DEPARTMENT OF

ELECTRONICS AND COMMUNICATION ENGINEERING

TECHNOLOGICAL INNOVATION MANAGEMENT

AND ENTREPRENEURSHIP

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BEC501 C
V SEMESTER
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MODULE 1 NOTES
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Prepared by,
[Link] A M
U

Assistant Professor
Dept. of ECE
VT

MIT Thandavapura

A Unit of Maharaja Education Trust®

MAHARAJA INSTITUTE OF TECHNOLOGY

THANDAVAPURA

NH 766, Nanjanagud Taluk, Mysuru- 571 302

(An ISO 9001:2015 and ISO 21001:2018 Certified Institution)
(Affiliated to VTU, Belagavi and approved by AICTE, New Delhi)

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 DEPARTMENT OF
ELECTRONICS AND COMMUNICATION ENGINEERING

MODULE 1 CONTENTS
CHAPTER 1- MANAGEMENT
 Nature and Functions of Management – Importance
 Definition
 Management Functions
 Levels of Management

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 Roles of Manager
 Managerial Skills
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 Management & Administration
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 Management as a Science
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 Art & Profession (Selected topics of Chapter 1, Text 1)

CHAPTER 2 - PLANNING
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 Planning-Nature
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 Importance
 Types
 Steps and Limitations of Planning
 Decision Making – Meaning,
 Types and Steps in Decision Making (Text 1)

Text Book 1: Principles of Management – P.C Tripathi, P.N Reddy, McGraw Hill Education, 6th
Edition, 2017

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 CHAPTER 1
NATURE AND FUNCTION OF MANAGEMENT
1. IMPORTANCE OF MANAGEMENT
Q.: Explain the importance of management. (7M)

 Management is a critical element in the economic growth of a country

 The 4 factors which serves as a resource are people, money, material and machines, by bringing
together the 4 factors the management enables a country to experience a substantial level of
economic development.
 The country with enough income and manpower can still be poor if it does not have proper

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managers to coordinates these resources.
 Without management a country’s resource can never become production.
 Management is essential in all organization, be it a business activity or any other activity

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 Principles of management are universal. It is not only applied for managing business, it is applied
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for other organizations like education, military, social and government.
 Thus management is same process in all organization but varies with complexity depending on
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size of organization.
 Management is dynamic in every organization
 The term dynamic means coordinating current organizational activities and planning for future.
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 It settles disputes and promotes leadership within the organization.

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 The quality and performance of the management determines the success of the organization.

2. DEFINITION OF MANAGEMENT
Q.: Define Management. (VTU - 1M) or Give different definitions of management as interpreted by
management scholars (VTU - 7M) *****

 Definition 1:Mary Parker Follett:“Management is the art of getting things done through people"
 This definition defines fundamental difference between a manger and personnel of an organization.
 Manager is one who contributes to the organization goals indirectly by directing the efforts of others
– not by performing the task himself.
 Person who is not a manager makes his contribution to the organizations goal directly by performing
the tasks by himself.
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 Sometimes the person can play both roles simultaneously. For example, sales manager can perform

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 managerial role by directing sales team to meet the goals set up by the organization and non-
managerial role by handling customers directly in negotiating the deals.
 2 weakness of Mary Parker Follett’s definition are:
1. The use of term “Art” in defining the management: Which says management is an Art which
is half-truth. Art deals with application of knowledge, management also involves gaining of
knowledge i.e. science.
2. The definition does not involve various functions of manager.

 Definition 2: Elaborate definition of management is given by George R. Terry: "Management is a

process consisting of planning, organizing, actuating and controlling, performed to determine and
accomplish the objectives by use of people and resources".

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 The 4 management activities included in this process are:
1. Planning: the manager thinks of their actions in advance
2. Organizing: the manager coordinates humans and Materials resources

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3. Actuating: the manager motivates and direct subordinates
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4. Controlling: the manager ensures that there is no deviation from the plan
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3. MANAGEMENT FUNCTIONS OR THE PROCESS OF MANAGEMENT

Q.: Define management. Explain any 4 management functions. (VTU - 10M) or List and explain 4
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basic function of management. (VTU – 10M) or Explain the process of management (10M) *****
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 Though many authors have defined several functions of management, there are 6 essential and well
accepted functions of management. They are:
1. Planning
2. Organising
3. Directing
4. Controlling
5. Innovating
6. Representing
 Management process is a circular continuous movement which is carried out in order starting from
planning till representing, as shown in figure 1.
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 Figure 1: Management Process

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1. PLANNING

 Planning is the function that determines “what” should be done in “advance”. It is looking ahead and


preparing for future.
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It determines what is to be done, how it is to be done and where the things need to be done. It also includes
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who as to do it and how results are to be evaluated.
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 It is a process of deciding the business objectives and charting out the methods of attaining those
objectives.
 Planning is not only done at the organization levels, it is made at all divisions, department and sub-units.
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 Thus, planning in performed by mangers at all 3 levels – top, middle and first-line manger levels.
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 Plans made by the top managers of the organization may take long period of over years (5-10 years).
 Plans made by middle and first-line managers may take shorter period of over few months, weeks or
sometimes within few days.

2. ORGANISING

 To organize a business well, it is required to provide all the useful resources for its proper functioning.
Resources like people, money, raw materials, and tools.
 Organizing can be divided into 2 sections:
1. Human organization
2. Material organization
 Human organization:
 Once the managers define the objectives, and plans to achieve then, they must design and develop
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human organization to carry out the plan successfully.

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  The purpose human organization is creating an environment for human performance by identifying
and grouping work among people so same interest and defining roles and responsibility for each
individual and establishing the relationship.
 Staffing is also an important function in building human organization. In staffing manager finds the
right person for each job.
 Staffing also provides manager the authority of hiring adequate manpower for all the positions in
the organization.
 Staffing also involves selecting and training of future managers and encouraging all to have a
disciplined approach towards work.
 Material organization:
 The purpose of material organization is to utilize the proper raw material required for production at

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the right point of time.
 It includes process like Procurement, inspection, storage and monitoring of components.


3. DIRECTING
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In directing the manager explains his people what they have to do and help them do it to the best of their
ability.
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 This function can be called as leading, directing, motivating, actuating and so on.
 Directing involves 3 sub-sections: Leadership, Motivation and Communication.
1. Leadership: Leadership is a process by which a manger guides and influences the work of his
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subordinates.
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2. Motivation: Motivation means encouraging workers to give their best. 2 classification of motivation
are: financial motivation which takes the form of salary, bonus, etc. and non-financial motivation
takes the form of job security, appreciation, etc.
3. Communication: Communication is the processing of passing information from one person to
another.

4. CONTROLLING

 Controlling is measuring and correcting of activities of subordinates to make sure that the work is going
on as per the plans.
 Controlling generally relates to the measurement of achievement. This involves three elements.
1. Establishing standards of performance.
2. Measuring current performance and comparing with established standards.
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3. Taking necessary corrective action to meet the set standards.

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 5. INNOVATING

 These days it is not necessary for an organization to grow big, but it is necessary for the organization to
grow better.
 This makes innovation an important function of a manager.
 Innovation means creating new ideas which improves the product, process and practice.
 For example, innovation can be implemented in packaging (Creating trail packs), distribution, and
business models.

6. REPRESENTING

 A manager also needs to spend part of his time in representing the organization before various outside
groups which have some stake in the organization.

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 These stakeholders can be government, suppliers, customers, etc.
 Every function has 2 dimensions:

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1. Substantive Dimension – Defines what is done and How it is done.
2. Procedural Dimension - Defines where is it done.
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4. LEVELS OF MANAGEMENT
Q.: Describe the levels of management. (VTU – 5M) *****
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 There are 3 levels of management as shown in figure 2.

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Figure 2: Management levels

1. Top Management: It is a Top Management which defines policies for the company and consist of
Chairman, Directors, President, Vice-President and CEO.
2. Middle Management: It is a vast and diverse group that includes Manager in Project, Sale, Marketing
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and department Heads.

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3. First-line Management: It is a lower management group made up of Supervisors, and Foreman.

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  There are 2 approaches to management:
1. Top-Down approach: The top-down approach to management is a strategy in which the decision-
making process occurs at the Top management level and is then communicated to the lower levels.
2. Bottom-Up approach: Bottom-up approach is a strategy in which the actual work will be initiated by
the workers at the first-line management level and is integrated in middle and top management.
 Time management in different levels are as follows:
1. Plans made by the top managers of the organization may take long period of over years (5-10 years).
2. Plans made by middle and first-line managers may take shorter period of over few months, weeks or
sometimes within few days.

5. ROLES OF A MANAGER

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Q.: Explain 10 different roles played by manager. (VTU – 10M) or List and explain the roles of a
manager (VTU – 10M) *****

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Manager in any organization plays variety of roles responding to a particular situation.
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 The three important roles played by a manager are:
1. Interpersonal roles
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2. Decision roles
3. Informational roles
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1. INTERPERSONAL ROLES
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 These includes figurehead, leader and liaison roles.

FIGUREHEAD ROLE
In figurehead role, the manager will perform some duties that are casual and informal ones like, receiving
and greeting visiting dignitaries, attending to social functions of employees, entertaining customers by
offering parties and lunches etc.
LEADER
As a leader, managers motivate, direct and encourage his subordinates. He also try to adapt the individual
needs with the goals of the organization.
LIAISON
In the role of liaison, the manager must develop contacts with outside people and collects useful
information for the well-being of the organization.
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 2. INFORMATION ROLES
 A manager plays as monitor, disseminator and spokesman.
MONITOR
A manager monitors his environment and collects information through his personal contacts with
colleagues and subordinates.
DISSEMINATOR
As a disseminator, the manager passes some of the information directly to his subordinates.
SPOKESMAN
As a spokesman, he communicates the information of organization before various outside groups which
have stakes in the organization. These stakeholders are government officials, suppliers, customers etc. He
also communicates the performance of company to shareholders and the rules and responsibilities to his

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subordinates.

3. DECISION ROLES

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There are four decision roles played by a manager. They are entrepreneur, disturbance handler,
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resource allocator and negotiator.
ENTREPRENEUR
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As an entrepreneur, a manager continuously looks for new ideas and tries to improve the organization by
going along with changing work environment.
DISTURBANCE HANDLER
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As a disturbance handler, manager works like a fire fighter by given solutions to various problems that
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arises in the company – Customer may go bankrupt, suppliers may back off from his contract and so on.
RESOURCE ALLOCATOR
As a resource allocator, the manager divides the work, provides required resources and facilities to carry
allocated work and delegates required authority among his subordinates. He decides who has to do what
and who gets what.
NEGOTIATES
As a negotiator, manager negotiates with the employees and tries to resolve any internal problems like
trade agreements, strikes and grievances of employees.
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6. MANAGERIAL SKILLS
Q.: List and explain managerial skills with the help of skill- mix diagram (VTU – 10M) or Explain
skill-mix at different levels of management (VTU – 10M). *****

 A manager should possess basic 3 major skills:

1. Conceptual skill
2. Technical skill
3. Human relations skill

1. CONCEPTUAL SKILLS
 Conceptual skill refers to the ability of a manager to take in abstract, his innovative and creative

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ability and his ability to assess the environment.
 Managers at the top are responsible for deciding what’s good for the organization.
 Senior executives are often called on to “think outside the box” - to arrive at creative solutions to

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complex, sometimes ambiguous problems.
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They need both strong analytical abilities and strong creative talents.
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2. TECHNICAL SKILLS
 The technical skill is the managers understanding of the nature of job that the people around him
have to perform.
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 It refers to person’s knowledge in any type of process or techniques.

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 There are 3 things a manager must know about technical skills:

1. Which skill should be employed?
2. What is the role of each skill employed?
3. How are different skills interrelated?

3. HUMAN RELATIONS SKILL

 Human relations skill is an ability to interact effectively with people at all levels.
 This skill in manager has an ability to:
 Recognize the feelings and sentiments of others
 To judge the outcome of various course of action he may undertake
 To examine his own concepts and values which enables to develop useful attitude.
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Figure 3 shows the skill-mix of a manager with the change in his levels.

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At top management, technical skill becomes least important and conceptual and human relations skills seems to
be important aspect.
Middle management is the equal combination of all skills embedded in a manager.
At supervisory level. Conceptual skill becomes least important and technical and human relations skills seems
to be important aspect.

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Figure 3: Skill-Mix at different management levels

7. MANAGERIAL EFFECTIVENESS
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 According to Peter Drucker, manager’s performance can be measured in terms of 2 concepts:
1. Efficiency: It is the ability of the manager to do somethings correctly i.e., at lowest possible cost.
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2. Effectiveness: It is the ability of the manager to do correct things i.e. achieve high levels of value.
 Maximizing efficiency and effectiveness often creates conflict between 2 goals.

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Manager needs both, but efficiency is important and effectiveness is critical.

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8. MANAGEMENT AND ADMINISTRATION

 There is lack of concurrence among management writers over the meaning and use of the words
management and administration.
 One group of management writers feels that:
 Administration involves "thinking". It is a top level function that centers around the preparation of
plans, rules, policies and objectives of an organization.
 Management involves "doing" and is a lower level function, concerning with execution and direction
of policies and operations.
 Another group of management writers feels that:
 Management is regarded as comprehensive general function covering entire process of planning,
organizing, directing and controlling.
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 Administration is regarded as a branch of management that comprises of two functions - planning

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 and controlling.
 According to them, the function of management is divided into two categories - the upper level
management usually called as administrative management and the lower level management which is
termed as operative management.
 According to Peter Drucker, the basic difference between management and administration lies in use of
these terms in different fields.
 Managing of business enterprises is called management and
 Managing non business organizations is called administration.
 Hence financial performance plays key role in management.
 But in managing non business organizations like educational institutions, government offices,
military etc., administration is more priority than financial decisions.

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 Figure 4 shows the time spent in administrative and managerial functions at different levels where top
level spends more time in administration activity and as it moves down in the organization more time is
spent in management activity.

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Figure 4: Time spent in administrative and managerial functions at different levels

9. MANAGEMENT – A SCIENCE OR AN ART?

1. MANAGEMENT AS A SCIENCE
 Science is an organized knowledge. A discipline can be called scientific if its:
 Methods of inquiry are systematic and practical: Being systematic means being orderly and unbiased.
 Information can be accumulated and analysed: All the scientific information collected first as raw
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data is finally arranged in order and analysed with the help of statistical tools.
 Results are cumulative and communicable: Science is also cumulative in that what is discovered is
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 added to that which has been found before.
 The essential feature of any science is the application of scientific methods to the development of
knowledge.
 We learn from past mistakes and go in right direction in future. On the basis of the above discussions of
science, it can be accepted that management is also a science.

2. MANAGEMENT AS AN ART
 Under science one learns “why” of a phenomenon and under art one learns “how” of it.
 It is the art of getting things done through others in dynamic and mostly non-repetitive situations.
 Art is concerned with the understanding of how a practical work can be accomplished. Management in
this sense is more of an art.

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 Managing, like any other practice such as medicine, music composition, engineering, accounting or even
cricket - is an art.

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Thus management involves both elements – those of a science and or an art. While certain aspects of
management make it a science, certain others which involve application of skill make it an art.
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10. MANAGEMENT – A PROFESSION?

 It is seen that management is partly an art and partly a science. Management does not possess the
characteristics of a profession.
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 A profession is expected the following characteristics:

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 Organized and systematic knowledge

 Formalized methods of acquiring training and experience
 Ethical code to regulate the behavior of the members of the profession
 Charging of fees based on service
 Unlike medicine and law, the management does not have any fixed norms of managerial behavior. There
is no uniform code of conduct or licensing of managers.
 Lawyers and doctors take up profession after obtaining a valid academic qualification where as a manager
job is not restricted to individuals with a special academic degree only. Based on this factors, it can be
concluded that management is not a profession.
 However, the present trend is towards the professionalization of management. Nowadays, it has become
essential to acquire management degrees or training in management to be called as good manager.
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 There is increased demand for qualified managers with M.B.A degree after graduation.
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 Peter Drucker's opinion on management is: "A degree in management does not by itself make an

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 individual a professional manager any more than does a degree in philosophy make an individual a
philosopher".
 By insisting on holding a degree, we are over emphasizing knowledge and completely overlooking skill.
This leads to loosing of good and skilled managers who do not have required degree.
 There have been good examples of efficient managers without any professional managerial degree. Some
of them are, Ford of Ford Motors, Bill Gates of Microsoft, Jemshedji Tata Birla, Dhiru Bhai Ambani of
Reliance group etc.
 But nowadays, management has become a profession than art or science.

QUESTION BANK
MODULE 1 CHAPTER 1

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1. Define Management? Explain any 4 management functions. (10M - Mar 2022, July 2023)*****

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2. Explain the roles of a manager. (10M - Mar 2022, Feb 2023, July 2023) *****
3. List and explain managerial skills with the help of skill-mix diagram. (10M – July 2023, Aug 2022)
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*****
4. Give different definition of management as interpreted by management scholars. (7M – Feb 2021)
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5. Describe levels of management. (7M – Feb 2021)

6. Explain 10 different roles played by manager. (10M – Aug 2022) *****
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7. Distinguish between management and administration. Draw the diagram for time spend in administrative
and managerial function at different levels. (6M – Feb 2023) ***
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8. Discuss modern approaches of management. (6M – Feb 2021)

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 CHAPTER 2
PLANNING
1. NATURE OF PLANNING
 Planning is the beginning process of management. Manager must plan before organize, staff, direct or
control.
 Planning sets all other function into action. Without planning other function produces confusion or
sometimes nothing. This is called as “Principle of Primacy of Planning”.
 Planning as 3 sub-systems:
 Environmental sub-system: Includes factors like population changes, governmental actions
 Competitive sub-system: Includes past and present actions of competitors

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 Internal sub-systems: Includes unique features of firm like location, facilities, personnel etc.
 It is an intellectual process, which requires a manager to think before acting. It is referred to as "deciding

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in advance" as to what to do, how to do, when to do and who has to do it.
According to Koontz and O'Donnell, planning is a continuous process. A manager should continuously
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watch the progress of the plans like a navigator who constantly checks where his ship is going in the
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vast ocean. They call it the principle of navigational change.

 A plan should be flexible to change to adapt to the changing situating without undue cost. This calls for
flexibility in the areas like technology, market, finance, personnel and organization.
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 Planning is vital at all levels of an organization. Top level managers are concerned with long range
planning involving 2 to 5 years, middle level managers are concerned with medium range planning
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involving few months to one year and first-line managers are concerned with planning the activities of
daily or week or up to a month.
 There are various levels of planning:
 Strategic planning: It is a long-term planning which involves question like what business should the
organization be in the decade from now?
 Tactical planning: It is a short-term planning which involves question like what are our short-term
financial and personnel needs?
 Contingency planning: It is a planning for what to do if there is a change in government policy
 Planning is non-static and is basically a discrete exercise. It is dynamic in nature. It is a blue print to
which the accomplishment must confirm.
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2. IMPORTANCE OF PLANNING***
Define planning. Describe importance of planning. (8M – Feb 2023)

1. Minimize risk and Uncertainty

In the today's complex organizations, decision making cannot be relied only upon intuition, planning
plays a vital role in decision making. Planning provides logical facts and procedure to managers for
making decisions. This logical decision making based on plans to organization minimizes uncertainty
and risk. In a developing country like India, with rapidly changing social and economic conditions,
planning helps the managers to cope up with uncertainty and risk.
2. Leads to success
Planning does not ensure success, but planning leads to success. This is because if the work is planned
in advance, there will be no confusions arising and things will happen as per plan and achieve goals.

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3. Focuses attention on the organization’s goals
Planning helps the manager to focus their attention on the goals and activities of organization. This

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makes the entire organization to walk towards the goals and create coordination in accomplishing the
goals.
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4. Facilitates Control
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In Planning, manager sets goals, targets and means to accomplish these goals. These goals and plans
become standards or benchmarks against which performance can be measured. Thus good plans help
effective control on the activities.
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5. Trains Executives
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Planning is also an excellent means for training executives. They involved in activities of organization,
and the plans arouse their interest in the various aspects of planning.

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3. TYPES OF PLANS / HIERARCHY OF ORGANISATIONAL PLANS *****
Explain the Hierarchy of organizational plan with the help of a diagram. (10M – Aug 2022)

 Types of plans that are arranged in a hierarchy within the organizational is as shown in the figure below:

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Figure: Hierarchy of organizational plans
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1. VISION
 At the top of this hierarchy is the vision.
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 Vision is the dream that an entrepreneur creates about the direction of the business in future.

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It describes aspiration, beliefs and values of the organization.

 A vision should be brief, focused, clear and inspirational to an organizations employee.
 Vision should be linked to customer’s needs and convey general strategy.

2. MISSION
 Mission is the unique aim of an organization.
 It is an organizations specialization in area like service, product, client.
 Mission specifies general strategy for achieving vision.
 Example of mission: “imparting quality education to women”.
 The mission statements can be multiple points which may also mention cultural values. Ex: Corporate
unity, business ethics, quality.
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 It may be changes over time of few years with new opportunities or new market conditions.
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3. OBJECTIVES
 Objectives are goals or aims that a management whishes the organization to achieve in pursuit of it
mission.
 These are the end point for all business activities.
 Only after these end point manager can decide kind of organization, personnel, qualification, supervisor
and direction of the work.
 Objectives should be described by the word purpose.
 Purpose of the organization should be its primary role which is defined by the society. Ex: purpose of
each university is to impart education.
 Purpose is therefore the broad aim which applies to the organization and society.
 Objectives are the specific targets to be reached by an organization.

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CHARACTERISTICS OF OBJECTIVES ***
Explain any 5 important characteristics of objectives in planning (10M – July 2023)

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1. Objectives are multiple in number: every business or organization can have multiple objectives with
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various key areas like: Market standing, innovation, productivity, resources, profit, manager
performance, work performance and public responsibility.
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2. Objectives changes over time: Due to economical, technical, social, political or ethical changes objectives
may change according to the current trends.
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3. Objectives are either tangible or intangible: objectives key areas like Market standing, innovation,
productivity, resources, profit are tangible which are measured and manager performance, work
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performance and public responsibility are intangible which cannot be measured.

4. Objectives have a priority: At given time accomplishment of one objective is important than others. Ex:
Objective of maintain the minimum cash balance is more important than meeting due dates on account.
5. Objectives are generally arranged in a hierarchy: generally, organization objectives are defined at the top,
followed by divisional or departmental objectives. Next come objectives of each section and finally
individually objectives.
6. Objectives sometimes clash with each other: A entire organization is break down into multiple units like
production, sale, finance, etc. each unit defines the individual objectives which must clash with other
unit’s objectives. Ex: Ex: Production unit defining the objectives – Low cost, and Sales unit defining the
objectives – High Quality.
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 REQUIREMENTS OF SOUND OBJECTIVES
1. Objectives must be clear and acceptable: clarity is measure of peoples understanding and also accepted
by people.
2. Objectives must support one another: Objectives should interfere with one another.
3. Objectives must be precise and measurable: Objectives must always precise in terms of goals and
measurable in terms of standards of “how well” and “how much”. Ex: Quality education – Result, Newer
teaching – Activity.
4. Objectives should always remain valid: Manager should constantly review and reassess the objectives
from time to time.

ADVANTAGES OF OBJECTIVES

.IN
1. They provide basis of planning
2. They act as motivator
3. They facilitate coordination among various groups
4. They function as a basis for managerial control. C
N
5. They facilitate better management
SY

6. They reduce misunderstandings.

4. STRATEGIES
U

 Strategy is defined as a giving a response to a competitive environment by performing SWOT (Strength,

Weakness, Opportunity and Threat) analysis.
VT

 The 2 activities involved in strategy formylation are: Environmental appraisal and Corporate appraisal.
 Environmental appraisal: It is done by analyzing the components and attributes of environment.
 The components of external environment are:
1. Political and legal component: Stability of government, Industrial licensing law, fiscal policies and
restriction on capital movement.
2. Economical component: Level of economic development, trends in price, exchange rate, supply of
labors, raw martials and capital.
3. Competitive components: Identification of competitor, analysis of their performance, anti-monopoly
laws and rules, protection of patents.
4. Social and cultural components: Literacy level of population, religious and social characteristics,
17

rate of social change.

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  Corporate appraisal: This involves the analysis of company strengths and weakness. The company
strengths may lie in its outstanding leadership, excellent product design, low-cost manufacturing skill,
personal relationship with the customer, efficient transportation and logistics, effective sales
promotions, effective sales promotion, and so on.
 Any of this strengths represents unique skill or resources that can determine the company’s competitive
edge are called its core competency.

MODE OF STRATEGY FORMULATION

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C
N
SY
U
VT

5. OPERATIONAL PLANS *****

List some of the standing plans and single-use plans and explain. (6M – Feb 2021)
 Based on their use, plans are classified as standing plans and single use plans.
 Standing plans are designed for situations that often repeat. These plans can be used again and again.
 Single use plans are developed to achieve a specific end. After reaching that target, that plan becomes
18

useless.
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 STANDING PLANS
 Standing plans are designed for situations that often repeat. These plans can be used again and again.
 Ex: Bank uses same plan for loan application for each new client.
 There are 4 types of standing plans: policies, procedures, methods and rules of any organization.

1. POLICIES
 A policy is a general guideline for decision making. It sets up the boundaries around decision.
 As defined by Terry, "Policy is a verbal, written or implied overall guide, setting up boundaries that
supply the general limits and direction in which managerial action will take place".
 They deal with "how to do" the work. They only provide a framework within which decisions must
be made by the management in different areas of organization.

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 There are several policies in different functions of any organization like personal policy, promotion
policy, marketing policy, purchase policy, pricing policy, training policy, recruitment policy,
payment policy etc.
 Types of policies C
N
1. Classifications on the basis of sources: Policies may be divided into
 Originated policies - Established formally by top managers for the purpose of guiding action
SY

of their sub-ordinates.
 Appealed policies – Arises from the appeal made by the subordinates against supervisor.
U

 Implied policies – These policies are stated neither in writing or verbally. Only by watching
the actual behavior of the supervisor these policies are made.
VT

 Externally imposed policies – Policies imposed by external agencies such as government,

trade associations.
2. Classifications the basis of functions: Classification like personnel policy, promotion policy,
pricing policy, distribution policy, investment policy etc.
3. Classifications on the basis of organizational level: Classification like Top level policy,
departmental policy, shop level policy etc.

2. PROCEDURES
 Procedures are the detailed guidelines that are used to carry out the policies.
 A procedure provides a detailed set of instructions for performing a sequence of actions involved in
doing a certain piece of work.
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 Procedures are to be followed every time when that activity is performed.

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 Procedures may also exist for conducting meetings of board of directors, shareholders, issuing raw

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 materials from stores, packaging of finished goods, inspection etc.
 The difference between policy and procedures are given below:
Policy Procedure
1. General guidelines of the organization. 1. General guidelines at the action level.
2. Top level activity. 2. Departmental activity.
3. Policies fulfill the objectives of an 3. Procedures guide the way to implement the
organization. policies.
4. Policies are often made without any study 4. Procedures are always made after thorough
or analysis. study and analysis of work.

3. METHODS
 A method is a prescribed way in which one step of a procedure is to be carried out. Thus a method is
a part of procedure.

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 A procedure has a number of steps, each step may have number of methods to do it. Methods help in
increasing the effectiveness of a procedure.

4. RULES C
N
 Rules are detailed and recorded instructions that a specific action must or must not be done under the
SY

given instructions.
 Reporting time to office, lunch time, availing of leaves, use of LTC facility etc., are some of the
examples that follow rules.
U

 A rule is different from a policy or procedure. Since it does not give a guide to thinking, it is not a
policy. Since it is not a sequential procedure hence it is not a procedure.
VT

SINGLE-USE PLAN
 Single use plans are developed to achieve a specific end. After reaching that target, that plan becomes
useless.
 The major types of these plans are: Programmes and Budget.
1. PROGRAMMES
 Programmes are precise plan which needs to be made to carry out non-routine and non-repetative
task.
 The essential key factors of every programme are time and budget.
 Single step in a programme is set up as a project. Ex: If a company need some personnel, then hiring
process as to be set up, which is a project.
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 A schedule specifies the time where each action takes place and Budget specifies the money for each
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 action.
2. BUDGET
 Budget is a financial quantitative statement prepared before time period.
 Budgets are the plan for future period. They are expressed in numerical terms.
 Important budgets are sales budget, production budget, etc.

BUSINESS PLAN
A good business plan must have the following characteristics:
 It must provide full information on all topics to reader
 It must be an objective tone
 It must not be over critical of past mistakes

.IN
 It should not be full of technical details

4. STEPS IN PLANNING AND PLANNING PREMISES*****

C
Discuss various steps involved in planning (7M/10M – Feb 2021)
N
The main steps involved in planning are as follows:
SY

1. Establishing verifiable goals or set a goals to be achieved: the first step in planning is to determine the
enterprise objectives set by top managers. It is very important to establish objectives for the entire
enterprise and the objectives for each subordinate work units. That is, the major objectives are broken
U

down into departmental and individual objectives. It is a very crucial step in planning.
VT

2. Establishing planning premises: It is the process of creating assumptions about the future on the basis
of which the plan will be ultimately formulated. Planning premises are important for the success of
planning as they reveal facts and information relating to the future such as economic conditions,
production costs competition, availability of material, resources and capital, government policies,
population trends etc. This tells about which plan is to be carried out. There three types of planning
premises:
I. Internal and external premises: Internal premises are premises within the organization. Some of
the examples are: policies, forecasts, investment, availability of equipment, capability of work force,
funds flow etc. External premises are premises outside the organization. They include: Government
policies, technological changes, business environment, economic conditions, population, buying
power, political stability, sociological factors, demand etc.
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II. Tangible and intangible premises: Tangible premises are the measurable premises. For example,
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population, investment, demand etc., are tangible premises. Intangible premises are those which

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 cannot be quantitatively measurable. Examples of this are: business environment, economic
conditions, technological change etc.
III. Controllable and uncontrollable premises: Some of the premises are controllable like, technical
man power, input technology, machinery, financial investment etc. Some other premises like, strikes,
non-availability of raw material, change in government policies, socioeconomic changes, phase-shift
in technology, wars etc., are uncontrollable by the organization.
3. Deciding the planning period: Businesses vary considerably in their planning period from years to
decades. There are 3 classes of planning period: Time for new product development, Time required to
recover capital investment and Commitment time.
4. Finding alternative courses of action: Next step is to search and identify some alternative courses of
action. It is very rare that for a plan there will be no alternatives. In this step alternatives are listed.

.IN
5. Evaluating the alternatives and selecting the best course of action: Once the alternatives are found,
then the next step is to evaluate them with respect to the premises and goals. A desired and best suitable
alternative is selected by comparative analysis with reference to cost, risk, and gain etc., keeping in mind
the goals and objectives.
C
N
6. Developing derivative plans: In order to complete the task, the selected plan must be translated into
programs, working plans and financial requirements in the sub-units. These sub-derived plans from main
SY

plan are termed as derivative plans.

7. Establishing and deploying action plans: action represents the lowest level of execution. The action
plan identifies particular activities necessary for the purpose and specifies the who, what, when, where
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and how of each action.

VT

8. Measuring and controlling the progress: This is the last step in planning. Each activity of plan is
monitored on a continuous basis and if any deviation or shortfall is noticed, then the manager will initiate
suitable corrective action.

5. LIMITATIONS OF PLANNING*****
Explain the limitations of planning. (8M – Mar 2022)

1. Planning is time Consuming: Planning involves the collection of data, analysis of data, forecasting, etc.
All this consumes a lot of precious time. Therefore, planning is a time-consuming activity.
2. Planning is expensive: Planning is the work of experts. They get paid very high salaries to make good
plans. Companies spend an enormous amount of money in collecting and analyzing data. Therefore,
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planning is a costly affair.

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3. Planning is Restrictive: Planning sometimes restricts the organization to risk-free opportunities. Is

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 forces the manager to work within the limits.
4. Planning is limited: The scope of planning is limited in organizations with rapidly changing situations.
5. Planning is inflexible: Establishment of advance plan tends to make administration inflexible. When
sudden changes like business recession, change in government policy etc. takes place there is a need to
do fresh plan which alters the original plan.
6. Problem for Technical Staff: The technical or creative staff do not like planning. They feel it is only
paperwork. It is so, since, it limits their creativity.
7. Resistance to Change: Planning brings many changes in the organization. However, people do not like
changes. So, they do not give full cooperation. Without their cooperation, the plans cannot succeed.
8. Inter-Departmental Rivalries: Planning requires coordination and cooperation of all the departments.
If there exist any inter-departmental rivalries and disputes, then the plans will fail. For example,

.IN
Production Department wants to produce Product A, but the Marketing Department insists on selling
Product B.

6. DECISION MAKING DEFINTION

C
N
Decision making is defined as "the process of choosing among alternatives". Decision-making occurs at
many stages of planning process. Decision-making and choosing the best alternative is probably the most
SY

important activity of the planning process.

7. TYPES OF DECISIONS*****
U

Decisions are classified into 7 categories:

VT

1. Programmed and Non-programmed decisions

2. Major and Minor decisions
3. Routine and Strategic decisions
4. Sequential and Bear-by-the-tail decisions
5. Individual and Group decisions
6. Simple and Complex decisions
7. Heuristics and Intuitive decisions

1. PROGRAMMED AND NON-PROGRAMMED DECISIONS

Explain programmed and non-programmed decisions. (4M/ 6M – Aug 2022, July 2023, Feb 2023)
23

 Programmed decisions are those that are made in accordance with some policy, rule and procedure.
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 These decisions are generally repetitive, and routine hence easy for the manager to make.

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  Example: determining salary payment to employee who have been ill, recording office supplies and son
on.
 Non-programmed decisions are non- repetitive in nature.
 These decisions are not arisen before, so it deserves custom-tailored treatment and handled by non-
programmed decisions.
 Example: Failing product line, allocation of resource, and so on.
 In case of programmed decisions, each manager is guided by same set of rules whereas in non-
programmed decisions, manager may bring his own personal beliefs, values and judgments in decisions
process.
 Manager usually spends more time in making routines, unimportant, programmed decisions and less
time for making non-routines, important, non-programmed decisions. This is called as “Gresham’s Law

.IN
of Decision making”.

2. MAJOR AND MINOR DECISIONS

C
N
Minor decisions are those decisions related to day-to-day and periodical occurrences. Purchase of
stationary, granting leave and permissions etc., are some examples of minor decisions. Major decisions are
SY

those decisions generally taken by top management. Some of them are purchasing new machinery,
employing new technology, hiring new people etc., are some of the major decisions.
Major and minor decisions can be measured in 4 ways:
U

1. Degree of futurity of decision: A decision which has a long range impact like replacement of men by
VT

machinery which lies under major decision. The decision to store raw materials maybe considered as
minor decision which doesn’t have long range impact.
2. Impact of decision on other functional areas: If decision affects only one function it is a minor
decision like shifting from book ledger to loose leaf ledger. If decision affects more than functional
areas then it is a major decision like preparing department’s profit and loss account.
3. Qualitative factors that enter the decision: A decision which involves certain subjective factors is
an important decision. The subjective factors are principles of conduct, ethical values, social and
political beliefs.
4. Recurrence on decisions: Decisions which are rare and have no rules are treated as major decisions
like renew of office subscription to business and decision is made at top level. Decisions which reoccur
very often and have rules becomes minor decisions like day-to-day spot decision and decision is made
24

at lower level.
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 3. STRATEGIC AND ROUTINE DECISIONS

Strategic decisions are similar to major decisions and are generally taken by top management. Some
examples are price increase/discount, change in product range etc. Routine decisions are decisions related
to day-to-day operations of an organization that are routine in nature.

4. SEQUENTIAL AND BEAR-BY-THE-TAIL DECISIONS

In sequential decision the manager makes a decision one part at a time, once the result of first part is
known, then the second part can will be decided and so on. Hence series of decisions can be made to solve
one main problem. Bear-by-the-tail decisions are like making important or difficult decisions.

.IN
5. INDIVIDUAL AND COLLECTIVE DECISIONS

 Decisions may be taken by an individual or a group of individuals. If the decisions are taken by single
C
person, they are called individual decisions and if taken by a committee or group of people, then they
N
are called collective decisions.
 Individual decisions are taken where the problem is of routine nature, and definite rules and procedures
SY

exist. Inter departmental decisions and important strategic decisions are generally taken by a group.
 Group decision-making has advantages like increased acceptance, better communication and better
U

co-ordination. It has some disadvantages also like, delay in arriving at decision, groups may be
indecisive, and groups may compromise or dominate.
VT

 To utilize the advantages of group decisions and avoid its disadvantages, two new techniques are
proposed known as 'Nominal group techniques' and Delphi Techniques.
 In nominal group technique, the members independently generate their idea and give in writing. The
ideas are summarized and discussed for clarity and evaluation. Finally, each member silently gives
his rating and opinion about each idea through voting system. The one with maximum vote is selected
as the group's decision.
 In Delphi technique, persons who are physically dispersed and anonymous to one another are asked
to send their opinion on a topic through mail. A carefully designed questionnaire is circulated for this
purpose. The responses are summarized into a feedback report and sent back to them with a second
questionnaire. A final summary is developed on the basis of replies received second time.
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 6. SIMPLE AND COMPLEX DECISIONS

 A simple decision is one that is related to a problem with few number of variables. When there are
many variables, the decisions making will be complex.
 Decisions in which the problem is simple and the outcome has high degree of certainty. These are
called routine decision. Ex: Standard operating procedure.
 Decisions in which the problem is simple and the outcome has low degree of certainty. These are
called judgmental decision. Ex: Product promotion.
 Decisions in which the problem is complex and the outcome has high degree of certainty. These are
called analytical decision. Ex: Area of production.
 Decisions in which the problem is complex and the outcome has low degree of certainty. These are

.IN
called adaptive decision. Ex: change is corporate plan according to change in environment.

7. HEURISTICS AND INTUITIVE DECISIONS

 C
Heuristics are rules of thumb which organizations evolve from their experience. Ex: Cut down on
N
advertising in a recession.
SY

 Intuitive are decisions which relies on feelings rather than facts.

8. STEPS IN DECISION MAKING / RATIONAL DESCION MAKING

U

PROCESS*****
VT

Explain all steps in rational decision making with a neat block diagram (8M – Feb 2023) or explain the
steps involved in decision making (7M – Feb 2021)

Step 1: Recognizing the problem: The first step in decision-making is the problem recognition. A problem
may exist either due to a deviation from the past experience, a deviation from the plan, people bringing problems
26

to the manager or problems arising from competition.

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Step 2: Deciding priorities among problem: The manager should identify the problems which he can solve,

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the problems which he feels that his subordinates can solve and the problems which are to be referred to the
higher officers. With this decision, the manager is left with very few problems to solve.
Step 3: Diagnosing the Problem: Correct diagnosis of the problem is very important for any manager.
Managers should follow systems approach in diagnosing a problem. He should make a thorough study of all the
sides of a problem coupled with organization before arriving at solution. If the diagnosis is made correctly, then
finding solution becomes easy.
Step 4: Developing alternative solutions or courses of action: After having diagnosed the problem, the next
step is to find alternate solutions. For every problem there will be some alternate solutions. It is very rare that
there is a problem with only unique solution. Alternatives do exist. Sometimes, in the absence of past history of
alternate solutions, the manager has to depend only on his own ability in finding alternatives.
Step 5: Measuring and comparing the effect of alternative solution: The alternative solutions are measured

.IN
and compared for their consequences. This involves a comparison of the quality and acceptability of these
alternatives.
Step 6: Converting the decision into effective action: The next step is to convert the decision into action. This

C
requires the communications of the decisions to the concerned employees in clear and simple terms. If there is
N
any opposition or non-acceptance from the employees, steps should be taken to convince them to accept the
same.
SY

Step 7: Follow-up: After having implementing the decision, the manager has to carry out the follow up action.
If the result is not satisfactory, the manager has to take necessary corrective action or modify his decision.

QUESTION BANK
U

MODULE 1 CHAPTER 2
VT

1. Define planning. Explain any 4 limitations of planning. (Mar 2022)

2. Explain the types of decision making. (Mar 2022)
3. List and explain any 5 importance characteristics of objectives in planning (July 2023)
4. Explain programmed and non-programmed decisions. (Aug 2022, July 2023, Feb 2023)
5. Define planning. Describe importance of planning. (Feb 2023)
6. Explain all steps in rational decisions making with a neat block diagram (Feb 2023) or steps
involved in decisions making. (Feb 2021)
7. Discuss steps involved in planning. (Feb 2021)
8. List some of the standing plans and single use plans and explain. (Feb 2021)
9. Explain the hierarchy of organizational plan with the help of a diagram. (Aug 2022)
27
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 DEPARTMENT OF
ELECTRONICS AND COMMUNICATION ENGINEERING

TECHNOLOGICAL INNOVATION MANAGEMENT

AND ENTREPRENEURSHIP

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BEC501 C
V SEMESTER
N
MODULE 2 NOTES
SY

Prepared by,
[Link] A M
U

Assistant Professor
Dept. of ECE
VT

MIT Thandavapura

A Unit of Maharaja Education Trust®

MAHARAJA INSTITUTE OF TECHNOLOGY

THANDAVAPURA
NH 766, Nanjangud Taluk, Mysuru- 571 302
(An ISO 9001:2015 and ISO 21001:2018 Certified Institution)
(Affiliated to VTU, Belagavi and approved by AICTE, New Delhi)

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 DEPARTMENT OF
ELECTRONICS AND COMMUNICATION ENGINEERING

MODULE 2 CONTENTS
CHAPTER 1- ORGANIZING AND STAFFING

 Organization-Meaning
 Characteristics
 Process of Organizing
 Principles of Organizing

.IN
 Span of Management (meaning and importance only)
 Departmentalization-Process Departmentalization, Purpose Departmentalization
C
 Committees– Meaning, Types of Committees.
N
 Staffing-Need and Importance
SY

 Recruitment and Selection Process

CHAPTER 2 - DIRECTING AND CONTROLLING

U

 Meaning of Directing
VT

 Requirements of Effective Direction

 Giving Orders
 Motivation-Nature of Motivation
 Motivation Theories (Maslow’s Need-Hierarchy Theory and Herzberg’s Two Factor Theory)
 Communication – Meaning, Importance and Purposes of Communication
(Text 1)
 Leadership -Meaning
 Characteristics
 Behavioral Approach of Leadership
 Coordination-Meaning
 Types
 Techniques of Coordination
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  Controlling – Meaning
 Need for Control System
 Benefits of Control
 Essentials of Effective Control System
 Steps in Control Process (Text 1)

Text Book 1: Principles of Management – P.C Tripathi, P.N Reddy, McGraw Hill Education, 6th
Edition, 2017

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C
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VT

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 CHAPTER 1
ORGANIZING AND STAFFING
1. MEANING OF ORGANIZATION
Q.: Define Organization. (1M)

 Organization - It is a rational coordination of the activities of a number of people for the achievement of
some common explicit goals, through division of labor and function and through a hierarchy of
responsibility and authority.
 They involve a significant amount of conscious planning, coordination and deliberate structuring

2. CHARACTERSTICS OF AN ORGANIZATION

.IN
Some important characteristics of an organization has:
 Common Objective - A purpose, goal already indicated during planning.

C
Well defined authority and responsibility - A clear concept of major duties or activities required to
N
achieve the purpose
 Division of Work - Classification of activities into jobs
SY

 Co-ordination - Establishment of relationships between these jobs in order to ensure coordination.

3. PROCESS OF ORGANISING
U

Organizing means designing the organization structures. The manager differentiates and integrates the activities
VT

in the organization. Process of organizing can describe this differentiation and integration in terms of a seven-
step procedure.
1. Consideration of objectives
 The first step in organizing is to know the objectives of the enterprise.
 Objectives determines the various activities.
 Example: The Structure of an Educational Institution is not the same as that for a Business Enterprise.
Therefore, Consideration of Objectives has the First & Foremost Role to play in the Process of
Organizing.
2. Deciding organizational boundaries
 After consideration of objectives, the next step is to decide what to do inside and outside the
boundaries of the organization.
1

 Making manufacture V/S buy choices for different goods and services.
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 Making choice about strategic alliances with other firms.

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  Choices have to be made to extend to different of the organization interact directly with environment.
3. Grouping of activities into departments
 To group all closely related and similar activities into departments and sections.
 Sometime different activities may be observed closely and grouped in one department.
 In addition, the activities of each Department can be further classified & placed under different
sections of that Department.
 Example: In the clothing Shop, separate sections may be created for men, women, kids, etc.
4. Analyzing inter-department relations and deciding which departments will be key departments
 The contributions which each department makes downward, upward and sideways to decide its
relative status.
 It is necessary to know the key departments, which renders key operations for fulfilling of goals.

.IN
 The attention of top management is focused on the minor issues raised by vocal managers known as
“Decibel system”.
 Example: Company which thinks advertising is the major aspects, creates a separate advertising &

C
Department which report directly to the president of the organization.
N
5. Determining levels at which various types of decisions are to be made
 Relative importance of various departments the levels at which various major and minor decisions are
SY

to made is determined.
 Frim must decide for itself as to how much decentralization of authority and responsibility it wants to
have.
U

 Extreme Decentralization may lead to loss of Control, on the other hand, Extreme Centralization may
VT

lead to improper decisions, failure to take decisions at the right time, delays & complete breakdown
of the morale of the employees.
 Therefore, Top Management must very carefully decide the levels of the enterprise at which various
types of decisions can be taken in order to achieve overall Objectives of the enterprise most effectively
& efficiently.
6. Determining the span of management
 One has to decide on the Span of Management. i.e., the Number of Subordinates who should report
directly to each Executive.
 The Narrower the Span, the taller would be the Structure with several levels of Management. This will
complicate Communication & increase financial burden of Salaries.
 For these reasons, a Flat Structure is generally desirable. However, the Span of Management, of each
Executive Position must be tailored to meet the satisfactory working environment of the enterprise.
2
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7. Setting up a coordination mechanism

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  Proper Coordination among various departments and its individuals is very important for the
successful and smooth running of the enterprise.
 As departments and individuals carry out their specialized activities.
 Therefore, effective Coordination Mechanisms are required to enable members of the Organization to
keep sight of the Organization Goals and reduce inefficiencies and conflicts.

4. PRINCIPLES OF ORGANIZATION
1. Objectives: the objective of the enterprise influences the organization structure hence it should be clear
and well defined.
2. Specialization: the activities of the enterprise must be grouped according to the functions and assigned
to persons according to their specialization.

.IN
3. Span of control: The span of control should be the minimum. That means, a Manager should be asked to
supervise a reasonable number of subordinates.

C
4. Management by exception principle: As the managers at higher level has very less time only
exceptionally complex problems should be referred to them and day-to-day routine problems should be
N
handled by the subordinates at the lower levels.
5. Scalar Principle: This principle is known as “Chain of Command”. The line of authority from the top
SY

management to first-line management must be clearly defined. The principle simply states that an
organization is a hierarchy.
U

6. Unity of command: Each subordinate should have only one superior whose command has to obeyed.
Multiple subordinates must be avoided.
VT

7. Delegation: Proper authority should be delegated at the lower levels of organization also. The authority
delegation should be equal to responsibility. Each manager should have enough authority to accomplish
the task assigned.
8. Responsibility: The supervisor should be held responsible for the acts of his subordinates. No supervisor
should be allowed to avoid responsibility.
9. Authority: The authority is the tool by which manager is able to accomplish the desired objectives. Hence
authority of each manager should be clear.
10. Efficiency: The organization structure should enable the enterprise to function effectively and accomplish
its objectives with lowest possible cost.
11. Simplicity: The Organization Structure should be as simple as possible and the Organization levels should,
as far as possible, be minimum. A large number of levels of Organization means difficulty of effective
3

communication and coordination.

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12. Flexibility: The Organization should be flexible, should be adaptable to changing circumstances and

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 permit expansion, replacement without dislocation and disruption of the basic structure.
13. Balance: There should be reasonable balance in the size of various departments between Centralization
and Decentralization, between the principle of span of control and short chain of command, and among all
types of factors such as Human, Technical and Financial.
14. Unity of Direction: There should be one Objective and one plan for a group of activities having the same
Objective. Unity of Direction facilitates coordination of activities at various levels.
15. Personal Ability: As people constitute an organization, there is a need for proper selection, placement and
training of staff. further, the organization structure must ensure optimum use of human resources and
encourage management development programs.
16. Acceptability: The structure of the organization should be acceptable to the people. 2 things generally
happen if people oppose the structure: It is modified gradually by people or it is used inefficiently.

.IN
5. SPAN OF MANAGEMENT OR MEANING AND IMPORTANCE

 C
Span of Management is also referred as Span of Control.
This indicates the number of subordinates who report directly to a manager.
N
 This determines the effective utilization of the managers and also the effective performance of their
SY

subordinates
 If the span is wider than the manager gets overstrained and the subordinates won’t get the proper guidance
 If the span is narrow, then the manager is underutilized and the subordinates will be over controlled.
U

 Example for span of management which explains, decreasing the span of management increases the
VT

number of levels. Suppose a sales manager has 16 salesmen reporting directly to him, the span of
management is 16.
 To reduce the span, consider there are 4 sales Assistant Sales Manager under 1 Sales Manager and each
Assistant Sales Manager will supervise 4 salesmen, the span of management is 4.
 By adding levels of management, communication between sales manager and salesmen should pass
through 4 additional assistant sales manager.
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 .IN
Figure 1: Decreasing the span of management increases the number of levels

6. DEPARTMENTALISATION / DEPARTMENTATION
C
N
 Departmentalization refers to dividing people into group or department based of criterion.
 There are 2 categories in departmentalization: Process departmentalization, Purpose departmentalization.
SY

PROCESS DEPARTMENTALISATION
U

There are 2 classifications for dividing work by process:

1. Departmentalization by Business or organisational Functions:
VT

 Functional Departmentalization is done on the basis of organizing activities and is present in almost
every Enterprise at some level in the organization structure.
 Example: Each Major function of the enterprise is grouped into a Departments like production, sales,
finance and HR.
 Advantages:
1. It is simple form of grouping activities for small organization.
2. It promotes excellence in performance because of experts in the specific domain.
3. It promotes economies of scale, like producing all product in one plant.
 Disadvantages:
1. Many times it is not easy to make clear breaks between each department.
2. It sometimes combines dissimilar jobs in single department.
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3. Each manager thinks about his department goals and does not think in terms of company as a whole.

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 4. It does not provide good training ground for the overall development of a manager.
5. It is not suitable for the organization with larger size.
2. Departmentalization by Technology
 Technology Departmentalization is done on the basis of several discrete stages in the process or
technologies involved in the manufacture of a product.
 This process used when work that would be done in several different locations in an enterprise is done
in one place because of the usage of special equipment.
 Example: Production of vegetable oil have separate departments like: crushing, refining and finishing.
 Advantages:
1. It facilitates the use of heavy and costly equipment’s in an effective manner.
2. It follows the principles of specialization where each department follows the special type of works.

.IN
3. It is suitable for the organizations having number of processes in manufacturing the product.
 Disadvantages:
1. Workers tends to feel less responsible for the whole product.
2. It does not provide good training ground. C
N
3. When technology is sequential, the breakdown of one department slowdowns the work of all the
other departments.
SY

4. It is difficult to compare the performance of different technology based department.

U

PURPOSE DEPARTMENTALISATION
VT

There are 5 external ways in which work can be departmentalized by purpose: Product, Customers, Regions,
Territory or Location, Division, and Time.
2. PRODUCT DEPARMENTALISATION
 Under this method for each major product, a separate department is created and separate manager will
handle each department.
 Product departmentalization is defined as “Grouping activities based on products or product lines”
which is suitable for large organizations.
 This is evident when an organization is diversified and each product need different raw materials,
technology, marketing methods.
 Within each department all the needed manufacturing, engineering, marketing, manpower and other
facilities are assembled.
 Example: Hindustan Lever manufactures detergents, soaps, chemicals and agro-based products.
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  ADVANTAGES
 Leads to continuous and undivided attention
 Helps top manager to compare performance of different products and act accordingly
 Product performance can be measured
 Department works with a clear goal
 DISADVANTAGES
 Duplication of staffs and facilities
 The department may divert from overall organizational goal

3. CUSTOMERS DEPARMENTALISATION
 An enterprise may be divided into number of departments on the basis of customer’s service.

.IN
 Ex: Educational Institutes to impart quality education: Day college (Full time), Evening college
(Employed students), Correspondence (Outstation students)
 ADVANTAGE
 It ensures full customers satisfaction C
N
 DISADVANTAGE
 It results in under-utilization of resources in some department
SY

 There may be duplication of facilities

U

4. REGIONS, TERRITORY OR LOCATION DEPARMENTALISATION


VT

It is most suitable for organizations which are dispersed over the globe in various locations.
 Many government organizations prefer this type as they can provide similar and adoptive services to
the regions
 Ex: Railways – Southern railways, Northern railways, Western railways, and Eastern railways.
 ADVANTAGES
 Places responsibility even at the lower level
 Emphasizes local markets and problems
 Can take locational advantages like availability of raw material
 It affords top management training
 Can invest in a region with better profit
 DISADVANTAGES
 Increases problem for top management to exercise control.
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 Unity of direction may be lost.

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5. DIVISION DEPARMENTALISATION
 Multi-product company segment themselves into several independent centers on the basis of product,
territory or customers, this is called as Divisions or Free-Form organizations.
 Each division is free to handle and operate their division within the framework of general company –
wide policies.
 Example: Samsung, Apple, Microsoft.

6. TIME DEPARMENTALISATION
 Activities are grouped on the basis of timing of their performance.
 Example: Small company expansion – owner or manager has 2 choices – extra shift or renting more
shops

.IN
COMBINED BASE


C
There are typically different bases for departmentalization for dealing with specific problems.
N
The 2 important combined base structures are: 1. Combined based organization 2. Matrix organization.
SY

1. COMBINED BASE ORGANIZATION

 Consider an organization manufacturing agricultural machinery may follow 3 different levels like
Primary level, Intermediate level and Ultimate level.
U

 The primary level is the level immediately below the chief executive which is “Product” as the base
VT

like tractor department, appliance department, generator department etc.

 Intermediate level is “Territory” as the base which comprise of region like Eastern plant, Southern plant
and Western plant.
 Ultimate level is “Function” as the base which mainly includes the functionalities like production, sales,
finance, etc.

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 .IN
Figure 2: Combined base organization

2. MATRIX ORGANIZATION
 C
Another form of combined base organization which is popular nowadays is “Matrix Organization”.
N
 It is also called as Grid or Lattice pattern organization.

SY

It is a form of organization where 2 types of departmentalization – Functional and Product exist

simultaneously as shown in figure 3.
U
VT

 Functional departmentalization consists of General manager which is permanent fixture of the matrix
9
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organization, they hold the complete authority for the overall operation of their respective units.

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  Product departmentalization consists of Project managers are created as the need for them arises hence
they are temporary fixture of the matrix organization.
 Members of a project team are borrowed from the functional departments and are placed under the
direction of project manager.
 On the completion of the project the member of the team including the project manager revert to their
respective department until next assignment.
 The solid line is Functional departmentalization which are permanent and the dotted lines is Product
departmentalization which are temporary.
 ADVANTAGES
 Combination of all necessary inputs at one place reduces problem of communication and
coordination.

.IN
 Flexibility in organization resources helps in innovation.
 Stress on optimization of total project eliminates chances of sub-optimization of goals.
 Change of project to employee promotes intellectual growth.
 DISADVANTAGES C
N
 It interrupts the unity of command.
 It causes interpersonal conflicts.
SY

 The employee needs to work under 2 bosses - Functional manager and project manager.
U

CHOICE OF A SUITABLE BASE


VT

Factors that are considered for suitable base selection are as follows:
1. Specialization: The base should ensure maximum specialization of skill and efforts. Question asked
in specialization will be like: How will the choice affect differentiation among specialists?
2. Coordination: The base should ensure proper coordination and control of the activities of different
departments. Question asked in coordination will be like: Which base provides the best hope of
obtaining the required control and coordination?
3. Economy: All the departmentalization used, its benefits should always be more than its cost.
Question asked in Economy will be like: Which base provides efficient utilization of machinery?
4. Whole task: Organization should be broken down so that each department has a “Whole task”.
Nature of task are may be like, in Technological departmentalization - weaving and spinning in
textile work, Time departmentalization – work based on shifts.
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7. COMMITTEES
 COMMITTEE DEFINITION: It is a group of people who have been formally assigned some task or
some problem for their decision and implementation.
 Committees are setup for group participants when they have:
 Recurring problem arises in the same group or
 Major problem that can be resolved after series of discussion with the group
 The new pattern of management is proposed by Likert which replaced the one-to-one relationship
characteristics with “Inter-locking groups” approach.
 Under this approach, each unit head and his subordinates would work as a decision-making committee.
 Each unit head will serve as a “Chief” for the level below him and as a subordinate for the level above
him, he will be like a linking pin function as shown in figure 4.

.IN
C
N
SY
U
VT

 Committees are classified into 2 main categories: Advisory committee and Executive committee.
 Advisory committee is vested with only staff authority, they can only give advice and cannot enforce
the implementation. Examples are: Sales committee, finance committee.
 Executive committee is vested with line authority they not only take decisions but also enforce its
implementation. Examples are: Board of Directors, CEO.
 Committee can also be classified as Standing committee and ad hoc forces.
 Standing committee are permanent committee deals with recurrent organizational problem and
members are chosen because of their tittle or position, instead of individual qualifications or skills
Ex: finance committee in a company, loan approval company in a bank, admission company in a
college.
11

 Ad hoc force are short term forces that dissolve after the task is over. The members are chosen for their
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skills and experience

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  ADVANTAGES
 Committees consist of all department heads as a member which promotes better understanding
between each other.
 Committee provides forum for sharing knowledge and experience to all.
 Committee provides opportunity for participants in decision-making.
 Committee promotes transmitting ideas, and information to the all.
 Committee decisions are based on facts and are unbiased.
 DISADVANATGES
 No members will be held responsible in the committee if any wrong decisions are passed.
 A huge amount is spent in setting meetings and allowance to members.
 Decisions are made though certain compromises among the members.

.IN
 Secrecy maintenance is difficult.

SUGGESTIONS FOR MAKING COMMITTEES EFFECTIVE

C
To overcome the limitations following suggestions will be carried out:
N
1. The number of members in the committee should not be very large.
SY

2. The committee’s authority should be carefully spelled out, and its activities correctly choose and
closely defined.
3. The members of committee should enjoy equal form of status.
U

4. The members should give importance to organizational goal rather than departmental goal.
5. The chairman of the committee should plan and conducting meeting fairly.
VT

6. It is useful to take careful minutes of meeting, circular them for draft for corrections and then have a
final copy.
7. The work of the committee should be periodically reviewed to determine if it works effectively.
8. It is important to know whether the committee benefits are worth its cost.

8. STAFFING
 It is the process of filling and keeping filled positions in an organization.
 It includes several sub-functions:
 Recruitment-getting applicants for the jobs as they open up.
 Selection of the best qualified from those who seek the jobs.
12

 Transfers and promotions.

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 Training to improve the effectivity of the jobs.

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9. IMPORTANCE AND NEED FOR PROPER STAFFING
 It helps to search the talented and competent people.
 It ensures improved productivity by matching people with job.
 It helps to avoid disruption of work due to shortage of personnel.
 It helps to prevent under-utilization of personnel or overburdening of human resource.

10. RECRUITMENT
 It is the process of attracting candidates to fill the positions in the organization structure.
 Once the requirement of manpower is known, the recruitment process starts.

.IN
SOURCES OF RECRUITMENT

 The source of recruitment can be classified in 2 main categories: Internal and External.
 Internal sources refer to present working force in the company.
 C
External sources refer to vacancies to be filled by external people. Most commonly used external
N
sources are:
1. Re-employing former employees – Former employees who have been laid off or have left the
SY

company for personal reason may be re-employed. These people may require less initial training.
2. Friends and relatives of present employees – Company with good personnel relation encourage their
U

employees to recommend their friends and relatives.

3. Applicants at the gate – Unemployed persons who calls at the gates of the company are interviewed
VT

and those who found suitable for existing vacant position are selected.
4. College and technical institutions – Many big companies remain in touch with the colleges and
technical institutes from where young and talented persons may be recruited.
5. Employment exchange - Employment exchange is an office setup by the government for bringing
together those who are search of job and those employers who are looking for workers. Those who
found suitable for existing vacant position are selected.
6. Advertisements – Advertising the vacancy in leading papers may also helpful for searching workers.
7. Labour unions – In company with strong labour union, person is recommended for appointment by
their labour union.
13

INTERNAL VS EXTERNAL SORUCES OF RECRUITMENT

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 From the point of impact on motivation, external sources are not desirable, when there are adequate and

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 qualified person’s already inside the organization.
 If management wants his workers to improve prospects by participating effectively inside the
organization program, it is desirable to follow a policy of recruitment from within. Outside workers will
have lack of knowledge of products and cannot participate effectively.
 On the other hand, internal candidates are too advanced in age, it may become it may be difficult for
the management to recover outside sources of recruitment.

INTERNAL RECRUITMENT ADVANTAGES AND DISADVATAGES

 ADVANTAGES
 A sense of security develops among the employee.
 Employee remains loyal to the organization.

.IN
 People recruited within does not require induction program.
 Labour turnover is reduced.
 People are motivated and become efficient.
 DISADVANTAGES C
N
 Limits the choice of selection to few candidates.
 It may encourage favoritism.
SY

EXTERNAL RECRUITMENT ADVANTAGES AND DISADVATAGES

U

 ADVANTAGES
 New workers bring fresh ideas.
VT

 Field of choice becomes wide.

 DISADVANTAGES
 Present employee may lose their sense of security and become disloyal.
 There will be loss in employee-employee relationship.

11. SELECTION PROCEDURE

 There are several Steps in selection procedure:
1. Application blank
 Filling the “application blank” by the candidates is the first step in the process of selection.
 In this the candidate gives details about his qualification, specialization, experience, etc.
14

2. Initial interview of the candidate

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 This is done to clarify the information already furnished in application blank and also to

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 create a friendly environment for the candidates.
 The interview must be properly planned and the interviews from different specialization must
make applicant feel ease.
3. Employment tests
 To test further abilities of the candidates, some tests are conducted in this step.
 These tests determine candidate’s particular traits, attitude, likes, dislikes, intelligence and
capacity to learn.
 There are several types of tests that can be listed as follows:
1. Aptitude tests – This test measures the applicant’s capacity to learn the skill required for
a job.
2. Interest tests – This is the test used to find out the type of work in which the candidates

.IN
have an interest. Ex: Sales job, Marketing job.
3. Intelligence test – This test is used to find out the candidate’s intelligence. By this test
candidate’s mental alertness, reasoning ability, power of understanding can be judged.

C
Ex: Reading and summarizing the paragraph in the allotted time, writing 10 to 15 words
N
that begins with the same letter.
4. Performance test – This is the test used to measure the candidate’s level of knowledge
SY

and skill in the particular job in which appointed.

5. Personality test – It is used to measure those characteristics of the candidates which
constitutes his personality. Ex: Self-confidence, judgment, temperament, originality, etc.
U

4. Checking reference
VT

 If the candidate is found satisfactory, then it is very important to get his personal background,
history, character, etc. For this the candidate’s friends, previous employer can be contacted.
 With the increase in the percentage of fake resumes, seeking help from the external screening
agencies which is used for verification of educational and professional qualifications, pre-
employment status and past criminal records of job applicant.
5. Physical or medical examination
 It is done to check the physical fitness of the candidates for the job.
 To prevent the unwarranted claims by the candidates.
 To prevent communicable diseases entering the company.
6. Final interview
 This is just an informal interview wherein the candidate will be intimated about his selection
15

and briefed about his future prospects in the company.

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*****

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 QUESTION BANK
MODULE 2 CHAPTER 1

1. Explain span of management concepts and its importance. (5M – Feb 2023, 10M – Aug 2022, 6M
– Feb 2021) *****
2. Define committee. Explain different types of committees. (5M – Feb 2023)
3. What is recruitment? Explain steps in selection process. (10M – Feb 2023, 10M – Mar 2022) *****
4. Explain different sources of recruitment. (10M – Aug 2022, 10M – July 2023) *****
5. Define organization. Explain principles of organization. (10M – Feb 2021, 10M – Mar 2022) *****
6. List the characteristics of organization. (4M)
7. Explain 5 external ways in which work can be departmentalized by purpose. (Product, Customers,

.IN
Regions, Territory or Location, Division, and Time)
8. Explain the typical matrix organization or Grid or Lattice pattern organization. ***

C
N
SY
U
VT

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 CHAPTER 2
DIRECTING AND CONTROLLING

1. DIRECTION OR DIRECTING MEANING

 Direction means issuance of orders and leading and motivating subordinates as they execute the orders.
 Haimann – “Directing consists of the process and techniques utilized in issuing instructions and making
certain that operations are carried on as originally planned”
 Koontz and O’Donnell – “Direction is the interpersonal aspect of managing by which subordinates are
led to understand and contribute effectively and efficiently to the attainment of enterprise objectives”.

.IN
2. REQUIREMENTS OF EFFECTIVE DIRECTION
1. Harmony of objectives
 C
An organization functions best when the goal of the organization is in complete harmony with the
N
goal of the members.
 In directing subordinates, manager should take advantage of individual motives to gain group goal.
SY

 Ex: If the employee is told to work hard so that company profit may increase, they probably will
not. But if they are told they will receive bonus or promotions they are more likely to work hard.
U

2. Unity of command
 Subordinates should receive orders and instructions from the supervisor only.
VT

 The violation of instructions may lead to conflicts between supervisor and subordinates.
 Boss is the only person who knows about the nature of his subordinates, responses to different
motivations and he is responsible for selecting best directing techniques to maximize productivity.
3. Direct supervision
 Every supervisor must maintain face-to-face direct contact with his subordinates.
 Direct supervision boosts morale of employees, increases loyalty and provides immediate feedback
about their work progress.
4. Efficient communication
 Communication is the instrument of direction.
 Supervisor communicates to his subordinates where he transfers information from one person to
another by transmitting ideas, facts, thoughts, feelings and values.
17

 Efficient communication is a 2-way process.

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 5. Follow-through
 Direction is not only telling subordinates what they should do but also seeing that they do it in a
desired way.
 The manager should follow up the entire performance of the subordinates and keep a track of their
activities.

3. GIVING ORDERS
 The order is a device employed by a line manager in directing his immediate subordinates to start an
activity, stop it or to modify it.
 The orders should be clear and complete, compatible with the purpose of organization and with the
personal interest of the organization.

.IN
 Mary Parker Follett stated 3 principles followed for giving order:
1. Attitude – It is necessary for carrying out an order and should be prepared in advance.
2. Face-to-face suggestions – These are preferable for long distance orders.
C
3. Depersonalized – An order should be depersonalized and made an integral part of a given situation.
N
 Chester Barnard stated 4 conditions followed for giving order:
SY

1. Order should be clear and complete

2. Order should be compatible with the purpose of organization
3. Order should be compatible with the employee’s interest
U

4. Orders should be operational


VT

Orders can be communicated verbally or in writing. There are 5 conditions for written orders:
1. Subject is important
2. Several individuals are affected
3. Details are involved
4. Distance exist between order-giver and recipient
5. Deadline missed
 Manager follows 4 methods for orders:
1. Force – “Do what is say, or else….” Meaning that employee will be punished if he does not follow
the order. The result is frustration and restriction to output.
2. Paternalism – “Do what I say because I am good to you” Meaning that the employee develops a
feeling of gratitude towards the manager.
3. Bargain – “You do what I say and later I will do what you say” The result of this effect is managers
18
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control is gradually reduced.

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 4. Harmony of objectives – “If we perform well together each will achieve his goal” This is the best
formula for ensuring compliance to orders.

4. MOTIVATION
 Motivation means Mover which means “To Move”.
 Motivation – It is an ability to move other people in the right direction to get work done.
Techniques of coordination.

NATURE OF MOTIVATION

1. Individuals differ in their motives: The individual goal differs so do their motives. One example is,

.IN
there are 2 men playing football, the first man play football with the focus of winning and the second
man play football for enjoyment. This means there is no single motive to same job, it differs from person
to person hence manager should deal with human diversity.
C
2. Sometimes the individual himself is unaware of his motive: Only the small part is conscious and
N
visible, the rest is beneath the surface. Below the surface concepts is unconscious motive.
3. Motives change: Each individual motives are not fixed. For example, a temporary worker may work
SY

hard in the beginning to become permanent. When made permanent his motive will be gain promotion.
Hence each individuals motive changes from time to time.
U

4. Motives are expressed differently: The way in which motives are turned into actions also vary
between one individual and others. For example, the motive is “If I work hard, I will be successful”,
VT

one person can work hard in the allotted hours to be successful and another will work hard even beyond
the working hours to be successful. Hence the same motives might be expressed differently from each
individual.
5. Motives are complex: It is difficult to explain and predict the behavior of workers. For example, a
group of people plan for a trip with varieties of plans and on the day of trip only few people will turn
up. Upon this it is found that many people disagree with the location, time and dates, hence motives are
complex and hard to accept by all.
6. Multiple motives make the choice of goals difficult for an individual: Motives operates
simultaneously with each individuals. This results in 3 types of motivational conflicts:
 Approach-Approach Conflicts – Person has 2 motives which he likes equally, but it is possible to
have only one. Example: Person has choice of either remaining at his present place with same salary
19

or going to new place with salary hike. In this situation choosing tow work towards satisfaction of
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one motive results in other motive remaining unsatisfied.

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  Avoidance-Avoidance Conflict – Person is forced to choose between 2 motives, both are disliked
equally. Example: person is dissatisfied with his present job, wants to leave it but also wants to
avoid unemployment.
 Approach-Avoidance Conflict – Person is attracted to the positive characteristics of the motive, but
wants to avoid negative characteristics. Example: Person may be motivated to work overtime for
extra pay but may get scolding for reaching home late. One motive has both negative and positive
characteristic.

MOTIVATION THEORIES
 Motivational theories under each head are as follows:
1. Maslow’s Need Hierarchy Theory

.IN
2. Herzberg’s Two-factor Theory

1. MASLOW’S NEED-HIERARCHY THEORY


C
All people have variety of needs, some needs are satisfied and some are not. An unsatisfied need is the
starting point in the motivation process.
N
 When a person has unsatisfied needs, they attempt to do something to satisfy the needs. This is called
SY

as goal.
 According to A.H. Maslow, needs are arranged in a hierarchy with 5 categories as shown in figure 1.
U
VT

 Physiological needs: These are the basic needs for sustaining human life, such as food, water, shelter
and sleep.
 Security needs: These are both economical and psychological secure related to man’s confidence that
he will be able to deal with the problem that might occur such as lay-off, disaster and dismissal.
20

 Social needs: These are the needs associated with different people and accepted by them to love and to
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be loved.

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  Esteem needs: These are the needs related to respect and prestige. There are 2 types: Self-esteem – It
is an individual need to inside himself that he is worthy. Esteem from others - It is the others thinks that
he is worthy.
 Self-fulfilment needs: These are the needs for realizing one’s potential. These include the need for
realizing one’s capabilities to the fullest.

CHARACTERISTICS OF HUMAN NEEDS

.IN
C
N
SY

2. HERZBERG’S TWO-FACTOR THEORY

 According to Herzberg, absence of certain job factors tends to make workers dissatisfied.
 Presence of same factor in themselves does not produce high levels of motivation.
U

 Herzberg called these factors as maintenance or hygiene factors.

VT

 The 10 maintenance factors are:

1. Fair company policies and administration
2. A supervisor who knows the work
3. A good relationship with one’s supervisor
4. A good relationship with one’s peers
5. A good relationship with one’s subordinates
6. A fair salary
7. Job security
8. Personal life
9. Good working condition
10. Status
21

 To build high level of motivation, different factors are necessary. These are called as Motivators or
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satisfiers. There are 6 factors:

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 1. Opportunity to accomplish something significant
2. Recognition for significant accomplishments
3. Change of advancement
4. Opportunity to grow and develop on the job
5. Chance for increased responsibility
6. The job itself
 Maintenance factors has 2 groups known as Intrinsic rewards – They are internally generated by the
task itself and are not tangible which are visible to others and Extrinsic rewards – They are distributed
by other people and are tangible and visible to others.
 The 2 groups defined are unidirectional, which means the effect can be seen only in one direction.
 In the absence of maintenance factors, workers may feel dissatisfied, there might be more absence, and

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more quits. In the presence of it, workers may fell motivated.

5. COMMUNICATION
 C
COMMUNICATION – “Communication means the process of passing information and understanding
N
from one person to another.”

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IMPORTANCE – Communication is necessary for achieving goals of the organization.

PURPOSES OF COMMUNICATION
U

There are10 different purposes under communication:

1. Communication is needed in Recruitment process to hire employees. The recruits are told about the
VT

organization structure, policies and its practices.

2. Communication is needed in orientation to make people understand the rules and regulations in the
organization.
3. Communication is needed to enable employees to perform their function effectively. Employees need to
know their jobs relationship and importance to the overall operation.
4. Communication is needed for evaluation of work of the subordinates and their contribution towards the
organization.
5. Communication is needed to teach employee about the personal safety about the job. This is essential to
reduces accidents, this lowers compensation, legal cost and also decreases recruitment and training cots.
6. Communication is needed for projecting the organization in society.
7. Communication helps the manager in the decision process. The manager should make a choice of useful
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and essential information.

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 8. Communication helps in achieving coordination. In a larger organization, work is carried out on the
basis of division of labors and specialization, there is a need of coordination among the several units.
9. Communication is the effective way to build support for change. This develops mutual understanding,
cooperation and goodwill between them and management.
10. Communication increases managerial efficiency. The success of the manager in the performance of his
duties depends on his ability to communicate. The effective communication is very essential for the
efficiency of a manager.

*****

QUESTION BANK

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MODULE 2 CHAPTER 2

C
1. Explain Maslow’s need-hierarchy motivational theory with the help of neat block diagram. (10M
N
– Aug 2022) *****
2. Write about the requirements of effective direction. (8M – Feb 2023, 10M – July 2023) *****
SY

3. Explain Maslow’s need-hierarchy motivational theory and Herzberg’s two factor theory as
applicable to an organization. (10M – Mar 2022) *****
U

4. Discuss the purpose of communication. (10M – Mar 2022) *****

5. Explain the concepts of giving orders suggested by Mary Follett and Chester Barnard along with the 4
VT

methods involved in giving order. ***

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 LEADERSHIP
1. DEFINITION OF LEADERSHIP
 George R Terry - “The will to do is triggered by leadership and lukewarm desires for achievement are
transformed into burning passion for successful accomplishment by the skillful use of leadership”
 Peter Drucker - “Leadership is the lifting of man’s visions to higher sights, the raising of man’s
performance to a higher standard, the building of man’s personality beyond its normal limitations”
 Alford and Beatty - “Ability to secure desired actions from a group of followers voluntarily without the
use of forces”
 Peter Drucker - “Ability to prompt others to seek defined objectives enthusiastically”

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2. CHARACTERSTICS OF LEADERSHIP
Some important characteristics of a leadership are as follows:

C
1. Leadership implies the existence of followers–The quality of person’s leadership can be
determined by studying his followers. Questions like: What kind of followers does he have? How
N
strong is the committee as a result of his leadership? By answering these questions nature and
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quality of leadership can be measured. Leaders within the organization also have followers. The
supervisor can have several levels both in upward and downward like branch head, division
manager, vice-president of the department.
U

2. Leadership involves a community of interest between leader and his followers – The objective
of both leader and his men are one and the same. If the leader strives for one purpose and workers
VT

for another purpose, then it is no leadership.

3. Leadership involves an unequal distribution of authority among leaders and group members–
Leaders can direct some of the activities of group members, that is the group members are
compelled or are willing to obey most of the leader’s directions. The group of members cannot
direct the leader’s activities, though they will obviously affect those activities in a number of ways.
4. Leadership implies that the leaders can influence their followers or subordinates in addition
to being able to give their followers or subordinates legitimate directions – Leaders not only tell
their subordinates what to do by way of command but also influence by their behavior and conduct.
The use of command by leaders succeeds only in bringing about the temporary behavioral change
in the followers. Permanent attitude changes come through the use of influence.

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3. TRADITIONAL APPROACHES TO LEADERSHIP –
BEHAVIOURALAPPROACH

 The behavioral approach is based on the assumption that the leaders are not born but they can be
trained.
 Under behavioral approach, leadership approach is categorized from 3 viewpoints:
1. Motivation
2. Authority
3. Supervision

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C
N
MOTIVATION
SY

 Motivation leadership behavior can have either positive or negative aspects.

 In Positive behavior aspect the leader’s emphasis on Rewards to motivate the subordinates.
 In Negative behavior aspect the leader’s emphasis on Punishments and penalties.
U
VT

AUTHORITY
 From the view of authority, leadership styles can be described in 3 styles:
1. Autocratic Leadership
2. Democratic Leadership
3. Free Rein Leadership

1. AUTOCRATIC LEADERSHIP
 In this types of leadership, leader alone determines policies and makes plan. He tells what to do and
how to do.
 He demands strict and obedience way behavior from the employee. He might use rewards for obtaining
obedience from his employee.
 Employees dislikes both these forms because in one form they have constant fear and in another form
25

they remain under constant gratitude.

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  MERITS
 Increase efficiency, save time and get quick result.
 Save time as the workers have to work with the plan defined by the leader.
 Produces quick result since there will be no deviation in the plan.
 Chain of command and division of work is clear
 DEMERITS
 It motivates people through Fear.
 Leader alone is involved in decision making.
 They express low morale, low productivity and massive resistance.

2. DEMOCRATIC LEADERSHIP

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 In this type the leader thinks “with” rather than “for” the people. Leader along with team determines
policies and makes plan.
 The entire group is involved in and accepts responsibility for goal setting and achievements.
 Subordinates have considerable freedom of action.
C
N
 He serves as a coordinator for the team, and he shows greatest concern for his people rather than high
production.
SY

 MERITS
 Team participates in making decisions.
 Improves quality of decision.
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 Provides motivation.
VT

 Encourages people to grow.

 DEMERITS
 Takes more time.
 Loss of leader control.
 Leaders might avoid responsibility.

3. FREE-REIN LEADERSHIP
 This type of leadership is also called as Laissez Faire Leadership. The leader has no control.
 He only provides information, materials and facilities for group objectives.
 Here the workers should handle Kind of freedom.
 MERITS
 Team takes all decisions.
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  DEMERITS
 More conflicts for decisions making.
 Loss of leader control.
 Figure 1 shows the spectrum of a wide variety of leadership styles moving from a very authority style
to democratic style.

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SUPERVISOR C
N
 Supervision is the act of overseeing work done by people.
SY

 From supervisor point of view, leadership style can either be employee-oriented or production-oriented.
 Employee-oriented leader is a one who cares about welfare of his subordinates rather than production.
 Production-oriented leader is a one who cares about production welfare of his subordinates.
U

 The 2 important studies under this category are: Ohio State University study and Management Grid.
VT

1. OHIO STATE UNIVERSITY MODEL

 The Ohio state model is as shown in figure 2. Which consist of Initiating structure and consideration.

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  The Initiating structure refers to leader’s behavior in structuring the job of the follower and establishing
well-defined patterns of organization and communication.
 Consideration is the leader’s behavior showing mutual respect, trust and friendship.
 These 2 types of leader’s behaviors are independent.
 Some leaders follow structure and give little consideration, others are considerate but provide little
structure. Many leaders do not fit into both categories. They use mix of structure and consideration.
 Thus there are 4 styles of leadership in Ohio state model:
1. Low consideration, High Initiating structure
2. High consideration, High Initiating structure
3. High consideration, Low Initiating structure
4. Low consideration, Low Initiating structure

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2. MANAGERIAL GRID / MANAGERIAL STYLES
 Robert and Jane use a chart called Managerial Grid to describe five types of managerial styles. They

C
use a terms like “Concern for production” and “Concern for people”. These 2 dimensions are plotted on
N
a 9-point scale on two separate axes as shown in figure 3.
SY
U
VT

 Concern for people is shown in horizontal axis and Concern for productionis shown in vertical axis.
Thus there are 81 combinations of concerns represented in a grid.
 There are 5 major grids which are seen more often. They are:
1. Task Management: Here the management shows maximum concern for production and least
concern for people. Therefore, it is called “Authority-Obedience” approach.
2. Country-Club Management: This is reverse of Task Management. Here the management shows
maximum concern for people and least concern for production. Therefore, it is called “Love
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conquers all” approach.

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 3. Impoverished Management: Here the management shows least concern for production as well as
for people. The manager wants just the things to be done, he ignores human relationship as well as
production. Therefore, it is called “Speak no evil, hear no evil, see no evil” approach.
4. Team Management: Here the management shows maximum concern for production as well as for
people. Maximum concern for production is based on decision arrived from the worker’s
participation and maximum concern for people is based on workers task related morale. Therefore,
it is called “One plus one can add up to three” approach.
5. Dampened pendulum or the middle of the road style: Here the management shows balanced
concern for production as well as for people. Neither too much production is expected nor too much
concern for people is expressed. The manger follows middle position. Therefore, it is called “Get
results but do not kill yourself” approach.

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4. CO-ORDINATION
 MEANING: Some definitions of the term 'co-ordination' would be:
 C
“Coordination is the management of interdependence in work situation”
N
 "Co-ordination refers to the orderly arrangement of individual and group efforts to ensure unity of
action in the realization of common goals." - Mooney and Reiley
SY

 "To co-ordinate means, to unite and correlate all activities." - Henry Fayol
 "Co-ordination means balancing and keeping the team together by ensuring a suitable allocation of
U

working activities to the various members, and seeing that these are performed with due harmony
among the members themselves" - E.F.L. Brech
VT

5. TYPES OF COORDINATION
 Coordination may be classified as Internal or External, Vertical or Horizontal and Procedural or
Substantive.
 Internal coordination - Coordination among the employees of the same department or section, among
workers and managers at different levels, among branch offices, plants, departments and sections is
called internal coordination.
 External coordination - Coordination with customers, suppliers, government and outsiders with whom
the enterprise has business connections is called external coordination.
 Vertical coordination– It is what exists within a department where the departmental head is called
upon to coordinate the activities of all those placed below him.
 Horizontal coordination–It takes place sideways. It exists between different departments such as
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 production, sales, purchasing, finance, personnel, etc.
 Procedural coordination - It is meant the specification of the organization itself - that is, the
generalized description of the behaviors and relationships of the members of the organization.
 Procedural coordination establishes the lines of authority, and outlines the sphere of activity and
authority of each member of the organization.
 Substantive coordination - It is concerned with the content of the organization’s activities.
 In an automobiles factory, an organization chart is an aspect of procedural coordination, while
blueprints for the engine block of the car being manufactured are an aspect of substantive coordination.

6. TECHNIQUES OF COORDINATION/APPROACHES TO COORDINATION

.IN
1. Employing only basic coordinating techniques: This approach can serve the needs of organization
with required condonation requirements.
a. Rules, Procedures and Policies: The specification of rules, procedures and policies is a very

C
common device to coordinate sub-units for repetitive activities. It covers all possible situations
for example, if sales and credit department makes a great deal, the coordination between
N
management and sales and credit team may improve.
SY

b. Planning: Planning ensures coordinated effort. Under planning target of each department joins
with the targets of all other department.
c. Hierarchy: The oldest and simplest way for achieving coordination is hierarchy or chain of
U

command. By putting interdependent units under one boss, some coordination activities is
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ensured. Example: Purchase, stores, inspection, etc. may put in one executive department for
purpose of coordination.
2. Increasing coordination potential: The organization whose coordination is not fulfilled by basis
coordination techniques, needs additional coordinating mechanism such as:
a. Direct contact – To avoid overload of problems on top level executives, the problems with least
concern can be resolved in the lower level by informal contacts.
b. Task force–This is temporary group formed for those departments which are facing a problem. It
exists till the problem exist later it will be resolved.
c. Committees – The periodic decision committee which are permanent is called as committee.
This will ease the hierarchical structure, promotes effective communication, and make their
implementation more effective.
d. Induction–Inducting new employee into new social setting of his work is also a coordinating
30

mechanism. This helps to make new employee to get familiar with the organization rules and
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 policies.
e. Indoctrination – Indoctrinating organizational members with the goals and mission of the
organization, a device used commonly in religious and military organizations is coordinating
device. Here the leader should be capable to develop in minds of workers to create desire and will
to work together for the purpose.
f. Incentives – Providing incentives through profit-sharing plan, which promotes team spirit and
better cooperation between employees, superiors and subordinates.
g. Liaison departments–Liaison help to handle the contact and communication between two
departments, which typically occurs between sales and production unit.
h. Work flow – A workflow is the sequence of steps by which organization acquires input and
transforms them into output. Its uses technology, economic, ands social consideration and helps

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in coordination.
3. Reducing need of coordination: This is used in those organization in which even expanded
coordinating mechanism fails. Some new forms of organization structure are used like autonomous

C
work teams and matrix organization which reduces coordination needs.
N
7. CONTROLLING DEFINATION / MEANING
SY

 E F L Brech - “Control is checking current performance against predetermined standards contained in

the plans, with a view to ensuring adequate progress and satisfactory performance”
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 George R Terry - “Controlling is determining what is being accomplished, that is, evaluating the
VT

performance and if necessary applying corrective measures so that the performance takes place
according to plans”.

8. NEED FOR CONTROL SYSTEM

A control system is need for 4 purposes:
1. Measuring progress: There is a close link between planning and controlling the organization’s
operations. The fundamental goals and objectives of the organization and the methods for attaining
them are established. The control process continually measures progress towards goals, control is used
in verifying whether everything happens according to the plan adopted, the instructions issued and
principles established. As the navigator manager continually takes readings to see where his
department is heading with the plan adopted.
2. Uncovering deviations: Once a business organization is set into motion toward sits specific
31

objectives, events occur that tend to pull it "off target". Major events which tend to pull an
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 organization “off target" are as follows:
Change
Change is an integral part of any organization which occurs due to Markets shift, new products
emerge, new materials are discovered and new regulations are passed. The control function enables
managers to detect change that are affecting their organization’s products or services,
Complexity
Organizations are geographically have separated plants and decentralized operations make control
necessary. Diversified product lines need to be watched closely to ensure that quality and profitability
are being maintained; sales in different retail outlets need to be recorded accurately and analyzed.
Mistakes
Managers and their subordinates very often commit mistakes. For example, wrong parts are ordered,

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wrong pricing decisions are made, problems are diagnosed incorrectly, and so on. A control system
enables managers to catch these mistakes before they become serious.
Delegation
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When managers delegate authority to subordinates, their responsibility to their own superiors is not
N
reduced. The only way managers can determine if their subordinates are accomplishing the tasks that
SY

have been delegated to them is by implementing a system of control.

3. Indicating corrective action: Controls are needed to indicate corrective actions. For example, the
plans need to be redrawn or goals need to be modified or there is need for reassignment or clarification
U

of duties or for additional staffing or for conforming to the way the work should be done.
4. Transmitting corrective action to the operation: Controls are needed to transmit corrective action to
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the operation which reduces error and keeps the output "on course" with the modification of
transformation subsystem. The thermostat is a example, where the room temperature drops below a
desired level, the control mechanism in the transformation subsystem at once transmits this
information and the temperature begins to rise till it reaches the selected level.
The transformation subsystem takes the shape of a closed loop as shown in Figure 4. However, the
system is closed only in the short run. Human intervention is involved to adjust the system
periodically. Thus, the overall system is open, but we have closed loop control once the system is set.
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9. BENEFITS OF CONTROL
 Increases productivity
 Reduces defects and mistakes
 Helps meet deadlines
 Facilitates communication
 Improves safety
 Lowers cost
 Gives the workers control over their environment.

10. ESSENTIALS OF EFFECTIVE CONTROL SYSTEM

The essentials of an effective control system are as follows.

.IN
1. Suitable: The control system will differ between activities. Controls used in the sales department will
be different from those used in finance and personnel. Similarly, a machine-based method of

C
production requires a control system which is different from the system that is used in labor intensive
methods of production. Hence, every control system depends on specific needs.
N
2. Timely and Forward Looking: Although an ideal control system, as in certain electric controls,
SY

should be able to detect deviations before they occur, the same is not possible in personnel and
marketing controls which always include a time lag between the deviation and corrective action. In
any case, the feedback system should be as short and quick as possible and the information should
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reach the superior before it is too late to head off failures.

VT

3. Objective and Comprehensible: The control system should be both objective and understandable.
Objective controls specify the expected results in clear and definite terms. Employees are not made to
go up and down the hierarchy to get the information. It provides employees with direct access to any
additional information which they may need to perform their task.
4. Flexible: The control system should be flexible so that it can be adjusted to suit the needs of any
change in the basic nature of the inputs and/or the sizes, varieties or types of the same product or
service. One way of introducing flexibility into a control system is to make the adjustments automatic.
Both flexible budgets and standard costs, for example, provide a shifting standard for expenses, as the
volume of work goes up or down.
5. Economical: Economy is another requirement of every control system. The benefit derived from a
control system should be more than the cost involved in implementing it. To spend a dollar to protect
99 cents is not control. It is waste.
33

6. Prescriptive and Operational: A control system in order to be effective and adequate must not only
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 detect deviations from the standards but should also provide for solutions to the problems that cause
deviations. In other words, the system should be prescriptive and operational. It must disclose where
failures are occurring, who is responsible for them, and what should be done about them. It must focus
more on action than on information.
7. Acceptable to Organization Members: The system should be acceptable to organization members.
When standards are set only by upper level managers, there is a danger that employees will regard
those standards as unreasonable or unrealistic. They may then refuse to meet them. Individuals who
have to report deviations to someone they perceive as a lower level staff member may stop taking the
control system seriously.
8. Reveal Exceptions at Strategic Points: A control system should be such as to reveal exceptions at
strategic points. Small exceptions in certain areas have greater significance than larger deviations in

.IN
other areas. It should also to be noted here that a good controlling system is actually designed to keep
things from going wrong, and not just to correct them afterwards.
9. Motivate people to high performance: A control system is most effective when it motivates people

C
to high performance. Since most people respond to challenges meeting tough standards. If the target is
N
so tough, it is impossible to meet and more likely to discourage than to motivate efforts.
10. Should not lead to less attention to other aspects: Control of one aspect of operations should not
SY

lead to less attention to other aspects. For example, if control put pressure on employee to increase
output, the quality of work, care of equipment, and prevention of waste should be neglected.
11. Should be periodically reviewed and evaluated: Every control system should be periodically
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reviewed and evaluated in relation to its objectives to see how effective and efficient the design proved
VT

to be or why is failed.

11. STEPS IN CONTROLLING

The various steps that are involved in the process of controlling are as follows:

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 Step 1: Setting of standards
The first step in the control process is to establish standards. Standards are the targets against which
actual performance will be compared. Since entire operations cannot be observed, each organization
must develop its own list of key areas for which standards need to be established. Some key areas are:
profit, production, market position, employee attitude and public.
Guidelines for setting pars/standards
1. They must be specifically determined in quantitative terms: Pars or standards expressed in general
terms such as “cost should be reduced” or “order should be executed quickly”.
2. They should be accepted by the individuals involved.
3. They need to be flexible in order to adapt to changing conditions.
4. They should emphasize the achievements of results more than rules and methods.

.IN
Step 2: Measuring and comparing actual results against standards
The second step in the control process is to measure actual performances of various individuals, teams
and departments in the background of established standards. Wherever quantitative measurement is
C
applicable, it is easy to measure, while qualitative standards are difficult to measure. Tests, surveys,
N
employee appraisals, exit interviews, media reports, open forums etc., are some of the ways employed
to measure qualitative standards.
SY

Step 3: Taking corrective action

The final step in the control process consists of taking remedial actions so that deviation may not
U

occur again in future. Corrective steps are initiated so that any defects in the actual performance may
be rectified.
VT

Corrective actions may include the following activities.

1. Change in methods, rules, procedures strategies etc.
2. Introduce training programs
3. Job redesign
4. Replacement of personnel
5. Re-establishing budgets and standards
6. Better compensation packages to employees
7. Changing machinery and processes

*****
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 QUESTION BANK
MODULE 3 CHAPTER 1

1. Explain 5 types of managerial styles using managerial grid chart. (Aug 2022, Jul
2023 -10M)*****
2. Discuss essentials of effective control system. (Jan 2021 -6M)*****
3. Discuss different leadership styles from authority view point. (Jan 2021 – 7M) or
discuss autocratic, democratic, and free rein leadership styles. (Feb 2023 – 8M)
*****
4. What is the meaning of control? Write the benefits of control. (Feb 20203 – 4M) ***

.IN
5. Explain the detail step in control process. ***
6. Discuss different leadership styles from supervisor view point. (Ohio state university model and
managerial grid / managerial styles) ***
C
7. Write a note on techniques of coordination/approaches to coordination.
N
SY
U
VT

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 DEPARTMENT OF
ELECTRONICS AND COMMUNICATION ENGINEERING

TECHNOLOGICAL INNOVATION MANAGEMENT

AND ENTREPRENEURSHIP

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BEC501 C
V SEMESTER
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MODULE 3 NOTES
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Prepared by,
[Link] A M
U

Assistant Professor
Dept. of ECE
VT

MIT Thandavapura

A Unit of Maharaja Education Trust®

MAHARAJA INSTITUTE OF TECHNOLOGY

THANDAVAPURA
NH 766, Nanjangud Taluk, Mysuru- 571 302
(An ISO 9001:2015 and ISO 21001:2018 Certified Institution)
(Affiliated to VTU, Belagavi and approved by AICTE, New Delhi)

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 DEPARTMENT OF
ELECTRONICS AND COMMUNICATION ENGINEERING

MODULE 3 CONTENTS
CHAPTER 1 - SOCIAL RESPONSIBILITIES O F BUSINESS
 Meaning of Social Responsibility
 Social Responsibilities of Business towards Different Groups
 Social Audit

.IN
 Business Ethics and Corporate Governance (Text 1)
Text Book 1: Principles of Management – P.C Tripathi, P.N Reddy, McGraw Hill Education, 6th
Edition, 2017
C
N
CHAPTER 2 – ENTREPRENEURSHIP
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 Definition of Entrepreneur
 Importance of Entrepreneurship
 Concepts of Entrepreneurship
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 Characteristics of successful Entrepreneur

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 Classification of Entrepreneurs
 Myths of Entrepreneurship
 Entrepreneurial Development models
 Entrepreneurial development cycle
 Problems faced by Entrepreneurs
 Capacity building for Entrepreneurship

Text Book 2: Entrepreneurship Development Small Business Enterprises- Poornima M Charantimath,

Pearson Education 2008,

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 CHAPTER-1
SOCIAL RESPONSIBILITIES OF BUSINESS
1. MEANING OF SOCIAL RESPONSIBILITY
 Adolph Berle: Social responsibility is the manager responsiveness to public consensus
 Keith Davis: Social responsibility refers to 2 types of business obligations:
1. Socio-Economic Obligation: Every business sees the economic consequences of its actions, which
does not focus on public welfare.
Ex: Promote employment, maintains competition
2. Socio-Human Obligation: Every business sees to nurture and develop human values.

.IN
Ex: Motivation, coordination, team work

2. SOCIAL RESPONSIBILITY OF BUSINESS TOWARDS DIFFERENT

GROUPS C
N
 Business enterprises have responsibility towards:
[Link] the Consumer and the Community
SY

[Link] Employees and Workers

3. Towards Shareholders and Other Businesses
U

[Link] the state

1. Towards the Consumer and the Community
VT

 Production of cheap and better-quality goods and services by developing new skills, innovations
and techniques, by locating factories and markets at proper places.
 Levelling out seasonal variations in employment and production.
 Deciding priorities of production in the country's interest and conserving natural resources.
 Providing social audit.
 Making real consumer needs as the criterion for selecting messages to be given by product
advertisements. Example: Toothpaste is bought not to kill bacteria but to create white teeth. This
kind of advertising promotes over-consumption, forces consumers to constantly compare
themselves negatively with others, creates in them dissatisfaction with the old products.
 Preventing creation of monopolies. Monopolies are bad in that they make the community face high
prices, short supply and inferior quality of goods.
 Providing after sale services.
 Ensuring hygienic disposal of wastes after production and voluntarily assisting in making the town

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 environment satisfying.
 Achieving better public relations by giving to the community, true, adequate and easily intelligible
information about its working.
 Supporting programmes like supporting education. Slum clearance and similar other programs.

2. Towards Employees and Workers

 Fair wages to employees, which is possible only when the businessman is willing to accept a
voluntary on his own profits.
 Selection, training and promotion irrespective of race, religion.
 Social security measures and good quality of work life.
 Good human relationship i.e., maintaining industrial peace, educating workers to produce their

.IN
own leadership.
 Freedom, self-respect and self-realization.
 Recognition of talented workers and provide appreciation through incentives.

C
N
3. Towards Shareholders and Other Businesses
 Promoting good governance through internal accountability and transparency.
SY

 Fairness in relations with competitors. Competition with rival businessmen should always be fair
and healthy. Businessmen sometimes treat their rivals as enemies and try to harm each other.
U

4. Towards the state

VT

 Keeping away active participation in and direct identification with any political party.
 Observing all the laws of land which may have the following objectives:
a. To provide direction to the economic and business life of the community.
b. To bring about harmony between the limited enterprise interest and social interest.
c. To provide safeguard against wrong business practices.
d. To compel business to play fair to all participants
e. To enforce maximum production lines.
f. To allocate limited resources according to social priorities and preferences.
g. To implement rural uplift and secure balanced.
h. To enforce distributive justice.
i. To prevent week partners in business getting exploitation.

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3. SOCIAL AUDIT
 A social audit is a systematic study and evaluation of the organization’s social performance as
distinguished from its economic performance. The term "social performance" refers to any
organizational activity that effects the general welfare of society.
 BENEFITS
1. It supplies data for comparison with the organization’s social policies and standards. The
management can determine how well it is living up to its social objectives.
2. It develops a sense of social awareness among all employees. In the process of preparing reports
and responding to evaluations, employees become more aware of the social implications of their
actions.
3. It provides data for comparing the effectiveness of different types of programmes.

.IN
4. It provides data about the cost of social programmes, so that the management can relate this data
to budgets, available resources, company objectives, etc.
5. It provides information for effective response to external groups which make demands on the
organization. C
N
 LIMITATIONS
1. They are difficult to measure.
SY

2. Their classification under "good" or "bad" is not universally accepted. In other words, the same
social result may be classed as "good" according to one opinion, and as "bad" according to an-
U

other.
3. Most of them occur outside the organization, making it difficult for the organization to secure
VT

data from these outside sources.

4. BUSINESS ETHICS
 Business ethics is the application of moral principles to business problems. Ethics extend beyond the
question of legality and involve the goodness or badness of an act.
 An action may be legally right but ethically wrong. For example, a small village community located
twenty miles from the closest urban shopping area has a single grocer's shop. The owner of the shop
can charge extra price for his product though legally but not ethically.
 Discrimination against women in pay and promotion opportunities is also unethical, which continues
to exist despite there being the Equal Remuneration Act, 1976.
 One of the most commonly cited reasons for the lack of promotions of women is the effect a term
used for artificial barriers based on attitudinal or organizational bias that prevent qualified women

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 from progressing in the organization into senior management level positions.
 How does a manager decide what is ethical or unethical? There are four important factors which
affect his decision.
 Government legislation.
 Business codes - But being voluntary in nature these codes, though pointed to with pride, are
usually ignored in practice.
 Pressure groups - For example, in recent years’ Indian carpet industry has been facing
consumer boycott from the west for employing child labor.
 Personal values of the manager himself - But a manager with strong personal values mostly
finds himself in a dilemma when an unethical course of action becomes his only choice to
achieve the company's goal.

.IN
5. CORPORATE GOVERNANCE
 The term "corporate governance" is used to denote the extent to which companies run in an open and
C
honest manner in the best interest of all stake-holders.
N
 The key elements of good corporate governance are transparency and accountability which
incorporates a system of checks and balances between all key players, viz., board of directors,
SY

auditors and stake-holders.

 Major recommendations of this committee are as under:
U

 Non-executive directors whose most important role is to bring an independent judgement to bear
on issues of strategy, performance, resources, etc. should be picked through a formal selection
VT

process on merits.
 Companies should have remuneration committees consisting wholly or mainly of non-executive
directors which should recommend to the board executive directors' emoluments.
 Companies should have audit committees consisting of minimum 3 non-executive directors to
report on any matter relating to financial management.
 Audit partners should be rotated and there should be fuller disclosure of non-audit work.
 This is a voluntary code and has only some moral requiring companies to mention in their annual
report whether they are following the code, and if not, why.
 Benefits of Good Corporate Governance
1. It creates overall market confidence and long-term trust in the company.
2. It leads to an increase in company's share prices.
3. It ensures the integrity of company's financial reports.
4. It maximizes corporate security by acting as a whistle blower.

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 5. It limits the liability of top management by carefully articulating the decision-making process.
6. It improves strategic thinking at the top by inducting independent directors who bring a wealth of
experience and a host of new ideas.

6. CORPORATE GOVERNANCE IN INDIA

1. The Securities and Exchange Board of India (SEBI) monitors corporate governance of listed
companies in India which should comply the following rules:
 50% of board should consist of independent directors if the company has an executive
chairman. In case of non-executive chairman, 1/3rd of the board should consist of independent
directors.
 Following persons are not qualified for becoming independent directors:

.IN
 Shareholder with more than 2% shareholding in the company
 Former executive who left the company less than 3 years ago
 Partner of current legal, audit, and consulting firm

C
 Relative of promoter, an executive director or senior executive
N
2. The companies have introduced several provisions relating to corporate governance such as setting
up of audit committee.
SY

3. The world council for corporate governance has instituted the Golden Peacock Award to foster
competition among companies to improve their quality of cooperate governance.
U

4. India has several bodies that rate companies for their credit-worthiness. Important amongst them are:
SRISIL (Credit Rating and Information Service of India Ltd.), ICRA (Information and Credit Rating
VT

Agency of India Ltd.) and CARE (Credit Analysis and Research).

*****

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 QUESTION BANK
MODULE 3 CHAPTER 1
1. Explain benefits and limitations of social audit. (Aug 2022, Jan 2021, Feb 2023, Mar 2022 – 10M)
*****
2. Discus corporate governance. Explain the benefits of corporate governance. (Jan 2021, Feb 2023 –
7M) *****
3. Explain corporate governance in India. (Aug 2022, Jul 2023 -10M) *****
4. How do u understand business ethics? What are the factors which affects the decision in ethical or
unethical? (Jan 2021 – 6M)

.IN
5. What is the meaning of social responsibility? Describe the social responsibilities of business towards
consumer and community. (Feb 2023 – 6M)
6. Describe the social responsibilities of business towards employee and worker. (Jul 2023 – 10M)

C
7. Describe the social responsibilities of business towards different group. (Mar 2022 -10M) *****
N
SY
U
VT

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 CHAPTER2
Entrepreneurship

1. Definition of Entrepreneur

 An individual who bears the risk of operating a business in the face of uncertainty about the future
conditions

Encyclopedia Britannica

 He is the one who innovates and introduces something new in the economy.

-Joseph A. Schumpeter

.IN
 He shifts economic resources out of an area of lower and into an area of higher productivity and
greater yield.

C -J. B. Say (French economist)

N
 He searches for change, responds to it and exploits opportunities. Innovation is the specific tool of an
SY

entrepreneur.

Peter F. Drucker
U

 Entrepreneurs are people who have the ability to see and evaluate business opportunities together with
the necessary resources to take advantage of them and to intimate appropriate action to ensure
VT

success.

International Labour Organisation (ILO)

 He is the one who is endowed with more than average capacities in the task of organising and coordi
nating the various factors of production. He is a pioneer and captain of industry.

-Francis A. Walker

 He is a critical factor in economic development and an integral part of economic transformation.

-William Diamond

 He is a person who is able to look at the environment, identify opportunities to improve the
14

environment. Marshall Resources, and implement action to maximize those opportunities.

Page

-Robert E. Nelson

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  He is the agent who buys means of production at a certain price in order to combine them into a
product that is going to sell at prices that are certain at the moment at which he commits himself to hi
s costs.

-Cantillion

 The word entrepreneur is derived from a Sanskrit word called "Antaraprerana",

-Poornima Charantimath
2. Importance of Entrepreneurship

 Entrepreneurial development today has assumed special significance, since it is a key to economic
development.

.IN
 Entrepreneurs are, thus the seeds of industrial development and the fruits of industrial development
are greater employment opportunities to unemployed youth, increase in per capita income.

 Higher standard of living and increased individual saving, revenue to the government in the form of
C
income tax, sales tax, export duties. Import duties and balanced regional development.
N
 India needs entrepreneurs. It needs them for two reasons: to capitalize on new Opportunities and to
SY

create wealth and new jobs.

3. Concepts of Entrepreneurship
U
VT

 "Entrepreneur" is a person who creates an enterprise. The process of creation is called as

"entrepreneurship". The word "entrepreneur" has been taken from French, where it was originally
meant to designate an organiser of musical and other entertainment

 The word "entrepreneur" is derived from the French verb enterprendre, which means 'to undertake '.
This refers to those who "undertook" the risk of new enterprises.

 In the earlier part of the 16th century, the French men who organised and led military expeditions
were referred to as entrepreneurs. French tradition regarded an entrepreneur as a person translating a
profitable idea into a productive activity. During the year 1700. the architects and contractors of
public works were called entrepreneurs. Quensnay recognised a rich farmer as an entrepreneur who
manages and makes his business profitable by his intelligence and wealth.

 In economics and commerce, an entrepreneur is an economic leader who possesses the ability to
recognise opportunities for the successful introduction of new commodities, new techniques, and new
sources of supply, and to assemble the necessary plant and equipment
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  In early 16111 century, the entrepreneur was denoted as a dealer who bought a thing at a certain price
and sold it at uncertain price, making a profit.

4. Characteristics of successful Entrepreneur

 The following are some characteristics that every success full entrepreneur must possess in adequate
measure.

 Creativity

 Innovation

 Dynamism

.IN
 Leadership

 Team building

 Achievement motivation
C
N
 Problem solving
SY

 Goal orientation

 Risk taking and decision making ability

U

 Commitment.


VT

Creativity: The terms creativity and innovation are often used to mean the same thing, but each has a
unique connotation. Creativity is "the ability to bring something new into existence".

 This definition emphasises the "ability", not the "activity." of bringing something new into existence.
A person may therefore conceive of something new and envision how it will be useful, but not
necessarily take the necessary action to make it a reality. Innovation is the process of doing new
things, but creativity is a prerequisite to innovation.

 Ideas usually evolve through a creative process whereby imaginative people bring them into
existence, nurture them, and develop them successfully.

 The creative process for an idea involves five stages

 Germination

 Preparation

 Incubation
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  Illumination

 Verification

A model of the creative process is shown in Figure

.IN
 Germination: The germination stage is the seeding process. It is not like planting seed as a farmer
does to grow corn, but more like the natural seeding that occurs when pollinated flower seeds,
scattered by the wind, find fertile ground 10 take root.

 C
The exact manner in which an idea is geminated is a mystery; it is not something that can be
N
examined under a microscope. However, most creative ideas can be traced to an individual's interest
in or curiosity about a specific problem or area of study.
SY

 Preparation: Once the seed of curiosity has taken form as a focused idea. Creative people embark on
a conscious search for answers. If it is a problem they are trying to solve-such as Alexander Graham
U

Bell's determination to help those with impaired hearing-then they begin an intellectual journey.
Seeking information about the problem and how others have tried to resolve it.
VT

 If it is an idea for a new product or service, then market research is the business equivalent. Inventors
will set up laboratory experiments. Designers will begin engineering new product ideas. And
marketers will study consumer-buying habits.

 In rare instances the preparation stage will produce results more often Conscious deliberation will
only overload the mind, but the effort is important to gather information and knowledge vital to an
eventual solution.

 Incubation: Individuals sometimes concentrate intensely on an idea but more often they simply allow
ideas time to grow without intentional effort The idea once seeded and given substance through
preparation is put on a back burner: the subconscious mind is allowed time to assimilate information.

 Incubation is a stage of "mulling it over" while the subconscious intellect assumes control of the
creative process. This is a crucial aspect of creativity because when we consciously focus on a
problem we behave rationally to attempt to find systematic resolutions. When we rely on
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 subconscious processes our minds are untrammeled by the limitations of human logic.

 Therefore when a person has consciously worked to resolve a problem without success. Allowing it to
incubate in the subconscious will often lead to a resolution.

 Illumination: The fourth stage, occurs when the idea resurfaces as a realistic creation. There will be a
moment in time when the individual can say. ··Oh, see!”Illumination may be triggered by an
opportune incident the important point is that most creative people go through many cycles of
preparation and incubation, searching for that catalyst of an incident that can give their idea full
meaning.

 Verification: An idea once illuminated in the mind of an individual continues to have little meaning
until verified as realistic and useful. Entrepreneurial effort is essential to translate an illuminated idea

.IN
into a verified, realistic, and useful application.

 Verification is a stage of development that refines knowledge into application, during this stage many
ideas fall by the wayside as they prove to be impossible or have little value. More often, a good idea

C
has already been developed, or the aspiring entrepreneur finds that competitors already exist.
N
Inventors quite of come to this harsh conclusion when they seek to patent their products only to
discover similar inventions registered.
SY

(b) Innovation: Entrepreneurs innovate Innovation is the specific instrument of entrepreneurship. It is the
act that endows resources with a new capacity to create wealth. Innovation, indeed, creates resource
U

Successful entrepreneurs. Whatever their individual motivation- be it money, power, curiosity, or the
desire for fame and recognition-try to create value it and to make a contribution.
VT

 Systematic innovation means monitoring following seven sources for innovative opportunity.

 The unexpected-unexpected success, unexpected failure, unexpected outside event.

 The incongruity-between reality as it actually is and reality as it is assumed to be or as it "ought to be"

 Innovation based on process need

 Changes in industry structure or market structure that catches everyone unawares

 Demographics (population changes)

 Changes in perception, mood, and meaning

 New knowledge-scientific and non-scientific

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 (c) Dynamism: Innovation together with dynamism constitutes a potential combination for
prosperity. Dynamism revises the targets of the enterprise upwards time and again The enterprise may
open up new vistas, better product mix or charismatic product image stimulating steady growth.

 A dynamic entrepreneur is always pragmatic. Given the potentialities of the enterprises, he sets
attainable goals, which are to be accomplished within specific timeframes. An entrepreneur tends to
approach problems to solve them rather than running away from them.

 Being the decision maker, he cannot wish away problems. They have to be analyzed systematically
and solved ill the interest of the enterprise. He must believe in. create, and practice "win-win"
situations. This is a condition where everyone wins and no one looses. A good entrepreneur-manager
trains his staff continuously besides undergoing the same process himself.

.IN
(d) Leadership: Leadership is the basic quality of an entrepreneur. This spirit keeps him paces
forward in any field, Leadership qualities will enable a person to stand apart in whatever profession he
might be in.
C
N
 The quality of hi s leadership is clear from personal relationships, mode of handling a problem,
generating resources and taking others in to one’s own stride. An enterprise endowed with the
SY

resource of leadership will always be prominent in the market.

e) Teambuilding: An entrepreneur should have an ability to build a team. A team is a group of

U

individuals with a common purpose that is focused and aligned to achieve a specific task or set of
VT

outcomes.

A good team will be able to share knowledge, core competency, and goals;

The teambuilding skill consists of the following steps.

 Step 1: Wanting to feel better

 Step 2 : Identifying the problem and needs of the enterprise

 Step 3 : Creating a vision

 Step 4 : Setting goals for the group

 Step 5 : Reviewing progress

(f) Achievement motivation: Entrepreneurs have a high need for achievement and arc guided by
their inner self. Motivating their behavior towards accomplishment.

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 (g) Problem solving: It is important that an entrepreneur should be able to solve problems and not
avoid them. A formal problem-solving model helps entrepreneurs solve problems on a logical manner.

The model consists of six steps.

(a) Define the problem

(b) Gather information

(c) Identify various solutions

(d) Evaluate alternatives and select the best option

(e) Take action

(t) Evaluate the action taken

.IN
(h) Goal orientation: Goal setting is the achievement of targets and objectives for successful
performance of an entrepreneur, both long run and short run. It helps to measure how well individuals

C
and groups are meeting the performance standards.

The goal-setting process requires three steps. Which are as follows?

N
1. Definition of goal
SY

2. Specific goals

3. Feedback about goal achieved

U

(i) Risk taking and decision-making ability: Entrepreneurs arc persons who take decisions under
VT

conditions of uncertainty and therefore are willing to bear risk, but never gamble with results. This is
evidenced by market studies exploring alternative lines of production or a new product mix, or a new
combination of inputs and so on they set goals that require high level of performance

 Risk bearing and decisions making calls for absolute clarity in thinking and coordinated actions.
Though decision-making can be taught in classrooms and perfected through experience individual
ability always stands supreme.

(j) Commitment: One of the subtle qualities of an entrepreneur is hi s willpower. Strong

determination with sound thinking fortifies will power. It is determination that provides the
entrepreneur energy to work for 15- 18 hours a day 7 days a week and 52 weeks in a year till the unit
reaches a natural stage of take off.

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 5. Classification of Entrepreneurs

a) Based on Functional Characteristics

1. Innovative entrepreneur: Such entrepreneurs introduce new goods or new methods of production or
discover new markets or reorganise their enterprises. Entrepreneurs in this group are characterized by
an aggressive assemblage of information for trying out a novel combination of factors. Such
entrepreneurs can do well only when a certain level of development has already been achieved: they
look forward to improving upon the past.

2. Imitative or adoptive entrepreneur: Such entrepreneurs do not innovate themselves but imitate
techniques and technology innovated by others. Entrepreneurs in this group are characterised by their
readiness to adopt successful innovations by successful entrepreneurs. Such entrepreneurs are

.IN
particularly suitable for underdeveloped economies as adoption saves costs of trial and error.

3. Fabian entrepreneur: Such entrepreneurs display great caution and skepticism in experimenting with

C
any change in their enterprise. They change only when there is an imminent threat to the very existence
of their enterprise.
N
4. Drone entrepreneur: Such entrepreneurs are characterised by a die-hard conservatism and may even
SY

be prepared to suffer the loss of business.

(b) Based on the Developmental Angle

U

1. Prime mover: This entrepreneur sets in motion a powerful sequence of development, expansion, and
VT

diversification of business.

2. Manager: Such an entrepreneur does not initiate expansion and is content just staying in business.

3. Minor innovator: This entrepreneur contributes to economic progress by finding better use for existing
resources.

4. Satellite: This entrepreneur assumes a supplier’s role and slowly moves towards a productive enterprise.

5. Local trading: Such an entrepreneur limits his enterprise to the local market.

(c) Based on Types of Entrepreneurial Business

1. Manufacturing: An entrepreneur who runs such a business actually produces the products that can
be sold using resources and supplies. For example, apparel and other textile products, chemical and
related products, electronics and other electrical equipment, fabricated metal products, industrial
machinery and equipment, printing and publishing, rubber and miscellaneous plastic products,
stone, clay etc.

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 2. Wholesaling: An entrepreneur with such a business sells products to the middle man.

3. Retailing: An entrepreneur with such a business sells products directly to the people who use or
consume them.

4. Service: An entrepreneur in this business sells services rather than products

(d) Based on the Nine Personality Types of Entrepreneurs

1. The Improver: If you operate your business predominately in the improver mode you are focused
on using your company as a means to improve the world your overarching motto is: morally correct
companies will be rewarded working on a noble cause. Improvers have an unwavering ability to run
their business with high integrity and ethics. Personality Alert: Be aware of your tendency to be a

.IN
perfectionist and over-critical of employees and customers.

2. The Advisor: This business personality type will provide an extremely high level of assistance and

C
advice to customers. The advisor's motto is: the customer is right and we must do everything 10
please them. Companies built by advisors become customer focused. Personality Alert: Advisors
N
can become totally focused o n the needs of their business and customers that they may ignore their
SY

own needs and ultimately bum out.

3. The Superstar: Here the business is centered on the charisma and high energy of the Superstar
CEO. This personality often will cause you to build your business around your own personal brand.
U

Personality Alert: Superstars Can be too competitive and workaholics

VT

4. The Artist: This business personality is the reserved but a highly creative type. Often found in
businesses demanding creativity such as web design and ad agencies. As an artist type you'll tend to
build your business around the unique talents and creativities that you have. Personality Alert: You
may be overly sensitive to your customer's responses even if the feedback is constructive. Let go the
negative self-image.

5. The Visionary: A business built by a Visionary will often be based on the future vision and
thoughts of the founder. You will have a high degree of curiosity to understand the world around
you and will set-up plan to avoid the landmines. Personality Alert: Visionaries can be too focused
on the dream with little focus on reality. Action must precede vision.

6. The Analyst: If you run a business as an Analyst, your company focus is on fixing problems in a
systematic way often the basis for science, engineering or computer firms. Analyst companies excel
at problem solving. Personality Alert: Be aware of analysis paralysis. Work on trusting others.
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 7. The Fireball: A business owned and operated by a Fireball is full of life. energy and optimism.
Your company is life energizing and makes customers feel the company has a get it done attitude in
a fun playful manner. Personality Alert: You may over commit your teams and act impulsively.
Balance your impulsiveness with business planning.

8. The Hero: You have an incredible will and ability to lead the world and your business through any
challenge. You are the essence of entrepreneurship and can assemble great companies Personality
Alert: Over promising and using forceful tactics to get your way will not work long term. To be
successful, trust your leadership skills to help others find their way.

9. The Healer: If you are a Healer, you provide nurturing and harmony to your business. You have an
uncanny ability to survive and persist with an inner calm. Personality Alert: Because of your

.IN
caring, healing attitude toward your business, you may avoid outside realities and use wishful
thinking. Use scenario planning to prepare for turmoil.

(e) Based on schools of Thought on Entrepreneurship

C
N
These are six schools of thought on entrepreneurship each with its own underlying set of beliefs. Each of
these schools can be categorized according to its interest in studying personal characteristics,
SY

opportunities, management or the need for adapting an existing venture.

Assessing personal qualities

U

1. The Great Person school of entrepreneurship

2. The Psychological Characteristics school of entrepreneurship
VT

Recognising opportunities
3. The Classical school of entrepreneurship
Acting and managing
4. The Management school of entrepreneurship
5. The Leadership school of entrepreneurship
Reassessing and adopting
6. The Intrapreneurship school of entrepreneurship

 The Great Person school of entrepreneurship: This school believes that an entrepreneur is born
with an intuitive ability, sixth sense, traits, and instincts. The successful entrepreneur is described as
having a strong drive for independence and success, with high levels of vigour. Persistence and self-
esteem.

 This "great person" has an exceptional belief in himself and his abilities. Attention is paid to such
traits as energy, perseverance, vision and single mindedness, or abilities such as being inspirational or
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 motivational. Other traits frequently mentioned include physical attractiveness, popularity and
sociability, intelligence, knowledge, judgment and fluency of speech as also tact, diplomacy, and
decisiveness.

 The Psychological Characteristics school of entrepreneurship: This school of thought focuses on

personality factors and believes that entrepreneurs have unique values and attitudes towards work and
life. These, along with certain dominant needs, propel the individual to behave in certain ways.
Entrepreneurs can be differentiated from non-entrepreneurs by personality characteristics.

 Three personality characteristics have received considerable attention in research: (1) personal values
such as honesty, duty responsibility, and ethical behavior; (2) risk-taking propensity; and (3) the need
for achievement.

.IN
The Classical school of entrepreneurship: Innovation Creativity or discovery is the key factors
underlying the classical body of thought and research on entrepreneurship. In this view
entrepreneurship refers to the process of creating an opportunity or the opportunity-seeking style of

C
management that sparks innovation. The critical aspect of entrepreneurship is in the process of doing
rather than owning.
N
 The Management school of entrepreneurship: As in most fields of organizational study.
SY

Entrepreneurship draws heavily from management theory. The management school suggests that an
entrepreneur is "a person who organises or manages a business undertaking assuming the risk for the
sake of profit". This school deals with the technical aspects of management and seems to be based on
U

the belief that entrepreneurs can be developed or trained in the classroom.

VT

 Since many entrepreneurial ventures fail each year. A significant proportion of these failures might be
traced to poor management and decision making. as well as to financing and marketing weaknesses
according 10 this school. Entrepreneurship is a series of learned activities which focus on the central
functions of managing a firm.

 The Leadership school of entrepreneurship: An entrepreneur is often a leader who relies on people
to accomplish hi s purposes and objectives. The Leadership school of entrepreneurship is a non-
technical side of the management school which suggests that entrepreneurs need to be skilled in
appealing to others 10 joins the cause.

 A successful entrepreneur must also be a people manager or an effective leader/mentor that plays a
major role in motivating directing and leading people. Thus the entrepreneur must be a leader able to
define a vision of what is possible and attract people to rally around that vision and transform it into
reality.

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  The Intrapnmeurship school of entrepreneurship: The Intrapreneurship school evolved in
response to the lack of innovativeness within organisations. Intrapreneurs. to the limited extent that
they possess discretionary freedom of action are able to act as entrepreneurs and implement 'their
ideas without themselves becoming owners. Alertness to opportunities is one dimension of
intrapreneurial activity.

Myths of Entrepreneurship

Some of the major myths are discussed below.

(a) Entrepreneurs are born, not made

According to this long-prevalent myth the characteristics of entrepreneurs cannot be taught or learned
they are innate traits with which a person must be born. Today however the recognition of
entrepreneurship as a discipline is helping to dispel this myth. Like all disciplines. Entrepreneurship

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has models, processes and case studies that allow the topic to be studied and the traits acquired by
training and development.
(b) Entrepreneurs are academic and social misfits
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The belief that entrepreneur’s arc academically and socially ineffective is born of some business
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owners having started successful enterprises after dropping out of school or quitting a job in fact.
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Educational and social organisations did not recognise the entrepreneur they abandoned him or her as a
misfit in a world of corporate giants. Business education.
(c) Entrepreneurs fir an ideal profile
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These lists were neither validated nor complete; they were based on case studies and on research
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findings among achievement-oriented people. Today we realise that a standard entrepreneurial profile
is hard to compile. Contemporary studies being conducted at universities across the world will, in the
future, provide more accurate insights into the various profiles of successful entrepreneurs.

(d) All you need is money to be an entrepreneur

It is true that a venture needs capital to survive: it is also true that a large number of business failures
occur because of lack of adequate financing. Yet having money is not the only bulwark against failure.
Failure due to a lack of proper financing is often an indicator of other problems: managerial
incompetence, lack of financial understanding, poor investments, and poor planning, and so on.

(e) All you need is luck to be an entrepreneur

Being in "the right place at the right time" is always an advantage, but "luck happens when preparation
meets opportunity" is an equally appropriate adage. Prepared entrepreneurs who seize an opportunity
when it arises often appear to be "lucky". They are, in fact, simply better prepared to deal with
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 situations and turn them into successes. What appears to be luck is really a combination of preparation,
determination, desire, knowledge, and innovativeness.
(f) A great idea is the only ingredient in a recipe for success

A great idea may stay just that if it is not backed by adequate finance, demand for the product and,
most importantly, good management Venture capitalists say bad management is the main cause of
failures among small businesses. "The quality of management will determine the success/failure of the
venture."
(g) My best friend will be a great business partner

Teaming up with your best friend just because you share an idea and a drink every weekend may not
be a good idea. Sure, you may agree on most issues but misunderstandings can erupt over insignificant
aspects like who should be in the office first, who's in charge of supervising the office staff and so on.

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(h) Having no boss is great fun

If you thought your boss was way too demanding, watch out for your vendors, bankers, investors,

C
suppliers and customers. The owner of a restaurant delivery service we met complains that a client
refused to pay for the order because the restaurant did not put in pickles. Since customers can make or
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break you, their wish often ends up being your command.
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(i) I can make lots of money

When Sumit Roy, a training consultant quit his job at Lintas and set up his own outfit called
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Univbrands in 1992, he had to make quite a few sacrifices. "For the first three months I gave up my car
and traveled by bus," he says. For most people it is years, not months, before the money starts coming
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in. Till that happens, you'll have to miss the security of your monthly pay cheque are you ready for
that'?
(j) I'll definitely become successful

Put it down to plain optimism, egoism or a survival strategy. but most business owners or even those
starting off on their own refuse to accept the possibility of failure. Do not believe those clichés about
winners never quitting and quitters never winning: the number of people who fail are legion and it can
happen to you as well.
(k) Life will be much simpler if f work for myself

Don’t believe it for one moment. Working for yourself is definitely more strenuous than working for
others, at least when starting off. Take for instance Dincsh Gupta. He set up Green Investors'
Grievances Services two years ago to take care of individuals' stock-related problems and has a
punishing schedule even now. His typical day starts at 5 a.m. and ends at 7 p.m.

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 6. Entrepreneurial Development Models
The models suggested for the development of entrepreneurship fall in the following categories.

(a) Psychological models

(b) Sociological models

(c) Integrated models

(a) Psychological Models

McClelland (1961) has given a significant lead in identification of determinants of entrepreneurship. In

his model, he ascribes more importance to achievement motives, which earlier related to child-rearing
practices. But in his recent book with D.G. Winter. he has altered his earlier proposition on the
importance of child rearing as the intrinsic determinant of the achievement motive.

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(b) Sociological Models

Frank W. Young's theory of entrepreneurship is a theory of change based upon society incorporation

C
of relative such-groups. The relativeness of sub-group which has a low status in a larger society will
lead to entrepreneurial behavior if the group has better institutional resources than others in the society
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at the same level. Young's model of entrepreneurship suggests the creation of supporting institutions in
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society as the determinant of entrepreneurship.

(e) Integrated Models

T. V. Rao (1975) in "entrepreneurial disposition" has included the following factors.

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(i) Need for motive is the dynamic which for the prospective entrepreneur has the greatest possibility
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of achieving the goals if one performs those activities.

(ii) Long- term involvement is the goal either at thinking level or at activity level in entrepreneurial
activity that is viewed as a target to be fulfilled.
(iii) Personal, social and material resources which, he thinks are related to entry and success in the area
of entrepreneurial activity.
(iv) Social-political system to be perceived as suitable for establishment and development of his
enterprise.
B. S. Venkata Rao (1975) described the following five stages for promoting small entrepreneurship.
(1) Stimulation
(2) Identification
(3) Development
(4) Promotion
(5) Follow up

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 (1) Stimulation: This stage includes the creation of an industrial atmosphere, policy statement
emphasizing the role of small industry wide publicity of industrial development programmes and
formation of special schemes and creation of support institutions. This stage is necessary to
stimulate interest of the backward regions in industrial activity and to create awareness.
(2) Identification: This stage is necessary to identify prospective entrepreneurs the prospective
entrepreneurial force can be identified in rural artisan factory workers, persons with formal
training in engineering and technology, and graduates in business administration and management.
(3) Development: This stage would include organisation of motivation and managerial training
programmes along with advice on technology formulation of bankable project location and so on.
(4) Promotion: This stage would include government policy initiatives for promoting small
entrepreneurship.

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(5) Follow up: This stage includes reviewing the policies and programmes of the government and
seeking follow up with a view to making them more effective.
7. Entrepreneurial development cycle

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The entrepreneurial development cycle consisting of the following components for the promotion
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and development of entrepreneurship.
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1. Stimulatory activities: These activities ensure the emergence of entrepreneurs in the society.
They prepare the background for the entrepreneurship to sprout and for people to start looking
for entrepreneurial pursuits. They generate initial motivation and offer opportunity to acquire
skill. These can be achieved by the following activities.
 Entrepreneurial education
 Planned publicity for entrepreneurial opport-unities
 Identification of potential entrepreneurs through scientific methods
 Motivational training to new entrepreneurs
 Help and guidance in selecting products and preparing project reports
 Making available techno-economic information and product profiles
 Evolving locally suitable new products and processes
 Availability of local agencies with trained personnel for entrepreneurial counselling and
promotions
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  Creating entrepreneurial forums
 Recognition of entrepreneurs
2. Support activities: These activities help a person to develop into an entrepreneur. They
nurture and help Entrepreneurial Development Cycle entrepreneurship to grow. This can be
done by providing the necessary infrastructure in the form of computers, Internet connectivity,
offering consultancy and training, and providing all required information as to how a person
should groom himself as an entrepreneur. Financial assistance for projects and seminars could
also promote entrepreneurship. These activities can be promoted in the incubation centre to
groom a person to become an entrepreneur. The various support activities are given below.
 Registration of unit
 Arranging finance

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 Providing land, shed, power, water, and so on.
 Guidance for selecting and obtaining machinery
 Supply of scarce raw materials
 Getting licences/import licences C
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 Providing common facilities
 Granting tax relief or other subsidy
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 Offering management consultancy services

 Help marketing the product
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 Providing information
3. Sustaining activities: These activities are all those that help in the continuous and efficient
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functioning of entrepreneurship. These include modernization of infrastructure, encouraging

diversification providing opportunities and supporting industry-institute interaction through
consultancy, promoting quality, and organizing need-based common facilities centres. The
various sustaining activities are as follows.
 Help modernization
 Help diversification/expansion/substitute production
 Additional financing for full capacity utilization
 Deferring repayment/interest
 Diagnostic industrial extension/consultancy services
 Production unit’s legislation/policy change
 Product reservation/creating new avenues for marketing
 Quality testing and approving services
 Need-based common facilities centres
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 8. Problems Faced By Entrepreneurs and Capacity Building for
Entrepreneurship

The problems of entrepreneurs may be divided into two groups-external and internal. External
problems are those which result from factors beyond the control of the entrcpreneurs while internal
problems are those which are not influenced by external factors.
Internal Problems of Entrepreneurs
1. Planning
(a) Technical feasibility
 Inadequate technical know-how
 Locational disadvantage
 Outdated production process
(b) Economic viability
 High cost of inputs

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 Break-even point too high
 Uneconomic size of project
 Choice of idea C
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 Feeble structure
 Faulty planning
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 Poor project implementation

 Lack of strategies
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 Lack of vision
 Inadequate connections
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 Lack of motivation
 Underestimation of financial requirement
 Unduly large investment in fixed assets
 Overestimation of demand
2. Implementation
Cost over-runs resulting from delays in getting licences Sanctions and so on and inadequate
mobilization of finance
3. Production
(a) Production management
 Inappropriate product mix
 Poor quality control
 Poor capacity utilisation
 High cost of production
 Poor inventory maintenance and ,eplacement
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  Lack of timely and adequate modernisation and so on
 High wastage
 Poor production
(b) Labour management
 Excising high wage structure
 Inefficient handling of labour problems
 Excessive manpower
 Poor labour productivity
 Poor labour relations
 Lack of trained skilled labour or technically competent personnel
(c) Marketing management
 Dependence on a single customer or a limited number of customers/single or a limited number

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of products
 Poor sales realisation


Defective pricing policy
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Booking of large orders at fixed prices in an inflationary market
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 Weak market organisation
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 Lack of market feedback and market research

 Unscrupulous sale purchase practices
(d) Financial management
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 Poor resource management and financial planning

 Faulty costing
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 Dividend policy
 General financial indiscipline and application of funds for unauthorised purposes
 Deficiency of funds
 Over trading
 Unfavourable gearing or keeping adverse debt equity ratio
 Inadequate working capital
 Absence of cost consciousness
 Lack of effective collection machinery
(e) Administrative management
 Over centralisation
 Lack of professionalism
 Lack of feedback to management (Management Information System)
 Lack of timely diversification
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  Excessive expenditure on R and D

External Problems of Entrepreneurs

(a) Infrastructural
 Location
 Power
 Water
 Post Office and soon
 Communication
 Non-availability or irregular supply of critical raw materials or other inputs
 Transport bottleneck
(b) Financial


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Capital
 Working capital
 Long-term funds
 Recovery
C
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(c) Marketing
(d) Taxation
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(e) Raw material

(f) Industrial and financial regulations
(g) Inspections
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(h) Technology
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(i) Government policy

(j) Administrative hurdles
(k) Rampant corruption
(l) Lack of direction
(m) Competitive and volatile environment
9. Capacity Building for Entrepreneurship
India has an extraordinary talent pool with virtually limitless potential for entrepreneurship. India
must, however, commit to creating the right environment to develop successful business [Link]
do this, India must focus on four areas.
1. Create the right environment for success:

 Entrepreneurs should find it easy to start a business to do so most Indians would start slow with
capital borrow from family and friends: the CEO playing the role of salesman and strategies. a
professional team assembled months or perhaps years after the business was created.
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  The first challenge for India is to create a handful of such areas of excellence-the breeding
ground for ideas 10 grow into businesses. Some already exist in a very preliminary way (the
businesses are there). For example. Gurgaon and Hyderabad for remote services or Bangalore
for IT services. However these areas of excellence need strengthening before they can claim to
be India’s own "valley".
 One way of strengthening these areas is to consider the role of universities and educational
institutions-places where excellence typically thrives. Creating such educational institutions by
strengthening the Indian Institutes of Technology (IITs) and starting new ones is going to be
very important.
2. Ensure that entrepreneurs have access to the right skills:

 A survey conducted by Mc Kinsey & Company revealed that most Indian start up businesses

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face two skill gaps: entrepreneurial (how to manage business risks. build a team. identify and
get funding) and functional (product development know-how. marketing skills. and soon).
 In other countries entrepreneurs either gain these skills by hiring managers or have access 10
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"support systems" such as universities or other institutions that may nurture many regional
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businesses. In addition business schools give young graduates the skill s and knowledge
required for business today.
SY

 India can move towards ensuring that the curriculum in universities is modified to address
today's changing business landscape, particularly in emerging markets, and build "centres of
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entrepreneurial excellence" in institutes that will actively assist entrepreneurs.

3. Ensure that entrepreneurs have access to "smart" capital:
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 For a long time, Indian entrepreneurs have had little access to capital. It is true that in the last
few years, several venture funds have entered the Indian market. And, while the sector is still in
its infancy in India, VCs are providing capital as well as critical knowledge and access to
potential partners, suppliers, and clients across the globe. However, India has only a few angel
investors who support an idea in the early stages before VCs become involved.
 India Venture 2000 showed this to be a critical. gap. While associations such as TIE are
seeking to bridge the gap (by working at creating a TIE India Angel Forum), this is India's third
challenge: creating a global support network of "angels" willing to support young businesses.
4. Enable networking and exchange:

 Entrepreneurs learn from experience-theirs and that of others. Much of the success of Indians
in Silicon Valley is attributed to the experience, sharing, and support TIE members have
extended to young entrepreneurs. During India Venture 2000. Established entrepreneurs who
still remembered the challenges they faced, offered 10 support startups clearly.
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  India would benefit from creating a strong network of established entrepreneurs and managers
that entrepreneurs could draw on for advice and support.
 The rapid pace of globalisalion and the fast growth of Asian economics present tremendous
opportunities and challenges for India through planning and focus, India can aspire to create
the pool of entrepreneurs who will be the regions'-and the worlds ' -leaders of tomorrow.

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 DEPARTMENT OF
ELECTRONICS AND COMMUNICATION ENGINEERING

TECHNOLOGICAL INNOVATION MANAGEMENT

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AND ENTREPRENEURSHIP
BEC501 C
V SEMESTER
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MODULE 4 NOTES
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Prepared by,
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[Link] A M
Assistant Professor
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Dept. of ECE
MIT Thandavapura

A Unit of Maharaja Education Trust®

MAHARAJA INSTITUTE OF TECHNOLOGY

THANDAVAPURA
NH 766, Nanjanagud Taluk, Mysuru- 571 302
(An ISO 9001:2015 and ISO 21001:2018 Certified Institution)
(Affiliated to VTU, Belagavi and approved by AICTE, New Delhi)
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 DEPARTMENT OF
ELECTRONICS AND COMMUNICATION ENGINEERING

MODULE 4
CONTENTS
CHAPTER 1 - Modern Small Business Enterprises
 Role of Small Scale Industries
 Impact of Globalization and WTO on SSIs
 Concepts and definitions of SSI Enterprises

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 Government policy and development of the Small Scale sector in India
 Growth and Performance of Small Scale Industries in India,
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 Sickness in SSI sector,
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 Problems for Small Scale Industries, Ancillary Industry and Tiny Industry
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Text Book 2: Entrepreneurship Development Small Business Enterprises- Poornima M Charantimath,

Pearson Education 2008,
CHAPTER 2 – Idea Generation and Feasibility Analysis
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 Idea Generation
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 Creativity and Innovation

 Identification of Business Opportunities
 Market Entry Strategies
 Marketing Feasibility
 Financial Feasibilities
 Political Feasibilities
 Economic Feasibility
 Social and Legal Feasibilities
 Technical Feasibilities
 Managerial Feasibility, Location and Other Utilities Feasibilities
Text Book 2: Entrepreneurship Development Small Business Enterprises- Poornima M Charantimath,
Pearson Education 2008,
2
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 CHAPTER-1
Modern Small Business Enterprises
1. Role of Small Scale Industries
 Today the small -scale industry (SSI) constitutes a very important segment of the Indian economy.
Credit for the development of this sector is due to the vision of former Prime Minister Jawaharlal
Nehru who supported to develop core industry and put in supporting sectors in the form of small-
sector enterprises.

 The small-scale sector has emerged as a dynamic sector of the economy. The sector has grown
phenomenally during the past five decades besides playing a vital role in fulfilling India's socio-
economic objectives.

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Role of SSI
 Dynamic and vibrant sector of the economy
 Prominent role in socio -economic transformation of the country
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 Accounts for 35 per cent of industrial production, 40 percent of exports and 60 percent of
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employment opportunities
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The Importance of Small Scale Industries

 Provide increased employment through labour-intensive process.
 Require lower gestation period.
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 Easy to set up in rural and backward areas.

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 Need small/local market.

 Encourage growth of local entrepreneurship.
 Create a decentralized pattern of ownership.
 Bring up diversification of economic activities.
 Introduce new products particularly to cater to local needs.
 Influence the standard of living of local people.
 Provide equitable dispersal of Industries throughout rural and backward areas.

2. Impact of Globalization on SSI in India

 The small scale industry never had a strong desire to grow to medium and large scale because of the
benefits of protection given to it.

 Many of the policies also discouraged the growth of small-scale units into large ones and had a
stunting effect on manufacturing, employment and output growth.
3

 With globalization, the SSIs are now more exposed to severe competition both from the large-scale
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 sector for-domestic and foreign-and from MNCs.

 The World Trade Organization (WTO) regulates multilateral Trade requiring its member countries to
remove import quotas, restrictions and reduce import tariffs.

 This opens up the possibility of direct competition in the domestic market with the imports of high-
quality goods from developed countries.

 In order to protect, support. and promote small enterprises as also to help them become self-
supporting , a number of protective and promotional measures have been undertaken by the Central
Government

The promotional measures cover the following.

 Industrial extension services

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 Institutional support in respect of credit facilities
 Provision of developed sites for construction of sheds
 Provision of training facilities.
 Supply of machinery on hire-purchase terms C
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 Assistance for domestic marketing as well as exports
 Special incentive for setting up enterprises in backward areas and elsewhere
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 Technical consultancy and financial assistance for technological up gradation

3. Impact of the WTO on SSI’s

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 The emerging challenges to the small· scale sector are due to the impact of the agreements under the
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WTO to which India is a signatory along with 134 member countries.

 The main outcome of WTO-stipulated requirements will be brought about through reduction in export
subsidies. Greater market access. Removal of non-tariff barriers and reduction in tariffs.

 Tighter patent laws through regulation of intellectual property rights under the TRIPS Agreement
Trade-Related Aspects of Intellectual Property Rights (TRIPS)
 Worldwide market and opportunity to export
 Intensified competition in the domestic market
 Import of high Quality goods

4. CONCEPTS AND DEFINITIONS OF SSI

 Small-scale Industrial Unit (SSI): An industrial undertaking in which the investment in fixed assets in
plant and machinery, whether held on ownership terms or on lease or by hire purchase, does not
exceed Rs 100 lakh as on March 31. 2001. Is to be treated as a small-scale industrial unit.
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  Ancillary Unit: This is a sub-class of SSIs. An industrial undertaking which is engaged or is proposed
to be engaged in (i) the manufacture of components. sub-assemblies, tooling's or intermediates: or (ii)
rendering of services, or supplying or rendering not less than 50 per cent of its production or its total
services, as the case may be, to other units for production of other articles and whose investment in
fixed assets in plant and machinery, whether held on ownership terms or on lease or on hire purchase,
does not exceed Rs 1 crore as on March 31, 2001, is to be treated as an ancillary enterprise

 Export-oriented Unit (EOU): An industrial undertaking in which the investment in fixed assets in
plant and machinery, whether held on ownership terms. or on lease. Or by hire purchase, does not
exceed Rs 100 lakh and have an obligation to export 30 percent of production.

 Tiny Unit: The investment limit in plant and machinery in respect of tiny enterprises is Rs 25 lakh
irrespective of the location of the unit.

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 Women entrepreneurs: A small-scale industrial unit/industry related service or business enterprise,
managed by one or more women entrepreneurs.

 C
Small-scale Service and Business (industry-related) Enterprises (SSSBEs): Industry-related service
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and business-related enterprises with investment in fixed assets. Excluding land and building, up to Rs
10 lakh, irrespective of location as on March 31, 2001. are to be treated as SSSBEs
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5. GOVERNMENT POLI CY AND DEVELOPMENT OF THE SMALL-

SCALE SECTOR IN INDIA
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 India's concern and support for small-scale enterprises has focused excessively on the small-scale
industry
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 Various measures taken by the Central and State governments, for the development of the SSI have
included product reservations, preferential allocation of credit and interest subsidy in framework,
extension of business and technical services, marketing assistance including export promotion by
institutions such as National Small Industries Corporation

 India's SSI sector is divided into seven industry groups

Traditional Sector
 Handicrafts
 Handlooms
 Khadi, village and cottage industries
 Coir
 Sericulture
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 Modern Sector
 Power looms
 Residual small-scale industries

Industrial Policy 1991

 The industrial policy measures announced in 1991 laid special emphasis on promotion and
strengthening of small, tiny, and village industries. Besides affecting changes in investment limits.

 The policy also proposed to encourage and support industry associations to establish counseling and
common testing facilities and technological up gradation aimed at improving productivity, efficiency
and cost effectiveness in the small scale sector.

Policy Initiatives Since 1999

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 To better focus the attention on the problems of the SSl sector, a new Ministry of Small-scale
Industries and Agro and Rural Industries was created on October 14, 1999.

 C
New Credit Insurance Scheme was announced in the Budget 1999-2000 for SSI security to banks and
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to improve the flow of investment credit to SSI units. Particularly export-oriented and tiny units.


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Banks on the basis of 20 per cent of their annual turnover determine the working capital limit for SSI
units.

 A national program to boost rural industrialization has been announced, with a mission to set up 100
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rural clusters every year.

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6. Sickness in SSI sector

 Sickness was identified through the latest definition of RBI given by the Kohli Commines. Incipient
sickness was identified in terms of continuous decline in gross output.

 Sickness in the total 551 sector was to the turn of 1 %, whereas in the registered and unregistered 551
sectors it was 3 .38% and 0 .64% respectively.

 The maximum number o f sick units- about 59.33 % was located in West Bengal, Kerala,
Maharashtra, Karnataka, and Andhra Pradesh.

 Out of the units having loan outstanding with institutional sources such as banks and financial
institutions, sickness was reported to be about 19.6 % in the registered 551, sector and 16.61 % in the
unregistered 551 sector. In the total 551 sector, this percentage was 17.8.

 Incipient sickness, identified interns of a continuous decline in gross output was 11.5% in the
6

registered 551 sector and 6.48 % in the unregistered 551 sector. In the total 551 sector, this percentage
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  The States of Kerala, Tamil Nadu, Andhra Pradesh, Karnataka and Maharashtra had maximum
number of sick/incipiently sick 551 units. These five States together accounted for 54.28% of the sick/
incipiently sick SSI units in the country.

 “Lack or demand" .and "Shortage of working capital” was the main reason. For sickness/incipient
sickness in both the registered and unregistered 551 sectors.

7. Problems for Small Scale Industries, Ancillary Industry and Tiny

Industry
Internal problems
 Choice of idea
 Feeble structure
 Faulty planning

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 Poor project implementation
 Poor management
 Poor production
 Quality C
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 Marketing
 Inadequate finance
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 Labour problems
 Capacity utilization
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 Lack of vertical and horizontal integration

 Inadequate training in skills
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 Poor and loose organization

 Lack of strategies

External problems
 Infrastructure
(a) Location
(b) Power
(c) Water
(d) Post Office and so on
(e) Communication
 Financial
(a) Capital
(b) Working capital
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(c) Long-term funds

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 (d) Recovery
 Marketing
 Taxation
 Raw Material
 Industrial and financial regulations
 Inspections
 Technology
 Policy
 Competitive and volatile environment

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 CHAPTER-2
Idea Generation and Feasibility Analysis
1. IDEA GENERATION
 The feasibility study begins with the formulation of business idea, which you can obtain through
market research, family, friends, suggestion boxes or brainstorming. At this phase, you can downsize
the number of ideas and retain the most realistic one.

 Depending on your business culture, you can discard the extra ones or preserve them for future
references when you need to. You have to conceptualize and visualize your business’s final product, a
process that entails analyzing the product’s target market, size, quality, color and weight.

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 Establishing yourself as a successful entrepreneur depends upon choosing a good idea that idea must
not only be good for the market, but good for the project and good for the entrepreneurs.


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It should also be manageable by you without much dependence on others. Importantly, the idea
should give satisfaction results to you.
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 Ideas are the key to innovation. Without them, there is not much to execute and because execution is
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the key to learning, new ideas are necessary for making any kind of improvement. It is obvious that
ideas alone won’t make innovation happen as you need to be able to build a systematic process for
managing those ideas. The point of ideation isn't just about generating a lot of them but about paying
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attention to the quality of those as well.

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 Idea generation is described as the process of creating, developing and communicating abstract,
concrete or visual ideas.

 The frontend part of the idea management funnel focuses on coming up with possible solutions to be
perceived or actual problems and opportunities, the fig below shows the idea management.

Idea management funnel

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  As mentioned, ideas are the first step towards making improvement. Making progress as individual
human beings depends on new ideas. From the perspective of an individual, new ideas can help you to
move forward if you feel stuck with a task or are unable to solve a certain problem.

 Favorite tips, tools and techniques that can be used to generate new ideas more systematically

 Idea Challenge

 SCAMPERTechnique

 OppositeThinking

 BrainstormCards

 Analogy Thinking

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Idea Challenge

 Is a focused form of innovation where you raise a problem or opportunity with the hopes of coming
up with creative solutions.
C
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 The point of idea challenge is to participate in ideation and generate ideas around a pre-defined theme
for a limited period of time.
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 It allows you to form a specific question and direct that question at a specific audience to receive new
ideas and unique in sights.
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The SCAMPER Technique

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 Is a method used for problem-solving and creative thinking It’s a holistic way of applying critical
thinking to modify ideas, concepts or processes that already exist.

 The purpose of the SCAMPER is to make adjustments to some parts of the existing idea or process to
reach the best solution.

Opposite/reverse thinking

 Is a technique that can help you question long-held assumptions related to your business. It’s a useful
tool to consider if you feel your team is stuck with the conventional mindset and coming up with
those “out-of-the-box ideas” seems to be difficult.

 Often, finding the best solutions isn’t found through a linear thought process. Although our brains are
wired that way, opposite thinking can help us question the rule with this type of thinking, you
consider the exact opposite of what’s normal. You can even think backwards to find unconventional
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solutions.
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 Brainstorm Cards

 Brainstorm cards are a useful tool created by the Board of Innovation for coming up with dozens of
new ideas related to whatever challenge or problem you are currently working with.

 Brainstorm cards help you consider external factors such as: societal trends, new technologies, and
regulation in the context of your business.

Analogy thinking

 Is a technique for using information from one source to solve a problem in another context. Often one
solution to a problem or opportunity can be used to solve another problem.

 Analogy thinking can, for example, be used for analyzing a successful business, identifying what
makes it great, and then applying those same principles for your business. This is an effortless method

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for coming up with new ideas that are pre-validated

 The purpose of generating new ideas is about improving what already exists as well as coming up
with something new.
C
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 Coming up with completely new ideas can help you approach your problem or opportunity from a
new perspective. It enables you to expand the range of ideas beyond your current way of thinking
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which eventually leads to more ideas.

2. Creativity and innovation

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 Creativity is thinking new things, the ability to develop new ideas and to discover new ways of
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looking at problems and opportunities.

 Innovation is doing new things, the ability to apply creative solutions to those problems and
opportunities in order to enhance people’s lives or to enrich society.

Creativity

 Creativity is the act of turning new and imaginative ideas in to reality. Creativity is characterized by
the ability to perceive the world in new ways, to find hidden patterns, to make connections between
seemingly unrelated phenomena, and to generate solutions. Creativity involves two processes:
thinking, then producing.

Innovation

 Is the implementation of a new or significantly improved product, service or process that creates value
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for business, government or society.

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  Innovation is important because it’s the only way that you can differentiate your products and services
from those of your competitors. For customers and clients to choose your business, your offer needs
to be distinctive and valuable, and the only way to achieve this is through innovation.

3. Identification of Business Opportunity

 Several studies have shown that previous experience in an industry helps entrepreneurs to recognize
business opportunities. In addition, the extent and depth of an individual's social network also affects
the identification of opportunity. People who build a substantial network of social and professional
contacts will be exposed to more opportunities and ideas than people with sparse networks.

 It is important for entrepreneurs to grab a business opportunity before the market becomes saturated with
competitors and the window of opportunity is closed to them. There are three general approaches entrepreneurs
use to identify an opportunity.

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Observing trends:

 Entrepreneurs can identify business opportunities by carefully observing trends. The most important

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trends to follow are economic, social, technological, and political trends.
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Solving a problem:
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 Another approach to identifying business opportunities is to recognize and solve a pressing problem
that customers are facing today. From an entrepreneur's point of view, every problem is a disguised
opportunity.
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Finding gaps in the market place:

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 A third approach to identifying business opportunities is to find a gap between what is needed by the
customer and what is actually provided to the customer. Finding such gaps can help entrepreneurs
develop new products and improve existing ones.

4. Market entry strategy in India

 A market entry strategy is the planned method of delivering goods or services to a new target market
India is the second-most populous market in the world, but also among the most complex to enter as a
company without any previous experience in the region.

 5 tips for better Indian market entry strategy

Find the right partner

 India is the world’s seventh largest economy in terms of GDP, and has a population of 1.3 billion
people. It is a complex market for the best Indian companies, and even more so for companies from
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abroad.
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  Businesses with a pre-determined mindset and less exposure to international markets might find the
commerce culture in India too intimidating.

 Identifying the right partner goes a long way in successfully navigating the complexities of the local
business environment for a new entrant in to the Indian market. A local partner can provide much-
needed assistance in understanding the Indian market.

 This partner can give you valuable market insights on competition, regulation and other important
issues. They can also introduce you to the network with the reach to target prospective clients without
much investment on the ground

Localize your products to meet consumer needs and preferences

 India is a vast and diverse country encompassing many different identities, languages, cultures and

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religions. It is important to avoid making generalizations or assumptions, as local practices and
consumer behavior may vary substantially from region to region.


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Since India has such a pluralistic, multilingual society, more often than not, a one solution fits all
approach doesn’t work. Even a global bigwig like McDonald’s had to localize its product Offerings
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based on the fact that half of Indians are vegetarian. They also have to leave their most popular item,
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beef burgers, off the shelf given the religious sensibilities of the Indian population.

Remember the high level of price sensitivity


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It is extremely important for a new entrant into the Indian market to get its price strategy right,
particularly if it’s targeted towards the low and middle income populations. Even with a growing
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economy and a growing middle class, there’s no denying the fact that India is still a low middle
income economy, with a per capita income of around $2,000 and a huge population still living below
the poverty line.

 Since the government cannot afford to provide for education and healthcare coverage, the majority of
the population has to pay for these necessities from their own income. With little disposable income
left after covering basic amenities, there’s not much money left in the hands of a significant portion of
the population. This makes the market price sensitive as many people need to spend judiciously.

Enter the Indian market for long-term growth, not to make a quick buck

 India is certainly not a place for businesses to make quick gains–you need to be invested for the long
haul. All though it’s a huge market with a population of 1.3billion people, including 400 million
middle class consumers, it has its share of challenges when it comes to market entry.
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  Because India is such a huge and attractive opportunity, there is no dearth of competition. More often
than not, you have companies looking for market share and compromising on potential short-term
profitability in order to establish them more firmly there. Given the complexity of the market, it takes
time for the companies to understand the environment and develop the right strategy.

Prepare to navigate a much different legal and regulatory landscape

 The Indian judicial system follows “common law”, and the constitution has provided for a single
integrated system of courts to administer both union and state laws.

 Due attention should be paid, including seeking professional advice, before entering into a formal
agreement. Court judgments are often delayed because of the huge backlog of cases, so any agreement

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should provide the scope for alternate dispute resolution mechanisms.

5. Feasibility Analysis or Project Analysis


C
Feasibility (possibility) analysis is used to determine the viability of an idea, such as ensuring a
project is legally and technically feasible as well as economically justifiable. It tells us whether a
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project is worth the investment it ultimately tests the viability of an idea, a project, or a new business.
SY

 A feasibility study may become the basis for the business plan, which outlines the action steps
necessary to take a proposal from ideation to realization.
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 A feasibility study allows a business to address where and how it will operate, its competition,
possible hurdles, and the funding needed to begin. The business plan then provides a framework that
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sets out a map for following through and executing on the entrepreneurial vision.

 A schematic diagram of the project feasibility study is shown in figure.

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 Types of Feasibility Analysis:

 Marketing feasibility

 Financial Feasibility

 Political feasibility

 Economic Feasibility

 Social Feasibility

 Legal feasibility

 Technical Feasibility

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Managerial feasibility

 Location and other feasibility

6. Marketing feasibility

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This mainly deals with determining the potential market and the market share for the proposed
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project. Market analysis is concerned with forecasting the demand for the product/service under
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consideration. It requires finding a variety of information on consumption trends, cost structures,

structures of the competition, the elasticity of demand, consumer behavior, and exports and imports.

 In simple words it determines whether a product or service can sustain in a specific market or not as
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well as whether it is capable of generating financial surplus for the firm or not.
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 Most market feasibility studies include:-

 Description of the industry
 Current Market Analysis
 Competition or presence of competing products.
 Anticipated future market potential.
 Potential buyers and sources of revenues.
 Sales projections.

 Market feasibility tests can be carried out not only on products but on ideas, campaigns, processes and
entire businesses too.

7. Financial Feasibility
 This mainly deals with determining the risk and return for the proposed project. Financial analy sis seeks to
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ascertain whether the proposed project will be financially viable. It requires finding a variety of inhumation on
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the cost of the project and the means of finance; the cost of capital, the projected liability cash flows of the
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 project, the break-even point, the level of risk, the investment outlay and worthiness, and projected financial
position.

 In order to as certain financial viability, financial projections are made and on the basis of such
projections which need to be objective and realistic, the followings broad parameters are evaluated for
determining the feasibility of the project-
 Return on Investment
 Payback period of the outlay
 Internal rate of return
 Profitability index.

 In case of a new project, financial viability can be judged on the following parameters:
 Total estimated cost of the project

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 Financing of the project in terms of its capital structure, debt to equity ratio and promoter’s share of
total cost
 Existing investment by the promoter in any other business
 Projected cash flow and profitability. C
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 The financial viability of a project should provide the following information:
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 Full details of the assets to be financed and how liquid those assets are
 Rate of conversion to cash-liquidity
 Project’s funding potential and repayment terms
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 Sensitivity in their payments capability to the following factors

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 Mild slowing of sales

 Acute reduction/slowing of sales
 Small increase in cost
 Large increase in cost
 Adverse economic conditions.

 If, on the above mentioned parameters, the project is found suitable, then only further feasibility tests
are carried out.

8. Political feasibility
 Political feasibility is a measure of how well a solution to a policy problem, will be accepted by a set
of decision makers and the general public. For a policy to be enacted and implemented, it must be
politically acceptable, or feasible.


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Political feasibility analysis is used to predict the probable outcome of a proposed solution to a policy
problem through examining the performer, events and environment involved in all stages of the
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 policy- making process.

9. Economic Feasibility
 This is also called social-cost benefit analysis and is mainly concerned with judging a project from the
social point of view. The focus is on the social costs and benefits of the proposed project. It deals with
determining benefits and costs in terms of shadow prices and other social impacts.

 Economic analysis requires finding a variety of information on economic costs and benefits measured
in terms of the efficiency (shadow) prices, employment to be generated by the project, impact of the
project on the distribution of income in society; and the impact of the project on the level of savings
and investment in society.

 The purpose of an economic feasibility study (EFS) is to demonstrate the net benefit of a proposed

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project for accepting or disbursing electronic funds/benefits, taking in to consideration the benefits
and costs to the agency, other state agencies, and the general public as a whole.

 In sync with the phrase “Parity between haves and have not’s”, a social cost-benefit analysis (SCBA)
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of the project should be carried out. This ensures that the organization is contributing to the GDP of
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the economy and is also discharging its social obligations, by providing employment opportunities
and bringing in improvement in quality of life.
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 Economic feasibility helps companies determine what that amount is before a project is ultimately
approved. This allows companies to carefully manage their money to insure the most
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[Link] or not
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revisions to a project that at first seems unfeasible will make it feasible.

10. Social Feasibility

 Social feasibility is a detailed study on how one interacts with others with in a system or an
organization. Social impact analysis is an exercise aimed at identifying and analyzing such impacts in
order to understand the scale and reach of the project’s social impacts.

 At a minimum, all projects demand a review of project data at the Appraisal Phase, so as to identify if
material social impacts exist. Social impact analysis greatly reduces the overall risks of the project, as
it helps to reduce resistance, strengthens general support, and allows for a more comprehensive
understanding of the costs and benefits of the project.

 However, social impact analysis can be expensive and time consuming, so the full analysis process
cannot be justified for all projects. At a minimum, all projects demand a review of project data at the
Appraisal Phase, so as to identify if material social impacts exist. If they do, a full social impact
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analysis should be conducted.

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11. Legal Feasibility
 It should first be determined whether the proposed project conflicts with legal requirements, and if the
proposed venture is acceptable in accordance to the laws of the land. The project team has to make a
thorough analysis of the legal issues surrounding the project, across several dimensions.

 A detailed legal due diligence should be done to ensure that all for seeable legal requirements, which
have not or will not be dealt with, in other appraisal exercises, are met for the development of the
project.

 The main objectives of the legal feasibility analysis are as follows:

 To ensure that the project is legally do able
 To facilitate riskmanagement,indicating the risks and obstacles that need to be addressed within the
technical analyses, the financial model and/or the Value for Money analysis

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 To avoid, to the extent possible, major problems in the project’s development and implementation,
specifying the requirements that need to be considered at subsequent stages of the PPP process,
[public private partnership]

12. Technical Feasibility

C
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 This principally deals with determining the technical viability for successful of the proposed project
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and for ascertaining whether sensible choices have been made with respect to location, size, process,
etc.
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 Technical analysis requires finding a variety of information on the availability of raw material and
various other inputs, the type of technology to be adopted, choosing a suitable layout for the site,
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building and plant, and choosing the appropriate plant, machinery, and process.

 This assessment is based on an outline design of system requirements, to determine whether the
company has the technical expertise to handle completion of the project. When writing a feasibility
report, the following should be taken to consideration.

 The technical feasibility assessment is focused on gaining an understanding of the present technical
resources of the organization and their applicability to the expected needs of the proposed system. It is
an evaluation of the hardware and software and how it meets the need of the proposed system.

 An in depth and critical study of following parameters is done:

 Plant location
 Layout
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 Plant &machinery and equipment

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  Manufacturing process
 Infrastructure
 Technology
 Efficient waste disposal.

 The technical feasibility assessment is focused on gaining an understanding of the present technical
resources of the organization and their applicability to the expected needs of the
[Link] the proposed
system.

13. Managerial feasibility

 Managerial Feasibility analysis objectively and rationally uncover the strengths and weaknesses of an
existing business or proposed venture, opportunities and threats which are presented by the

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environment, there sources required to carry through, and ultimately the prospects for success.

 In its simplest terms, the two criteria to judge feasibility are cost required and value to be attained.

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Managerial feasibility study is an analysis of the viability of an idea. The Managerial feasibility study
focuses on helping answer the essential question of “should we proceed with the proposed project
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idea?”
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14. Location and other feasibility

 There is a saying that the three most important considerations in business are location, location,
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location. If you’re starting a new business that operates primarily offline, location is critical.


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Your business location analysis should take into account demo graphics, psychographics, census and
other data, location analysis is to maximize chances of success in business.

 The location of a retail outlet is the most influencing factor for the success of the business. Therefore
selecting a location for a retail store or an outlet is a challenging process. The purpose of this study is
to define a method and develop a system to analyze the feasibility of a selected location for a retail
store.

 Consumer surveys were conducted in selected areas to get information about consumers' shopping
patterns and selections .From the web service, identify transport modes, locations of competing stores
and shopping areas.

 The retail industry is a fast growing and a highly revenue generating industry. The location of a retail
outlet is the most influencing factor for the success of the business. Therefore selecting a location for
a retail store or an outlet is a challenging process. The purpose of this study is to define a method and
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develop a system to analyze the feasibility of a selected location for a retail store.
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  Many hospital and restaurant businesses fail due to in appropriate location or market entries.

 Location feasibility and market studies are an essential part of the building or growing a business.

15. Other Feasibilities

Schedule Feasibility
 A project will fail if it takes too long to be completed before it is useful. Typically this means
estimating how long the system will take to develop, and if it can be completed in a given time period
using some methods like payback period. Schedule feasibility is a measure of how reasonable the
project timetable is.

 Some projects are initiated with specific deadlines. It is necessary to determine whether the deadlines
are mandatory or desirable. To do proper scheduling, the versatile techniques like PERT & CPM are

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adopted.
Resource Feasibility
 This involves questions such as how much time is available to build the new system, when it can be
C
built, whether it interferes with normal business operations, type and amount of resources required,
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dependencies, and developmental procedures with company revenue prospects.
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 There are resources necessary to complete any project. All the important resources like human
resource, artificial resources, and financial resource [Link] taken care of by indulging in complete
research on feasibility of the resources needed to complete the project.
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Operational Feasibility
 Operational feasibility is the measure of how well a proposed system solves the problems, and takes
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advantage of the opportunities identified during scope definition and how it satisfies the requirements
identified in the requirements analysis phase of system development.

 The operational feasibility assessment focuses on the degree to which the proposed development
projectsfitsinwiththeexistingbusinessenvironmentandobjectiveswithregardtodevelopment schedule,
delivery date, corporate culture and existing business processes.

 To ensure success, desired operational outcomes must be imparted during design and development.
These include such design-dependent parameters as reliability, maintainability, supportability,
usability, product ability, disposability, sustainability, affordability and others. These parameters are
required to be considered at the early stages of design if desired operational behaviors are to be
realized.
Commercial Feasibility
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 Commercial Feasibility is as curtained by finding out the following:

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  Profit margin
 Size of the market.
 Degree of demand for the product
 Future growth of market
Environmental Feasibility:
 The environmental feasibility study considers both human and environmental health factors. The EF
is a comparative process that looks at all potential solutions, and then evaluates them against specific
criteria to ultimately find the best choice. It is a fact that external environment exerts considerable
influence on the organizations.

 In fact the climatic conditions in a particular area/region have a significant impact on the existence of
an enterprise. Therefore, it is necessary to ascertain the environment viability as well.

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 The parameters considered are:
 Overall protection of public and environmental health

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 Effective reduction of hazardous waste toxicity, mobility and volume.
 Long-term and short-term effectiveness of environmental policies of the company
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 Potential consequences of the remedial measures taken for protecting environment
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Ecological Feasibility

 This mainly deals with determining the quantum of damage likely to be caused by the proposed
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project to the environment, and the cost of restoration measures required to be under taken to ensure
that the damage to the environment is within acceptable limits.
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Technological Innovation Management & Entrepreneurship Module-5a

Technological Innovation
Management & Entrepreneurship
B.E., V Semester, Electronics & Communication Engineering
[As per Choice Based Credit System (CBCS) scheme]
[Subject code: 18ES51]

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C
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MODULE -5
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a) Business Model
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b) Financing and How to start a Business?

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c) Project Design & Network Analysis

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Technological Innovation Management & Entrepreneurship Module-5a

Module-5a

Business Model
Meaning:

The business model con be defined as:

A business model is essentially a blueprint of how the business will add value and make money in the
existing market environment. Most business models can be separated into three distinct parts: planning
and manufacture, sales and marketing, and revenue management.
OR

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A business model is a company's core strategy for profitably doing business. Models generally include
information like products or services the business plans to sell, target markets, and any anticipated
expenses. The two levers of a business model are pricing and costs.
OR

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The term business model refers to a company's plan for making a profit. It identifies the products or
services the business plans to sell, its identified target market, and any anticipated expenses. Business
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models are important for both new and established businesses.
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What Is a Business Model?

The term business model refers to a company's plan for making a profit. It identifies the products or
services the business plans to sell, its identified target market, and any anticipated expenses. Business
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models are important for both new and established businesses. They help new, developing companies
attract investment, recruit talent, and motivate management and staff. Established businesses should
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regularly update their business plans or they'll fail to anticipate trends and challenges ahead. Business
plans help investors evaluate companies that interest them.

The important aspects of business model are:

➢ A business model is a company's core strategy for profitably doing business.

➢ Models generally include information like products or services the business plans to sell, target
markets, and any anticipated expenses.

➢ The two levers of a business model are pricing and costs.

➢ When evaluating a business model as an investor, ask whether the idea makes sense and whether
the numbers add up.

Understanding Business Models

A business model is a high-level plan for profitably operating a business in a specific marketplace. A
primary component of the business model is the value proposition. This is a description of the goods or

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Technological Innovation Management & Entrepreneurship Module-5a

services that a company offers and why they are desirable to customers or clients, ideally stated in a way
that differentiates the product or service from its competitors.

A new enterprise's business model should also cover projected startup costs and financing sources, the
target customer base for the business, marketing strategy, a review of the competition, and projections of
revenues and expenses. The plan may also define opportunities in which the business can partner with
other established companies. For example, the business model for an advertising business may identify
benefits from an arrangement for referrals to and from a printing company.

Successful businesses have business models that allow them to fulfill client needs at a competitive price
and a sustainable cost. Over time, many businesses revise their business models from time to time to
reflect changing business environments and market demands.

When evaluating a company as a possible investment, the investor should find out exactly how it makes

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its money. This means looking through the company's business model. Admittedly, the business model
may not tell you everything about a company's prospects. But the investor who understands the business
model can make better sense of the financial [Link] business plan. If expenses are out of control,
the management team could be at fault, and the problems are correctable. As this suggests, many analysts
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believe that companies that run on the best business models can run themselves.
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In their simplest forms, business models can be broken into three parts:
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1. Everything it takes to make something: design, raw materials, manufacturing, labor, and so on.
2. Everything it takes to sell that thing: marketing, distribution, delivering a service, and
processing the sale.
3. How and what the customer pays: pricing strategy, payment methods, payment timing, and so
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on.
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As you can see, a business model is simply an exploration of what costs and expenses you have and how
much you can charge for your product or service.

A successful business model just needs to collect more money from customers than it costs to make the
product. This is your profit—simple as that.

New business models can refine and improve any of these three components. Maybe you can lower costs
during design and manufacturing. Or, perhaps you can find more effective methods of marketing and
sales. Or, maybe you can figure out an innovative way for customers to pay.

Keep in mind, though, that you don’t have to come up with a new business model to have an effective
strategy. Instead, you could take an existing business model and offer it to different customers. For
example, restaurants mostly operate on a standard business model but focus their strategy by targeting
different kinds of customers.

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Business Model Analysis

Analyzing your business model can help to determine whether a venture is, or will be, viable and
valuable. After completing a Business Model Canvas for a current or future business model, designers
often ask the following questions:

✓ Where are our revenues coming from?

✓ What value is delivered to which markets?
✓ What costs are involved in delivering that value?
✓ Are our perceived key activities and key resources as important for gaining revenue as we think
they are?
✓ If we change our model in a specific way, what are the effects?

This requires insight into several elements of the business model, attributes of these elements and the
relations between different elements. Analyzing these elements will provide the foundation for business

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model change and innovation in an organization. You can analyze a business model from several different
perspectives. In our example, each possibility is analyzed from a different perspective, and answers a
specific question.

Business Model Design C

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Business model design generally refers to the activity of designing a company's business model. It is part
of the business development and business strategy process and involves design methods
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The process of business model design is part of business strategy. Business model design and innovation
refer to the way a firm (or a network of firms) defines its business logic at the strategic level. In contrast,
firms implement their business model at the operational level, through their business operations.
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A business model describes the value an Organization offers to its customers. It illustrates the capabilities
and resources required to create, market and deliver this value, and to generate profitable, sustainable
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revenue streams.

An important misconception to point out, the product does not make a business. The product is often an
essential part of the business, however the product does not encompass all of the business. There is always
a tension between the business model and the product, as they constantly influence and rely on each other.

There is a common business model used for defining a company’s business model, it is the Alexander
Osterwalder’s Business Model Canvas:

➢ Value Propositions: what you offer to a customer in a given segment, and the customer needs you
satisfy.

➢ Channels: How you plan on reaching your various customer segments, and which group you
would like to target most.

➢ Customer Relationships: You need to plan on maintaining customer relations effectively.

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➢ Revenue Streams: what are your customers paying for? How much? How would they prefer to
pay?

➢ Key Resources: what resources are essential to deliver your Value Propositions through the
Channels and maintain our Customer Relationships?

➢ Key Activities: what are the most important things you must do to make your business work?

➢ Key Partnerships: who are our Key Partners and why? What Key Resources do they provide and
what Key Activities do they carry out? What’s in it for them? What relationship should we have?

➢ Cost Structure: what costs are implied by our Business Model? Which are largest? What is fixed
and what is variable? What drives them?

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All business model design projects are unique and present a challenge to the participants because there is
no one formula or prediction for how they will evolve.

The process consists of five phases; mobilize, understand, design, implement, and manage. This process

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provides a framework which all businesses regardless of their industry or context can apply to themselves
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SY
U
VT

Business Plans.

Introduction
A business plan is a roadmap and blueprint of the project. A business plan is a written
document that describes in detail how a business is going to achieve its goals.
It is a document that explains, a business opportunity, identifies the market to be served, and
provides details about how the entrepreneurial organization plans to pursue it.
Ideally, the business plan describes the unique qualifications that the management team
brings to the effort explains the resources required for success, and provides a forecast of
result, over a reasonable time horizon.
A business plan is based on estimates and explains the importance and purpose of business

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plan, provides the contents of a business plan, and gives the process of preparing and
presenting a business plan. It includes two sample business plans and gives a step-by-step
procedure for starting a business enterprise.

Scope and Need of Business Plan

A business plan is the written representation of an entrepreneur's vision for his/her business.
A business plan is a written document between 20-10 pages in length that describes where a
business is beading and how it hopes to achieve its goals and objectives.
A workable business plan should determine the direction of the company; highlight the
challenges in the path of the business: and formulate strategies and contingencies to keep the

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business on track in order to reach predetermined goals and objectives.
A business plan is not just for a start-up company but also for those which are growing. It prepares for
a spin-off from a parent firm, or even for a project within an established organization. It can be used

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to establish realistic goals or targets to achieve, and to determine the current position.
N
A business plan is used to help make crucial start-up decisions, to reassure investors, to measure
operational progress, to test planning and assumptions, to adjust forecasts, and to set the standard for
SY

good operational management.

The need for preparing a business plot arc given below:

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✓ Entrepreneurs reap benefits from the planning activity itself.

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✓ A business plan is used to get finance from banks or to get equity funding from
angel investor , or venture capitalists.
✓ It can also be used to attract business partners and key employees or to make
business alliances
✓ If the business plan is prepared within a large organization, then it enables the board
of directors, to make capital investment decisions.
✓ The act of writing the plan will force the entrepreneur and his team to think through
all the key elements of the business.
✓ The plan provides a basis for measuring actual performance against expected
performance.
✓ The plan's financial projections can be used as a budget. Actual results that fall
short of planed results will prompt the entrepreneur to investigate and take
corrective action.

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✓ The plan acts as a vehicle for communicating to others what the business is trying to
accomplish.

Financial Plan

The financial plan is a critical section of the business plan as it translates all the other parts of the
business into anticipated financial results. The financial plan section is the section that determines
whether or not your business idea is viable, and is a key component in determining whether or on your
business plan is going to be able to attract any investment in your business idea.
Basically, the financial plan section of the business plan consists of an analysis of
Financial statements such as
• The income statement,

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• The cash flow projection,
• Projected balance sheet,
• Break-even charts,
•
•
•
Cost of the project,
Sources, and C
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Uses of funds.

A financial plan is simply an overview of your current business financials and projections for growth.
SY

Think of any documents that represent your current monetary situation as a snapshot of the health of your
business and the projections being your future expectations.

It helps you, as a business owner, set realistic expectations regarding the success of your business. You’re
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less likely to be surprised by your current financial state and more prepared to manage a crisis or
incredible growth, simply because you know your financials inside and out.
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And aside from helping you better manage your business, a thorough financial plan also makes you more
attractive to investors. It makes you less of a risk and shows that you have a firm plan and track record in
place to grow your business.

Components of a successful financial plan:

All business plans, whether you’re just starting a business or building an expansion plan for an existing
business, should include the following:

1) Profit and loss statement

2) Cash flow statement
3) Balance sheet
4) Sales forecast
5) Personnel plan
6) Business ratios and break-even analysis

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Marketing Plan

The term "market is often used to describe the various elements of the total business environment. The
market is where the company's product or service will be sold. The marketing plan is written after
conducting a market analysis. This section provides information on assessing the market’s size and
growth, defining the target market, and articulating the value proposition. The value proposition gives
the unique set of benefits that the customers will get if they choose to purchase the company offerings
over its competitor's offerings.

Stakeholders know that marketing is the activity most associated with success or failure. A company that
is not able to connect with its customers will fail even if it offers attractive products or services. A
sound and realistic marketing plan is the best guarantee that a solid customer connection will be made.
The marketing plan should be supported with a solid market intelligence report forth, plan to be
credible.

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The plan should be clear about all aspects of marketing, including price, position, promotion, place,
and customer value proposition. The marketing plan provides strategies to sell the company's product

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or service. The marketing plan should be a dynamic plan used to monito r the progress of the business.

9 Key Elements for an Entrepreneur to Create a Successful Business Marketing Plan

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A Business Marketing plan is very important for any product or company, in order to achieve
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individual and organizational goals. A Business Marketing plan is a drafted document which
gives the overall summary of the market. It clearly states how the firm plans to achieve its goals
as planned. It also contains detailed guidelines regarding how the product will perform in each
life cycle and the budget allocated for the same. And of course, it should be achievable and
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must be able to respond positively to changing market conditions.

1. Overall Summary of the Business Model

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Without prior knowledge regarding what the business is supposed to do, an entrepreneur can’t achieve his
or her goals.

The executive summary should define the overall details of what the business is all about and the goals
and objectives.

It should be clear with the core values and the positioning in the market. It must clearly explain how the
brand will enter the local market followed by the international market – if ultimate ambitions stretch that
far. This can be done by maintaining its equipment base, input/output process and the good quality of
items. It further focuses on the generation of financial resources.

2. A Strategy That Must Be Followed

You should be clear with your product strategy, which must be based on consumer needs. He/she should
survey the situation using various details of their customers.

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A few of the elements that must be included are:

• Company or product mission

• Marketing and Financial objectives
• Resource availability
• Cash flow analysis
• Competitive analysis

3. Availability of Products and Services

Entrepreneurs should have a full understanding of how their products or services will reach their target
audience.

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Designing good products and services to customers is just one part of the whole plan, however. The aim
must be making it available that too much in a cost-effective manner. And it should be the ultimate goal
of an entrepreneur. It can be achieved by making the best use of the team, promotional activities used for

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sales, advertising methods and other tools that are being used for communication.
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4. Pricing Strategy

The most important stage of any business model is its pricing. Price can be the maker or breaker of a
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product. It is the one element of the marketing mix that produces revenue. All other elements fall on the
opposite side of the ledger. People should design their product or brand so that it commands a premium
price and reaps big profits. It should also reflect a value that the consumers are willing to pay and [Link] a
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benefit

5. Awareness of the Product

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Always plan how you intend to make your product or service known to your intended customer base. You
could have the best offering in your industry or place, but if nobody has heard of it or you, you’re as good
as in trouble.

The time to plan your social media, content marketing and advertising campaigns is not when you are
ready to go to market! that outweighs the cost

6. Who Will Benefit From Your Offering?

Segmentation, targeting and positioning are the essences of Marketing. Your target customer base will go
some way to determining the price you can ultimately charge. It will also determine how you can best
communicate your offering to them and where you will find them.

7. Short Term and Long Term Objectives

Entrepreneurs must have a clear vision of their mission, marketing and financial objectives. They need to

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be specific about how their brand will satisfy the target market. Nobody can expect immediate profit. But
planning must include short, medium and long-term goals. You need to be clear regarding how your
business will proceed as per the life cycle of whatever you are selling. And you need input from other
areas of marketing. Nobody can think of or execute everything entailed in pushing an offering to market.

8. SWOT Analysis

Before designing a complete project, a pilot project needs to be designed and implemented. An entrepreneur should
know everything – including any flaws that may become apparent. Also, the project strength, shortcomings,
appropriate options for progressing and warnings can be tested in the pilot project itself for the successful
completion or execution of the main project. For this, you need to do a thorough SWOT (Strengths, Weaknesses,
Opportunities, and Threats) analysis.

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9. PEST Analysis

SWOT Analysis will give you the inner view of the business model. However, it is very important to

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determine how a business will run in the changing economic scenario. Hence, a detailed PEST
analysis needs to be done to know how your model will run in the changing Political, Economic, Social
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and Technological Environment.
SY

Your Business Marketing plan can be the key to success in any field, no matter the offering.
Inadequate planning almost guarantees failure.
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A Business Marketing plan is a drafted document which gives the overall summary of the market. It
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clearly states how the firm plans to achieve...

Human resource planning

Human resource planning allows companies to plan ahead so they can maintain a steady supply of skilled
employees. That's why it is also referred to as workforce planning. The process is used to help companies
evaluate their needs and to plan ahead to meet those needs.

What Is Human Resource Planning (HRP)?

Human resource planning (HRP) is the continuous process of systematic planning ahead to achieve
optimum use of an organization's most valuable asset—quality employees. Human resources planning
ensures the best fit between employees and jobs while avoiding manpower shortages or surpluses.

There are four key steps to the HRP process. They include

✓ Analyzing present labor supply

✓ Forecasting labor demand,

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✓ Balancing projected labor demand with supply, and

✓ Supporting organizational goals.

HRP is an important investment for any business as it allows companies to remain both productive and
profitable.

Human resource planning needs to be flexible enough to meet short-term staffing challenges while
adapting to changing conditions in the business environment over the longer term. HRP starts by
assessing and auditing the current capacity of human resources.

The challenges to HRP include forces that are always changing, such as employees getting sick, getting

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promoted or going on vacation. HRP ensures there is the best fit between workers and jobs, avoiding
shortages and surpluses in the employee pool.

To satisfy their objectives, HR managers have to make plans to do the following:

• Find and attract skilled employees.

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N
• Select, train, and reward the best candidates.
• Cope with absences and deal with conflicts.
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• Promote employees or let some of them go.

Investing in HRP is one of the most important decisions a company can make. After all, a company is
only as good as its employees, and a high level of employee engagement can be essential for a company's
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success. If a company has the best employees and the best practices in place, it can mean the difference
between sluggishness and productivity, helping to bring the company profitability.
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production planning

Production plan serves as a guide for your company's production activities. It establishes and sequences
activities which must be carried out to achieve a production target, so that all staff involved are aware of
who needs to do what, when, where and how.

Production Planning in 5 Steps

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C
N
SY

Production planning is “the administrative process that takes place within a manufacturing business and
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that involves making sure that sufficient raw materials, staff and other necessary items are procured and
ready to create finished products according to the schedule specified”, as defined by the Business
VT

Dictionary.
A production plan serves as a guide for your company’s production activities. It establishes and sequences
activities which must be carried out to achieve a production target, so that all staff involved are aware of
who needs to do what, when, where and how.
A production plan will help you meet product demand while minimizing production time and cost by
improving process flow, reducing the waiting time between operations, and optimizing use of plant,
equipment and inventory. In order to do this, you must align your production plan to your business
strategy and business plan, and support production planning by coordinating with other departments, such
as procurement, finance and marketing.
The diagram above shows the production planning and control process divided in five steps:

Key factors of a production plan

✓ Forecast market expectations. To plan effectively, you will need to estimate potential sales with
some reliability. ...
✓ Inventory control. ...

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✓ Availability of equipment and human resources. ...

✓ Standardized steps and time. ...
✓ Risk factors

Product and service plan

The products and services section of your business plan outlines your product or service, why it's needed
by your market, and how it will compete with other...

The products and services section of your business plan is more than just a list of what your business is
going to provide. Especially if you intend to use your business plan to get funding or find partners, your
products and services section needs to showcase the quality, value, and benefits your business offers.

The products and services section of your business plan outlines your product or service, why it's needed

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by your market, and how it will compete with other businesses selling the same or similar products and
services. Your product and services plan should include:

✓ A description of the products or services you are offering or plan to offer

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✓ How your products and services will be priced
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✓ A comparison of the products or services your competitors offer in relation to yours
✓ Sales literature you plan to use, including information about your marketing materials
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and the role your website will play in your sales efforts
✓ A paragraph or so on how orders from your customers will be processed or fulfilled
✓ Any needs you have in order to create or deliver your products, such as up-to-date
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computer equipment
VT

✓ Any intellectual property, such as trademarks, or legal issues you need to address
✓ Future products or services you plan to offer

This is the part of your business plan where you will describe the specific products or services you're
going to offer. You'll fully explain the concept for your business, along with all aspects of purchasing,
manufacturing, packaging, and distribution.

Product Planning is the ongoing process of identifying and articulating market requirements that define a
product's feature set. Product planning serves as the basis for decision-making about
price, distribution and promotion. Product planning is the process of creating a product idea and following
through on it until the product is introduced to the market. Additionally, a small company must have
an exit strategy for its product in case the product does not sell. Product planning entails managing the
product throughout its life using various marketing strategies, including product extensions or
improvements, increased distribution, price changes and promotions.

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The Business Plan Format

In reality there is no standard format for the presentation of a good business plan. Business plans vary in
content and size of the business concerned and on the emphasis that is placed on certain critical areas as
opposed to others.

THE CONTENTS

Every business plan should address a number of fundamental issues without which it would not be
complete. These issues can be grouped under six major areas that are the pillars of every business activity
whether large or small. These are:

• Sales and Marketing

• Operations
• Human Resources

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• Finance
• Information & Communication Technologies (ICT)
• Information Management
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Essential contents of a business plan in a simple format
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The table below lists the important elements of a business plan and offers some simple points that need to
be taken into consideration in regard to each section. It is worth noting that these points are by no means
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exhaustive and are meant to serve only as examples. The table is intended to provide you with a simple
format upon which to base your business plan.
The format provides you with a framework for presenting your thoughts, ideas and strategies in a logical,
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consistent and coherent manner. In other words the business plan format helps you to clarify your own
VT

ideas and present them clearly to others.

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Content of business plan format

SLN.O CONTENT REMARK

1 Executive summary A snapshot of your business
2 Company description Describes what you do.

3 Market analysis Research on your industry, market, and

competitors.
4 Organisation and Your business and management
management structure.
5 Service or product The products or services you’re
offering.
6 Marketing and sales How you’ll market your business and
your sales strategy.

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7 Funding request How much money you’ll need for next
3 to 5 years.

8 Financial projections Supply information like balance sheets.

9 Appendix
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An optional section that includes
résumés and permits.
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SY

Project Report preparation and presentation

A Project Report is a document which provides details on the overall picture of the proposed business.
The project report gives an account of the project proposal to ascertain the prospects of the proposed
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plan/activity. ... It contains data on the basis of which the project has been appraised and found feasible.
VT

The project report is an important document and should be prepared carefully. Banks and other financial
institutions decide whether a loan should be granted, and If granted, the amount that should be sanctioned
on the basis of this report. The project report is generally prepared to cover the following broad segments:

I .General information: The following information should be provided,

➢ Name of the unit and address.

➢ Name of product/service.
➢ Constitution of the unit.
➢ Name of the promoter.
➢ Educational qualification.
➢ Experience.

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II. Details of the project: The following information should be provided.

➢ Product/service details.
➢ Details of machinery.
➢ Details of raw material.
➢ Utility.
➢ Manpower requirement.
➢ SWOT ( Strengths, Weaknesses, Opportunities, and Threats) analysis.

III .Market survey: The market survey report should be enclosed.

[Link] of project: The following details should be provided.

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➢ Fixed cost: Land/building, machinery, office equipment, miscellaneous items.

➢ Working capital: Stock in raw material, semi-finished goods, finished goods, bills
receivable, working expenses.
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➢ Total investment: Fixed capital, working capital, preliminary and preoperative
expenses,interest during implementation, contingency.
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➢ Means of finance: Term loan, working capital loan, own investment (with incentives).

➢ Profitability: Revenue, production cost, depreciation, administrative expenses, interest,

maintenance, sales and advertisement, profit, annual income before tax, taxes, net profit.
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V. Annexure:
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Promoter's bio data, organizational chart, details of group units if any, statutory sanctions/approvals,
project feasibility study report, project schedule, arrangement of land and building, statement of cost of
plant, machinery and other equipment, details of orders and enquiries, process chart, financials for project
and its analysis, financials of the company and its analysts, manpower planning, and financial statements.

Why some Business Plan fails

Like any other project, writing a business plan needs care full planning and systematic execution .Some
business plan fails because of the following reasons

1) Failure to address the customer's problems and needs:

The business plan should address the customer's problems/needs/wants. It should clearly state
how big the business opportunity is. The entrepreneur should document customer pain point

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before preparing the plan. Customer needs can be identified from direct experience, letters from
customers, or from market research.

2) Unrealistic goals set by the promoters:

Setting goals requires the entrepreneur to be well informed about the type of business and the
business environment. The goals set by the entrepreneur are based on data and the business plan is
no good if it does not include a lot of data. The goals set by the entrepreneur should be Specific,
Measurable, Achievable, Realistic, and Time-bound (SMART), the financial and market
projections should be realistic, logical, and reasonable.

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3) Lack of commitment to the business by the promoters:

The promoters must make a total commitment to the business in order to be able to meet the
demands of new venture. Investors will not be interested in a venture that does not have committed

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promoters. Investors also expect the promoter to make a significant commitment to the
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business. It is also required to have complete focus on the business especially if it is a new
venture and promoters should not be over enthusiastic in trying to do all things at once.
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4) Lack of experience of the promoters:

A lack of experience will result in failure unless the entrepreneur can either attain the necessary
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knowledge or team up with others who already have experience in this area.
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5) Lack of professionalism:

The business plan should be brief, clear, and nicely organized. It should highlight those points that
can attract investors. The assumptions made in preparing the business plan should be realistic.

……………………………………………

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MANAGEMENT & ENTREPRENEURSHIP MODULE 5b

Technological Innovation
Management & Entrepreneurship
B.E., V Semester, Electronics & Communication Engineering
[As per Choice Based Credit System (CBCS) scheme]
[Subject code: 18ES51]

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MODULE -5 C
N
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a) Business Model
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b) Financing and How to start a Business?

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c) Project Design & Network Analysis

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MANAGEMENT & ENTREPRENEURSHIP MODULE 5b

b)Financing and How to start a Business?

Financial opportunity identification

Putting all your eggs in one basket is never a good business strategy. This is especially true when it comes to financing
your new business. Not only will diversifying your sources of financing allow your start-up to better weather potential
downturns, but it will also improve your chances of getting the appropriate financing to meet your specific needs.

Whether you opt for a bank loan, an angel investor, a government grant or a business incubator, each of these sources
of financing has specific advantages and disadvantages as well as criteria they will use to evaluate your business.

According to a recent study, over 94% of new businesses fail during first year of operation. Lack of
funding turns to be one of the common reasons. Money is the bloodline of any business. The long

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painstaking yet exciting journey from the idea to revenue generating business needs a fuel named capital.
That’s why, at almost every stage of the business, entrepreneurs find themselves asking – How do I
finance my startup?

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Business simply cannot function without money, and the money required to make a business function is
known as business funds. Throughout the life of business, money is required continuously. Sources of funds
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are used in activities of the business. They are classified based on time period, ownership and control, and
their source of generation.
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U
VT

Sources of Financing Business

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MANAGEMENT & ENTREPRENEURSHIP MODULE 5b

Non banking Sources

Funds can be raised from avarietyof sources for financing a project. The two broad sources
of finance available to a firm are equity financing und debt financing. The key factors in
determining the debt - equity ratio for a project are the cost, nature of assets, business risk,
norms of' lenders, control considerations, andmarketconditions. Equity and debt come in
variety of forms and are raised in different ways.

1. Equity Financing

This is a shareholder's fund and it may be in the form of equity capital, preference, internal actual
venture capital, and angel investing. Equity financing means exchanging partial ownership in a firm for

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funding. Equity shareholders enjoy the rewards as well as bear the risk of ownership. However, their
liability, unlike the liability of the owner in n proprietary firm and the partners in a partnership
concern, is limited to their capital contributions. The rights of equity share holders consist of the right
to residual income; the right to control; the pre-emptive right to purchase additional equity shares

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issued by the firm; and the residual claim over assets in the event of liquidation.
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a ) Equity Capital
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This represents ownership capital as equity shareholders collectively own the finn. When a company is
fanned, it first issues equity shares to promoters and also, in most cases, raises loans from banks financial
institutions and other sources.
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As the need for financing increases, the company may issue shares and debentures privately to
promoters' relatives, friends, business partners, employees, financial institutions, banks, mutual funds,
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venture capital funds, and others. Venture capital funds are likely to be an important source of finance for a
nascent venture. Such investors are specific and small in number.

As the company grows, it may raise capital from the public. The first issue of equity shares to the public
by an unlisted company is called the initial public offering (lPO). Subsequent offerings are called
seasoned offerings. Apart from equity shares, a firn may issue preference shares and debentures to the
general investing public through a public issue.

b) Preference Capital

This represents a hybrid form of financing. It has some characteristics of equity and some attributes of
debentures. It is a special class of a company's shares, on which dividends are paid before the dividends
on ordinary shares, and whose holders are repaid before others if the company goes bankrupt.

c) Internal Accruals

The internal accruals of a firm consist of depreciation charges and retained earnings. Depreciation

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MANAGEMENT & ENTREPRENEURSHIP MODULE 5b

represents the allocation of capital expenditure to various periods over which the capital expenditure is
expected to benefit the firm. Even though the amount that may be available by way of internal accruals
may be limited and the opportunity cost of retained earnings quite high, internal accruals are viewed
favorably by most corporate management because internal accruals are readily available; the use of
internal accruals in contrast to external equity eliminates issue costs and losses on account of under
pricing; there is no dilution of control when a firm relies on internal accruals; and the stock market
views internal accruals with a pessimistic approach.

d) Venture Capital [VC]

It is finance invested by professionals, called venture capitalists, in start- ups with growth potential. A
venture capitalist provides guidance to the company and is a business partner sharing both risk and
rewards. Venture capital is an important source of equity for start-up companies. Venture capital injects

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equity finance with a solid capital base for future growth. Venture capital firms provide equity for business
and expect 20 to 40 per cent equity stake in a company and high returns on their investments within three
to five years.

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Venture capital firms in India invest the shareholders' money in start-ups. The Indian Venture Capital
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and Private Equity Association (IVCA) is the national-level organization for venture capital firms in
India. The organization promotes and encourages the venture capital industry in the country and
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encourages member to invest in high-growth companies.

A few well-known venture capital firms in India are Sequoia Capital India, Ventureast, Intel Capital,
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Helion Venture Partners, DFL India, Nexus lntel Capital, Helion Ventures Partners, DFLIndia
Ventures,Kleiner Perking, NorwestVenture Partners, Cannan Partners, Indo US Ventures, DG India
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Ventures and Inventus Capital Partners.

Stages of Venture Capital Financing

The requirements of funds vary with the life cyclestage of the enterprise. Depending upon the stage they
finance, venture capitalists are called angel investors, venture capitalists, or private equity
suppliers/investors. The venture capital investment process is different from normal project financing. In
1984, [Link] and [Link] of the School of Business, University of Santa Clara, California,
formulated a model of venture capital inves tment activity which with some variations is commonly
used today. .As per this model, this activity is a five-step process as follows:

1. Deal organization.
2. Screening.
3. Evaluation or due diligence.
4. Deal structuring.
5. Post-investment activity and exit.

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Tyebjee and Bruno identified six stages of venture capital financing, which arc given below:
a. The seed money stage: A small sum of money required to prove a
concept or develop a product.
b. Start-up: Financing of firms that are less than one year old. The
funds are primarily meant for marketing and product development.
c. First-round financing: Additional money needed to begin sales and
manufacturing after the start-up funds are exhausted.
d. Second-round financing: Funds required for working capital for a
firm that is selling its product but still losing money.
e. Third-round financing: Financing of a firm that has broken even and
is planning an expansion. This is also called mezzanine financing.
f. Fourth-round financing: Financing of a firm that is expected to go

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public within six months. This is also called bridge financing.

[Link] Investing
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Angel investors are wealthy individuals who invest in entrepreneurial firms, usually during start-up.
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They provide cash to young investors and take equity in return. Angels are usually entrepreneurs
who have successfully built companies, or have spent a part of their professional career in mentoring
start-ups. Angels invest their own money and actively mentor the company. Angels usually expect a
lower return on investment than venture capital firms.
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Business angels are high-net-worth individuals, usually successful people or professionals, who
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provide early stage capital to start up businesses in the form of either debt, equity capital, or both.
They are often self-made millionaires and are accustomed to taking calculated risks with their own
money. They provide financing for start-up and early-stage firms that are too small to get the
atten- tion of VC firms, often too limited in their revenue potential at maturity to interest VC
firms, and too risky for bank loans and for most VC appetites.

An angel network is a unique concept, which brings together highly successful CEOs and entre-
preneurs from India and around the world interested in investing in start-ups and have a
potential of creating high-growth companies. The network .provides equity finance along with
high-quality mentoring. Some of the well-known angel investing networks in India arc Chennai
Funds, the In- dian Angel Network, the Mumbai Angels, and the TiE Entrepreneurship
Acceleration Programme.

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[Link] Financing
Debt financing is basically money that is borrowed to run the business. Debt financing refers
to borrowing money from a source outside the company under certain terms and conditions
relating to interest rates and the period of return of the principal amount, Most entrepreneurs
prefer to start their
Operation with money borrowed from banks and financial institution when a firm raises money
for working capital or capital expenditures by selling bonds, bills or notes to individual and /or
institutional investors, this money is called a debt fund. In return for lending the money, the
individuals or institutions become creditors and receive a promise that the principal and interest
on the debt will be repaid. Term loans and debentures are two important ways of raising long-
term debt.
Term Loans

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.. . Financial institutions and banks have traditionally been the primary source of long:term-debt for public and
private firms. Term loans represent a source of debt finance, which is generally repayable in less than ten
years. They are typically employed to finance the acquisition of fixed as sets. Financial institutions give
Indian rupee term loans as well as foreign currency term loans. Term loans represent secured borrowing.

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Usually assets, which are financed with the term loan, provide the prime security. In order to protect their
interests, financial institutions impose restrictive covenants on the borrowers. Financial institutions
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such as SIDBI, IDBI, and ICICI fund entrepreneurial ventures
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b)Debentures
For large firms, debentures are a viable alternative to term loans. Debentures are instruments
for raising debt finance. Debentures often provide more flexibility than term loans as they offer
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greater choice with respect to maturity, interest rate, security, repayment, and special features .
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[Link] Sources
Working capital advance by commercial banks represents the most important source for
financing current assets. Apart from principal sources like equity, internal accruals, venture
capital, term loans,debentures, and working capital advance, there are several other ways in
which finance may be obtained. These include deferred credit. lease finance, hire purchase,
unsecured loans and deposits. Special schemes of institutions, subsidies, sales tax deferments
and exemptions, commercial paper, factoring, and securitization.

Government Schemes for funding Business

The objectives of the ministry of Micro, Small, and Medium Enterprises include supporting and
developing existing MSME and creating new enterprise and providing support to Khadi village,and
Coir industries. These objectives can be met by creating an ecosystem that supports entrepreneurship
and skill development in MSME. The only registered members in MSME are eligible for these schemes.

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India has more than 40 million registered and unregistered SMEs engaged in varied sectors including
IT, manufacturing, packaging, and food processing. This sector is one of the key growth drivers of the
country, contributing about 40% to India’s GDP. Recognising the importance of this sector, the
government has started the ‘Make In India’ initiative to encourage more SMEs to become a part of
India’s growth journey.

✓ Owing to their small size, SMEs and MSMEs, as compared to big firms, are burdened with
many challenges that come in the way of their growth. The most important are accessing
finance at the right cost and getting the support of labour at the right time. Here are some of
the common challenges that this business sector has to deal with in order to increase their
efficiency and output

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✓ Trained talent migrates from SMEs to higher paying jobs as soon as a lucrative
opportunity comes along, which undermines the firms’ stability.

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✓ In order to survive in the market and stay relevant, SMEs tend to drop the prices of
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their services and products below profitable levels. This shakes up the market prices
for competitors too and leads to overdependence on existing clients.
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✓ Unlike bigger firms, who have ready cash to fall back on, SMEs have to rely on their
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working capital to fund every need of the hour. Sometimes this is not enough given
their recurring expenses. This is especially a challenge when it comes to investing in
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new technology to fuel their growth.

✓ Another bigger point of contention for start-ups is that they have to eye growth
keeping their USP intact. Maintaining the same quality of goods and services while they
grow into bigger firms is difficult for most start-ups as they don’t enjoy the finances
required for rapid expansion, be it hiring best-in-class talent or buying state-of-the-art
equipment.

SMEs can deal with these challenges with adequate and timely funding, which government loans aim to
provide to different sectors. As a business owner, here are the top government business loan options you
can choose from.

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India was recently termed as the only, truly emerging market in the world at the moment. A part of this
growth is fueled by the micro, small and medium enterprises of the country. The SME sector contributes
over 40% of the total GDP and remains a critical source of employment for the India’s growing
population. Recognizing the importance of SME growth in the post-demonetization era, the government
has started some new business loan schemes and boosted other existing ones. Here are the top business
loan schemes from the government of India that you can avail for small business finance.

MSME Business Loans

Perhaps the most talked about business loan scheme right now is the ‘MSME Business Loans in 59
Minutes’, a scheme first announced in September 2018. The loans under this scheme are given for

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financial assistance and encouragement of MSME growth in the country. Both new and existing business
can utilize the scheme for a financial assistance up to ₹ 1 crore. The actual process takes 8-12 days to
complete, while the approval or disapproval is granted within the first 59 minutes of application. It is a

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refinancing scheme, wherein five authorized public sector banks will grant the funds. The interest
rate depends on the nature of your business and credit rating. No information has been given on
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subsidizing the principal amount or interest funding
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To apply for business loan under this scheme, you need GST verifications, Income Tax verifications,
bank account statements for the last 6-months, ownership related documentation, and KYC details. More
information on application and approvals can be sought by visiting the SIDBI portal for this business
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loan.
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MUDRA Loans

Micro-units Development and Refinance Agency (MUDRA) is an organisation established by the

government of India to provide business finance to micro-business units. The loans under the scheme are
given on the pretext of ‘funding the unfunded’. Since small companies and startups are often left to their
own devices for financing their venture, the government has created the concept of low-cost credit to such
undertakings. MUDRA Loans are also a refinanced business loans, approved and disbursed through
public sector banks, private sector banks, co-operative societies, small banks, scheduled commercial
banks and rural banks that come under the scheme. The loans are generally given to micro or small
businesses operating in the manufacturing, trading and services sector. The MUDRA Loans are structured
as under,

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• Sishu Loans up to Rs. 50,000/-

• Kishor Loans up to Rs. 5,00,000/-
• Tarun Loans up to Rs. 10,00,000/-

Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE)

This scheme provides collateral-free financing to the MSME sector for both existing and new
enterprises. The Ministry as well as the Small Industries Development Bank of India (SIDBI)
established the Credit Guarantee Trust scheme in 2000- 200l for micro and small enterprises.
The coverage of the loan under CGTMSE shall ensure that the financial institution gets the
guaranteed amount without any time lag at a minimal cost.

National Small Industries Corporation Subsidy

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The NSIC subsidy for small businesses offers two kinds of financial benefits – Raw Material Assistance
and Marketing Assistance. Under the raw material assistance scheme of NSIC, both indigenous and
imported raw materials are covered. Under the marketing support, funds are given to SMEs for enhancing

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their competitiveness and the market value of their products and services. The NSIC is mainly focused
on funding small and medium enterprises who wish to improve / grow their manufacturing quality and
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quantity

Technology Upgradation Schemes

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This scheme allows small businesses to upgrade their process by financing technological upgradation.
The technological upgradation can be related to numerous processes within the organization, such as
manufacturing, marketing, supply chain etc. Through the CLCSS scheme, the government aims to reduce
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the cost of production of goods and services for small and medium enterprises, thus allowing them to
remain price competitive in local and international markets. The scheme is run by the Ministry of Small-
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Scale Industries.
SME need to gain competitive advantage in international markets by upgrading their
technology. The various schemes provided by the government for technology
upgrading are:
• Credit Linked Capital Subsidy Scheme (CLCSS):

Through the CLCSS scheme, the government aims to reduce the cost of production of goods
and services for small and medium enterprises, thus allowing them to remain price competitive
in local and international markets. The scheme is run by the Ministry of Small-Scale
Industries. This scheme aims at facilitating technology upgradation by providing capital
subsidy for the modernization of production equipment and techniques.
• Technology Upgradation Fund Scheme (TUFS): This scheme is provided by
the Ministry of Textiles. It provides interest subsidy, capital subsidy, or margin
money subsidy on the basic value of the machinery.

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Marketing Assistance Scheme

The Ministry of MSME, through the National Small Industries Corporation (NSIC),
provides marketing support to MSME under the marketing assistance scheme.
MSME can get subsidies to organize and participate in domestic and foreign trade
exhibitions and also buyer-seller meets. This would help MSME to develop
contacts and venture into international markets.

Certification Scheme

In order to enhance the competitive strength of MSME, to improve quality,

environment, and safety standards, certification is needed. To promote this, the
government provides incentives to MSME obtaining JSO 9001, ISO 14001,and

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Hazard Analysis and Critical Control Point (HACCP) certification. This scheme is
administered by the development commissioner of MSME. The scheme envisages a
one-time reimbursement of charges for acquiring ISO 9001/14001/HACCP
certifica-tions to the extent of 75 per cent of the expenditure, subject to a maximum
of Rs.75,000 in each case.
Credit Rating Scheme C
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The credit rating scheme for this sector has been formulated in consultation with the
Indian Banks Association and rating agencies. The NSJC has been appointed as the
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nodal agency for the implementation of this scheme through various empanelled
agencies. Eligible enterprises get a subsidy of up to 75 per cent for getting themselves
rated by a credit rating agency under the Performance and Credit Rating Scheme of
NSIC.
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It has been predicted that growth in the MSME sector would cross the double-digit mark in the
next five [Link] key drivers would remain housing and infrastructure, white goods, and
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automobiles. The services would also continue to churn out employment in retail, transportation,
education, telecommunications, entertainment, and recreation. MSME will continue to be an important link in
India’s long journey to becoming a developed nation. The sector has the potential to create millions of employment
opportunities

Product Launch,Pre launch and post launch Requirement

A product launch is when a company decides to launch a new product in the market. Product launch can be of an
existing product which is already in the market or it can be a completely new innovative product which
the company has made

A product launch is when a company decides to launch a new product in the market. Product launch can
be of an existing product which is already in the market or it can be a completely new innovative product
which the company has made.

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Product launch involves various steps which involves understanding customer needs, product design,
testing of the product, marketing & advertising and ensuring that the product reaches out to all its
audience. A successful product launch provides a sales momentum for the company.
Importance of a Product Launch
When any new product or service is introduced in the market, it is called a Product Launch. An existing
product can also be launched after further innovation or upgrades to the product. A Product launch passes
through a number of steps known as the product launch process, starting from the ideation phase to
development phase, testing phase, analyze phase to finally the launch of the product or service.
The market launch starts after the product or the service has been launched and encompasses the
marketing plan and its implementation to ensure that the product reaches the target market. Brand launch
is defined as the creation of a new brand in the marketplace and positioning it where none other exists. A
good product launch helps in the following:

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1. Create Awareness: Launching a product or brand through articles, events and promotional events
ensure that the campaign gets noticed and people become aware of the product or brand. This, in turn, can
increase the customer base and sales.

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2. Planning and Staffing: The soft launch can give an idea of the strategies to be implemented, resources
and staffs requirement and the training and preparation needed to take care once the product is released to
the whole marketplace.
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Furthermore, there are 2 approaches to launching a new product or service. They are:
1. Soft Launch
2. Hard Launch
A soft launch is when the approach towards the release is limited to a small set of the target
audience or a limited demographics or geographic area and check if any changes are required
before launching the product to the whole market
Whereas, a hard launch is when the product is released with full force marketing efforts from the
very first day in order to spread awareness and excitement to customers and persuade them.
These are the two types of product launch.

Elements for a Good Product Launch

The principles & key elements for a successful product launch are the following:

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a) Relating Product Capabilities to Market Needs
b) Having a clear positioning and messaging tagline
c) Setting clear goals for launch
d) Having the power of leverage C
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e) Having a proper time of launch
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Advantages & Disadvantages of Product Launch

Some merits of product launches for a company are:
1. Excitement and Attention: Once the product launch is communicated to the audience through a press
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release, articles, social media, and events, people get aware of the launch and it will create excitement in
their minds.
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2. Building Trust: If people are invited to try the products through free samples, it can build trust and
customers can overcome their skepticism and accept the product. This also allows the promotion of a
product through word-of-mouth, social media, and communities.
3. Training and Preparation: A soft product launch gives time to train and prepare employees to deal with
the public appearance and customer queries once the product is launched to the whole market.
4. Increased Revenue Streams: New products can pave the path to unexplored revenue streams.
Moreover, a new product or brand launch captures the interest of different business which allows
expansion of the business and entering into new ventures.
Disadvantages of a product launch.
1. High Investment: Launching a new brand or product needs a lot of investment of time and resources for
training employees, press releases, promotional activities and events. There is a risk of the product not
getting successful and the launch getting failed.
2. Proper Approach to Launch: Different types of products need different approaches to launch, whether
soft launch or hard launch. If the requirement is towards quick and more dramatic results, a hard product
launch is preferred.

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Post Launch / Pre Launch Requirements

Nearly 75 percent of startups fail within the first three years. The classic saying “prior planning prevents
poor performance” applies directly to a startup. There needs to be an established audience presence
beforehand to achieve this. It is crucial to look at the big picture and how you can build up excitement
leading up to the big day. Here are some ways in which you can ensure a strong start for your business:

7 Ways to Build Hype Months Before Your Business Launches

1. Explain how your product or service changes lives. Think back to the reason you started a business. ...

2. Pinpoint interests of your target market. ...

3. Find the right influencers. ...

4. Create a webpage with a sign-up form. ...

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5. Hold contests with giveaways. ...

6. Track and analyze everything. ...

7. Keep audience in suspense.

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1. Explain how your product or service changes lives.
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Think back to the reason you started a business. What makes your idea innovative? When you begin to
lay the framework for promoting your new business, the preliminary advertising has to have a clear cut
way of saying how you plan change the status quo. This will generate the proper interest to get the market
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buzzing about your startup. Make notes on what your target market’s current mindset is and what you
would like it to be after your business takes flight.
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2. Pinpoint interests of your target market.

Knowing your target audience and everything about it is key to running a successful business. Being
educated on your market can tell you which tools to use to make the biggest impact. What type of media
channels is your target market most receptive to? Once you have determined this, you can create your
brand’s personality to fit the mold and speak the same language.

If your brand was a person, what would they be like? What do they stand for? How are they relatable?
Having a firm understanding of the target market’s interests and positioning your brand accordingly will
get consumers on board early on to create a strong foundation.

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3. Find the right influencers.

Once you have successfully pinpointed your target market and their interests, the challenge is reaching
them on a level in which they will critically engage. To overcome this obstacle, it is crucial to find right
the opinion leaders or influencers within the respective communities.

These influencers have the ability to make a profound impact on public perception for matters in which
they are well known. These can be bloggers, politicians, educators, journalists or even other business
owners. Getting key influencers on board early will do wonders in getting consumers excited to see your
innovative idea take shape.

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4. Create a webpage with a sign-up form.

As soon as your business launches, growth should be a top priority and should be carefully premeditated

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well before the big day. A great way to do this is to create a pre-launch webpage with a sign-up form. Not
only will this help gauge consumer interest early on, it will take the pre-launch hype and generate it into
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customer leads.
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It is important to make this page as quick and user-friendly as possible. Only collect information that is
absolutely necessary as the user will likely give up if it is too time consuming. Be sure there is a clear call
to action and the page is easy to share on social media. In the digital world, creating a strong pre-launch
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website is essential in creating hype for a startup.

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5. Hold contests with giveaways.

A fun and effective way to build brand exposure before a launch is to have contests involving potential
customers. Provide some motivation to sign up early. This will help build rapport with your target market
while keeping costs relatively low. In order for a contest to be valuable to your business, it must have
defined goals. Do you want to raise awareness? Generate more leads? Show social responsibility?
Regardless of the end goal, the strategy needs to be clear from the start to be effective. Most importantly,
make sure the giveaways are unique and meaningful. The prize should something that appeals to the entir
e target demographic and will drive traffic your website.

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6. Track and analyze everything.

Business results are becoming more and more data-driven. Tracking is critical in determining what works
and what doesn’t. In the months leading up to your launch, you need to capture every element to ensure
you are maximizing your online efforts. For your website, place an analysis code on every page to make
sure each visit is being tracked. Keep of list of goals you want your website to accomplish. Once you
have all the data, analyze what is working and what can be optimized.

7. Keep audience in suspense.

In months leading up to a launch, be careful not give away too many details about your product or

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service. Keep in mind, building hype before a business launch is not about what your product or service
does, but what it might do. The more information you give out beforehand can kill anticipation, and the
hype will not be as strong. However, you do want to give the public small hints of what is in store to draw

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attention. Think of how you can creatively hold out while advertising small tidbits leading up to launch
day.
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Procedure for getting License and Registration for business startup

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One of the primary aspects of starting a business enterprise is registering the business. Primarily, the
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registration of business is filed with the state in which the business operates. Some types of businesses
have to register with the federal government, but only if you operate businesses such as those
pertaining to firearms, tobacco and alcohol. Registering your business with state entities helps you to
start and run your business legally. The Small Business Administration (SBA) is a great resource that
provides many tools to help with registering your business.

In order to set up an enterprise, the entrepreneur has to decide on the constitution of the unit at the initial stages of the
project The various types of constitution of the enterprise are sole proprietor- ship, partnership, limited company
(private/public), cooperative, and franchising.

Obtain Registration

The sole proprietor has no legal formalities. Usually MSME choose to register with the District Industries Centre for
obtaining various facilities and incentives. Partnership firms are governed by the lndian Partnership Act, 1932. The

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terms and conditions of partnership are contained in the partnership deed. Companies register with the registrar of
companies and cooperatives register with the Registrar of cooperatives.

Obtain Clearances from Departments as Applicable

For setting up a new enterprise in India, a number of clearances and approvals are required from concerted authorities
depending on the type of enterprise. The approvals and clearances that may be required from various departments are given
in Table
Approvals and Clearances Required from Various Departments

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Applications in the prescribed form is to be submitted along with the following documents,

✓ A copy of the Provisional Registration Certificate (PRC)

✓ A detailed Project Report,

✓ A Certified copies of educational qualification,experience and other categories as may be

applicable,

✓ Applicable earnest money deposit

Challenges and Difficulties in starting an Enterprise

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Entrepreneurs face many challenges in today’s ultra-competitive business world;
fortunately, contemporary times have also blessed entrepreneurs with more resources for
tackling those problems than ever before.

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The following lists the “Top 10” challenges faced by entrepreneurs today, defines why each
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problem exists
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What are the biggest challenges entrepreneurs face when starting their own business? How do
successful entrepreneurs handle and solve problems in business? Must an entrepreneur face these
business challenges when starting a business?
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1 Developing the Vision and Business Idea

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Developing a business idea is usually the first challenge faced by every entrepreneur when starting a
business from scratch. Finding the right business opportunity or creatively developing an idea is certainly
not an easy task. I call “Envisioning the idea” the first true task of an entrepreneur. As an entrepreneur,
you must possess the ability to see what others cannot see. While others see problems, you must see
opportunities.
But seeing opportunities is just the beginning. The main business challenge is going to be your ability to
forge that opportunity into a business idea. I see this as a business challenge because the process of
transforming problems into business opportunities is like trying to turn lead into gold. I call it the
entrepreneurial process of “Creating Value out of nothing”; a process that brings innovative products
into existence.
An entrepreneur must always be ahead of his time or else he will lose his relevance. It is the duty of an
entrepreneur to bring into the present what is yet to be. It is also the duty of an entrepreneur to bring
solutions to other people’s problems. Back in the days when cars were custom made and exclusively for
the rich, Henry Ford envisioned affordable cars for the masses. That single vision made Henry Ford one
of the richest men in history.

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The Wright brothers envisioned a flying machine but they were massively opposed because the thought of
humans flying was perceived as impossible. Today, the airplane is a common reality.
Developing the vision and idea is the first true task and challenge of being an entrepreneur.

2. Assembling a Business Team

The second business challenge you will face in the course of starting your business from scratch is
assembling the right business management team “strategic round table business team” that will meet
regularly to brainstorm on ways to grow your business.
The process of building a business team starts even before the issue of raising initial start-up capital arises

As an entrepreneur, you are bound to have strengths and weaknesses. That is the more reason you need a
business team to cover up or compliment your weaknesses. A team is a necessity for building a successful
business.

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Your strategic business team should comprise your banker, your accountant, and any other seasoned
entrepreneur that has the capability to be of tremendous impact to your business.

3. Raising Capital for your Business C

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After developing your idea, and getting your business team in place, the next challenge you are going to
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face when starting a business from scratch is that of raising capital

Trying to convince investors about something that doesn’t exist yet is definitely a challenge, especially in
this time of economic recession. Trying to make them understand that you are trustworthy and equal to
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the task is not child’s play, especially when you are building your first business and have to prove the
world that you are up to it.
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Most brilliant business ideas never scale through the venture capital stage because the entrepreneur is
either not prepared or lacks what it takes to raise the needed capital.

“The world is filled with brilliant ideas and excellent products but the world lacks seasoned
entrepreneurs.” – Robert Kiyosaki

To overcome the challenge of raising capital, you must develop the ability to sell your idea and vision to
potential investors. When I say: “sell your ideas“, I mean improving your communication skills and your
manner of presentation. In the game of raising capital, you must have a good story to tell, backed by a
strong business plan, a good business team and good persuasion skills. You must know how to pitch angel
investors and venture capitalists alike.

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4. Finding the Right Business Location

Is finding a good location a business challenge? Finding a good business location at the right price is
definitely not easy. To get a location that has a rapidly growing population, good road network and other
amenities at a good price? Not easy . Nowadays many office buildings are empty due to the financial
crisis, and rents are negotiable. Try to find a location where there are more starting entrepreneurs to split
costs and help each other with infrastructure.

5. Finding Good Employees

Business owners know how difficult it is to find a hardworking, trustworthy employee. Most employees
want to work less and get paid more. Finding a good employee who will be passionate about delivering
his or her services is quite difficult. Finding good employees is a minor task compared to the business
challenge of forging your hired employees into a team. You may have great employees but if they can’t

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act as a team, they are worthless and will yield nothing but stagnation. A football team may have great
players but if they fail to play as a team, their combined possessed skills are utterly useless.

Employees are the representatives of your business to your customers and the outside world. They are a

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reflection of your business culture and ethics. If just one of your employees rude to just one of your
customers, it is going to portray a bad image for your company. Remember: Bad news travels fast! So
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you must be very careful when hiring employees. Remember the golden rule of business; “Hire slow and
fire fast.”Teambuilding and hiring the right employees is a science.
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[Link] Good Customers

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The sixth challenge you will face in the process of starting a small business from scratch is finding good
customers. Note the keyword “good customers.” In the process of building a business, you will come to
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find out that there are good customers as well as bad customers. You must be on guard for bad customers.
Good customers are really hard to find. A good customer will be loyal to your company and will be
willing to forgive you if you make a mistake and apologize. A good customer will try to do the right thing
that will benefit both him/herself and your company mutually.

Bad customers will always look for loopholes in the company’s policy to exploit and make a few gains.
Bad customers will always try to exploit the company’s goodwill and look for ways to rip off the
company. Bad customers are responsible for bad debts.

Good customers build your business and bad customers will always try to liquidate your business. Just as
you fire employees, you must also be prepared to fire bad customers without hesitation. Don’t invest all
your time and effort on customers that simply are not worth it! A beautiful saying goes like this: “Don’t
get up on a dead horse and say: Giddy-up!”

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 MANAGEMENT & ENTREPRENEURSHIP MODULE 5b

[Link] with Competition

Competition is the next challenge you will face when starting a business. Most individuals see
competition as a plague but competition is a good challenge. Competition as a benchmark for creativity,
the main engine that stimulates innovation and production of quality products at great prices. Without
competition, there will be no innovation and without innovation, your business will become stagnant.

Competition keeps us on our toes and drives us to constantly improve our products and services.

Competition keeps us on our toes and drives us to constantly improve our products and services.

8. Unforeseen Business Challenges and Expenses

Just as a pilot is always on the watch for unpredictable bad weather, thunderstorms and technical failures,
so a good entrepreneur must always be prepared for whatever may occur. Unexpected challenges can
come in the form of:

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• Not being able to make payroll
• Bad debts from customers
• Loss of market share
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Unpaid bills and taxes
Inadequate stock or inventory
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• Unexpected resignation of staff from sensitive positions
• Dwindling working capital
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These business challenges, if not handled properly, can ruin your plan to build a successful business.
Another challenge you must expect is an unforeseen increase in business expenses. If not handled
properly, it might result in constant negative cash flow and eventually: business failure.
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9. Keeping Up With Industrial Changes and Trends

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Change in trends is a challenge you must be prepared for when starting a small business. Trends have
made and broken lot of businesses. a lot of profitable businesses that have been wiped out by slight
industrial changes and trends. A typical example is the Dotcom trend of the mid-nineties, where many
established businesses were wiped out by emerging web based Dotcom companies.

Keeping eyes open to spot trends is really a challenge but the big task will be your ability to quickly use
the trend to your advantage. These days, we can see the same thing happening in the retail business.

10. Exiting the Business

When building a business from scratch, you are going to face the challenge of determining your exit
strategy. You have to plan your exit strategy before you even start the business. Most entrepreneurs run
their business without any plans to exit and even if they have an exit strategy, they find it difficult to
implement it.

Before starting a business, it is advisable to plan an exit. Lack of an exit plan is the primary reason why
most businesses crumble after the death of the founder. An exit strategy is very important to the long-

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MANAGEMENT & ENTREPRENEURSHIP MODULE 5b

term survival of a business. Now how do you plan an exit strategy? There are benchmarks you can use to
determine your exit from any business. Most smart entrepreneurs will use a certain benchmark as a target
and once this specific target is reached, they exit the business. but always remember: “your exit is more
important than your entry.”

As a final note, challenges come only to make you stronger; so don’t faint in the face of challenges. Stand
tall; keep moving your business forward and see you at the top

…………………………………………

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Technological Innovation Management & Entrepreneurship Module 5c

Technological Innovation

Management & Entrepreneurship

B.E., V Semester, Electronics & Communication Engineering

[As per Choice Based Credit System (CBCS) scheme]

[Subject code: 18ES51]

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MODULE -5
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a) Business Model
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b) Financing and How to start a Business?

c) Project Design & Network Analysis

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Technological Innovation Management & Entrepreneurship Module 5c

MODULE – 5c
PROJECT DESIGN AND NETWORK ANALYSIS

INTRODUCTION

The execution of a Project follows a definite path of planning, scheduling and controlling. The first and the
foremost aspect of a project is the project design. It is in fact the heart of the project entity. It defines the
individual activities which go into the corpus of the project and their interrelationship with each other.
Project design enables to identify the flow of event which must take place for the successful implementation
of the project.

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Network techniques help the management of an organization in performing these functions
efficiently and effectively. Together they stand concerned with the development of the project work plan
and the duration time-estimate and evaluationof these in the light the constraints of the project situation.
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The strategy selected as a result of the techno-economic analysis forms the initiation of the project
design development. Briefly, project design is the framework of a project formulated with detailed
sequences and develops an acceptable work plan for the project. It helps the entrepreneur to implement the
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project as scheduled without any hindrances.

The strategy is examined in detail and the details are utilized to compile the sequential nation of the
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constituent activities of the project. This compilation of the sequential narration is known as the Project
Logic. When it is represented in the form of graphical pattern, it is known as a network.
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IMPORTANCE OF NETWORK ANALYSIS

The network analysis has the potential of unfolding unknown snags involved in Project estimates which,
when detected, may provide management not only to improve on the ongoing project estimates but also to
take serious lesson for future application. This would, of course, require seriousness and sincere application
of different facts of the technique of network analysis which require, among other things, that

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(a) The whole project should be considered with reference to the sequence of activities and events. Sequence
here is not a mere mathematical problem. It underlines activities that are to follow one after another
leading to an event.

(b) This would also require that the events should be thought of in different steams of
operations and their relationship understood clearly.

(c) The whole project may be put on one network while different segments of the project may be detailed out
in separate networks for final integration in the overall network. This would imply that no important detail of
any operation in the project, from beginning to end, would miss the attention of the management.

(d) The time estimates may be made taking into view two discrete aspects: one projects in which previous
experience does not exist at all and time estimates would have to be based on probabilities and two, time

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estimates may be deterministic, being based on previous experience of similar types of operations in
different other projects.

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(e) Cost estimates would depend on the project time estimates and the changes in the prices of
different factors of production. In this specific context, mere provision of escalation clauses
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would not be enough. Inflationary changes would have to be attempted so that management may
know for certain what slippage in time would mean in terms of cost. This is apart from efficiency
variations — both favorable and unfavorable — depending on circumstances not quite foreseen at
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the time the estimates were made.

(f) The physical progress of the projects, individuality and simultaneity of events, jobs farmed out snags in
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different areas of project work would all require adequate notice and application of correctives in proper
time. It is also possible that management may think it appropriate and economical to speed up
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completion of projects by what is known as 'crashing.'

The concept of crashing is particularly relevant in view of the avoidance of huge constructive total loss that
slippage, dilly-dallying or other factor may cause.

ORIGIN OF PERT AND CPM

Programme Evaluation and Review Techniques - PERT Critical Path

Method - CPM

Incidentally, PERT, CPM and MOST are but three of some 40 different names given to network analysis. It
is believed and underlined that network is a logical extension of the old Grant Bar Chart. PERT and CPM
techniques were developed in the U.S. independently, while CPM came into focus about 1957 as an
offshoot of collaboration between Du Pont and Remington Rand. While different distinctions are often

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ascribed to CPM and PERT, the basic distinction is perhaps that the emphasis of CPM is essentially on the
activities themselves, the costs associated with completion of each activity and optimum plan for the project
as a whole. PERT, which was developed in 1958 as a result of collaboration between the Operational
Research Division of the United States Navy and a firm of business consultants, had for emphasis the events
rather than the activities leading to events. Most of the distinctions have, however, dissolved while both
PERT and CPM underwent different measures for attaining perfection through their application as tools.

PERT was applied to help solve problems of producing the Polaris Missile system to a very tight schedule.
Application of PERT has been based on probability estimates covering those pessimistic, those optimistic
and those considered formal. In unique types of projects like the Polaris Missile, since previous experience
in similar types of activities do not exist, probability calculations have occupied a significant place.
However, considering that all these techniques concerned with planning and control of projects have
network analysis as a common denominator, it is relevant to point out that MOST emphasizes more on

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building up of Gantt type charts covering each activity, event, time, cost, projects farming out, employment
of different classes of managers and workers, procurement of materials, deployment of materials relating to
the completion of the project. Unlike PERT and CPM diagrams, MOST diagrams actually begin at the end
of the project, working back towards the start of the activities. Instead of 'beginning to end' emphasis in

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PERT and CPM, in MOST the emphasis is on 'end to beginning.' One advantage of MOST diagrams is that
it can be converted into PERT-CPM type diagram depending on the requirements of management.
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NETWORK
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A network comprises a set of exponents connected with each other in a sequential relationship with each
step till the completion of a project.
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Network analysis is a system which plans both large and small projects by analysing the project activities.
Projects are broken down into simple activities, which are then arranged in a logical sequence. It is also
decided as to which task will be performed simultaneously and which others sequentially. A network
diagram constructed below presents the relationship between all the activities involved .Time, costs and
other resources are allocated to different activities.

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NETWORK TECHNIQUES
In a project, there may be two categories of jobs or activities — which can be taken up concurrently and
which can be taken up only after completing some other activities — either completely or partially. Hence,
in a bar chart, some of the bars may run parallel or overlap each other time-wise while some may run
serially. The scheduling of construction and identification of potential causes of delay form an important
part of a project appraisal. Timing and sequencing of various activities involved in project implantation are
reviewed, keeping in view the conditions regarding the availability of construction materials, labour,
procurement and delivery periods of plant and machinery, erection and commission, start-up and trial-runs,
training of staff, etc.

The implementation schedule also takes into account seasonal and other variations in working conditions
which might interfere with the implementation of the project. Several techniques of project scheduling and

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control such as Bar Charts, Programme Evaluation and Review Techniques (PERT), Critical Path Method
(CPM) etc. are used.

Of these CPM have come to be widely used in project management as they are very useful in the basic
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management functions of planning, scheduling and control. These techniques can be applied in diverse
kinds of projects like construction of a building or a highway, planning and launching of new product, large
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maintenance projects, scheduling ship construction and repairs, end-of-the month closing of accounts, large,
research projects, etc.
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NEED FOR NETWORK.

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Techniques Network analysis helps in designing, planning, coordinating, controlling and decision-making in
order to accomplish the project economically in the minimum available time with the limited available
resources. Network techniques were developed from the Milestone Chart and Bar Chart. These conventional
planning methods, because of their inherent limitations, could not be utilized for planning large and
complex projects.

They had the following disadvantages:

(a) A bar chart becomes too cumbersome while dealing with big and complex projects when the activities
are to be considered in detail and their interaction or interdependencies are to be studies clearly.

(b) A bar chart does not point out-which tasks should be given priority as regards resources (i.e., men,
money, materials and machinery).

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(c) The effects of changes in schedule cannot be evaluated with the help of a bar chart.

(d) A bar chart neither satisfactorily tells the time at which the activities begin and end nor does it indicate
tolerances in activity timings.
The functions of planning, organizing, directing and controlling are essential to very enterprise regardless of
the type, size, purpose, or complexity of the operation. Techniques, of course, vary because they must be
adapted to and appropriate for each individual firm and its own circumstances. PERT is one of the
management techniques which is considerably more useful to some managers than to others. It is of the
tested tools of management in industrially-developed countries.
It works a method of minimizing production delays, interruptions, and conflicts; of co-coordinating and
synchronizing the various parts of the overall job; and of expediting the completion of projects towards
scheduling and budgeting resources so as to accomplish a predetermined job. It is a communication facility

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in that it can report developments and keep the managers posted and informed.

PROGRAMME EVALUATION AND REVIEW TECHNIQUES - PERT

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STEPS IN PERT
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The first step in the development of a PERT network is the establishment of objectives. There will be a
major objectives to be accomplished, linked by supporting objectives. When these are identified, they must
be linked together so as to enable to planner to see the project in its true perspective and also see the
relationships between and among all the steps.
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The second step is to schedule work breakdown in great detail.

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In the third step; both technical and managerial persons should begin to work together.
The fourth step is that each person who participates in the application of PERT to the control of the project
should have some basic familiarity with the general nature of the work and with the ultimate objective
desired.
Some authors have also indicated the following steps involved in PERT analysis:
1. Development of project network.

2. Time estimation.

3. Determination of critical path, event slacks, and activity floats.

4. Development of project schedule.

5. Calculation of variability duration and the probability of completion in a given time.

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PERT deals with the problem of uncertain activity time by the application of statistical analysis to the
determination of estimated time for each activity of the project. This technique, as a manager's tool, defines
and coordinates what must be done to successfully accomplish the objectives of a project on time. It aids the
decision-maker but does not make decisions for him.
In PERT, time is the basic measure. It is usually expressed in calendar weeks the project should be
completed within the stipulated optimistic time. In order to arrive at the most reliable estimate of time, three
time estimates are usually employed under this technique as given below:
(i)The optimistic time: It is the shortest time possible if everything goes perfectly well with no
complications, the chance of this optimum actually occurring might be one in a hundred;
(ii) The pessimistic time: It is longest time conceivable; it includes time for unusual delay's and thus the
chance of its happening might be only one in a hundred;

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(iii) The most likely time: It would be the best estimate of what normally would occur. The differences in
these three times give a measure of the relative uncertainty involved in the activity.

Advantages of PERT C
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(a) This technique gives the management the ability to plan the best possible use of resources to achieve a
given goal within the overall time and cost limitations.
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(b) It helps management to handle the uncertainties involved in programmes where no standard time data
are available.
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(c) It presses for the right action, at the right point, and at that right time in the organization.
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Limitations of PERT
(a) The basic difficulty comes in the way of time estimates for the completion of activities because
activities are of non-repetitive type.

(b) This technique does not consider resources required at various stages of the project.

(c) Use of this technique for active control of a project requires frequent updating and revising the PERT
calculations and this proves quite a costly affair.

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CRITICAL PATH METHOD (CPM)

Next to PERT, the CPM for planning and controlling projects has enjoyed the widest use among all the
systems that follow the networking principles.
CPM was developed in 1956 at the E.I. Dupont Nemours & Co., U.S.A., in connection with the periodic
overhauling and maintenance of a chemical plant. It resulted in reducing the shut-down period from 130
hours to 90 hours and saving hours and saving the company $1 million.
CPM has two time-cost estimates for each activity (one time-cost estimate for the normal situation and the
other estimate for the crash situation) but does not incorporate any statistical analysis in determining such
time estimates. CPM operates on the assumption that there is a precise known time that each activity in the
project will take.
Advantages of CPM

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Besides being applicable to schedule large and small projects it has some of the important advantages listed
below:
(a) It helps in ascertaining the time schedule.

(b) With its aid, control by the management is made easy.

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(c) It makes better and detailed planning possible.

(d) It provides a standard method for communicating project plans, schedules, time and cost performance.
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(e) It identifies the most critical elements and thus more attention can be pa•,i to these activities.
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Limitations of CPM
(a) CPM fails to incorporate statistical analysis in determining the time estimates.

(b) It operates on the assumption that there is a precise known time that each activity in the project will take
but this may not be true in actual life.

(c) It is difficult to use CPM as a controlling device for the simple reason that one must repeat the entire
evaluation of the project each time when changes are introduced into the network. It may be remembered
that CPM was initially developed as a static

planning model and not as a dynamic controlling device.

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DIFFERENCES BETWEEN PERT AND CPM

Though the fundamental network of PERT and CPM are identical, yet there are certain differences in
details as listed in Chart.

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