220004465-ed-poornima-charantimath.ppt

8/10/2019 220004465-ED-Poornima-Charantimath.ppt

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Entrepreneurship Development and Small Business Enterprises 1Content




Contents

1. Modern Small Business Enterprises 2. Entrepreneurship 3. Women Entrepreneurs 4. Institutions Supporting Small Business Enterprises

5. Setting up a Small Business Enterprise 6. Family Business 7. Sickness in Small Business Enterprises 8. Strategic Management in Small Business

9. Financial Management in Small Business 10.Marketing Management in Small Business 11.Production Management in Small Business 12.Human Resource Management in Small Business




Chapter 1 - Modern Small

Business Enterprises

The Small-Scale Industry (SSI) Sector continues to play a vibrant role in thesocio-economic transformation of the country. In the changed environment,

the SSI sector needs to integrate itself with the overall domestic economy andglobal markets by gearing itself to greater interdependence by capacity

building and networking.




Learning Objectives

• To understand the role and importance of small-scale

industry (SSI)• To present the impact of globalisation and the WTO on

SSI

• To introduce concepts and definitions of SSI

• To illustrate government policy and development of thesmall-scale sector in India

• To trace the growth and performance of SSIs in India

• To analyse the findings of third All India Census of SSIsector

• To understand small and medium enterprises in othercountries

• To understand the problems and prospects of SSIs




ROLE OF SMALL-SCALE INDUSTRIES

• Dynamic and vibrant sector of the economy

• Prominent role in socio-economic

transformation of the country

• Accounts for 35 per cent of industrial

production, 40 per cent of exports and 60 percent of employment opportunities




The Importance of Small-scale Industries

• Provide increased employment through labour-

intensive process.• Require lower gestation period.• Easy to set up in rural and backward areas.• Need small/local market.• Encourage growth of local entrepreneurship.• Create a decentralised pattern of ownership.• Foster diversification of economic activities.

• Introduce new products particularly to cater to localneeds.• Influence the standard of living of local people.• Provide equitable dispersal of industries throughout

rural and backward areas.


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Impact of Globalisation and the WTO on SSI

• Tighter patent laws through regulation ofintellectual property rights under the TRIPS Agreement

• Worldwide market and opportunity to export

• Intensified competition in the domestic market

• Import of high quality goods



Investment Ceiling for Small-Scale Industries

(December 1999)

Type of SSI

unit

Investment

limit Remarks

Small-scale industry Rs 10 million Historical cost of plant and machinery

Ancillary Rs 10 million At least 50 per cent of its output should go

to other industrial undertaking

Export oriented Rs 10 millionObligation to export 30 per cent ofproduction

Tiny enterprise Rs 2.5 million No location limits

Women enterprise Rs 10 million 51 per cent equity holding by women

Service and businessenterprise

Rs 0.5 million No location limits



Evolution on Investment Limits for Small-

scale Industries Year Investment limit Additional condution

1950 Up to Rs 0.5 million in fixed assetsLess than 50 to 100 personswith or without Power

1960 Up to Rs 0.5 million in fixed assets No condition

1966 Up to Rs 0.75 million in plant and machinery No condition

1975 Up to Rs 1 million in plant and machinery No condition


1985 Up to Rs 3.5 million in plant and machinery No condition





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Content

India‘s SSI sector is divided into seven industry

groups

• Traditional Sector: Handicrafts, Handlooms, Khadi,Village and Cottage Industries, Coir and Sericulture.

• Modern Sector: Power looms and residual SSI

Indian definition of SSE based largely on cumulativeamount of investment in plant and machinery whoselimits have been periodically revised upwards

• Emerging liberalised and competitive economicenvironment necessitated structural andfundamental changes in the policy framework,causing a shift in focus from protection to promotion



Content

Performance of SSI Units during the 1980s



Content

Performance of Small-scale Industries

during the 1990s



Content

Comparative Performance of SSIs in Terms

of Average Growth Rates

Areas of

Performance

Average growth rate (%)

1980-1990 1991-2000

No. of Units 8.6 5.63

Production 19.9 16.14

Employment 6 4.05

Export 19.15 18.93



Content

Overall Performance of Small-scale Sector

in India



Content

Third All India Census on SSI

• All the SSI units permanently registered up to March 31

2001, numbering 22,62,401, were surveyed on a completeenumeration basis. Of these 13,74,974 units (61 %) werefound to be working and 8,87,427 units (39 %) were found tobe closed.

• Of the 13,74,974 working units, 9,01,291 were SSIs and4,73,683 were SSSBEs. Thus, the proportion of SSIs was65.55 per cent. About 5.08 per cent of the SSI units wereancillary units. The proportion of units operating in ruralareas was 44.33 %.

• In terms of the number of working units, six states, viz., TamilNadu (13.09 %), Uttar Pradesh (11.85 %), Kerala (10.69 %),Gujarat (10.08 %), Karnataka (8.04 %), and MadhyaPradesh (7.41 %), had a share of 61.16 %.




Third All India Census on SSI cont…

• With regard to closed units, six States, viz., Tamil

Nadu (14.33 %), Uttar Pradesh (13.78 %), Punjab(9.32 %), Kerala (8.43 %), Madhya Pradesh (7.4%), and Maharashtra (6.11 %) had a share of59.37 %.

• The per unit employment was 4.48. Theemployment per Rs 1 lakh investment in fixedassets was 0.67.

• The rice milling industry topped the list in terms ofgross output. In terms of exports, the textilegarments and clothing accessories industry wason top.




Third All India Census on SSI cont…

• Compared to the Second Census, the Third Censusbrought out some structural changes in theregistered SSI sector. While the proportion ofworking units remained the same, by and large, the

domination of SSIs among the working units hasbeen reduced considerably from 96 % to 66 %. Thisis mainly due to an increase in the number of unitsengaged in services. The per unit employment has

gone down from 6.29 to 4.48. The per unit fixedinvestment has gone up from Rs 1.60 lakh to Rs6.68 lakh. This could be due to technologicalupgradation.




Sector-wise Distribution of Working and Closed

Units

Rural Urban Total

Working

units 44.33% 55.67% 100.00%

Closed unit 37.92% 62.08% 100.00%

Total 41.82% 58.18% 100.00%




Percentage distribution of Registered SSI

units by location




Unregistered SSI Sector

• This sector was surveyed using a two-stagestratified sampling design. Out of the9,94,357 villages and urban blocks, 19,579villages and urban blocks were surveyed toidentify the units of unregistered SSI sector.Out of these, information was completereceived in respect of 19,278 villages andurban blocks. In these villages and urbanblocks, the enumerators selected 1,68,665unregistered SSI units for survey, but theycould actually survey 1,67,665 units.




Unregistered SSI Sector cont…

• The size of the unregistered SSI sector isestimated to be 91,46,216. Of these, only 38.75 %were SSIs and the rest were SSSBEs.

• The reasons for non-registration were elicited inthe Third Census. Interestingly, 53.13 % of theunits informed that they were not aware of theprovision for registration, while 39.86 % of theunits indicated that they were not interested.

• About 45.38 % of the units were engaged inservices while 36.12 % were engaged inmanufacturing and the remaining 18.5 % inrepair/maintenance.




Unregistered SSI Sector cont…

• The maximum number of unregistered SSI units (16.89 %)

were located in Uttar Pradesh. Other States with a highconcentration of unregistered SSI units were AndhraPradesh, West Bengal, Maharashtra, Madhya Pradesh,Tamil Nadu, Karnataka, Bihar, Rajasthan and Gujarat.

• About 96.9 % were proprietary units and 1.13 % partnershipunits.

• The average employment was 2.05 and the employmentgenerated per Rs 1 lakh fixed investment was 3 persons.

• About 10.13 % of the units were women enterprises and thesocially backward classes managed 57 % of the units.




Total SSI sector

• The size of the total SSI sector is estimated to be

over one crore (1,05,21,190). About 42.26% ofthese units were SSIs, the rest were SSSBEs. Thenumber of ancillaries among SSIs was 2.98%.

• About 47.22% of the units were located in UttarPradesh, Andhra Pradesh, Maharashtra, MadhyaPradesh and Tamil Nadu.

• The services sector emerged as the dominantcomponent in the total SSI sector with a share of44% of the units.




Total SSI sector cont…

• Although registration is voluntary in the SSIsector, the registered SSI sector was found tobe the cream of the total SSI sector. In termsof size, it was only 13%, but in terms of

investment its share was 59 % and itcontributed to 59% of the total production.

• About 95.8% of the units were of the proprietarytype of ownership. Entrepreneurs belonging tosocially backward classes managed about 56% ofthe units.




Total SSI sector cont…

• The percentage of women enterprises was10.11%. The percentage of enterprisesactually managed by women was 9.46%.

• The percentage of women employees was13.31%. The employees belonging to

socially backward classes was to the tune of57.45%.




Sickness in SSI sector • Sickness was identified through the latest definition

of RBI given by the Kohli Committee. Incipientsickness was identified in terms of continuousdecline in gross output.

• Sickness in the total SSI sector was to the tune of1%, whereas in the registered and unregistered SSIsectors it was 3.38% and 0.64% respectively.

• The maximum number of sick units.about 59.33 %was located in West Bengal, Kerala, Maharashtra,Karnataka, and Andhra Pradesh.




Sickness in SSI sector cont…

• Out of the units having loan outstanding withinstitutional sources such as banks and financialinstitutions, sickness was reported to be about19.6% in the registered SSI sector and 16.61% inthe unregistered SSI sector. In the total SSI

sector, this percentage was 17.8.

• Incipient sickness, identified in terms of a

continuous decline in gross output was 11.5% inthe registered SSI sector and 6.48% in theunregistered SSI sector. In the total SSI sector,this percentage was 7.4.





• Combining the three yardsticks used tomeasure sickness, viz., (a) delay inrepayment of loan over one year, (b) declinein net worth by 50%, and (c) decline in output

in last three years, about 13.98% of the unitsin the registered SSI sector were identified tobe either sick or incipient sick. This

percentage was only 6.89 in the case ofunregistered units. In the total SSI sector, thispercentage was 7.82.





• The States of Kerala, Tamil Nadu, AndhraPradesh, Karnataka, and Maharashtra hadmaximum number of sick/incipiently sick SSIunits. These five States together accounted

for 54.28% of the sick/incipiently sick SSIunits in the country.

• ―Lack of demand‖ and ―Shortage of workingcapital‖ were the main reasons forsickness/incipient sickness in both theregistered and unregistered SSI sectors.




Third All India Census On SSI




Small and Medium Enterprise (SME)

• International SME network (INSME) is ahub of networks and structure ofservices among members.

• Definition of an SME varies from onecountry to another.




Definition of SMEs in Various Countries

In the Indian context, we have so far not

defined medium enterprises clearly. What

is neither small nor large is being loosely

defined as medium. Further, enterprise

encompasses businesses, services andindustries. In the broadband of ‗ small‘,

the discussion extends to medium as well.

Another possible connotation for theSMEs is the small manufacturing

enterprises.

External and Internal Problems Faced




External and Internal Problems Faced

by Small-scale Industries




Chapter 2 – Entrepreneurship

―What differentiates an entrepreneur? To visualize adream and go after it. At the end of the day, that's whatyou do in life. Either that dream can be so unreachable,so crazy that you never reach it—or that dream can havethe inherent ability to be achieved.‖




IMPORTANCE OF ENTREPRENEURSHIP

• Entrepreneurial development today has assumedspecial significance, since it is a key to economicdevelopment.

• Entrepreneurs are, thus the seeds and fruits ofindustrial development.

• They have invented new products and developedorganizations and the means of production tobring them to market.




Why Should You Become an Entrepreneur?

• You will be your own boss and boss to otherpeople and make decisions that are crucial tothe business‘ success or failure.

• You will make money for yourself rather thanfor someone else.

• You may participate in every aspect ofrunning a business and learn and gainexperience in a variety of disciplines.

Difference between a Manager and an




• Entrepreneur

Own bossTakes own decisions

Hires employees He is an employee

Uncertain rewards which can be unlimited

• Manager

Salaried employee

Executes the decisions of the owner

He is an employee

Fixed rewards and salary

Difference between a Manager and an

Entrepreneur




CONCEPTS OF ENTREPRENEURSHIP

• Entrepreneurial Development is a key to socio-

economic transformation of the region.

• Entrepreneurship can be defined as a process of actionan entrepreneur undertakes to establish his enterprise.

• The word ―entrepreneur‖ is derived from the FrenchVerb enterprendre, means ‗to undertake‘. This refers

• to those who ―undertook‖ the risk of new enterprises.

• Entrepreneurial development process can be explainedin five stages.




• The word entrepreneur is derived from a Sanskrit word called―Antaraprerana‖. Poornima Charantimath

• An individual who bears the risk of operating a business in the face ofuncertainty about the future conditions.

Encyclopedia Britannica• He is the one who innovates, and introduces something new in the

economy.Joseph A. Schumpeter

• He shifts economic resources out of an area of lower and into an area ofhigher productivity and greater yield.

J.B.Say (French economist)

• He searches for change, responds to it and exploits opportunities.Innovation is the specific tool of an entrepreneur.

Peter F. Drucker

Various Definitions of an Entrepreneur




• Entrepreneurs are people who have the ability to see and evaluatebusiness opportunities; together with the necessary resources to takeadvantage of them; and to intimate appropriate action to ensure success.

International Labour Organization (ILO)

• He is the one who is endowed with more than average capacities in thetask of organizing and coordinating the various factors of production. Heis a pioneer and captain of industry.

Francis A. Walker• He is a critical factor in economic development and an integral part ofeconomic transformation.

William Diamond

• He is a person who is able to look at the environment, identifyopportunities to improve the environment, marshall resources, and

implement action to maximize those opportunities.Robert E. Nelson

• He is the agent who buys means of production at a certain price in orderto combine them into a product that is going to sell at prices that arecertain at the moment at which he commits himself to his costs.

Cantillion

Various Definitions of an Entrepreneur

The Characteristics of a Successful




• Creativity• Innovation• Dynamism• Leadership

• Team Building• Achievement Motivation

• Problem Solving

• Goal Orientation• Risk Taking and Decision-Making ability• Commitment

The Characteristics of a SuccessfulEntrepreneur




Classification of Entrepreneurs

Based on the functional characteristics: Innovative,

Imitative/Adoptive, Fabian, Drone.Based on the Developmental Angle: Prime mover,

Manager, Minor innovator, Satellite, Local trading.

Based on the types of Business: Manufacturing,Wholesaling, Retailing, Service.

Based on the 9 Personality types: The Improver,The Advisor, The Superstar, The Artist, The

Visionary, The Analyst, The Fireball, The Hero, TheHealer.

Based on the Schools of Thought onEntrepreneurship.

M h f E hi




Myths of Entrepreneurship

• Entrepreneurs are born not made• Entrepreneurs are academic and social misfits• Entrepreneurs fit an ideal profile.• All you need is money to be an entrepreneur

• All you need is luck to be an entrepreneur• A great idea is the only ingredient in a recipe forbusiness

• My best friend will be a great business partner

• Having no boss is great fun• I can make lots of money• I will definitely become successful• Life will be much simpler if I work for myself

Models suggested for the development of




Models suggested for the development of

entrepreneurship

• Psychological models.

• Sociological models.

• Integrated models.

Five stages for promoting smallentrepreneurship

• Stimulation.

• Identification.

• Development.• Promotion.

• Follow up.

C




Entrepreneurial Development Cycle

EntrepreneurialDevelopment

Cycle

SustainingActivities




PROBLEMS FACED BY ENTREPRENEURS

Problems faced by entrepreneurs are:

• Internal problems• External problems and• Specific management problems.

To build capacity for entrepreneurship followingmeasures can be taken:

• Availability of credit,

• imported raw materials,• Skilled labour,• Technology and Equipment,• Infrastructural facilities,• Advisory Services and access to market.

Ch 3 W E




Chapter 3 - Women Entrepreneurs

―When women move forward, the familymoves, the village moves and the Nation

moves‖. - Pandit Jawaharlal Nehru



WOMEN ENTREPRENEURSHIP DEFINED




WOMEN ENTREPRENEURSHIP DEFINED

• ―An enterprise owned and controlled by a women

having a minimum financial interest of 51 per cent ofthe capital and giving at least 51 per cent of theemployment generated by the enterprise towomen.‖ - Government of India

• ―A woman entrepreneur can be defined as aconfident, innovative and creative woman capableof achieving self economic independenceindividually or in collaboration, generates

employment opportunities for others throughinitiating, establishing and running the enterprise bykeeping pace with her personal, family and sociallife.‖ - Kamal Singh

FACTORS INFLUENCING WOMEN




FACTORS INFLUENCING WOMENENTREPRENEURS

• The following are the major factorsinfluencing women entrepreneurs. – Economic independence

– Establishing their own creativity

– Establishing their own identity – Achievement of excellence

– Building confidence

– Developing risk-taking ability

– Motivation

– Equal status in society

– Greater freedom and mobility

Some Common Features of Women




Some Common Features of Women

Entrepreneurs in India

• Women with small families are more likely to

become entrepreneurs.• A majority of women entrepreneurs are married.

• Unmarried women face difficulties in getting

financial support to launch their enterprises.• Many women entrepreneurs belong to the low-

income group.

• Gender discrimination is encountered at everystage of business development.

• Though the trend is changing, it is notuncommon to find enterprises owned by

women but run by men .

WOMEN ENTREPRENEURSHIP




WOMEN ENTREPRENEURSHIPENVIRONMENT

• Women entrepreneurs operate throughdifferent spheres or environment. The overallcontext of women entrepreneurshipdevelopment can be described in three

different spheres – Micro sphere

– Meso sphere

– Macro sphere

CHALLENGES IN THE PATH OF WOMEN




CHALLENGES IN THE PATH OF WOMENENTREPRENEURSHIP

• Lack of Confidence Problems of Finance andWorking

• Capital Socio-cultural

• Barriers Production

• Problems Inefficient Marketing Arrangements

GRASSROOT ENTREPRENEURSHIP




GRASSROOT ENTREPRENEURSHIPTHROUGH SELF-HELP GROUPS (SHGs)

• Entrepreneurship can make significant

contributions towards women empowermentby allowing her to participate in economicactivity and decision-making process.

• A Self-help Group is a small economicallyhomogeneous and affinity group ofrural/urban poor, voluntarily formed to saveand mutually agree to contribute to a commonfund to be lent to its members as per groupdecisions.

H d S lf H l G W k?




How do Self-Help Groups Work?

1. The group addresses a felt need and acommon interest.

2. The benefits of working together outweighthe costs.

3. The group is embedded in the local socialorganisation.

4. The group has the capability, leadership,knowledge and skills to manage the tasks.

5. The group owns and enforces its rules andregulations

Institutions supporting women




pp g

entrepreneurship in India

• Consortium of Women Entrepreneurs of India

(CWEI)

• Federation of Indian Women Entrepreneurs(FIWE)•Federation of Ladies‘ Organisation(FLO),

Women‘s India Trust (WIT)• Central Bank of India Credit Schemes

• NABARD

• DWCRA

• Small Industries Development Bank of India (SIDBI)

• Association of Women Entrepreneurs of Karnataka(AWAKE)

WOMEN ENTREPRENEURS IN INDIA




WOMEN ENTREPRENEURS IN INDIA

• Kiran Mazumdar Shaw

• Vidya Chhabria

• Anu Aga

• Ranjana Kumar

• Sulajja Firodia Motwani

• Amrita Patel

• Priya Paul

• Elsie Nanji• Swati Piramal

• Shahnaz Hussain

• Rajshree Pathy

• Shanti Ekambaram

• Vinita Jain

• Anuradha Desai

• Mallika Srinivasan

• Lalita Gupte

• Ekta Kapoor• Naina Lal Kidwai

Success Stories




Success Stories

• The success story of three women‘s organisation spromoting womenentrepreneurship in India

– The strength of Women Entrepreneurs – Shri

Mahila Griha Udyog, Lijjat Papad (Recognised byKhadiand Village Industries)

– Co-operative Women Entrepreneurship -The

Mahila Bunkar Sahakari Samiti – Sabala: An organisation for womenempowerment

Summary




Summary

• The Government of India has defined awomen‘s entrepreneurship as ―an enterpriseowned and controlled by a women having aminimum financial interest of 51 per cent of

the capital and giving at least 51 per cent ofthe employment generated by the enterpriseto women‖.

• The overall context of women‘s

entrepreneurship development can bedescribed in three different spheres: microsphere, mesosphere, and macro sphere.

Summary




Summary cont…

• •The problems and constraints experienced by

women entrepreneurs have resulted in restrictingthe expansion of women entrepreneurship.Facilitating their direct participation in incomegeneration activities and decision-making capacity

can make significant contributions towards womenempowerment. Entrepreneurship can help women‘seconomic independence and improve their socialstatus.

• There are several institutions in India for promotingwomen entrepreneurship. Financial institutions andbanks have also set up special cells to assistwomen entrepreneurs.

Summary




Summary cont…

• •Self -help Groups enable the rural poor toearn their livelihood through entrepreneurialactivities besides participating in the processof development.

• A select group of women entrepreneurs, whoare high achievers, are shattering the glassceiling.

Chapter 4 – Institutions Supporting




p st tut o s Suppo t gSmall Business Enterprises

There are always plenty of resources for those who can createpractical plans for using it.

—N Hill

Learning Objectives




Learning Objectives

• To identify the Central levelinstitutions/agencies supporting small-business enterprises

• To identify the State levelinstitutions/agencies supporting small-business enterprises

• To identify other agencies supportingsmall-business enterprises

Institutions Supporting Small Business



Entrepreneurship Development and Small Business Enterprises 65

Content

pp gEnterprises

SSIs

CENTRAL LEVEL

SSI BOARDKVICSIDONSIC

NSTEDB

NPCNISIET

NIESBUDIIEEDI

STATE LEVEL

DIs

DICs

SFCs

SIDCs/SIICs

SSIDCsOTHERS

Industry Associations

Non GovernmentalOrganisationsResearch andDevelopmentLaboratories

The Main Services Rendered by the




Content

yDC(SSI) Office

• Advising the Government in policy formulation forthe promotion and development of small-scaleindustries.

• Providing techno-economic and managerial

consultancy, common facilities and extensionservices to small-scale units.

• Providing facilities for technology up gradation,

modernization, quality improvement and infra-structure.

• Developing Human Resources through training andskill up gradation.

The Main Services Rendered by the




Content

• Providing economic information services.

• Maintaining a close liaison with the CentralMinistries, Planning Commission, StateGovernments, Financial Institutions and other

Organizations concerned with development ofSmall-scale Industries.

• Evolving and coordinating Policies and Programmes

for development of Small-scale Industries asancillaries to large and medium scale industries.

• Monitoring of PMRY Scheme.

yDC(SSI) Office

Services provided by SIDO




Content

Services provided by SIDO

(a)Entrepreneurship Development and Management

Training.

(b)Extension and Training Services.

(c)Skill Development.

(d)Entrepreneurship Development Institutes (EDIs).

(e)Preparation of Project Profiles.(f) Plant Modernization Studies.

(g)Marketing Support.

(h)Collection of Data.

(i) Prime Minister‘s Rozgar Yojana (PMRY).(j) National Awards.

(k)Prototype Development and Training Centre

Salient Features of PMRY




Content

Programme• Reservation for SC/ST/OBCs.

• Preference for weaker sections and women.

• No collateral guarantee required. Only assets

created under the scheme would be hypothecatedto the bank.

• Each entrepreneur whose loan is sanctioned is

provided training for 15 to 20 working days and astipend of Rs 300/- for the industry sector andtraining of 7 to 10 working days, and a stipend of Rs150/- for the service and business section.

NGOs/Associations with SCXs Established with the




Content

Financial Assistance from Government

• Karnataka Small-scale Industries Association,

Bangalore• Kerala State Small Industries Association, Trichur

• North Karnataka Sub-Contracting Exchange, Hubli

• United Cycle Parts Manufacturers Association,

Ludhiana• Ambattur Industrial Estate Mfrs. Association, Chennai

• Udyog Vihar Industries Association, Gurgaon

• Small Industries Development Council,Thiruvananthapuram

• PHD Chamber of Commerce and Industry, New Delhi

NGOs/Associations with SCXs Established




Content

• Maharashtra Industrial Development Corporation,Nagpur

• Vidharbha Industries Association, Nagpur

• All Assam Small-scale Industries Association, Guwahati• Eastern U.P. Chamber of Commerce and Industry,

Allahabad

• Tamil Nadu Small and Tiny Industries Association,Chennai

• M.P. Laghu Udyog Sangh, Bhopal

• Kanara Small Industries Association, Mangalore

with the Financial Assistance from

Government

The Venture Capital Cycle




Content

The Venture Capital Cycle

Chapter 5 - Setting up a SmallB i E i




Content

Business Enterprise

Long-range investing under rapidly changing conditions,especially under conditions that change or may change at any

moment under the impact of new commodities andtechnologies, is like a shooting at a target that is not only

indistinct but also moving and moving jerkily at that.- JA Schumpeter

Learning Objectives




Content

Learning Objectives

• To identify the business opportunities

• To understand the procedure for setting up ofa small-scale industrial unit

• To present a business plan



Home-based Businesses




Content

Home-based Businesses • There are many businesses especially in the

services sector, which can be run efficiently fromhome. A list of some of such industries: – Courier and messenger service – Outdoor catering service – Mail order retailing – Beauty parlours – Health clubs – Travel agencies – Clearing and maintenance services

– Travel agencies – Date processing – Medical clinics – Crèches

Business opportunities Need to be Filtered




Content

through a Five-layer Sieve

• Researching your industry. how can you learn

more about your chosen industry and about theresources that are available to help you?

• Market assessment. is there a market for your

product or service? If so, how much incomecan you expect to derive from it?

• Profitability assessment. how much will startinga new business cost you? Can you afford a

lengthy ―red ink‖ period following start-up, aswell as periodic lulls in cash flow? Can youafford to fail?

Business opportunities Need to be Filtered

S




Content

through a Five-layer Sieve• Financing assessment. will you be able to obtain the

necessary financing for your business? If so, fromwhere?

• Legal assessment. what potential legal liabilities are youexposing yourself to by starting a new business? Are

the costs of protecting yourself worth the trouble?

The potential sectors for businessopportunities are:

Green business, Biotechnology, Events management,IT enabled services, Food processing, Mineral water,Courier services, Insurance, Telecommunication,Herbal, Travel and Tourism, Vermiculture, and Plastic.

Flow chart for setting up a small-scale industrial(SSI) it




Content

(SSI) unit1. Selection of a project

a. Product or service selection

b. Location selection

c. Project feasibility studyd. Business plan preparation

e. Prepare project profile

2. Decide on the constitution

3. Obtain SSI registration 4. Obtain clearances from

departments as applicable

5. Arrange for land/shed 6. Arrange for plant and

machinery

7. Arrange for infrastructure

8. Prepare project report

9. Apply and obtain finance

10 a. Proceed to implement

b. Obtain final clearances

Project feasibility study: a schematic diagram




Content

Project feasibility study: a schematic diagram

Generation of ideas

Initial screening

Is the idea prima facie promising

Plan feasibility analysis Terminate

YesNo

Conduct market analysis Conduct technical analysis

Conduct financial analysis

Conduct economic & ecological analysis

Is the project worthwile?

Prepare funding proposal

YesNo

Terminate

P r e l i m i n a r y W o

r k

A n a l y s i s

E v a l u a t i o n

Table of Contents of a Business Plan




Content

Table of Contents of a Business Plan

I. Title Page

II. Executive Summary – Vision and Mission Statement

– Fact Sheet

III. Company Plan – Company Description

– Merchandising Plan – Operating Plan

– Organisational Plan

Table of Contents of a Business Plan Cont




Content

Table of Contents of a Business Plan Cont…

IV. Marketing Plan

– Market Description and target market

– Competition analysis

– Methods of distribution

– Advertising

– Pricing

– Product/service design

– Timing of market entry – Industry trends

Table of Contents of a Business Plan Cont




Content


V. Financial Plan

– Summary of financial needs

– Sources and uses of funds

– Cash flow statement

– Three year income projection

– Break even analysis

– Balance sheet

– Income statement – Risk assessment

– Business financial history





Content


VI. Supporting Documents

– Personal resumes

– Personal financial statement

– Credit reports

– Copies of leases

– Letters of reference

Information Heads in a Project Profile




Content

Information Heads in a Project Profile

• Introduction

• Promoter(s) Background (education, experience, and so on)• Product(s) description (specification, uses, and so on)

• Market and marketing

• Details of infrastructure needed

• Plant and machinery (description, capacity, cost, and so on)• Process details

• Raw materials (requirements, specification, cost, and so on)

• Manpower required (type of personnel required and

salaries/wages)• Cost of the project and means of finance

• Cost of production and profitability



A Mutual Dependence




Content

A Mutual Dependence

• Small scale industries should seek

registration with the Director of Industries ofthe concerned State government.

• Obtain a Provisional Registration Certificate.Once the unit goes into production, the PRChas to be converted into a Permanent

Registration Certificate (PMTC).

The Specific Clearances Usually RequiredDepending on the Type of Unit




Content

Depending on the Type of Unit

• Agricultural land conversion• Urban land ceiling

clearance

• Building plan approval

• Factories Act

• Trade licence• Pollution Control Board

clearances

• Sales tax registration

• Central excise registration

• Bureau of Indian Standards(BIS) certificate

• Fruit Products Order (FPO)licence

• Food Adulteration Act licence

• Power loom registration• Electronics industries

registration

• Drugs and cosmetics licence

• Approvals of hotels

• 100 per cent export-orientedunit

NSIC Procedures for Hire Purchase ofMachinery




Content

Machinery

• The hire purchase application has to be made

on the prescribed form.

• The Director of Industries of the State underwhose jurisdiction the applicant happens tobe, forwards the application to the head officeof the NSIC at Delhi with his recommendation

and comments.

NSIC Procedures for Hire Purchase ofMachinery




Content

Machinery Cont…

• All applications for indigenous or imported machines

are considered by acceptance committeescomprising the representatives of the ChiefController of Imports, Development Commissioner,Small-Scale Industries, and other concerned

departments.• The decision of these committees is conveyed to

the parties concerned with copies to the regionaloffices of the NSIC and the concerned Directorate of

Industries.• It is open to an applicant whose case has been

rejected to get his application reviewed by a highpowered committee known proforma invoice.



The Project Report is Generally Prepared to Cover

the Following Seven Broad Segments




Content

the Following Seven Broad Segments

1. Executive summary

2. Existing company details (if any)

3. Operational details of the existing company(if existing)

4. Project details

5. The company vis-à-vis related industry

6. Conclusion7. Annexure

Regulatory or Taxation Clearances




Content

g y

• Registration under Sales Tax Act.Commercial Tax

officer of the area concerned.• Registration under Central Excise Act.Collector ofCentral Excise or his nominee.

• Payment of Income Tax.ITO of the area concerned.

• Registration of Partnership deed.Inspector Generalof area concerned.• Calibration of weights and measures.Weights and

Measures Inspector of State.

• Power connection.designated officer of StateElectricity Board.• Employee strength exceeding 10 with power

connection, or 20 without power - Chief Inspector ofFactories.

Product Specific Clearances




Content

p

• Establishing a printing press.District Magistrate.

• License for cold storage construction.designated official inState.• Pesticides - Central/State Agricultural Department.Ministry of

Agriculture.• Drugs and pharmaceuticals.drug licence from State Drug

Controller.• Safety matches/fireworks.licence under Explosives Act from

Directorate of Explosives, Nagpur.• Household electrical appliances.licence from the Bureau of

Indian Standards.• Wood working industry within 8 km from forest.District Forest

Officer.• Milk processing and milk products manufacturing units.approval

under Milk and milk Products Order from State Agricultural/Food Processing Industries Department above adesignated capacity.

Chapter 6 - Family Business




Content

For still in every house, that loves the right, their fatefor evermore rejoiced in an issue fair and good.

- Aeschylus

Learning Objectives




Content

g j• To understand the role and importance of a family

business• Understand the various definitions, and types offamily businesses

• Identify the model of family business, familybusiness system governance, history of familybusiness, responsibilities and rights of shareholdersin family business

• Discuss the succession in family business and thekey issues in sibling rivalry in family business

• Identify the causes for pitfalls in family business• Identify the requirements needed to improve the

capability of a family business

Some of the Largest Family FirmsWorldwide




Content

Worldwide • Wal-Mart (USA, revenues $245 billion, Sam Walton family)

• Samsung Group (South Korea, revenues $98.7 billion, Leefamily)

• Fiat Group (Italy, revenues $54.7 billion, Agnelli family)

• The Gap (USA, revenues $13.8 billion, Fisher Family)

• L.Oreal (France, revenues $12.2 billion, Bettencourtfamily)

• IKEA (Sweden, revenues $10.4 billion, Kamprad family)

• Tata Group (India, revenues $7.9 billion, Tata family)

• Grupo Modelo (Mexico, revenues $3.5 billion, DiezFernandez family)

• McCain Foods (Canada, revenues $3.5 billion, McCainfamily)

Family Business Defined




Content

y

1. in which two or more extended family

members influence the business through theexercise of kinship ties, management roles,and ownership rights

and/or

2. which the owner intends to pass to a familyheir

The ―3-Circle‖ Model of Family Business




Content

Ownership

FamilyBusiness

The ―3-Circle‖ Model of Family Business




Content

The 3-circle model of family business has three

systems

(a) The business system

(b) The family system

(c) The ownership system.

There are three components to family governance.

• Periodic assemblies• Family council meeting• A family constitution

Snapshot




Content

p

The succession plan should include the following.

• Key goals for the succession process

• A schedule of the transition stage

• Contingency plan

Succession—Three ways to ease transition.• Hire the most competent advisors you can find and

afford

• Business valuation is a critical element ofsuccession planning

• Funding is often a hidden or non-recognised cost ofsuccession planning

Creating Family Legacy for Future Generations




Content

• Family foundations have a valuable use in

succession planning.• Unless a family business owner has something to

move to, he or she is not likely to move from thefamily business. It is not just a matter of a title, but aplace where they can be involved in what they havecreated. The family business is their .theatre., it ishow members of family business are defined; it is

where they go for validation. For many familybusiness entrepreneurs, the idea of not being partof the family business is a concept that provokesmany emotions.

Creating Family Legacy for Future Generations




Content

• One strategy we recommend is to have the

family business entrepreneur considercreating a family foundation. This is notsomething that goes into play after the person

dies, but something that can capture theircreative energy while they are still alive.

PITFALLS OF THE FAMILY BUSINESS




Content

• Causes of pitfalls of family business are

as follows:

• Lack of focus and strategy

• Nepotism in family

• Lack of professionalism

• Inability to separate the family‘s interest fromthe interest of the business

• Sibling rivalry in the family business

Seven Simple Tips to Avoid Conflicts inFamily Business




Content

Family Business

• Make time to understand the points of view of

others the payoff can be huge.• Understand we make a difference. Oneconversation at a time don‘t try to out shouteveryone else.

• Seek more information and insights from thosewith whom you disagree ask for amplificationand examples that will enable you to betterunderstand other points of view.

• While disagreements on issues may be strong,do not forget the family‘s values are a sharedbond and represent a shared commitment to thecommon good.

Seven Simple Tips to Avoid Conflicts inFamily Business




Content

Family Business

• Create ―rules of behaviour‖ for family meetings

and abide by them being family does not excuseboorish behaviour or lack of business etiquette.

• Do not ridicule or be sarcastic to other familymembers know and understand that being in a

family business does not result in solidarity ofopinion.

• Establish time limits on discussions and debates

when that time limit is reached but closure is notattained, table the topic for further research andput it on the agenda for discussion at a futuremeeting.

Tips for Controlling Sibling Rivalry in FamilyBusiness




Content

Business

• Open communications ―The number one

issue hands down is communication. If youknow there is stuff going on, you have to get itout. To know there is a time and place you

can express it is such a relief.‖

• Clarity of roles It is essential that siblings

know exactly what their job expectations are.There is a need to have roles clearly spelledout to avoid conflicts.

Tips for Controlling Sibling Rivalry in FamilyBusiness




Content

Business

• A sense of humor Use humor to release

tension and keep things in perspective.―When the worst things happen try to figureout what to do.‖

• Time away from the business Siblings shouldmake it a point to go off-premises for informaltime outside of the business setting. It is

necessary to do things like go to a localrestaurant together or simply talk on thephone during off-hours.

The Changing Environment of FamilyBusiness




Content

Business

• Sellers. Market Buyers.

Market

• Family Wealth

Shareholder Value

• Growth Eva (EconomicValue Added)

• Diversification

• Core Competency

• Family SuccessionPlanning Attracting

Managers

How to save the family business?




Content

• Formulate policy framework and rules

• Families must serve the business

• There should be future outlook

• Family members should be accountable

• Issues should be addressed

• Create shared vision

Chapter 7 – Sickness in SmallBusiness Enterprises




Content

Business Enterprises

Blue Light is Dims

Learning Objectives




Content

• To define the sick SSI unit and present the status of

sickness in small business enterprises in India

• To identify the causes of sickness in small businessenterprises

• To discuss the remedies to avoid sickness

• To present a case study of sickness in a SSI ofSangli district

• To present five examples of sick SSI units in Indiaand causes of sickness and rehabilitation packages

A small-scale industrial unit is considered sick




Content

• If any of the borrowal accounts of the unit remains

substandard for more than six months, that is,principal or interest, in respect of any of its borrowalaccounts has remained overdue for a periodexceeding one year. The requirement of overdueperiod exceeding one year will remain unchanged

even if the present period for classification of anaccount as substandard is reduced in due course;

• When there is erosion in the net worth due toaccumulated losses to the extent of 50 per cent of its

net worth during the previous accounting year, and

• When the unit has been in commercial production forat least two years.

Sick SSI Units




Content

• Amount in Rs Crore. Source: RBI• (P) - Provisional

• Note: These units include village and cottage industries

Summary of Third All-India Census onSickness in SSI




Content

Sickness in SSI No. of sick/incipient sick units (with erosion of net worth bymore than 50 per cent or delay in repayment of institutionalloan by more than 12 months or decline in gross output over

three consecutive years)

1,92,328

(13.98%)

6,30,568

(6.89%)

8,22,896

(7.82%)

Reasons for sickness/incipient sickness Lack of demand 1,11,508

(58%)

4,35,121

(69%)

5,46,629

(66%)

Shortage of working capital 1,09,844

(57%)

2,69,648

(43%)

3,79,492

(46%)

Non-availability of raw material 23,493

(12%)

76,029

(12%)

99,522

(12%)

Power shortage 33,099

(17%)

77,345

(12%)

1,10,444

(13%)

Labour problems 12,182

(6%)

26,282

(4%)

38,464

(5%)

Marketing problems 70,202(37%)

2,24,002(36%)

2,94,204(36%)

Equipment problems 16,995

(9%)

76,038

(12%)

93,033

(11%)

Management problems 9,124 (5%) 21,088 (3%) 30,212 (4%)

SICKNESS/INCIPIENT SICKNESS IN SSI




Content

Criteria to identify sickness

• Continuous decline in gross output comparedto the previous two financial years

• Delay by more than 12 months in repaymentof loan taken from institutional sources

• Erosion in the net worth to the extent of 50per cent of the net worth during the previousaccounting year

CAUSES FOR SICKNESS/INCIPIENTSICKNESS IN SSI




Content

SICKNESS IN SSI

Reasons for sickness

• Exogenous factors.

• Endogenous factors.

Exogenous Factors




Content

The external factors causing sickness are given

below:• Change in preference of consumers

• Cheaper variety of products available in the market

• Shortage in the supply of vital inputs• Rise in the cost of raw materials

• Radical changes in government policies

• General recession in industries• Foreign exchange fluctuations leading to adverse

effect on the price of machinery and raw materials,which are imported.

Endogenous Factors




Content

(a) Anatomical Causes

• Underestimation of the project cost

• The existing manufacturing process has

become out dated or obsolete• Selection of wrong project site, resulting in

increased transportation cost

• Undue investment in fixed assets• Defective working of plant and machinery

affecting quality of production

Endogenous Factors




Content

(b) Operational Causes

• Defective financial planning and financialmanagement

• No research and development planning

• Low productivity• Incapable and incompetent management

• Improper manpower planning

• Difference among promoters and interference in thefunctioning of the company

• Management that is inclined to making personalgains at the cost of the company

Rehabilitation of Sick Unit




Content

For tackling the problems of industrial

sickness in the SSI sector and rehabilitationof sick units, the Reserve Bank of Indiaissued guidelines to commercial banks inFebruary 1987 (modified in June 1989 and

April 1993) containing, inter-alia, definition ofsick SSI units, viability norms, incipientsickness, as also relief/concessions from

banks/financial institutions for implementationof packages in the case of potentially viablesick SSI units.

Viability of a Sick unit




Content

A unit may be regarded as potentially viable,

if after implementing a relief package spreadover a period not exceeding five years fromthe commencement of the package from a

financial institution, government and otheragencies, it would be in a position to continueto service its repayment obligations as agreed

upon.

Chapter 8 - Strategic Management in SmallBusiness




Content

―Business is like a war in one respect. If its grand strategy iscorrect, any number of tactical errors can be made and yet the

enterprises proves successful.‖ - Robert E. Wood

Learning Objectives




Content

• To identify the phases in the organisation life

cycle and organisation renewal cycle• To understand the importance and process of

strategic management

• To identify the essence of business ethics

ORGANISATION LIFE CYCLE




Content

• The organisation life cycle comenses five

stages: Start up, Expansion,Consolidation, Revival, and Decline.

• Reversing a company‘s pattern of poorperformance is called turning it around. Forentrepreneurs who survive the earlier stages

and who are also capable of turning theirventures around, the metamorphosis iscomplete.

Why Should an Organisation Have a Vision




Content

• Brings people together around a common

dream.• Coordinates the work of different people.

• Helps everyone make decisions.

• Builds foundation for business planning.

• Challenges the comfortable or inadequatepresent state.

• Makes incongruent behaviour morenoticeable.

The Organisational Renewal Cycle




Content

• Phase 1 Creativity

– Work is for a clear purpose – Excitement about a new idea model/product/market

– Lots of vision

– Chaotic/fun atmosphere

– Growth is fast and easy, almost natural• Phase 2 Stability

– Purpose stays the same

– Structure solidifies with policies, procedures, standards

– Controls set in, standards are enforced – Management becomes more .professional.

– Thinking about the future and planning is done at the top

The Organisational Renewal Cyclecont…




Content

• Phase 3 Crisis

– The environment changes – Standards are enforced from the top

– People work harder

– Results slip

– Group runs out of steam, loses vitality• Phase 4 Renewal

– Revisit basic purpose

– Renew mission, values and vision

– Redefine, question what the organisation is doing – Reconnect with customers/market

– Forge new directions

Outline for a Strategic Plan




Content

• Business mission.

• Situation analysis.• Internal environmental analysis includes a discussion of

the venture‘s strengths and weaknesses.

• External environmental analysis includes a discussion of

the venture‘s opportunities and threats • (industry and competitive analysis) in the market-place.

• Goal formulation.

• Strategy formulation.

• Formulation of programmes to meet goals.• Implementation.

• Feedback and control.

Steps in strategic planning




Content

Step 1

Step 2

Step 3

Step 4

Step 5

Evaluate your business

Make choices

Establish priorities

Develop an action plan

Implement the plan

Business Ethics




Content

• The very basis of business ethics refers to an

idea of how business fits into modern societyas a whole: a social philosophy of

business.

• An effective code of ethics should integrateinto a broad philosophy of a company on

corporate services and responsibilities and isa part of its mission statement.

Chapter 9 – Financial Management inSmall Business




Content

There is always plenty of capital for those who cancreate practical plans for using it. —N. Hill

Learning Objectives




Content

• Understand the importance of financial

management• Learn the functions of financial management

• Explain working capital management and variousworking capital schemes.

• Learn book keeping and accounting policies• Understand financial statements.balance sheet,

profit and loss account, cash flow statement

• Understand the meaning, purpose, and significanceof financial ratio analysis

• Get familiar with commonly applied methods ofdepreciation, accrual, and prepayment adjustment



Working capital cycle




Content

CASH

Receivables

Finished

goods

Raw

materials

Work in

proress

Working Capital Management




Content

A simple method of estimating the working

capital is based on the ―average manufacturing cycle‖.

• The cost formulas used for the valuation ofstock

• Are (a) FIFO, (b) LIFO, and (c) WAC

• Some of the important ratios used formanaging working capital are (a) Debtor‘s

turnover ratio; (b) Creditor‘s velocity ratio; (c)Stock turnover ratio; (d) Current ratio; and (e)Stock-working capital ratio.

ACCOUNTING AND BOOK KEEPING




Content

• The various stages in accounting process

are:• documentation, recording, classifying,

summarising, and bifurcation.

• The important books to be maintained by aSSI are: purchase book, sales book, cashbook, journal, and ledger.

Components of Financial Statements




Content

• Balance sheet

• Profit and loss account or incomestatement

• Cash flow statement

Features of a Cash Flow Statement




Content

• Prepared for a given period.

• Comparative position.• Vertically drawn.

• Cash flows from operating, investing and financing

activities.• Reconciliation with the opening and closing

balances of cash and cash equivalents.

• Indirect method for cash flows from operatingactivities.

• Signed by the person who prepared it and auditors.

• A derived statement.

Important financial ratios




Content

• Return on investment (ROI) ratios

• Solvency ratios

• Liquidity ratios

• Turnover ratios

• Profitability ratios

• Du Pont analysis• Capital Market ratios

EXERCISES




Content

• Activity 1: Divide the class into small group

of four to six students. Collect the annualreport of a local SSI. Study the annual reportand examine the financial statements of theenterprise and prepare a 20- minute Power

Point presentation on financial managementin a small business and present in the class.

• Request your professor to lend his

supervision for this exercise.• Problem 1: A proforma cost sheet of a

company provides the following particulars.

EXERCISES CONT…




Content

S.

No.

Elements of

Cost

Amount per Unit

1 Raw material 80

2 Direct labour 30

3 Overheads 604 Total cost 170

5 Profit 30

6 Selling price 200

EXERCISES CONT…




Content

• The following further particulars are available.

– Raw materials are in stock for one month – Credit allowed by suppliers is one month

– Credit allowed to customers is two months

– Lag in payment of wages a week and a half

– Lag in payment of overheads is one month

– Materials are in process for an average of halfmonth

– Finished goods are in stock for an average of onemonth

– ¼ of output is sold against cash




Content

• Cash in hand and at bank is expected to beRs 25,000. Prepare a statement showing theworking capital needed to finance a level of

activity of 1,04,000 units of product.

• You may assume that production is carried on

evenly throughout the year. Wages andoverheads accrue similarly and a period offour weeks is equivalent to a month.

Chapter 10 - Marketing Managementin Small Business




Content

Customers are:* The most important people in any business.* Not dependent on us. We are dependent on them.

* Not an interruption of our work. They are the purpose of it.- Don‘t ever forget it!

Learning Objectives

T d t d th i t f k ti i




Content

• To understand the importance of marketing in

SSI• To identify the common marketing problems

faced by SSI

• To identify the marketing process of SSI• To understand the significance of servicemarketing

• To identify the prevailing export environmentand procedures, formalities, anddocumentation

• required for exports

IMPORTANCE OF MARKETING




Content

• Marketing makes or breaks a small

enterprise.• Marketing can be defined as a process which

identifies, anticipates, and satisfies customer

needs efficiently and profitably in keeping withthe objectives of the enterprise.

• Common marketing problems faced by small-

scale industries are: lack of brand image, lackof sales force, product quality, credit sales,low prices, and local and limited market.

CUSTOMER RELATIONSHIP MANAGEMENT

C f f




Content

• CRM focuses on meeting the individual needs of

customers. The skill requires building a customerdatabase and doing data mining to detect trends,segments, and individual needs.

• The business, as a whole, engages in differentmarketing activities. The combination of all suchactivities is called a ―marketing mix‖. Though there

are many elements in a marketing mix, a popularclassification consists of ―4 Ps‖ -product,

promotion, price and place.

Customer Satisfaction Index

CS




Content

• CSI is generally calculated based on market

research. It is a known that, a satisfiedcustomer will influence five more persons tobuy the product/service. Whereas a

dissatisfied customer will express hisemotions to eleven persons. In case of 2percent customer complaints

• The CSI is calculated as

SI = 98*5.2*11/5=93.6%

Differences between Goods and Services

GOODS SERVICES




Content

GOODS

• Tangible

• Standardised

• Production separatefrom consumption

• Non-perishable

SERVICES

• Intangible

• Heterogeneous

• Simultaneousproduction andconsumption

• Perishable

Marketing Management in Small Business




Content

Sales Contract

Seller(Exporter)

Buyer(Importer)

Letter ofCredit

Application forLetter of Credit

Production of

Export Goods

Shipment ofExport Goods

PaymentCustomersClearance

Bank

CustomersClearance

Documents Required for Exporting

Bill f E h




Content

• Bills of Exchange

• Bills of Lading• Commercial Invoice

• Original Letter of Credit, if any

• Customs Invoice• Insurance Policy/Certificate

• Packing List

• Foreign Exchange Declaration Forms• Bank Certificate of Export Realisation

• Other relevant documents

Various Organisations Supporting Exports

Polic and ser ice s pport organisation




Content

• Policy and service support organisation

• Commodity specialisation organisation

• Training and reasearch institutions

• Trading/service corporations

• Financial institutions

• Export promotion zones

Chapter 11 - Production Management inSmall Business




Content

The power that enables the firm to have some influence on priceinsures that imitators will not pass on the resulting gains to the publicbefore the outlay for development can be recouped. In this way market

power protects the incentive to technical development.- J. K. Galbraith

Learning Objectives

E l i d ti t i ll




Content

• Explain production management in small

business enterprise• Discuss the functions of materials

management

• Understand the various productivityimprovement techniques

• Learn the concept of break-even analysis

• Introduce the TQM approach to business

PRODUCTION MANAGEMENT

P d ti S t A t h




Content

• Production System: A system whose

function is to convert a set of inputs into a setof desired outputs.

• Production Management: It refers to theapplication of management principles to theproduction function in an enterprise.

A simple production system




Content

Inputs Conversion

Process Output

Control

•Land

•Building

•Machines

•Labour

•Capital

•Management

•Materials

•Others

•Goods

•Services

Objectives of a Good Layout

• Provide enough production capacity




Content

• Provide enough production capacity.

• Reduce material handling costs.• Reduce congestion that impedes the

movement of people or material.• Reduce hazards to personnel.• Utilise labour efficiently.• Increase employee morale.• Reduce accidents.

• Utilise available space efficiently andeffectively.

Objectives of a Good Layout cont…

P id f l d d t fl ibilit




Content

• Provide for volume and product flexibility.

• Provide ease of supervision.

• Facilitate coordination and face-to-facecommunication where appropriate.

• Provide for employee safety and health.

• Allow ease of maintenance.

• Allow high machine/equipment utilisation.• Improve productivity.

Objectives of Production Planning & Control

• To deliver quality goods in required quantities to the




Content

• To deliver quality goods in required quantities to the

customer in the required delivery schedule• .to achieve maximum customer satisfaction atminimum possible cost.

• To ensure optimum utilisation of all resources.

• To ensure production of quality resources.• To minimise the product throughput time or

production/manufacturing cycle time.

• To maintain flexibility in manufacturing operations.

• To maintain optimum inventory levels.

• To coordinate between labour and machines andvarious supporting departments.

Objectives of Production Planning & Controlcont…

• To ensure effective cost reduction and cost




Content

• To ensure effective cost reduction and cost

control.• To plan for plant capacities for future

requirements.

• To remove bottlenecks at all stages of

production and to solve problems related toproduction.

• To prepare production schedules and ensure

that promised delivery dates are met.• To establish routes and schedules for work.

• To contribute to the profit of the enterprise.

Elements of Production Planning andControl

P d ti Pl i d




Content

Production Planning and

Control

Productionplanning

• Estimating

• Routing• Scheduling• Loading

Productionplanning

• Dispatching

• Expediting• Evaluating and

Corrective action

Materials management

• Materials management refers to the




Content

• Materials management refers to the

movement of production materials from thestage of their acquisition to the stage of theirconsumption.

• The two main functions of materialsmanagement are:

– purchase management – inventory management

Purchase cycle

(a) Recognition of need




Content

(a) Recognition of need.

(b) Description of need.(c) A suitable source is selected for the supply; sometimesa source has to be developed.

(d) Price and availability are determined.

(e) A purchase order is prepared and sent to the supplier.(f) Acceptance of the purchase order is obtained from the

supplier.

(g) Follow up is done to ensure timely delivery of the

material.(h) Receive the material, check the invoice, approve it for

making payment to the supplier.

(i) Supplier receives the payment.

Inventory Costs




Content

• Ordering costs

• Carrying costs

• Financial costs

Inventory Control Techniques

(a) Always Better Control (ABC)




Content

(a) Always Better Control (ABC)

(b) High, Medium and Low (HML)(c) Vital, Essential, and Desirable (VED)

(d) Scarce, Difficult, and Easy to obtain (SDE)

(e) Fast moving, Slow moving, and Non-moving (FSN)(f) Economic Order Quantity (EOQ)

(g) Max-Minimum System

(h) Two Bin System(i) Materials Requirement Planning (MRP)

(j) Just-in-time (JIT)

PRODUCTIVITY




Content

• Productivity = Output/Input

• Maintenance is that function of

manufacturing management that is concernedwith the day-to-day need of keeping thephysical plant in good operating condition.

Maintenance

(a) Breakdown maintenance




Content

(a) Breakdown maintenance

(b) Preventive maintenance

(c) Predictive maintenance

(d) Routine maintenance

(e) Planned maintenance

(f) Total productive maintenance (TPM)

Objectives of Maintenance Management

• Minimising the loss of productive time




Content

• Minimising the loss of productive time

because of equipment failure.• Minimising repair time and repair cost.

• Minimising the loss due to production

stoppages.• Efficient use of maintenance personnel and

equipment.

• Prolonging the life of capital assets byminimising the rate of wear and tear.

Objectives of Maintenance Management

cont…

• To keep all assets of the enterprise in good




Content

• To keep all assets of the enterprise in good

working condition.• To maximise efficiency and economy in

production through optimum use of facilities.

• To minimise accidents through regularinspection and repair of safety devices.

• To minimise the total maintenance cost.

• To improve quality and productivity.

BREAK-EVEN ANALYSIS

• The total cost incurred by the unit can be




Content

• The total cost incurred by the unit can be

classified as – Fixed cost

– Variable cost

• Break-even is the number of units that mustbe sold in order to produce a profit of zero(but will recover all associated cost).

BEP = Fixed cost / ( unit price – variableunit cost )

TOTAL QUALITY MANAGEMENT

• ―Quality‖ Defined




Content

• Quality Defined

– According to ISO 8402: Quality vocabulary,quality is ―The totality of features andcharacteristics of a product or service that bearon its ability to satisfy stated or implied needs.‖

• Broadly, quality is: – Fitness for use (Juran)

– Grade

– Degree of preference

– Degree of excellence

– Conformance to requirements (Philip Crosby)

Universal Process for Managing Quality

Quality Planning Quality Control Quality Improvement




Content

y g y y p

Establish quality goals Choose control subjects Prove the need

Identify customers Choose units to measure Identify projects

Discover customer needs Set goals Organise project teams

Develop product features Create a sensor Diagnose the causes

Develop process featuresMeasure actual

performance

Provide remedies, prove

that the emedies are

effective

Establish process controls Interpret the difference Deal with the resistance

Transfer to operationsTake action on the

difference

Change and control hold

the gains

Total quality management

• TQM provides the overall concept that fosters




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TQM provides the overall concept that fosters

continuous improvement in an organisation.The TQM philosophy stresses a systematic,integrated, consistent, organisation-wide

perspective involving everyone andeverything. It focuses primarily on totalsatisfaction for both the internal and externalcustomers, within a managementenvironment that seeks continuousimprovement of all systems and processes.

Quality Improvement Tools




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Part 1 : The Seven Statistical Tools

Part 2 : The New Seven Tools

Part 3 : Other Quality Improvement Tools

Five pillars of TQM

Product




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Product

Product HeardaspectsProcess

System

People

Suitability Softaspects

Process

Leadership

Quality System Standards

Standard Title Scope




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ISO 9000 –2000

Quality

ManagementSystems -Fundamentalsand Vocabulary

Provides fundamentals of quality managementsystem and specifies quality management termsand definitions

ISO 9001 –2000QualityManagementSystems – Requirements

Specifies requirements for a quality

management system where an organisationneeds to demonstrate its capability to meetcustomer requirements for product and/orservices and assessment of that capability byinternal and external parties

ISO 9004 –2000

Quality

ManagementSystems -Guidance forPerformanceImprovement

Provides guidance on quality managementsystems as a means for continual improvementof processes that contribute to the satisfaction ofthe organisation‘s customers and otherinterested parties

Quality Management Principles

• Customer focused organisation




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Customer focused organisation

• Leadership• Involvement of people

• Process approach

• Systems approach to management

• Continuous improvement

• Factual approach to decision making

• Mutually beneficial supplier relationship

Quality Management System ContinualImprovements




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ISO 9001:2000ISO 9001:2000 ―Quality Management Systems-




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y g yRequirements‖

• The title no longer includes the term ―Quality assurance‖. This is probably because the termsomehow had connotations with the manufacturingsystem only. The new standard tries to be moregenerally applicable and to be understood moreeasily.

• The requirements not only address qualityassurance of the product or service conformity, theemphasis has been shifted to the need for anorganisation to demonstrate its capability to achievecustomer satisfaction.

Quality Management Systems Requirements

• Contents




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Contents

1. Scope2. Normative Reference

3. Terms and Definitions

4. Quality Management Systems4.1 General Requirements

4.2 Documentation Requirements

Quality Management Systems Requirementscont…

5. Management Responsibility5 1 M t C it t




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5.1 Management Commitment

5.2 Customer Focus5.3 Quality Policy5.4 Planning (Objectives and QMS planning)5.5 Responsibility, Authority and Communication (R&A ,

MR,Int. Com.)5.6 Management Review (Gen., Input, Output)

6. Resource Management6.1 Provision of Resources

6.2 Human Resources (General, Competence, Awareness,and Training)6.3 Infrastructure6.4 Work Environment


7. Product Realisation




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7.1 Planning of Product Realisation7.2 Customer Related Processes (Requirements—

Determination and Review, Communication)

7.3 Design and Development

7.4 Purchasing

7.5 Production and Service Provision (Control ofProduction and Service Provision, Validation of

Processes, Identification and Traceability, CustomerProperty, Preservation of Product)

7.6 Control of Monitoring and Measuring Devices.


8. Measurement, Analysis, and Improvement




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, y , p

8.1 General8.2 Monitoring and Measurement (CustomerSatisfaction, Internal Audit, Processes,

Product)8.3 Control of Non-conforming Product

8.4 Analysis of Data

8.5 Improvement (Continual Improvement,Corrective Action, Preventive Action)

Steps in Preparation and Implementation ofISO 9001




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Steps in Preparation and Implementation ofISO 9001 cont…




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ENVIRONMENTAL MANAGEMENT SYSTEM

• The ISO 14000 document is titled




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Environmental Management System—

General Guidelines on Principles, Systemsand Supporting Techniques. It outlinessystem elements, with advice on how to

initiate, implement, improve, and sustain thesystem. By following its guidelines and thecore elements of the environmentalmanagement system specification, ISO14001, your organisation will have aframework to balance and integrateenvironmental and economic interests.

ISO 14000 Series




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ISO 14000 Series cont…




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Benefits of Environmental Management System

1. Protect human health and the environment from




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the potential impacts of its activities, product,and services

2. Assist in maintaining and improving the qualityof the environment

3. Meet customers‘ environmental expectations

4. Maintain good public and community relations

5. Satisfy investor criteria and improve access tocapital

6. Provide insurance at a reasonable cost

Benefits of Environmental Management Systemcont…

7. Gain an enhanced image and market share




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8. Satisfy vendor certification criteria9. Improve cost control

10. Limit liabilities

11. Provide resource conservation12. Provide effective technology development and

transfer

13. Provide confidence to interested parties (andshareholders)

Environmental Management SystemsRequirements

Contents




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1. Scope

2. Normative References

3. Definitions

4. EMS Requirements

4.1 General Requirements4.2 Environmental Policy

4.3 Planning

4.3.1 Environmental Aspects

4.3.2 Legal and Other Requirements

4.3.3 Objectives and Targets

4.3.4 Environmental Management Programme(s)

Environmental Management SystemsRequirements cont…

4.4 Implementation and Operation4 4 1 Structure and Responsibility




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4.4.1 Structure and Responsibility

4.4.2 Training, Awareness, and Competency4.4.3 Communication4.4.4 EMS Documentation4.4.5 Document Control

4.4.6 Operational Control4.4.7 Emergency Preparedness and Response4.5 Checking and Corrective Action

4.5.1 Monitoring and Measuring4.5.2 Non-conformance and Corrective and Preventive

Action4.5.3 Records4.5.4 EMS Audit4.6 Management Review

Chapter 12 - Human ResourceManagement in Small Business




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―All the activities of any enterprise are initiated and determined by the personswho make up that institution. Plants, offices, computers, automatedequipment, and all else that a modern firm uses are unproductive except forhuman effort and direction. Of all the tasks of management, managing thehuman component is the central and most important task, because all else

depends on how well it is done.‖ - Renesis Likert



Functions of Human Resource Development

• RecruitmentS l ti




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• Selection• Promotion• Pay• Performance assessment

• Grading structures• Training and development• Welfare• Communication

• Employee relations• Dismissal• Personnel administration

Human Resource Development

For a small enterprise, the following aspects




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of human resource development areimportant:

(a) Manpower planning(b) Recruitment, selection and placement

(c) Performance appraisal and development

(d) Employee compensation

(e) Motivation

(f) Communication

Job Description Chart

Job: Title: Billing clerk

Supervisor: Store manager




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Supervisor : Store manager

Summary: Responsible for receiving payments againstdelivery of goods from godown, prepares and processespaperwork, maintains requisite documents

Duties and Responsibilities:

– Receiving and placing stocks in store – Checks invoices against the goods received

– Inspection of goods received

– Codification and documentation

Job Specification:

Education: Graduate

Experience: Not compulsory

• Skills: Knowledge of computers

Human Resource Management

• Human Resource Management (HRM) can bedefined as a strategic and coherent approach to the




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defined as a strategic and coherent approach to the

management of an organisation‘s most valuedassets - the people working there who individuallyand collectively contribute to the achievement of itsobjectives. HRD is that component of HRM whichdeals with the development of human resources.For a small enterprise, the following aspects ofhuman resource development are important. – Manpower planning – Recruitment, selection, and placement

– Performance appraisal and development – Employee compensation – Motivation – Communication

INDUSTRIAL RELATIONS, LABOUR LAWS, AND ENVIRONMENTALAND POLLUTION CONTROL LAWS

Industrial Relations, Labour Laws, and




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Environmental and Pollution Control Laws

• Laws regulating the conditions of work in

factories and establishments – General laws, applicable to all factories and

establishments: Factories Act, 1948

– Specific laws, applicable to specific industries,like Mines Act, 1952, Indian Merchant Shipping Act, 1923, and Plantation Labour Act, 1998

INDUSTRIAL RELATIONS, LABOUR LAWS, AND ENVIRONMENTALAND POLLUTION CONTROL LAWS

• Laws relating to wages




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– Minimum Wages Act, 1948 – Payment of wages Act, 1936

• Law relating to social security measures

– Workmen‘s Compensation Act, 1923 – Employees‘ State Insurance (ESI) Act, 1948

– Employees‘ Provident Fund (EPF) Act and Family

Pension Fund Act, 1952



Thank You.