cash
flow, collateral and equity contribution, it is the business plan which
reflects the entrepreneur's credit history, the ability to meet debt and
interest payments, and the amount of personal equity invested thus
serving as an important tool in funds procurement.
ii. Entrepreneurs:
a) helps in determining the viability of the venture in a designated
market
b) helps in providing guidance to the entrepreneur in organizing his/her
planning activities as such:
i) identifying the resources required
ii) enabling obtaining of licenses if required etc.
iii) working out with legal requirements as desired by the government.
c) provides room for self-assessment and self-evaluation, requiring
entrepreneur to think through various scenarios and plan ways to avoid
obstacles.
15. Why is ‘customer relationship management’ important for any business? 3
Explain briefly
Ans. • It can help to understand the customer in a better way 1+1+1
• It will retain customers through better customer experience
• It will help to attract new customers
• Helps in winning new clients and contracts
• It will lead to increase profitability of the organization.
• Helps in decreasing customer management costs
(Any three)
16. Paramveer Singh runs an online business for gym equipment. Annual 3
demand for the Waist Flexers is 16,000. The annual holding cost per unit is
Rs.48 and the cost to place an order is Rs. 1,500. Calculate the Economic
order quantity of Waist Flexers.
Ans. Economic Ordering Quantity
𝟐×𝒂𝒏𝒏𝒖𝒂𝒍 𝒖𝒔𝒂𝒈𝒆 ×𝒐𝒓𝒅𝒆𝒓𝒊𝒏𝒈 𝒄𝒐𝒔𝒕 𝒑𝒆𝒓 𝒖𝒏𝒊𝒕 1
=
𝑪𝒂𝒓𝒓𝒚𝒊𝒏𝒈 𝒄𝒐𝒔𝒕 𝒑𝒆𝒓 𝒖𝒏𝒊𝒕

Thus as : annual demand= 16000

Order cost = Rs. 1,500
Annual carrying cost of 1 unit = Rs. 48

[5]
 𝟐×𝟏𝟔, 𝟎𝟎𝟎×𝟏, 𝟓𝟎𝟎 1
EOQ =
𝟒𝟖

½
= 𝟏𝟎, 𝟎𝟎, 𝟎𝟎𝟎

= 1000 Units
½

17. This is a market where there is an option to sell and buy new and old 3
financial instruments. It facilitates the transferring of financial resources
from surplus units to deficit units.
a. Identify this market and define it.
b. What is its function of transferring of financial resources from surplus
units to deficit units called?
Ans. a. Capital Market 1+1+1
A capital market may be defined as an organized mechanism meant for
effective and smooth transfer of money capital or financial resources
from the investors to the entrepreneurs. Here,
productive capital is raised and made available for industrial purposes.
b. Financial Intermediation
18. Idea germination is the seeding stage of a new idea in the creative process. 4
Explain the next four steps in the process.
Ans. Preparation: On the basis of the idea, interest and curiosity the need is 1×4
adjudged by the entrepreneur and he starts looking for the answer to
implement the idea. If the idea is to launch a new product or service
then market research is conducted.
Incubation: This is the subconscious assimilation of information. This is
the transition period.
Illumination: In this period of illumination the idea re-surfaces in
realistic way and entrepreneur comes out with viable plan to give
practical shape by collecting raw-material, arranging funds, policy–
making for the implementation of idea.
Verification: Also called the validation or testing stage. This is where the
idea is verified to prove that it has value. This is the most difficult phase
of creativity as obstacles begin to appear.
This is the developing stage in which knowledge is developed into
application.
(Steps to be in sequence)
19. State any four primary activities that are essential for a firm to have a 4
competitive advantage as given by Porter.

[6]
Ans. Primary activities 1×4
Inbound logistics: Goods being obtained from the organisation's
suppliers and to be used for producing the end product.
Operations: Raw materials and goods are manufactured into the final
product. Value is added to the product at this stage as it moves through
the production line.
Outbound logistics: Once the products have been manufactured, they
are ready to be distributed to distribution centres, wholesalers, retailers
or customers. Distribution of finished goods is known as outbound
logistics.
Marketing and sales: Marketing must make sure that the product is
targeted towards the correct customer group. The marketing mix is used
to establish an effective strategy, any competitive
advantage is clearly communicated to the target group through the
promotional mix.
Services: After the product/service has been sold, what support services
does the organization offer customers? This may come in the form of
after sales training, guarantees and warranties.
(Any four)
20. Infotics ltd. has been a socially responsible organization determined to 4
reduce waste production and do waste management. The company runs a low
cost canteen for its employees. It uses the available waste in form of
vegetable peels, fruit skin and unused food is left during the day is put for
composting. The methane gas so produced from this is used as fuel in the
kitchen. This saves the fuel resources .
a. Identify the type of ‘added value’ in this process.
b. Briefly explain any other type of ‘added value’ besides the one identified
in (a) above.
c. Also state any two values communicated by Infotics Ltd. to the society.
Ans. a. Environmental added value 1+1+2
b. 1. Quality added value
Quality added value is basically adding convenience, ease of use or other
desirable characteristics that customers value. For example, turning a
commodity into a branded product or design enhancements like pull
tabs for easy opening or sipper tops on
beverage bottles.
2. Cause-related added value
Cause-related added value is a social marketing strategy where business
contributes part of the revenue from a product or service to a cause. For
example, a business may donate a percentage of revenue from each
transaction to a cause such as an educational facility for disadvantaged
children or a wildlife sanctuary.
3. Cultural added value

[7]
 Cultural added value is also a social marketing strategy that employs
methods or systems of production involving cultural aspects or allow for
the needs and sensitivities of cultural
groups. For example, producing kosher food (in accord with Jewish law)
or using a combination of English and the language of other ethnic
groups in a community in written communications.
(Any one)
c. Social responsibility, Concern for the community
(Any other related value as per the question)

21. Industrial finance is a very complicated problem. To meet the growing needs 4
of the industries and entrepreneurs, heavy flow of finance is required. For
this, various financial institutions have been established at the National and
State levels. These institutions provide developmental finance.
(a) Give the name of the group of financial institutions
(b) Also, give any six points stating the need for such institutions.
Ans. (a). Specialised Financial Institutions 1+3
(b). Establishing of SFIs facilitated:
a) Provision of sufficient long-term funds in the desired sectors in
accordance with planned priorities to the industrial units and
entrepreneurs.
b) New and small entrepreneurs in setting up industry.
c) Development of (i) small scale industry and (ii) projects in backward
areas.
d) Provision of technical and managerial advice to the entrepreneurs,
facilitating thus, in identification, evaluation and execution of new
investment enterprises.
e) Underwriting of and direct subscription to the issue of shares and
debentures in the capital market of the upcoming ventures.
g) Establishment of enterprises which require extra-ordinarily large
amount of finance for their projects with a long-gestation period.
(0.5 marks for each point)

[8]
22. Raman is a potential investor who wishes to be a part of Equity Linked 6
Saving Scheme (ELSS). He has given the particulars of two companies to
seek your advice on investment. Compare the Return on Equity of the two
companies and suggest Raman where should he invest.

Particulars Alpha Ltd. (Rupees) Beta Ltd.(Rupees)

Total Capital 20,00,000 20,00,000
Invested
Owned Funds 10,00,000 10,00,000
Interest on 60,000 50,000
Borrowings from
Bank
Cost of goods sold 7,00,000 8,50,000
per month
Monthly Sales 10,00,000 15,00,000
Revenue
Salaries 2,40,000 3,60,000
Utilities 75,000 1,00,000
Depreciation 5,500 6,000
Tax Rate 20% 25%
Ans. Return On Equity = Profit after interest and tax/ Equity x100

Particulars Alpha Co. Beta Co.

Sales Revenue (Yearly) 1,20,00,000 1,80,00,000
COGS (Yearly) 84,00,000 1,02,00,000
GROSS MARGIN 36,00,000 78,00,000
Less:
i. Salaries Paid: 2,40,000 3,60,000
ii. Interest paid: 60,000 50,000
iii. Utilities: 75,000 1,00,000
iv. Depreciation: 5,500 6,000
Profit after interest before tax 32,19,500 72,84,000
Less Tax 6,43,900 18,21,000
Profit after interest and tax 25,75,600 54,63,000
ROE= Profit after interest and 2575600 5463000
tax/ Equity x100 /1000000 x100 = /1000000
257.56% x100= 546.3%
Return on Equity 257.56% 546.3%

[9]
 Raman should invest in Beta Company as its ROE is better than that of
Alpha Company.
(1 mark for the formula; 2 marks for table/format/components; 1 mark
for ROE of Alpha; 1 Mark for ROE of Beta; 1 mark for the final answer
i.e., Beta)
23. ‘Mittil Ltd’. is a leading company for manufacturing of soft-toys for 6
children. The company is in process of developing a prototype for a talking
pillow , ‘Talk O Hug’, which would enable parents to convey their message
to children when they are away at work. The mechanism is such that the
message is recorded in the device in the pillow and the moment the child
touches the pillow, the speaker sensors would repeat the message recorded
by the parents for their children. Though an innovation for India, imported
versions of this product are already available in the market. The management
wants to devise a pricing strategy to target the ‘switchers’ present in the
market.
a. Identify the pricing strategy that the management is planning to adopt.
State the marketing objective of the company behind this pricing decision?
b. State any two advantages and one disadvantage of adopting this pricing
policy to Mittil Ltd.,
c. Keeping in mind the nature of the product, suggest the distribution
channel that would suit the company for distributing ‘Talk O Hug’.
Ans. a. Penetration Pricing.
Penetration pricing is most commonly associated with a marketing 2 + 3 +
objective of increasing market share or sales volume, rather than to 1
make profit in the short term. The price will be raised later once this
market share is gained.
b. The advantages of penetration pricing to the firm are:
• It can result in fast diffusion and adoption. This can achieve high
market rates quickly. This can take the competitors by surprise,
not giving them time to react.
• It can create goodwill among the early adopters segment. This can
create more trade by word of mouth.
• It creates cost control and cost reduction pressures from the start,
leading to greater efficiency.
• It discourages the entry of competitors. Low prices act as a
barrier to entry
• It can create high stock turnover throughout the distribution
channel
• This can create critically important enthusiasm and support in
the channel.
(Any Two)

[10]
 Disadvantages or penetrating price method:
• The main disadvantage with penetration pricing is that it
establishes long–term price expectations for the product and
image preconceptions for the brand and company. This makes it
difficult to eventually raise prices.
• Another potential disadvantage is that the low profit margins may
not be sustainable long enough for the strategy to be effective.
(Any One)
c. Direct level.
24. Dr. Bhim is a senior cardiologist and is concerned about the depleting health 6
index. He researched and found that proper eating habits can improve the
quality of life. He initiated ‘MediBytes’ ,a unique canteen , where the food is
provided as per one’s health needs. The food served at ‘MediBytes’ has no
fast food and no aerated drinks. It provides zero oil food with all the basic
nutrients required for the body. Initially these canteen were started in
Hospitals but since people are becoming health conscious ‘MediBytes’ is
planning to open their branches in other locations also.
a. Identify and explain the idea field that was explored by Dr. Bhim?
b. State any two idea fields with examples other than the one identified in (a)
above.
Ans. (a) 1+1+2+
Service sector ideas 2
Entrepreneurial opportunities are not only restricted to the
manufacturer. Service sector is the most growing field these days, the
world over, thanks to emerging knowledge societies and advancements
in Information and Technology. So, new opportunities can be identified
by understanding the linkages to different business activities.
OR
Market driven or demand driven ideas
Market research yields valuable data about trends of supply, demand
and consumer preferences. Market research is a key factor to maintain
competitiveness over competitors.
OR
Creative efforts
Apart from applying creativity to spot and harness opportunities, it can
also be applied to develop new products and services.
There are basically five ways in which creative ideas can be generated:
1. Develop a new product or service.
2. Improve an existing product or service
3. Find a new process or resource for manufacturing a product.
4. Find new markets for existing products or services.
5. Find a new use of an existing product or service.
A very useful concept to bear in mind is that, most often creative
[11]
products and services are born as results of problem solving.

The child could have written any one of the above options and should
not have explained the same option in (b) part.

b) i. Natural resources
Ideas can be generated based on natural resources. A product or service
may be desired from forest resources, agriculture, horticulture etc.,
ii.) Existing products or services:
A great business idea combines skills with imagination and market
demand.
iii.) Trading related ideas
Trading these days is not limited to ordinary grocer or distributor
outlets. With increasing consumerism, the scope and nature of trade has
enlarged; local trade, import and export, e-commerce are all making
trading a very wide area of enterprise.
(Any two with proper examples)

[12]