Unit 1 Notes for Entrepreneurship for ITMU

8/11/2019 Unit 1 Notes for Entrepreneurship for ITMU

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Faculty: Ms Jiveta Chaudhary

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SML 300 ENTREPRENEURSHIP

NOTES

UNIT I Entrepreneurship: FoundationUnderstanding Entrepreneurship, Generation of Business Ideas, Intellectual Property, Family Business,

Entrepreneurial Support

UNDERSTANDING ENTREPRENEURSHIP

ENTREPRENEUR - MEANING

Person who undertakes the ‗risk‘ of a new venture

Derived from French words,

o Entre meaning ‗between‘

o Prendre meaning ‗to take‘

Originally used to describe people who ‗take on the risk‘ between buyers and sellers or who ‗undertake‘ a

task such as starting a new venture

An entrepreneur assembles and integrates all the resources needed, the business model, the strategy,and the risk bearing ability to transform an invention into a viable business

Any individual that sees and acts upon an opportunity. This includes introducing a new product or service,

identifying new markets, or putting a twist on an existing product, process or service. Also, includes the

raising of capital, taking the risk and controlling the new venture. Embodies creativity, aggressiveness, and

determination. By assembling various resources, s/he takes risks and creates a venture from an idea,

hobby, or simply a dream

An entrepreneur assembles and integrates all the resources needed, the business model, the strategy,

and the risk bearing ability to transform an invention into a viable business

An entrepreneur is an agent who buys factors of production at certain prices in order to combine them into

a product with a view to selling it at uncertain prices in future. -Cantillon

An economic agent who units all means of production – land of one, the labor of another and the capital of

yet another and thus produces a product. By selling the product in the market he pays rent on land, wages

to labor, interest on capital and what remains is his profit. - J. B. Say

Entrepreneurs are innovators who use this process of shattering the status quo of the existing products

and services, to design new products and services. – Joseph Schumpeter




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o Schumpeter – entrepreneur is an innovator who carries out new combinations to initiate and

accelerate the process of economic development. Forms of Innovation: -

New goods

New methods of production Opening of a new market

Conquest of new source of materials

Organization a unit in a new way

An entrepreneur is one who creates a new business in the face of risk and uncertainty for the purpose of

achieving profit and growth by identifying significant opportunities and assembling the necessary

resources to capitalize on them.

ENTREPRENEURSHIP - MEANING

Entrepreneurship is the attempt to create value through recognition of business opportunity, the

management of risk-taking appropriate to the opportunity and through the communicative and

management skills to mobilize human, financial and material resources necessary to bring a project to

fuition. – John Kaso and Howard Stavenson

Entrepreneurship is a systematic innovation which consists of the purposeful and organized search for

changes and in a systematic analysis of the opportunities such changes might offer for economic and

social innovation. – Peter F Drucker

Entrepreneurship is the purposeful activity of an individual or a group of associated individuals undertaken

to initiate, maintain and aggrandize profit by production and/or distribution of economic goods and

services.- Arthor H. Cole

Entrepreneurship is meant the function of seeking investment and production opportunity, organizing an

enterprise to undertake a new production process, raising capital, hiring labor, arranging the supply of raw

materials, finding site, introducing a new technique, discovering new sources of raw materials and

selecting top managers or day to day operations of the enterprise. – B. Higgings

Entrepreneurship is the dynamic process of creating incremental wealth. The wealth is created by

individuals who assume the major risks in terms of equity, time and/or career commitment or provide value

for some product or service. The product or service may or may not be new or unique but value must

somehow be infused by the entrepreneur by receiving and allocating the necessary skills and resources




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BASIS ENTREPRENEUR INTRAPRENEUR

(CORPORATE ENTREPRENEUR)

STATUS Owner Employee

CAPITAL Raises Does not raise

FREEDOM Works independently Semi-independent

RISK-TAKING Bears full risk Does not bear

GUARANTEE Guarantees payment to suppliers ofinputs

Does not guarantee

NORMS &RULES

Operates independently; Frames norms& rules

Operates from within; Bound by normsand rules

TRAITS OF ENTREPRENEURS / ENTREPRENEURIAL PROFILE /

CHARACTERISTICS OF ENTREPRENEURS

1. Desire for responsibility

2. Preference for risk (moderate)

3. Confidence in their ability to succeed

4.

Desire for immediate feedback5. High level of energy

6. Future orientation

7. Skill at organizing

8. Value of achievement over money

9. High degree of commitment

10. Tolerance for ambiguity

11. Flexibility

(Find in Essentials of Entrepreneurship and Small Business Management, 5 th edition. Author: Thomas W.

Zimmerer and Norman M. Sacrborough, pp 5 - 8)

An entrepreneur is a Risk taker, Resource Assembler, Organization Builder and Innovator

Other traits

1.

Mental Ability (Intelligence & Creativity)2. Innovative




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3. Leadership, Administrative & Organizing Skills

4. Opportunity obsession, Vision & Clarity

5. Motivation to excel

6.

Human Relations & PR Skills

Entrepreneurial Personality

1. High Need Achievement

Maintaining high standards and aspiring to accomplish difficult tasks. People with a high need for

achievement take responsibility for outcomes, engage in activities that have a moderate degree of risk and

require skill and effort. This motive has also been found to predict firm founding and the successful

performance of firms.

2. Internal Locus of Control

The degree to which a person believes that their actions can directly affect an event, or that they can

control an outcome. Researchers have discovered that founders of successful entrepreneurial firms have

a high internal locus of control, meaning they feel like they have significant control over the outcome of

events.

3. Low need for Conformity and High need for Independence & Autonomy

4. Self-Efficacy

A person‘s belief in their own ability, in other words, their task-specific self-confidence. Entrepreneurs with

high self-efficacy will persist even in the face of setbacks, will take negative feedback more positively, will

use feedback to improve their performance, will set more difficult goals, and will exert more effort over a

longer period of time. Researchers have found that when entrepreneurs have high self-efficacy, that there

is a strong relationship between this motivation and firm growth.

5. Goal Setting

Entrepreneurs who are motivated to set goals, particularly business growth goals, have been found to

increase firm growth, along with firm performance and innovation14. Challenging goals of all types have

repeatedly been found to lead to greater performance, highlighting the importance of setting goals that are

specific, attainable, and time-bound.




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ENTREPRENEURIAL MOTIVATION

External Motivators Internal Motivators

• Assistance form Government

• Financial assistance from Institutions

• Availability of technology and raw material

• Encouragement from big business units

• Heavy demand for product

• Increased income

• Material rewards

• ―no alternative‖

• Educational background

• Occupational experience

• Desire to do something pioneering and

innovative

• Family background

• ―be my own boss‖

• self-esteem

• Independence

Entrepreneurial motivation is viewed as the willingness of an entrepreneur to sustain his or her

entrepreneurial behaviour.

Motivation theorists have pointed out that at least three general categories of social motives as

important determinant of human behavior:

1. The need for achievement (n Ach)

Achievement motive - drive to do well, strive for excellence and overcome challenges and

obstacles in the pursuit of goal.

2. The need for Power (n Pow)

Power motive - drive to control, influence and to have impact on others and change the situations.

3. The need for affiliation (n Aff)

Affiliation motive - drive to establish, maintain or renew affective relationship with others.

All three motives may exist together in a person but one usually more dominant than the other motives for

most of the individual‘s actions. High need for achievement (high n Ach) has been identified as the critical

motive that influence for most of venture creation and entrepreneurship. Individual need of high need for

achievement is found in most good business founder. Need for achievement also known as urge to

improve. Individuals with High need for power (high n Pow) normally seek position of leadership. They

have potential to be good managers, executive or supervisors. High need for affiliation (n Aff) has mostly

been associated with individuals whose desire in life is to establish, maintain or renew affective

relationship with others. They have potential to be good social workers As an entrepreneur the need for

affiliation to certain extent may contribute to the drive for maintaining effective business networking.




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Common characteristics associated with achievement oriented entrepreneurs

Drive to achieve

•

Internally driven self-starter with strong desire to:• To compete with others

• To excel with self-imposed standards

• To pursue and attain challenging goal

Calculated risk taking

• High achievers tend to take moderated or calculated risk

– Examining the situation and determine how to increase the chance of winning a

business situation

– They make their effort to get the odds in their favor

– They do not take unnecessary risks

Internal locus of control

• They believe that success or failure is determined by their own effort.

• They believe in themselves

• They do not believe that success or failure of their ventures were determined by fate or luck

• This behavior is consistent with self-confidence and desire to take personal responsibility

Tolerance for failure

• High achievers take failure as a learning experience.

• Do not easily become disappointed, distress or discouraged by any setback or difficulties

faced in the mist of business competition.

• Many successful entrepreneurs belief that they learn more from their earlier failure than from

their earlier success.

Seeking Feedback

•

They have strong desire to actively seek and used feedback to know how well they are doing

and how to improve their performance.

• Most successful entrepreneurs are quick learners

Integrity and reliability

• Integrity and reliability help to build and sustain trust and confidence

• This helps to endure the relationship between entrepreneurs, partners, customers, suppliers

and stakeholders.

Besides the three social motives, a successful entrepreneur should also have the competence motivation.

Competence motivation is a drive to do high quality work. Competence motivated entrepreneurs: -




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seek mastery in job or tasks that they are undertaking,

develop problem solving skill and

strive to be innovative

tend to perform good work because the inner satisfaction they feel and esteem they gain from othersdue to their competence.

ENTREPRENEURIAL SKILLS AND COMPETENCIES

SKILLS

Technical Skills

Specific OperationTechnology

Communication

Interpersonal relations

Organizational ability

Coordinating Team

members

EnvironmentalObservation

Business Management Skills

Planning

Formulating Goals

Decision-making

Motivating

Marketing

Accounting

Negotiation

Entrepreneurial Skills

Inner Discipline

Risk-seeking

Innovation

Change-orientation

Persistency

Visionary

Entrepreneurial Motivation

Personal Characteristics

Personal Goals

IDEA

Environment

Entrepreneurial Activity

Expectations Outcomes Match




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COMPETENCIES

Competency is a combination of knowledge, skills and behaviour used to improve performance; or the

state or quality of being adequately or well qualified, having the ability to perform a specific role. For

instance, management competency might include systems thinking and emotional intelligence, & skills

in influence and negotiation.

Entrepreneurial competencies are a constellation of characteristics associated with development of a

successful business. These competencies are described as underlying characteristics of a person that

result in effective action and/or superior performance in a job. Competencies can range from

personality traits and individual motivations to specific knowledge and skills.

Entrepreneurial Competencies as given by McClelland and McBer (1985)

1. Initiative

The entrepreneur should be able to take actions that go beyond his job requirements and to act faster. He is always

ahead of others and able to become a leader in the field of business.

Examples

Does things before being asked or compelled by the situation.

Acts to extend the business into new areas, products or services

2. Sees and acts on opportunities

An entrepreneur always looks for and takes action on opportunities.

Examples

Sees and acts on new business opportunities

Seizes unusual opportunities to obtain financing, equipment, land, work space or assistance

3. Persistence

An entrepreneur is able to make repeated efforts or to take different actions to overcome an obstacle that get in the

way of reaching goals.

Examples

Takes repeated or different actions to overcome an obstacle

Takes action in the face of a significant obstacle

4.

Information Seeking

An entrepreneur is able to take action on how to seek information to help achieve business objectives or clarify

business problems.

Examples




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Does personal research on how to provide a product or service

Consults experts or experienced persons to get relevant information

Seeks information or asks questions to clarify a client's or a supplier's need

Personally undertakes market research, analysis or investigation

Uses contacts or information networks to obtain useful information

5. Concern for High Quality of Work

An entrepreneur acts to do things that meet certain standards of excellence which gives him greater satisfaction.

Examples

States a desire to produce or sell a top or better quality product or service

Compares own work or own company's work favorably to that of others

6. Commitment to Work Contract

An entrepreneur places the highest priority on getting a job completed.

Examples

Makes personal sacrifice or expends extraordinary effort to complete a job

Accepts full responsibility for problems in completing a job for customers

Pitches in with workers or works in their place to get the job done

Expresses a concern for satisfying the customer

7.

Efficiency Orientation A successful entrepreneur always finds ways to do things faster or with fewer resources or at a lower cost.

Examples

Looks for or finds ways to do things faster or at less cost

Uses information or business tools to improve efficiency

Expresses concern about costs vs. benefits of some improvement, change, or course of action

8. Systematic Planning

An entrepreneur develops and uses logical, step-by-step plans to reach goals.

Examples

Plans by breaking a large task down into sub-tasks

Develops plans that anticipate obstacles

Evaluate alternatives

Takes a logical and systematic approach to activities

9. Problem Solving

Successful entrepreneur identifies new and potentially unique ideas to achieve his goals.

Example




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Switches to an alternative strategy to reach a goal

Generates new ideas or innovative solutions

10. Self-Confidence

A successful entrepreneur has a strong belief in self and own abilities.

Examples

Expresses confidence in own ability to complete a task or meet a challenge

Sticks with own judgment in the face of opposition or early lack of success

11. Assertiveness

An entrepreneur confronts problems and issues with others directly.

Examples

Confronts problems with others directly

Tells others what they have to do

Reprimands or disciplines those failing to perform as expected

12.

Persuasion

An entrepreneur can successfully persuade or influence others for mobilizing resources, obtaining inputs, organizing

productions and selling his products or services.

Examples Convinces someone to buy a product or service

Convinces someone to provide financing

Convinces someone to do something else that he would like that person to do

Asserts own competence, reliability, or other personal or company qualities

Asserts strong confidence in own company's products or services

13. Use of Influence Strategies

An entrepreneur is able to make use of influential people to reach his business goals.

Examples

Acts to develop business contracts

Uses influential people as agents to accomplish own objectives

Selectively limits the information given to others

Uses a strategy to influence or persuade others




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ENTREPRENEURIAL SKILLS AND COMPETENCIES

Refer to Entrepreneurship Development by T N Chhabra. pp 1.13 – 1.16

1.

Scouting of entrepreneurial opportunities

2. Generation of business ideas

3. Converting the idea into reality

4. Arranging & Allocating Resources & Factors of Production

5. Supply of capital

6. Establishing, Owning and Managing the enterprise

7. Growth and development

FORCES THAT DRIVE ENTREPRENEURSHIP GROWTH

1. Entrepreneurs as heroes

2. Entrepreneurial education and support

3. Technological advances

4. Service economy

5. Changes in consumer socio-cultural and personality factors

6. Ecommerce and WWW

7.

Desire for independent lifestyle

8. International opportunities

Exchange Relationship

•Perceiving market opportunities

•Gaining command over market

•Purchasing inputs

•Marketing the products and responding to

competition

Political Administration

•Dealing with bureaucrats

•Managing human resources of the firm

•Managing customer and supplier relations

Management Control

•Managing finance

•Managing production

Technology

•Acquiring and overseeing assembly of the factory

•Industrial engineering

•Upgrading process and product quality

•Introduction of new production techniques andproducts

Kilby's Classification of

EntrepreneurialFunctions




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TYPES OF ENTREPRENEURS

1. Innovative Entrepreneur

One who introduces new goods, inaugurates new method of production, discovers new market and

reorganizes the enterprise.

Such entrepreneurs can work only when a certain level of development is already achieved.

Belong to developed countries.

2. Imitative Entrepreneur

Ready to adapt successful innovations done by innovating entrepreneurs.

Do not innovate the changes themselves.

Mainly belong to developing countries.3. Fabian Entrepreneur

A Fabian Entrepreneur is one who is very cautious in taking the decisions, very skeptical, and takes

calculative steps.

They imitate only in situations where it becomes necessary to do so.

Are lazy and shy

Lack the will to adopt to new methods of production.

4. Drone Entrepreneur

Drone Entrepreneurs suffer losses, as they refuse to make any modifications in the existing production

methods.

They struggle to exist, not to grow.

They are laggards as they continue to operate in their traditional way and resist changes.

(For, refer Refer to Entrepreneurship Development by T N Chhabra. pp 1.19 – 1.20)

Other Categories: -

5. Women entrepreneurs

6. Copreneurs

7. Corporate castoffs

8. Corporate dropouts

9. According to type of business

a. Business entrepreneur : Convert ideas into reality; deal with both manufacturing and trading

aspect of business (Small trading and manufacturing business)

b.

Trading entrepreneur : Undertakes trading activities; concerned with marketing (Domestic and

international level)




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c. Industrial entrepreneur : Undertakes manufacturing activities only; new product development etc

(textile, electronics, etc)

d. Corporate entrepreneur : Interested in management part of organisation; exceptional organising,

coordinating skills to manage a corporate undertaking (Ambani, Tata families)e. Agricultural entrepreneur : Production and marketing of agricultural inputs and outputs (Dairy,

horticulture, forestry)

REASONS FOR ENTREPRENEURIAL FAILURE

(Refer Rajeev Roy, pp 19-21)

1. Inexperienced management

2. Few trained or experienced manpower

3. Poor financial management

4. Lack of business linkages

5. Weak marketing effort

6. Lack of information

7. Incorrect pricing

8. Improper inventory control

9. Short-term outlook

10. Rapid growth

GENERATION OF BUSINESS IDEAS

Business idea and opportunity

Idea

A business idea is a concept which can be used for commercial purposes. It typically centres around a

commodity or service that can be sold for money, according to a unique model. Creativity

Ability to develop new ideas and discover new ways of looking at problems and opportunities

Innovation

Ability to apply creative solutions to problems and opportunities to enhance people‘s lives

Opportunity

An economic idea which can be implemented to create a business enterprise and earn profits

Criteria for converting a possibility into a business opportunity: -

o Favorable market demand

o Adequate rate of return




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o Potential for growth

o Fit with Entrepreneur‘s competence

o All ideas are not opportunities but all opportunities are ideas

Selection of business ideas: - Project must be compatible with the objectives and resources of the entrepreneur

Resources should be reasonably assured

Cost structure must be able to realize adequate returns

Effect of the external environment must be considered

Idea must be consistent with govt. policies, regulations, etc.

Idea Evaluation: -

What is your product?

What is the business model?

How big is your market?

How can you protect your business?

What are you getting out of it?

Approaches to idea generation / Sources of Ideas: -

Brainstorming

New ways of doing old things

Improving an existing product

Utilizing waste material

Converting hobby into business

Market research

Information from publications

Seminars and conferences

Discussion with people

BUSINESS IDEA EVALUATION




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5 C ANALYSIS / SITUATION ANALYSIS

Situation Analysis is study of current market or industry in which a company wants to launch a new product.

In order to launch a new product, a company first needs to study the market about certain things like how

many products of that particular industry are present in the market, what is their average cost of producing the

product, what is their average profit expectancy, what is the gestation gap between investment and the

product being released in the market, who are our competitors and what is their individual market share.

The Five Cs are

1. Company

2.

Collaborators3. Customers

4. Competitors

5. Climate or Context

Company

Product line

Image in the market

Technology and experience

Culture

Goals

Collaborators

Distributors

Suppliers

Alliances

Customers

Market size and growth

Market segments

Benefits that customer is seeking, tangible and intangible

Motivation behind purchase; value drivers, benefits vs. costs

Decision maker or decision-making unit

Retail channel- where does the customer actually purchase the product?




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Consumer information sources – where does the consumer obtain information about the

product?

Buying process; is it impulsive or careful evaluation

Frequency of purchase, seasonal factors Quantity purchased at a time

Trends- how consumers‘ needs and preferences change over time

Competitors

Actual or potential

Direct or indirect

Products

Positioning

Market shares

Strengths and weaknesses

Climate or context

Political and regulatory environment -- governmental policies and regulations that affect the

market.

Economic Environment -- business cycles, inflation rate, interest rates and other issues of

economic nature

Social and cultural environment – society‘s trends and fashions

Technological environment -- new knowledge that makes possible new ways of satisfying

needs, the impact of technology on the demand for existing products.

MICHAEL E PORTER’S FIVE FORCE ANALYSIS

The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a business

situation. This is useful, because it helps you understand both the strength of your current competitive position,

and the strength of a position you're considering moving into.

With a clear understanding of where power lies, you can take fair advantage of a situation of strength, improve

a situation of weakness, and avoid taking wrong steps. This makes it an important part of your planning toolkit.




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Conventionally, the tool is used to identify whether new products, services or businesses have the potential to

be profitable. However it can be very illuminating when used to understand the balance of power in other

situations.

Five Force Analysis assumes that there are five important forces that determine competitive power in a

business situation. These are:

1. Supplier Power: Here you assess how easy it is for suppliers to drive up prices. This is driven by the

number of suppliers of each key input, the uniqueness of their product or service, their strength and

control over you, the cost of switching from one to another, and so on. The fewer the supplier choices

you have, and the more you need suppliers' help, the more powerful your suppliers are.

2. Buyer Power: Here you ask yourself how easy it is for buyers to drive prices down. Again, this is

driven by the number of buyers, the importance of each individual buyer to your business, the cost to

them of switching from your products and services to those of someone else, and so on. If you deal

with few, powerful buyers, then they are often able to dictate terms to you.

3. Competitive Rivalry: What is important here is the number and capability of your competitors. If you

have many competitors, and they offer equally attractive products and services, then you'll most likely

have little power in the situation, because suppliers and buyers will go elsewhere if they don't get a

good deal from you. On the other hand, if no-one else can do what you do, then you can often have

tremendous strength.

4. Threat of Substitution: This is affected by the ability of your customers to find a different way of doing

what you do – for example, if you supply a unique software product that automates an important

process, people may substitute by doing the process manually or by outsourcing it. If substitution is

easy and substitution is viable, then this weakens your power.

5. Threat of New Entry: Power is also affected by the ability of people to enter your market. If it costs

little in time or money to enter your market and compete effectively, if there are few economies of scale

in place, or if you have little protection for your key technologies, then new competitors can quickly

enter your market and weaken your position. If you have strong and durable barriers to entry, then you

can preserve a favorable position and take fair advantage of it.




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Example –Coca Cola

Threat of New Entrants/Potential Competitors: Medium Pressure

Entry barriers are relatively low for the beverage industry: there is no consumer switching cost and zero

capital requirement. There is an increasing amount of new brands appearing in the market with similar

prices than Coke products

Coca-Cola is seen not only as a beverage but also as a brand. It has held a very significant market share

for a long time and loyal customers are not very likely to try a new brand.Threat of Substitute Products: Medium to High pressure

There are many kinds of energy drink s/soda/juice products in the market. Coca-cola doesn‘t really have

an entirely unique flavor. In a blind taste test, people can‘t tell the difference between Coca -Cola and

Pepsi.

The Bargaining Power of Buyers: Low pressure

The individual buyer no pressure on Coca-Cola

Large retailers, like Wal-Mart, have bargaining power because of the large order quantity, but the

bargaining power is lessened because of the end consumer brand loyalty.

The Bargaining Power of Suppliers: Low pressure

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The main ingredients for soft drink include carbonated water, phosphoric acid, sweetener, and caffeine.

The suppliers are not concentrated or differentiated.

Coca-Cola is likely a large, or the largest customer of any of these suppliers.

Rivalry Among Existing Firms: High Pressure Currently, the main competitor is Pepsi which also has a wide range of beverage products under its brand.

Both Coca-Cola and Pepsi are the predominant carbonated beverages and committed heavily to

sponsoring outdoor events and activities.

There are other soda brands in the market that become popular, like Dr. Pepper, because of their unique

flavors. These other brands have failed to reach the success that Pepsi or Coke have enjoyed.

FEASIBILTY ANALYSIS

The feasibility study is an evaluation and analysis of the potential of a proposed project which is based on

extensive investigation and research to support the process of decision making.

As the name implies, a feasibility study is an analysis of the viability of an idea. The feasibility study focuses on

helping answer the essential question of ―should we proceed with the proposed project idea?‖ All activities of

the study are directed toward helping answer this question.

Feasibility studies can be used in many ways but primarily focus on proposed business ventures. Farmers and

others with a business idea should conduct a feasibility study to determine the viability of their idea before

proceeding with the development of a business. Determining early that a business idea will not work saves

time, money and heartache later.

A feasible business venture is one where the business will generate adequate cash-flow and profits, withstand

the risks it will encounter, remain viable in the long-term and meet the goals of the founders. The venture can

be either a start-up business, the purchase of an existing business, an expansion of current business

operations or a new enterprise for an existing business.

Below are other reasons to conduct a feasibility study: -

Gives focus to the project and outline alternatives.

Narrows business alternatives

Identifies new opportunities through the investigative process.

Identifies reasons not to proceed.

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Enhances the probability of success by addressing and mitigating factors early on that could affect the

project.

Provides quality information for decision making.

Provides documentation that the business venture was thoroughly investigated. Helps in securing funding from lending institutions and other monetary sources.

Helps to attract equity investment.

MARKET ANALYSIS

A market, whether a place or not, is the arena for interaction among buyers and sellers. From seller‘s point of

view, market analysis is primarily concerned with the aggregate demand of the proposed product/service in

future and the market share expected to be captured. Success of the proposed project clearly hinges on the

continuing support of the customers. However, it is very difficult to identify the market for one‘s

product/service. After all, the whole universe cannot be your market. You have to carefully segment the market

according to some criteria such as geographic scope, demographic and psychological profile of the potential

customers etc. It is a study of knowing who all comprise your customers, for this you require information on:

- Consumption trends.

- Past and present supply position

- Production possibilities and connstraints

- Imports and ExportsCompetition




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- Cost structure

- Elasticity of demand

- Consumer behaviour, intentions, motivations, attitudes, preferences and requirements

- Distribution channels and marketing policies in use- Administrative, technical and legal constraints impinging on the marketing of the product

FINANCIAL ANALYSIS

The objective of financial analysis is to ascertain whether the proposed project will be financially viable in the

sense of being able to meet the burden of servicing debt and whether the proposed project will satisfy the

return expectations of those who provide the capital. While conducting a financial appraisal certain aspects

has to be looked into like:

- Investment outlay and cost of project

- Means of financing

- Projected profitability

- Break- even point

- Cash flows of the project

- Investment worthiness judged in terms of various criteria of merit

- Projected financial position

TECHNICAL ANALYSIS

The issues involved in the assessment of technical analysis of the proposed project may be classified into

those pertaining to inputs, throughputs and outputs.

• Input Analysis: Input analysis is mainly concerned with the identification, quantification and evaluation of

project inputs, that is, machinery and 67 materials. You have to ensure that the right kind and quality of inputs

would be available at the right time and cost throughout the life of the project. You have to enter into long-term

contracts with the potential suppliers; in many cases you have to cultivate your supply sources. When

Macdonald entered India, they developed sustainable sources of supply of potatoes, lettuce and other

ingredients for their burgers. The activities involved in developing and retaining supply sources are referred to

as supply chain management.

• Throughput Analysis: It refers to the production/operations that you would perform on the inputs to add value.

Usually, the inputs received would undergo a process of transformation in several stages of manufacture.

Where to locate the facility, what would be the sequence, what would be the layout, what would be the quality

control measures, etc. are the issues that you would learn in greater details in subsequent lessons




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• Output Analysis: this involves product specification in terms of physical features – color, weight, length,

breadth, height, functional features, chemical material properties, etc.

ECONOMIC ANALYSISEconomics is the study of costs- and- benefits. In regard to the feasibility of the study the entrepreneur is

concerned whether the capital cost as well as the cost of the product is justifiable vis-à-vis the price at which it

will sell at the market place. For example, technically, silver can be extracted from silver bromide, (a chemical

used for processing the X-ray and photo films); but, the cost of extraction is so high that it would not be

economically feasible to do so. Likewise, until recently cost of harnessing solar power was prohibitively high.

This cost-benefit analysis goes into financial calculations for profitability analysis that we discussed under

financial analysis. At this stage it is also useful to distinguish between the economic and commercial feasibility;

whereas economic feasibility leads one to the unit cost of the product, commercial feasibility informs whether

enough units would sell.

ECOLOGICAL ANALYSIS

In recent years, environmental concerns have assumed a great deal of significance especially for projects,

which have significant ecological implications like power plants and irrigation schemes, and for environment

polluting industries (like bulk drugs, chemicals and leather processing). The concerns that are usually

addressed include the following:

- What is the likely damage caused by the project to the environment?

- What is the cost of restoration measures required to ensure that the damage to the environment is contained

within acceptable limits?

LEGAL AND ADMINISTRATIVE

Think of the plight of the entrepreneur who worked on the idea of a laundry to cater to

hotels and hospitals, finds it eminently feasible only to learn subsequently that ‗laundry‘ does not figure as an

industry within the administrative definition of SSI as applicable on that date. Another entrepreneur in Kalyani

(West Bengal) developed an Ayurvedic preparation only to find that the office of DIC did not have an expert to

validate the project; the product had to be marketed as a confectionary item! What is implied from these

examples is that the entrepreneur has to be sure also of the administrative and legal issues involved in the

project. These include, choice of the form of business organisation, registration and clearances and approvals

from the diverse authorities.

PRODUCT SPECIFIC CLEARANCES: -




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For established a printing press-District Magistrate

• For pesticides – Central / State Agricultural Department- Ministry of Agriculture

• For safety matches / fireworks – licence under Explosives Act from Directorate of Explosives

• For household electrical appliances – licence from the Bureau of Indian Standards• Wood working industry within 8 km from forest – District Forest Officer

• For Drugs and Pharmaceuticals – drug license from State Drug Controller.

SWOT ANALYSIS




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BREAK EVEN ANALYSIS

Break-even analysis is a technique widely used by production management and management accountants. It

is based on categorising production costs between those which are "variable" (costs that change when the

production output changes) and those that are "fixed" (costs not directly related to the volume of production).

Total variable and fixed costs are compared with sales revenue in order to determine the level of sales

volume, sales value or production at which the business makes neither a profit nor a loss (the "break-

even point").

The Break-Even Chart




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In its simplest form, the break-even chart is a graphical representation of costs at various levels of activity

shown on the same chart as the variation of income (or sales, revenue) with the same variation in activity. The

point at which neither profit nor loss is made is known as the "break-even point" and is represented on the

chart below by the intersection of the two l ines:

In the diagram above, the line OA represents the variation of income at varying levels of production activity

("output"). OB represents the total fixed costs in the business. As output increases, variable costs are incurred,

meaning that total costs (fixed + variable) also increase. At low levels of output, Costs are greater than

Income. At the point of intersection, P, costs are exactly equal to income, and hence neither profit nor loss is

made.

Fixed Costs

Fixed costs are those business costs that are not directly related to the level of production or output. In other

words, even if the business has a zero output or high output, the level of fixed costs will remain broadly the

same. In the long term fixed costs can alter - perhaps as a result of investment in production capacity (e.g.

adding a new factory unit) or through the growth in overheads required to support a larger, more complex

business.

Examples of fixed costs: -

- Rent and rates

- Depreciation

- Research and development

- Marketing costs (non- revenue related)

- Administration costs

Variable Costs




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Variable costs are those costs which vary directly with the level of output. They represent payment output-

related inputs such as raw materials, direct labour, fuel and revenue-related costs such as commission.

A distinction is often made between "Direct" variable costs and "Indirect" variable costs.

Direct variable costs are those which can be directly attributable to the production of a particular product orservice and allocated to a particular cost centre. Raw materials and the wages those working on the

production line are good examples.

Indirect variable costs cannot be directly attributable to production but they do vary with output. These include

depreciation (where it is calculated related to output - e.g. machine hours), maintenance and certain labour

costs.

Semi-Variable Costs

Whilst the distinction between fixed and variable costs is a convenient way of categorising business costs, in

reality there are some costs which are fixed in nature but which increase when output reaches certain levels.

These are largely related to the overall "scale" and/or complexity of the business. For example, when a

business has relatively low levels of output or sales, it may not require costs associated with functions such as

human resource management or a fully-resourced finance department. However, as the scale of the business

grows (e.g. output, number people employed, number and complexity of transactions) then more resources

are required. If production rises suddenly then some short-term increase in warehousing and/or transport may

be required. In these circumstances, we say that part of the cost is variable and part fixed.

Example

Selling Price (SP) : 10/-

Variable Cost (VC) : 6/-

Contribution : SP – VC = 4/-

Fixed Cost (FC) : 5,000/-

Break even Quantity : FC/Contribution = 1250

Profit would be realized when more than 1250 units of the commodity are sold.

BUSINESS LIFE CYCLE

A business goes through stages of development similar to the cycle of life for the human race.




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Seed

The seed stage of your business life cycle is when your business is just a thought or an idea. This is the very

conception or birth of a new business.

Challenge: Most seed stage companies will have to overcome the challenge of market acceptance and pursue

one niche opportunity. Do not spread money and time resources too thin..

Focus: At this stage of the business the focus is on matching the business opportunity with your skills,

experience and passions. Other focal points include: deciding on a business ownership structure, finding

professional advisors, and business planning.

Money Sources: Early in the business life cycle with no proven market or customers the business will rely on

cash from owners, friends and family. Other potential sources include suppliers, customers, government

grants and banks.

Start-Up

Your business is born and now exists legally. Products or services are in production and you have your first

customers.

Challenge: If your business is in the start-up life cycle stage, it is likely you have overestimated money needs

and the time to market. The main challenge is not to burn through what little cash you have. You need to learn

what profitable needs your clients have and do a reality check to see if your business is on the right track.

Focus: Start-ups require establishing a customer base and market presence along with tracking and

conserving cash flow.




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Money Sources: Owner, friends, family, suppliers, customers, grants, and banks.

Growth

Your business has made it through the toddler years and is now a child. Revenues and customers are

increasing with many new opportunities and issues. Profits are strong, but competition is surfacing.

Challenge: The biggest challenge growth companies face is dealing with the constant range of issues bidding

for more time and money. Effective management is required and a possible new business plan. Learn how to

train and delegate to conquer this stage of development.

Focus: Growth life cycle businesses are focused on running the business in a more formal fashion to deal with

the increased sales and customers. Better accounting and management systems will have to be set-up. New

employees will have to be hired to deal with the influx of business.Money Sources: Banks, profits, partnerships, grants and leasing options.

Established

Your business has now matured into a thriving company with a place in the market and loyal customers. Sales

growth is not explosive but manageable. Business life has become more routine.

Challenge: It is far too easy to rest on your laurels during this life stage. You have worked hard and have

earned a rest but the marketplace is relentless and competitive. Stay focused on the bigger picture. Issues likethe economy, competitors or changing customer tastes can quickly end all you have work for.

Focus: An established life cycle company will be focused on improvement and productivity. To compete in an

established market, you will require better business practices along with automation and outsourcing to

improve productivity.

Money Sources: Profits, banks, investors and government.

Expansion

This life cycle is characterized by a new period of growth into new markets and distribution channels. This

stage is often the choice of the business owner to gain a larger market share and find new revenue and profit

channels.

Challenge: Moving into new markets requires the planning and research of a seed or start-up stage business.

Focus should be on businesses that complement your existing experience and capabilities. Moving into

unrelated businesses can be disastrous.

Focus: Add new products or services to existing markets or expand existing business into new markets and

customer types.




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Money Sources: Joint ventures, banks, licensing, new investors and partners, profits, banks, investors and

government.

MatureYear over year sales and profits tend to be stable, however competition remains fierce. Eventually sales start

to fall off and a decision is needed whether to expand or exit the company.

Challenge: Businesses in the mature stage of the life cycle will be challenged with dropping sales, profits, and

negative cash flow. The biggest issue is how long the business can support a negative cash flow. Ask is it time

to move back to the expansion stage or move on to the final life cycle stage...exit.

Focus: Search for new opportunities and business ventures. Cutting costs and finding ways to sustain cash

flow are vital for the mature stage.Money Sources: Suppliers, customers, owners, and banks. Profits, banks, investors and government.

Exit

This is the big opportunity for your business to cash out on all the effort and years of hard work. Or it can mean

shutting down the business.

Challenge: Selling a business requires your realistic valuation. It may have been years of hard work to build

the company, but what is its real value in the current market place. If you decide to close your business, thechallenge is to deal with the financial and psychological aspects of a business loss.

Focus: Get a proper valuation on your company. Look at your business operations, management and

competitive barriers to make the company worth more to the buyer. Set-up legal buy-sell agreements along

with a business transition plan.

Money Sources: Find a business valuation partner. Consult with your accountant and financial advisors for the

best tax strategy to sell or close-out down business.




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INTELLECTUAL PROPERTY RIGHTS

IPR

Intellectual property(IP) is the creation of human intellect. It refers to the ideas, knowledge, invention,

innovation, creativity, research etc, all being the product of human mind and is similar to any property,

whether movable or immovable, wherein the proprietor or the owner may exclusively use his property at

will and has the right to prevent others from using it, without his permission. The rights relating to

intellectual property are known as 'Intellectual Property Rights'.




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IPR is a collective term applied to a number of different types of legal rights granted by a country to the

holder of intellectual property. Their common property is that they stem from certain kinds of intellectual

effort and ingenuity. In the technological field, the grant of IPR may be seen as recognitions by the country

of the contribution of the innovator to the development of new or improved industrial processes andproducts.

Intellectual Property Rights, by providing exclusive rights to the inventor or creator, encourages more and

more people to invest time, efforts and money in such innovations and creations.

In today's knowledge-driven economy, intellectual property (IP) has become one of the key considerations

in all business decisions. The new products, brands and creative designs launched in the market are the

result of human innovation and creativity. This innovative and creative capacity is protected under the

intellectual property system. If not protected, it may be lost to competitors who may commercialise the

product or service, leaving the original inventor or creator without any financial benefit or reward. Hence,

proper protection of a company's intellectual property is necessary for turning ideas into those business

assets which have a real market value.

The protection of intellectual property will help a company in the following ways :-

o It will prevent competitors from copying or imitating a company‘s products or services.

o It will prevent wastage of investment in research and development (R&D).

o It will help create a corporate identity through a trademark and branding strategy.

o It will help the company to negotiate licensing, franchising or other IP-based contractual

agreements.

o It will help increase the market value of the company.

o It will help the company, enhance access to finance.

o It will help the company, obtain access to new markets.

o Also, knowledge of the existing IP rights, will help the enterprise avoid unnecessary conflicts and

litigations.

Types of IPR

1. Copyrights

Right over literary and artistic works

2. Industrial Property

a. Patents

b. Industrial Designs

c. Trademark

d.

Geographical Indication of Goods




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Copyrights and rights related to Copyright

The rights of authors of literary and artistic works (such as books and other writings, musical compositions,

paintings, sculpture, computer programs and films) are protected by copyright. Also, protection is granted

to related or neighbouring rights like the rights of performers (e.g. actors, singers and musicians),producers of phonograms (sound recordings) and broadcasting organizations.

Dimensions

o Idea expression

o Originality

o Fair use

Creators can prohibit others to:

o reproduce the work in any form, such as print, sound, video, etc.

o record the work in a compact discs, cassettes, etc.

o broadcast it in any form

o translate it to other languages

o use the work for a public performance, like a stage drama or musical performance

According to the Copyright Act, 1957, the term 'copyright' means the exclusive right to do or authorise the

doing of a 'work' or a substantial part of it. The term 'work' used here means:-

o A literary work: it includes computer programmes, tables, compilations and computer databases.

o A dramatic work: it includes any piece of recitation, choreographic work or entertainment in dumb

show, the scenic arrangement or acting, whose form is fixed in writing or otherwise.

o A musical work: it includes works of music, any graphical notation of such work but does not

include any words or action intended to be sung, spoken or performed with the music.

o An artistic work: it means a painting, a sculpture, a drawing (including a diagram, map, chart or

plan),an engraving or a photograph, whether or not they possess artistic quality. It also includes a

work of architecture and any other work of artistic craftsmanship.

o

A cinematographic film: it means any work of visual recording on any medium produced through a

process from which a moving image may be produced by any means.

o A sound recording: it means recording of sounds from which sounds may be produced regardless

of the medium by which sounds are produced.

Trade Marks

Trade Marks Act, 1999 has been enacted to amend and consolidate the law relating to trade marks, to

provide for registration and better protection of trade marks for goods and services and for the prevention

of the use of fraudulent marks.




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‗Mark‘ includes a device, brand, heading, label, ticket, name, signature, word, letter, shape of goods,

packaging or combination of colors, numeral shape of goods, packaging or combination of colors or any

combination thereof.

According to the Trade Marks Act, 1999, the term 'trade mark' means "a mark capable of beingrepresented graphically and which is capable of distinguishing the goods or services of one person from

those of others and may include shape of goods, their packaging and combination of colours".

Functions: -

o Product identification

o Guarantee of quality

o Advertisement

o Product image

Essentials: -

o Distinctive and unique

o Easy to pronounce and remember

o Easy to spell

o Short

o Satisfaction of requirements of registration*

o Should not belong to the class of prohibited marks

Requirements of Registration*

o If it is a word mark, or if it is a mark containing at least in part a word, then that word ought to be

easy to speak, spell and remember.

o Invented words or coined words that cannot be found in a dictionary as such form the best trade

marks of all, since they can seldom be used as a generic word for any purpose.

o One should always be careful to avoid selection of a geographical name precisely for the same

reason.

o

It is in the best interest of a person not to select as marks descriptive or generic names or names

that describes quality of a good such as best, perfect etc., or marks which have become

customary in the current language or in the established practices of related trade.

o The mark should not consist exclusively of the shape of goods which results from the nature of the

goods themselves, or the shape of goods which necessary to obtain a technical result or the

shape which gives substantial value to the goods.

o If the mark is of such a nature as to deceive the public or cause confusion or contains any matter

likely to hurt the religious susceptibilities of any class of Indian citizens or any scandalous or

obscene matter, it may be refused registration.




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o An action that will always satisfy the combined tests of both prudence and sound business sense

will be to conduct a thorough market survey and a search at the Trade Mark Office before seeking

to get a mark registered, so as to know whether similar mark or marks have already been

registered or filed for registration. Marks that can be adopted as trade mark: -

o Any name (including personal or surname of the applicant or predecessor in business or the

signature of the person), which is not unusual for related trade to adopt as a mark.

o An invented word or any arbitrary dictionary word or words, not being directly descriptive of the

character or quality of the goods/service.

o Letters or numerals or any combination thereof.

o Devices, including fancy devices or symbols

o Monograms

o Combination of colors or even a single color in combination with a word or device

o Shape of goods or their packaging

o Marks constituting a 3- dimensional sign.

o Sound marks when represented in conventional notation or described in words by being

graphically represented.

o All of the aforesaid marks have to be sufficient for the purpose of identification of and

distinguishing the goods, in relation to which they are being used, from other goods.

Duration of trade mark protection available in India

o Term of registration of a trademark is ten years, which may be renewed for a further period of ten

years on payment of prescribed renewal fees.

o However, non-usage of a registered trademark for a continuous period of five years is a valid

ground for cancellation of registration of such trademark at the behest of any aggrieved party.

Approximate total cost involved in trade mark registration

The exact cost involved in the registration of a trademark will depend on the following variables:

o The number of trademarks one registers – (e.g., the name of the brand, the company name, the

business logo)

o The number of classes under which one registers each logo

o The course taken by the opposition process (i.e. the existence of opposition, number of opponents

and the number of replies filed, the number of one month extensions sought over the maximum

period, for each step of the opposition process)

o

The amount of lawyer‘s fees for the filing process and the trademark search.

Approximate Estimate




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If an application is for a single name or logo for goods or services under one class only, then the

application will cost around INR 10,000 as the fee component for application, if one files for a word

mark (that is, comprising of text) and a graphic mark under two classes.

INR 1000 for a counter-affidavit in reply to an opposition.INR 5000 to INR 15000 on the lawyer‘s fees.

In addition to this, the trademark search, that is, the first step which is conducted before filing the

application, will cost around INR 500.

Hence, the approximate total cost ought to range between INR 16500 to 26500

Trademark Registration Process

1.

File trademark application and obtain application number




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This step involves drafting description of goods and services, prepare all the documentation, selecting the

most appropriate class or classes and filing the right type of trademark application in the trademark

registry, among other tasks requiring thorough understanding of the law governing trademark protection.

The trademark application will be filed online, and subsequently a trademark application number is issued.2. Conduct examination

Trademark registry conducts a thorough examination before registering any trademark. During

examination, the registry primarily checks whether the registration of trademark can be objected based on

any absolute or relative grounds, among various other grounds.

3. Is the trademark acceptable for registration?

The registry, based on its examination, determines whether the trademark is acceptable for registration. If

the trademark is acceptable for registration, then the process proceeds to step 4, else it proceeds to step

7.

4. Advertisement of application

If at step 3, the registry determines that the trademark is acceptable for registration, then the application

will be published. The publication provides an opportunity to the public to raise opposition to the

registration of the trademark.

5. Has anyone opposed registration?

If the registry does not receive any opposition to registration of the trademark, then the process proceeds

to step 6. On the other hand, if the registry receives an opposition to registration of the trademark, then the

process proceeds to step 14.

6. Trademark registered

The trademark will be registered, and the owner of the registered trademark can now take benefit of all the

rights obtained from registration.

7. Issue examination report

At step 3, if the registry, based on its examination, determines that the trademark is not acceptable for

registration, then the registry issues an examination report. The examination report will have the grounds

on which the registration is objected.

8. Respond examination report

The applicant will have to respond to the examination report, and try to overcome the objections. The task

of responding involves studying various case law, previous judgements, interpretation and application of

law to the case at hand, so that objections can be overcome. A person with expertise in trademark

prosecution will be able to effectively address the objections raised in the examination report.

9.

Is the application acceptable for registration?




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The registry, based on the response to the examination report, determines whether the trademark is

acceptable for registration. If the trademark is acceptable for registration, then the process proceeds to

step 4, else it proceeds to step 10.

10.

Call for hearingThe registry calls the applicant for a hearing, if the registry is of the opinion that the objections raised in the

examination report have not been overcome.

11. Attend hearing

The applicant or his representative will have to attend the hearing. The task of preparing for hearing

involves studying various case law, previous judgements, interpretation and application of law to the case

at hand so that Registrar can be convinced. It shall be noted that, preparation, presentation and

convincing skills of the professional plays a key role in succeeding at a hearing.

12. Is the application acceptable for registration?

The registry, based on the hearing, determines whether the trademark is acceptable for registration. If the

trademark is acceptable for registration, then the process proceeds to step 4, else the trademark is not

registered.

13. Trademark not registered

If the trademark registry, even after the hearing, refuses to register the trademark, then the registration to

the trademark is not granted. However, the applicant has the option of appealing against the decision of

the registry.

14. Make counter statement to the opposition and take part in opposition proceeding

After advertisement of application at step 4, the registry receives an opposition to registration of the

trademark, then opposition proceedings would begin. Some opposition proceedings are simple, while

others of complex. The process involves filing statements, counter statements and in many cases,

attending hearing. The task involves studying various case law, previous judgements, interpretation and

application of law to the case at hand, so that Registrar can be convinced.

15.

Is the application registrable?

The registry, based on the opposition proceedings, determines whether the trademark is acceptable for

registration. If the trademark is acceptable for registration, then the trademark is registered, else the

trademark is not registered.

16. Trademark not registered

If the trademark registry, after the opposition proceedings, refuses to register the trademark, then the

registration to the trademark is not granted. However, the applicant has the option of appealing against the

decision of the registry.




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Patents

The umbrella legislation relating to patents is the Patents Act, 1970. The term 'patent' is defined as a

monopoly right which is granted to a person who has invented a new and useful article, or an improvement

of existing article, or a new process of making an article. It consists of an exclusive right to manufacturethe new invented article or manufacture an article according to the invented process for a limited period.

Inventions that consist of products or new alloy is called product invention and the corresponding patent to

this is referred to as 'product patent'. Whereas, inventions that consists of process or processes of making

a known or new alloy is a process invention and patent for this is called a 'process patent'. This Act only

provided for process patent and for product like food, pharmaceutical and chemicals, the inventors were

granted only EMR (exclusive marketing rights).

Requirements of Obtaining a Patent: -

o Novelty

o Inventive

o Utility

o Capable of industrial application

The following are not patentable:

o Inventions which are frivolous or contrary to established natural laws

o Inventions, the primary use of which, are contrary to morality or can cause harm to humans or the

environment

o The mere discovery of a scientific principle without manifesting it in a product

o Discovery of a new use of an existing substance

o A new method of agriculture

o A business method

o A manufacturing process

o Any process for the medicinal, surgical, curative, prophylactic or other treatment of human beings

or any process for a similar treatment of animals or plants to render them free of disease or to

increase their economic value or that of their products.

Industrial Designs

‗Design‘ means only the features of shape, configuration, pattern or ornament or composition of lines or

colour or combination thereof applied to any article whether two dimensional or three dimensional or in

both forms, by any industrial process or means, whether manual, mechanical or chemical, separate or

combined, which in the finished article appeal to and are judged solely by the eye, but does not include

any mode or principle or construction or any thing which is in substance a mere mechanical device, and




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does not include any trade mark, as define in clause (v) of sub-section of Section 2 of the Trade and

Merchandise Marks Act, 1958, property mark or artistic works as defined under Section 2(c) of the

Copyright Act, 1957.

Under the Designs Act, 2000 the "article" means any article of manufacture and any substance, artificial,or partly artificial and partly natural; and includes any part of an article capable of being made and sold

separately.

Object of the Designs Act to protect new or original designs so created to be applied or applicable to

particular article to be manufactured by Industrial Process or means. Sometimes purchase of articles for

use is influenced not only by their practical efficiency but also by their appearance. The important purpose

of design Registration is to see that the artisan, creator, originator of a design having aesthetic look is not

deprived of his bonafide reward by others applying it to their goods.

Requirements

o The design should be new or original, not previously published or used in any country before the

date of application for registration. The novelty may reside in the application of a known shape or

pattern to new subject matter. Practical example: The known shape of "Kutub Minar" when applied

to a cigarette holder the same is registrable. However, if the design for which application is made

does not involve any real mental activity for conception, then registration may not be considered.

o The design should relate to features of shape, configuration, pattern or ornamentation applied or

applicable to an article. Thus, designs of industrial plans, layouts and installations are not

registrable under the Act.

o The design should be applied or applicable to any article by any industrial process. Normally,

designs of artistic nature like painting, sculptures and the like which are not produced in bulk by

any industrial process are excluded from registration under the Act.

o The features of the design in the finished article should appeal to and are judged solely by the

eye. This implies that the design must appear and should be visible on the finished article, for

which it is meant. Thus, any design in the inside arrangement of a box, money purse or almirah

may not be considered for showing such articles in the open state, as those articles are generally

put in the market in the closed state.

o Any mode or principle of construction or operation or any thing which is in substance a mere

mechanical device, would not be registrable design. For instance a key having its novelty only in

the shape of its corrugation or bend at the portion intended to engage with levers inside the lock

associated with, cannot be registered as a design under the Act. However, when any design

suggests any mode or principle of construction or mechanical or other action of a mechanism, a




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suitable disclaimer in respect there of is required to be inserted on its representation, provided

there are other registrable features in the design.

o The design should not include any Trade Mark or property mark or artistic works as define under

the Copyright Act, 1957.

Geographical Indication of Goods

Geographical Indications of Goods are defined as that aspect of industrial property which refer to the

geographical indication referring to a country or to a place situated therein as being the country or place of

origin of that product. Typically, such a name conveys an assurance of quality and distinctiveness which is

essentially attributable to the fact of its origin in that defined geographical locality, region or country.

Examples: -

o Darjeeling Tea

o Kota Doria

o Mysore Silk

o Mysore Agarbathi

o Kangra Tea

o Kullu Shawl

o Coorg Orange

o Mysore Sandalwood Oil

o Madhubani Paintings

o Phulkari

o Tequila (Mexico)

o Cognac (France)

o Lucknow Zardozi

o Nagpur Orange

The Geographical Indication of Goods (Registration and Protection) Act,1999 has been enacted to provide

for the registration and better protection of geographical indications relating to goods. According to the Act,

the term 'geographical indication' (in relation to goods) means "an indication which identifies such goods

as agricultural goods, natural goods or manufactured goods as originating, or manufactured in the territory

of a country, or a region or locality in that territory, where a given quality, reputation or other characteristic

of such goods is essentially attributable to its geographical origin and in case where such goods are

manufactured goods, one of the activities of either the production or of processing or preparation of the

goods concerned takes place in such territory, region or locality, as the case may be".




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Others

The Semi-Conductor Integrated Circuits Layout-Design Act,2000 has been enacted to provide for the

protection of semiconductor integrated circuits layout-designs and for matters connected therewith or

incidental thereto. According to the Act, the term 'layout-design' means "a layout of transistors and othercircuitry elements and includes lead wires connecting such elements and expressed in any manner in a

semiconductor integrated circuit". Here, the term 'semiconductor integrated circuit' means "a product

having transistors and other circuitry elements which are inseparably formed on a semiconductor material

or an insulating material or inside the semiconductor material and designed to perform an electronic

circuitry function".

Protection of Undisclosed Information (Trade Secrets or Knowhow)

Knowhow is another important form of intellectual property generated by R&D institutions that does not

have the benefit of patent or copyright protection. Such know-how is kept undisclosed as trade secrets. A

Trade Secret or undisclosed information is any information that has been intentionally treated as secret

and is capable of commercial application with an economic interest. It protects information that confers a

competitive advantage to those who possess such information, provided such information is not readily

available with or discernible by the competitors. They include technical data, internal processes,

methodologies, survey methods ,a new invention for which a patent application has not yet been filed, list

of customers, process of manufacture, techniques, formulae, drawings, training material, source code, etc.

It therefore becomes imperative to strengthen the confidentiality around the trade secret by ensuring that

contractual obligations are enforced on persons who are allowed to use the trade secret, especially,when

it is licensed to a third party.

Since there is no documentary evidence such as a Letters Patent or a Copyright registration or a

Trademark Registration to prove that the trade secret was originally created by the proprietor, it is

essential to maintain proof of creation of trade secret either by mailing the information to oneself and

retaining postmarked and sealed envelope or by depositing a copy of the information with a third party that

would maintain a dated copy.

Trade secret remains confidential for indefinite period of time as per the will of the proprietor provided the

security and its confidentiality is not breached. There is no specific legislation regulating the protection of

trade secrets in India. India follows common law approach of protection and all matters relating to it are

generally covered under the Contract Act, 1872. So, if the information constituting trade secret is leaked,

legal action can be brought against the parties who have leaked it under the Law of Contracts. However,

in such a case the protection of trade secret will be lost and it becomes available in public domain.

Protecting Trade Secrets

o Employees should be made to realize their responsibility to protect confidential material.




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o Employees should be educated to identify confidential material

o Data and information which is confidential should be marked as such.

o Access to sensitive material or sensitive areas of the workplace should be restricted on a need to

know basiso Interactions and disclosure to third parties should be channelled through specified responsible

employees

o When leaving an organization, an employee should be reminded of his obligations with respect to

confidential information through an exit interview.

Entrepreneurial Support

Business Incubators

Business Incubation is the temporary facilitative support provided to start up enterprises through the

delivery of complex services and special environment with an aim of improving their chance of survival in

the early phase of the life span and establishing their intensive growth. The term incubation refers to the

support, while incubator stands for the organization and infrastructure that are set up for these purposes.

Business incubation has been identified as a means of meeting a variety of economic and socioeconomicpolicy needs, which may include Creating jobs and wealth; Fostering a community's entrepreneurial

climate; Technology commercialization; Diversifying local economies; Building or accelerating growth of

local industry clusters; Business creation and retention; Encouraging women or minority entrepreneurship;

Identifying potential spin-in or spin-out business opportunities; and Community revitalization.




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Incubation Benefits (Refer Rajeev Roy, pp 132 – 135)

o Offering space on flexible terms

o Providing shared office services

o Presenting a business consulting network

o Providing opportunities to develop business relations

o Facilitating access to capital

Types of Incubators

o Business Incubators

o Technology Incubators

o Technology Innovation Centres

o Technology Business Incubators




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Business Incubators vs Business Accelerators

Incubator programs last for varying durations and include several forms of mentorship and support,

and nurture the business for the time it takes for it to get on its feet, sometimes for many years. On the

other hand, a business acceleration program usually lasts between 3-6 months. The emphasis of the

business accelerator is on rapid growth, and to sort out all organizational, operational, and strategic

difficulties that might be facing the business. It can be understood as a holistic business advisory

service, often bearing strong resemblance to traditional management consulting practices, but

adjusted to fit small and medium sized organizations.

Examples of Business Incubators in India: -




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o Angel Prime

o Kyron

o The Startup Center

o

Venture Nurseryo The Hatch

o TBI @ BITS Pilani

o CIIE @ IIM Ahmedabad

o NSRCEL @ IIM Bangalore

o SIIC @ IIT Kanpur

o SINE @ IIT Mumbai

o Technology based Incubator Society (TBIS), University of Delhi , South Campus

o SEED, MDI

o SP Jain Institute of Management Research

(Online resource: http://resource.nenonline.org/sites/default/files/webform/nen_incubators_ist.pdf)

BUSINESS CLUSTERS

A business cluster is a geographic concentration of interconnected businesses, suppliers, and associated

institutions in a particular field. Clusters are considered to increase the productivity with which companies

can compete, nationally and globally. The term business cluster, also known as an industry cluster,

competitive cluster, or Porterian cluster, was introduced and popularized by Michael Porter in The

Competitive Advantage of Nations (1990). Porter claims that clusters have the potential to affect

competition in three ways: by increasing the productivity of the companies in the cluster, by driving

innovation in the field, and by stimulating new businesses in the field. According to Porter, in the modern

global economy, comparative advantage—how certain locations have special endowments (i.e., harbor,cheap labor) to overcome heavy input costs—is less relevant. Now, competitive advantage—how

companies make productive use of inputs, requiring continual innovation—is more important.Put in

another way, a business cluster is a geographical location where enough resources and competences

amass reach a critical threshold, giving it a key position in a given economic branch of activity, and with a

decisive sustainable competitive advantage over other places

Cluster Types:

o Horizontal Clusters (resource sharing level)

o Vertical Clusters (supply chain level)

(Online Resource: MSME website)




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Family Business

Online Resource: http://www.pwc.in/publications/family-business-survey/index.jhtml

By definition, a family business is one in which the majority of the stake is held by the person who has

established or acquired the company (or by his or her parents, spouse, child or child's direct heir) and at

least one representative of the family is involved in the management or administration of the business.

In India, family businesses range from the small mom-and-pop store (or kirana) to large conglomerates

with equally varied business interests. As their growth has skyrocketed, many have stepped outside their

zones to acquire companies in new industries and geographies. Their contribution to India‘s growth is also

being increasingly recognised. Though family businesses have always been in India, managing them has

its own unique challenges:o Managing the diverse opinions of family members in the business, solving internal issues and

disputes, etc

o Creating clear succession plans between siblings or cousins

o Difficulties the younger generation may face in proving themselves to the former generation

o Differing views between the older generation and the newer generation

o Hiring external staff which may perceive that career advancement, freedom and decision-making

are solely the purview of family members

o Regular and streamlined access to the capital to help grow and develop the business

The results of PwC‘s Family Business Survey 2012 reveal that family firms are robust, vibrant and successful.

Being highly ambitious and entrepreneurial, they are delivering solid profits even in an uncertain economic

environment. These businesses are making a substantial contribution to the growth of the Indian economy,

and hence expect the government to offer a more targeted support (eg: access to capital, expediting

approvals, clarity in some tax issues, greater predictability, etc). However, family firms can do more to help

themselves, first by adopting professional processes and practices of their publicly listed corporate

competitors, and second, by being more proactive in finding and securing the assistance they need.

To make the most of new opportunities, leaders of family businesses must be prepared to do the following: -

Acquire the right mix of talent, technology, and innovation to stay ahead of their competitors

Need to devote more time and resources on entrepreneurship and innovations in existing operations

Redefine their strategies and goals from time to time, considering whether the strategies they are

pursuing will be relevant five years from now

http://www.pwc.in/publications/family-business-survey/index.jhtml






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Cross-verify and check whether they are competent enough to grow their market share, by penetrating

into the new markets, and even creating new markets

Examine their domestic performance thoroughly along with benchmarking with a peer group before

taking steps to go global so that when it happens, they are fully prepared to have successful forays ininternational markets

Documents

Unit 1 Notes for Entrepreneurship for ITMU