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Syllabus coverage
• To understand what constitutes a business opportunity,scanning the environment for opportunities, evaluation ofalternatives and selection based on personal competencies.
• An overview of the steps involved in starting a businessventure – location, clearances and permits required,formalities, licensing and registration procedures
• Assessment of the market for the proposed project
• To understand the importance of financial, technical and socialfeasibility of the project.
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.2
Government’s objectives for SSI sector
• To become a key player in the Indian economy in fosteringentrepreneurship, creating employment opportunities,increasing industrial production and accelerating the process ofsustainable development.
• And the SSI sector to:oUse modern technology to maintain quality and increase productivityoIntroduce new product lines to garner a higher share in exportsoIntegrate with the medium and large enterprisesoPromote entrepreneurship, stress will be on human resources and
development at grass root level
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.3
Setting up a small industry
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Project selection phases
The objective of the process is to:
• Select those products, processesor systems in an organizationwhere the value and cost ratio islow and where analysis will leadto increased benefits
• Generate alternative methods forproviding necessary functions
• Prepare and present a reportcontaining recommendationalong with benefits
• Perform all other actions requiredto put the proposal into effect
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.5
Project Selection
Information
Creative
Evaluation
Recommendation
Implementation
Follow up
Process for setting up a small scale industry
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.6
Industry Selection
Viability / Feasibility
Arranging know-how
Prepare project report
Selection / Procurement of
premises
Apply to DI for NOC, registration
and power allotment
Apply for Financing – fixed assets, working capital, export
finance
Apply to local body for NOC and permissions
Apply for Raw material Quota
Apply for power connection
Place orders for machinery
Recruit staff
Install machinery
Connect machinery
Procure raw materials
Trial run
Process for setting up a small scale industry (contd.)
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.7
Trial run
Corrective measures
Production
Record maintenanceProduct
standardizationQuality control
Productivity
SalesRaw material purchase
Recycle realizations
Sales realization
Pay creditorsProfits
Dividends
Plough back
Before becoming an entrepreneur…
• Fully conversant with the product line
• Adequate shop floor experience to guide floor personnel
• Familiar with raw materials, specifications, quality assuranceand prices
• Account keeping, maintain stores, prepare balance sheet etc
• Marketing channels, distribution network, agency practices
• Packaging, logistics
• Quality assurance
• Taxation, policies, laws, regulations, bureaucracy
• Incentives, subsidies
• Stress, high pressure, perseverance
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.8
Legalities, regulations
Licenses Registration Infrastructure
• No formal permissionrequired from Stateof Central Govt. tostart SSI
• No license requiredfor <100 workers and<10 lakhs fixed assets.
• Suggestedregistration forcompanies with >10employees.
• Copy of application tobe sent to Director ofSmall IndustriesService Institute.
• Registration is helpfullater for solicitingfinance, setting upinfrastructure etc.
• Approach Director ofIndustries, or SISI forprovision of built upspace in industrialestate.
• After initial clearancefrom State Director ofIndustries,Municipality orPanchayat issues aNo ObjectionCertificate.
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.9
Set up
Machinery Raw Materials Finance
• Can be provided byNational Small IndustriesCorporation (NSIC), ashire-purchase.
• NSIC looks forentrepreneurship,motivation, competenceetc.
• Entrepreneur needs toenlist with NSIC, andsend along registrationcertificate and report ofthe Director ofIndustries.
• Raw materials areclassified as:o Components and
spareso Non-ferrous
materialso Iron and steelo Chemicals
• Foreign exchangemaybe provided alongwith grants for priorityindustries.
• Used for• Machinery• Raw materials• Working funds
• State director forIndustries and StateFinancial Corporationsprovide funds based onsupporting documents:• Project report• Copy of registration• Cash flow statement• Stock statement
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Operations
Marketing Incentives
• The Government PurchaseScheme provides thegovernment as the largestsingle buyer of SSI products.
• Features• Enlist with NSIC• Receive tenders free of cost• No security deposit required
to participate in tenders• Price preference up to 15%
with larger industriesconsidered
• Seek the help of SISI orDirector of Industries
• Small IndustriesDevelopment Organization(SIDO) coordinates policiesand provides extensionservices and technicalconsultancy
• NSIC provides supportwith machinery
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Support
Industrial Management, Consultancy, and Training
Backward Areas Development
• SIDO offers consultancy in –technical, managerial,marketing, QC, production,labour laws, solving problemsetc.
• Available through panel ofexperts and in 264 notifiedbackward areas
• Machinery on hire-purchase• Government stores purchase• Sub Contracting Exchanges• Export promotion through Export Credit
and Guarantee Corporation (ECGC)
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Who to approach for whatArea Organization
Selection of Industry Small Industries Service Institute
India Investment Centre
Ministry of Industrial Development
Registration Director of Industries
Small Industries Service Institute
Factory Accommodation Director of Industries (state)
Machinery Small Industries Service Institute
National Small Industries Corporation
State Small Industries Corporations
Chief Controller of Imports and Exports
Raw Materials Development Commissioner, Small Scale Industries Organization
Director of Industries
State Small Industries Corporations
Chief Controller of Imports and ExportsContent (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.13
Who to approach for whatArea Organization
Finance Small Industries Development Bank of India
State Financial Corporation
State Director of Industries
Commercial Banks
Small Industries Service Institutes
Technical Know-how Small Industries Service Institutes
National Small Industries Corporation
Council of Scientific and Industrial Research
Productivity Councils
Small Industry Extension Training Institute
Standardization
Marketing
Inventions
Miscellaneous ProblemsContent (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.14
Selection of types of organisation
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Factors to determine type of organisation
• Type of business
• Selection of industry and area of operation
• Scope of operations, volume of business
• Amount of capital funds required
• Possibility of raising funds
• Costs and procedures and relative freedom from govt.regulations
• Comparative tax advantage
• Size of risk
• Continuity of the enterprise
• Degree of direct control and adaptability of administration
Ownership types for SSIs
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.17
Small Scale Industries
Private Public
Individual Collective
Sole Proprietorship
PartnershipJoint Stock Company
Cooperative
Limited Unlimited
Organizational structures
Line Organizations
• “…is characterized by direct lines ofauthority flowing from the top to thebottom of the organisationalhierarchy and lines of responsibilityflowing in an opposite but equallydirect manner.”
Functional Organizations
• The simplest type ofdepartmental categorizationwhich consists of grouping ofsimilar activities into majordepartments.
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.18
Line organizations
Advantages
• Simple to form and easy to operate
• Executives enjoy decision makingpowers
• Systematic organizational structure
• Balance between authority,responsibility and accountability
• Easy maintenance of discipline
• Easy and quick communication
Disadvantages
• Can become autocratic
• Suffers from lack of specialization
• Overload of responsibility
• Hampers initiative
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.19
Functional organization
Advantages
• Promotes better division of labour
• Ensures proper communication
• Offers good scope of specialization
• Promotes co-ordinated work
• Ensures systematic organization
Disadvantages
• Unity of command absent
• Tendency towards over-specialization
• Difficult to pinpoint responsibility
• Costly
• No continuity of authority
• Lower potency of developingmanagers for promotion
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.20
Introduction
• Incentiveso Encourages productivity; motivational force
o Includes concessions, subsidies and bounties
• Subsidyo Single lump-sum provided to cover cost
• Bountyo Bonus or financial aid to help it compete with
other units in country or in a foreign market
o To motivate for setting up new venture inlarger interest of the nation or society
Incentives Subsidies
Bounties
Concessions
Incentives
• Need for incentivesoCorrect regional imbalances in developmentoPromote entrepreneurship by removing economic constraintsoProvide competitive strength, survival and growth
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.23
Incentives Motivational
ForceStimulant
Entrepreneurial
SpiritNew Ventures Modernisation Diversification
Efficient Management
Objectives of Incentives
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.24
Entrepreneurship Development
Regional Development
Provide Competitive
Strength
Motivation
Stimulus to industry and
business
Types of incentives
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Incentives
Technical Financial Subsidy Tax
Machinery Consultancy CashInterest free
loansTransport Interest
Income Tax Sales Tax Excise Duty
Incentives strategy
• Subsidy for purchase of know how
• Entrepreneur training
• Developed land
• Factory shed
• Machinery
• Seed capital
• Central investment subsidy
• State investment subsidy
• Tax exemption
• Establishment grant
• Stamp duty
The Assistance Program
• Technical assistance throughindustrial extension service
• For obtaining raw materials
• Cash assistance
• Supply of machinery on hire-purchase
• Marketing assistance
• Rural industries projects
• Seed capital assistance
• Concessional financial assistance
• Pollution control
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.26
READ UP on Subsidy Schemes
in your books
Advantages and disadvantages
• Motivational force
• Encouragement to startup in backwardareas
• Industrial uniformity across regions
• Develop new entrepreneurs
• Increase in ability of entrepreneurs
• Reduce overall problems for SSIentrepreneurs
• Often misused
• Scope of favouritism and corruption
• Potential unethical businesspractices
• Financial drain on the exchequer
• Real objectives are seldom achieved
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.27
Incentives and facilities to exporters
• Duty drawback
• Duty exemption schemes
• Excise rebate
• Marketing development assistance
• Supply of raw materials
• Export oriented units /export processing zones
• Export houses, trading houses and star trading houses
• Export promotion capital goods scheme
• Foreign currency accounts
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.28
READ UP on State Based
Incentives in your books
Exploring export possibilities
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.29
Components and growth of SSI products exports
0
10000
20000
30000
40000
50000
60000
1947 1957 1967 1977 1987 1997 1999 2000
Exports
Exports
• The main components of exports ofproducts manufactured in SSIs are:o Khadi and handloom
o Handicrafts including gems & jewellery
o Processed food
o Garments
o Engineering goods
o Projects exports
o Computers
o Consultancy exports
• The government is trying to achievea 20%YOY growth on SSI exports
Export thrust areas
• Knitwear and hosiery
• Brassware and brass locks
• Heavy machinery, engineering products,tools
• Handloom, silk, weaving
• Coir, leather
• Sports goods
• Marine products
• Pottery
• Safety matches
• Chemicals
• Scientific instruments, engine pumps
LudhianaMachine toolsRs. 75 Cr
• Lack of Infrastructure and
• Waste disposal
SuratDiamondsRs. 4,000 Cr
• Direct international access
• Poor roads
MoradabadBrasswareRs. 800 Cr
• No direct access to ports
• Inadequate telecom
TirupurKnitwearRs. 2,400 Cr
• Lack of water• Power shortage
VishakhapatnamMarine ProductsRs. 638.39 Cr
• Lack of storage• Inadequate container
facilities
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.31
Export promotion measures
• Measures to:oStrengthen export productionoEncourage capacity expansionoAugment bargaining power
oEncourage entry of products tonew markets
oImprove inherent competitivestrength
• Some of the exportpromotion measures are:oExport promotion of capital
goodsoDuty exemptionoAdvance licenseoAdvance release ordersoExport import policiesoTrade finance
oAir cargo complexesoElectronics data interchange
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.32
Key areas for an export oriented SSI
• Quality control
• Marketing
• Infrastructure set upoVarious government agencies
• Problem areasoAvailability of raw materialsoQuality control
oMarketing facilities
• ProspectsoEmployment
• Export managementoPlanningoOrganizationoBuilding a teamoExecutive actionoManagement control
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.33
Further readings / viewings
• http://www.iitk.ac.in/siic/html/startingbusiness/Business3.html
• http://www.brainreactions.net/brainstorms/2222
• http://business.gov.in/starting_business/small_scale_unit.php
• http://smallb.in/%20/thinking-starting-business/big-list-business-ideas-small-business
• http://www.authorstream.com/Presentation/rallu-619634-steps-to-start-small-scale-industry/
https://www.youtube.com/watch?v=S5kCVq8YazY
https://www.youtube.com/watch?v=FMhfpOS5RbM
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.34