Cse 4109 - Tem - V3

LECTURE NOTES
ON
TECHNOLOGY ENTREPRENEURSHIP & MANAGEMENT
Technology Entrepreneurship & Management

CONTENTS
Contents
ENTREPRENEUR ....................................................................................................................................... 5
Entrepreneurship: ...................................................................................................................................... 5
Entrepreneur: ............................................................................................................................................ 5
Need of Entrepreneurship: ........................................................................................................................ 6
Characteristics of Entrepreneur ................................................................................................................. 7
Qualities of Entrepreneur: ......................................................................................................................... 8
Types of Entrepreneur ..............................................................................................................................11
Functions of Entrepreneur ........................................................................................................................12
Barrier to Entrepreneurship ......................................................................................................................14
Entrepreneur vs. Manager ........................................................................................................................16
Forms of Business Ownership: ................................................................................................................17
A) Sole–Proprietorship: .......................................................................................................................18
B) Partnership ......................................................................................................................................19
C) Joint Hindu Family ..........................................................................................................................23
D) Cooperative Society ........................................................................................................................25
E) Joint Stock Company:.....................................................................................................................29
Types of Industries ...................................................................................................................................32
Manufacturing Industries .....................................................................................................................32
Extractive Industries ............................................................................................................................33
Genetic Industries ................................................................................................................................33
Construction Industries ........................................................................................................................33
Service Industries .................................................................................................................................33
Small Scale Industries (SSI) .....................................................................................................................33
Characteristics of SSI ...........................................................................................................................33
Role in the Economy ............................................................................................................................34

Objectives of SSI .................................................................................................................................35
Advantages of small scale industries ....................................................................................................35
Disadvantages of small scale industries ...............................................................................................37
Ancillary Unit: .........................................................................................................................................38
A tiny unit ................................................................................................................................................38
Service Sector Unit ..................................................................................................................................38
Concept of Start-ups.................................................................................................................................39
Entrepreneurial support agencies at National, State and District level (Source) .......................................39
District Industries Centre (DIC) ...........................................................................................................40
National Small Industries Corporation (NSIC) ....................................................................................41
Odisha Small Industries Corporation (OSIC) .......................................................................................42
Small industrial Development Bank of India (SIDBI)..........................................................................42
National Bank for Agriculture and Rural Development (NABARD) ...................................................43
Commercial Bank ................................................................................................................................44
Khadi and Village Industries Commission (KVIC) ..............................................................................45
Technology Business Incubation (TBI) ................................................................................................47
Science & Technology Entrepreneurship Parks (STEPs) .....................................................................48
MARKET SURVEY AND OPPORTUNITY IDENTIFICATION (BUSINESS PLANNING) ..................49
What is Business planning? .....................................................................................................................49
Objectives of Business Planning: .........................................................................................................49
Process of Business Planning ...............................................................................................................51
Advantages of Business Planning ........................................................................................................53
Disadvantages of Business planning ....................................................................................................53
Time Schedule Plan .................................................................................................................................53
Assessing the demand and supply ............................................................................................................54
What is demand? ..................................................................................................................................54
What is supply? ....................................................................................................................................54

Identify the business opportunity .............................................................................................................57
Major criteria for final selection of a business opportunity ......................................................................58
Selection of Enterprise .........................................................................................................................59
Selection of product or Final Product Selection ...................................................................................59
Selection of Project ..................................................................................................................................59
UNIT 3 .........................................................................................................................................................61
PROJECT REPORT PREPARATION ........................................................................................................61
UNIT 4 MANAGEMENT PRINCIPLE.......................................................................................................68
UNIT 5 .........................................................................................................................................................76
FUNCTIONAL AREAS OF MANAGEMENT ...........................................................................................76
UNIT 6 .......................................................................................................................................................118
LEADERSHIP AND MOTIVATION .......................................................................................................118
UNIT 7 .......................................................................................................................................................132
WORK CULTURE, TQM .........................................................................................................................132
AND SAFETY ...........................................................................................................................................132
UNIT 8 .......................................................................................................................................................142
LEGISLATION .........................................................................................................................................142
UNIT 9 .......................................................................................................................................................150
SMART TECHNOLOGY ..........................................................................................................................150

ENTREPRENEUR
Entrepreneurship: Entrepreneurship is a process of actions of an entrepreneur who is a person
always in search of something new and exploits such ideas into gainful opportunities by accepting
the risk and uncertainty with the enterprise. Entrepreneurship is the process to develop, organize
and run a new business enterprise by accepting some risks and challenges in order to make profit.
Entrepreneurship is considered to be the combination of “Entrepreneur” and “Enterprise”.
Organizing an enterprise is described as Entrepreneurship. Here enterprise is defined as a unit of
economic activities or an economic organization especially a business organization.
Entrepreneurship refers to the general trend of setting up new enterprise in a society.

Entrepreneurship was traditionally believed to be an inborn quality and hence it was believed that
entrepreneurship are born and not made but recent studies have proved that entrepreneurship can be
planned and developed through creation of opportunities, extending facilities, allowing incentives
and developing sensitiveness to the above factors in a person. So, it can be believed that
entrepreneurs are not only born but entrepreneur can be made and anyone can become an
entrepreneur. According to J. Schumpter “Entrepreneurship can be defined as a creative
activity, the entrepreneur being an innovator who introduces something new in to the
economy”.
Entrepreneur: The word “entrepreneur” is derived from the French verb entrepreneur, which
means ‘to undertake’. This refers to those who “undertake” the risk of new enterprises. An enterprise
is created by an entrepreneur. The process of creation is called “entrepreneurship”. An Entrepreneur
is an individual who starts a new business accepting some risks and challenges and enjoying the
profits. In other words, Entrepreneur is described as an individual who takes risk to organize a
business to make his career. Entrepreneur is one who organizes, manages and assumes the risk of a
business enterprise.
Entrepreneur is also described as a person who runs a business at his own financial risk.
Entrepreneurs are usually calculated risk taker. An entrepreneur avoids low risk situation because
there is a lack of challenges in it. He also avoids high risk situation because he wants to succeed.
That is why an entrepreneur likes achievable challenges and is called a calculated risk taker.

According to Webster dictionary, an Entrepreneur is defined as someone who runs a business
at his own financial risk.
Need of Entrepreneurship:
The followings are the needs of Entrepreneurship:
1. Increased Profit: Profits can be increased in any enterprise either by increasing sales revenue
or reducing cost.
2. Employment Opportunity: Entrepreneurship provides the maximum employment.

Entrepreneurship firms contributed a large share of new jobs. The small enterprises are the
only sector that generates a large portion of total employment every year.
3. Social Benefit: It is not only beneficial to the business enterprise but to the society in the form
of providing diversified products, good quality products and services at the lower cost by their
innovation. The standard of living is a concept built on an increase in the amount of
consumption of a variety of goods and services over a particular period by a household.
4. Provide Innovation: Entrepreneurship provides new ideas, imagination and vision to the
enterprise. An entrepreneur is an innovator as he tries to find new technology, products and
markets which leads to increases Gross Domestic Products and standard of living of the
people.
5. Lifeline of a Nation: No country can progress without the development of entrepreneurship.

Every country try to promote its trade so that it is able to share the benefits of development.
6. Develops Entrepreneurship: Entrepreneurship is the nursing ground for new inexperienced

entrepreneurs. It is the field where a person can start his/her idea of the venture, which may
be ended up in a giant enterprise. All the large industrial ventures started as a small
entrepreneurial enterprise.
7. Impact on Community Development: It promotes a higher level of township, better

sanitation facilities and promote recreation, and religious activities along with education.
Thus, entrepreneurship leads to more stability and a higher quality of community life.
8. Promotes Research and Development: Entrepreneurship promotes different types of

techniques, ideas and methodology which can be tested through different experiments.

Therefore entrepreneurship provides funds for research and development with universities and
research institutions. This promotes the general development, research and development in
the economy.
Characteristics of Entrepreneur
1. Ability to take Risks: This is the first and foremost trait of entrepreneurship. Starting any
business involves a considerable amount of risk of failure. Therefore, the courage and capacity to
take the said risk are essential for an entrepreneur.
2. Innovation: In a world, where almost everything has been done, innovation is a priceless gift to
have. Innovation basically means generating a new idea with which you can start a business and
achieve a substantial amount of profit. Innovation can be in the form of a product, i.e., launching
a product that no one is selling in the market. It can also be in the form of process, i.e., doing the
same work in a more efficient and economical way.
3. Leadership: An entrepreneur has a vision. However, it takes a lot of resources to turn that vision
into reality. One of these resources are the people that the entrepreneur hires to perform various
functions like production, supplying, accounting, etc. A single person cannot perform all the tasks
and therefore it is important to bring some more people to do it. In this regard leadership is very
important because, a leader provides the required direction to the efforts of the employees.
Without proper leadership, everyone would be working independently without achieving the
desired results.
4. Open Minded: A good entrepreneur realizes that every situation can be a business opportunity.
Thus can be utilized for the benefit of the organization.
5. Confident and Well Informed: An entrepreneur needs to be confident about his ideas and skills.
This confidence also inspires the confidence of the people working for him as well as the other
stakeholders involved in his business.
6. Flexible: An entrepreneur should be flexible and open to change according to the situation. To
be on the top, a businessperson should be equipped to embrace change in a product and service
as and when needed.

7. Know about the Product: A company owner should be aware of the product offerings, and also
the latest trend in the market. It is essential to know if the available product or service meets the
demands of the current market. The entrepreneur should know the detailed information about the
product.
8. Creativity: Entrepreneurship starts with an idea. To be successful, a person needs to always be

thinking of new ideas and better ways of doing things.
9. Initiative: This is the unique characteristic of an entrepreneur. He should have the potential to
take the initiative regarding different products, ways of actions, production techniques, etc.
Therefore, taking initiative with such end and qualification is the prime characteristic of
entrepreneur in every economy.
10. Independent thought and action: Every entrepreneur should have potential to take
independent thought as well as way of action for the benefit of the enterprise. They should not
depend upon the others.
11. Problem solving attitude: Now a days in the competitive market the entrepreneur may face
many problems and in this regard he should have the problem solving attitude to overcome all
types of problem.
12. Ability to find opportunities: This is one of the major characteristic of an entrepreneur. He
always tries to find the opportunities along with take the benefits of that opportunities which will
ultimately lead to the benefit of the enterprise.
Qualities of Entrepreneur:
1. Hard Work: The successful entrepreneurs are very handworkers. They are not the lazy
people. They believe in smart work. They think logically and then act. They continuously
make planning. They never sit idle. They always try to progress expand the business.
2. Strong Leadership: Starting a new company can be a harrowing experience full of
uncertainty and risk. Successfully bringing a small organization through these trying periods
requires a lot of leadership skills.
3. The Organizer: An entrepreneur is one who is expert in organizing the resources for building
the business and running it successfully. He combines labor, land, machines, finance and
material for the business and has a great knowledge of utilizing all the resources in an

optimum way. He sells products in the market, earns profit, pays loan, distributes salaries of
employees, purchases required stuff for business and keep remaining for his own.
4. Risk Takers: Entrepreneurial success is usually experienced by people who are not afraid to
take a chance with a new idea or concept. These folks are more daring than most and tend
more of a ‘what if’ approach by following through on innovative ideas that others may shy
away from. These people are not only thinking outside the box but they are also living there
as well and in most cases quite comfortably! They watch the crowd and go in the opposite
direction because they know there will be less competition.
5. The Creative or Artist: This business personality is the reserved but highly creative type.
Their creativity moves forward their business. They are very artistic person and also they
show their artistic work in the business. They hold the things in a different way. They have
expertise in providing the things in a different way. They have the unique ideas.
6. Open Minded: Entrepreneurs develop the habit of learning from experience the limitations
of achievements. They modify the goal according to the environmental challenges and
threats. This modification does not mean avoiding the problems or the tasks instead they like
to face it. The modification is done in order to make it possible to achieve the goal within the
given environmental conditions.
7. Creativity: Mental ability consists of intelligence, an analytical approach and creative things.
An entrepreneur should have creative thinking and be able to engage in the analysis of various
problems and situations in order to deal with them. The entrepreneur should anticipate
changes and must be able to study various situations in which decisions may have to be made.
8. Clarity: An entrepreneur should have clear objective as to the exact nature of the business,
the nature of the goods to be produced and the subsidiary activities to be undertaken.
9. Commitment: He must be a person with full commitment to his objectives to his tasks and
to his profession. This commitment must be extended to his entire principles of running his
business and also commitment to his life.
10. Competence: An entrepreneur should be a man of competence which would involve
knowledge, information and wisdom. The knowledge is so fast exploding, thanks to the rapid
changes in technology, that his knowledge must be up-to-date and relevant to his
responsibilities. An entrepreneur must be a well-informed person and he must take all

decisions based on verified facts and figures. The information he collects must be up-to-date
and relevant.
11. Credibility: Credibility is the foundation of the entire enterprise. The enterpriser will have
to remember that he is credible to his customers and also to everyone who is directly or
indirectly contributing to his business. All the decisions that he takes must be relevant to the
needs of customers. He just exists for customers just as doctors exist for their patients and
teachers are supposed to exist for their students.
12. Self-Confidence: An entrepreneur must have self-confidence in his ability to complete the
task or to meet a challenge. Once he takes a decision, he has to be firm in the implementation
of the decision, though there may be initially no success or there may be some opposition to
his decision. Opposition is not to be ruled out arrogantly. The enterpriser must listen carefully
to the points made by those opposing the decision.
13. Expertise: An entrepreneur accumulates expertise day in and day out. He learns by trial and
error. He is up-to-date regarding latest technology and also is aware of the trends in
marketing. He should have the skill in managing finance before starting the business as also
of managing cash flow and the funds flow during the course of the business.
14. Sense of Effectiveness: Entrepreneurs like to see the problem solved through their involved
efforts. They do not like to avoid the problems but like to be effective or be instrumental in
solving problems rather than avoiding them. Their attitudes towards a problem is always one
of directing the efforts and finding ways and means to give solution to such problems.
15. Honesty: Honesty is the basic requirement of an entrepreneur. With the quality of honesty,
an entrepreneur gets profits by producing goods at low cost with durability and sale to
customer at less price.
16. Loyal: An entrepreneur should be loyal towards enterprise, employees and external party.
Under external party, it include customers, investors, government, other firms etc.
17. Co-operative: Co-operation is one of the important qualities of an entrepreneur. An
entrepreneur should do all functions and efforts by keeping this fact in mind. By co-operation,
he can maintain the conducive and healthy environment within enterprise as well as outside
too.
18. Politeness: Politeness is one of the important qualities of an entrepreneur. By politeness, he
can develop sound relation with employees and customers, investors and other persons too.

Types of Entrepreneur
1. Trading Entrepreneur: As the name itself suggests, the trading entrepreneur undertake the
trading activities. They procure the finished products from the manufacturers and sell these to
the customers directly or through a retailer. These serve as the middlemen as wholesalers,
dealers, and retailers between the manufacturers and customers.
2. Manufacturing Entrepreneur: The manufacturing entrepreneurs manufacture products. They
identify the needs of the customers and then explore the resources and technology to be used to
manufacture the products to satisfy the customers’ needs. In other words, the manufacturing
entrepreneurs convert raw materials into finished products.
3. Agricultural Entrepreneur: The entrepreneurs who undertake agricultural items are called
agricultural entrepreneurs. They cover a wide verities of agricultural activities like cultivation,
marketing of agricultural products, irrigation, mechanization and technology.
4. Small-Scale Entrepreneur: An entrepreneur who has made investment in plant and machinery
up to Rs 1.00 crore is called small-scale entrepreneur.
5. Medium-Scale Entrepreneur: The entrepreneur who has made investment in plant and
machinery above Rs 1.00 crore but below Rs 5.00 crore is called medium-scale entrepreneur.
6. Large-Scale entrepreneur: The entrepreneur who has made investment in plant and machinery
more than Rs 5.00 crore is called large-scale entrepreneur.
7. Imitating Entrepreneur: The imitating entrepreneurs are those who immediately copy the new
inventions made by the innovative entrepreneurs.
8. Innovative Entrepreneur: An innovative entrepreneur is a person who discovers totally new
things. An innovative owner is a person who creates innovative products and services. An
innovative entrepreneur is a person who innovates the business processes in his business. An
innovative person is a person who is not afraid to take a risk.
9. Fabian Entrepreneur: Fabian entrepreneurs are those entrepreneurs who are very much
doubtful or skeptical in their approach in adopting or innovating new technologies in their
enterprise. They are not adaptable to the changing environment. They love to remain in the
existing business with the age-old technique of production.

10. Drone Entrepreneur: These entrepreneurs are reluctant to change since they are very
conservative and do not want to make any changes in the organization. They are happy with
their present mode of business and do not want to change even if they are suffering the losses.
11. Industrial Entrepreneur: Industrial entrepreneur is essentially a manufacturer who identifies
the needs of customers and creates products or services to serve them. He is product-oriented
who starts through an industrial unit to create a product like electronic industry, textile unit,
machine tools.
12. Corporate Entrepreneur: These entrepreneurs use their innovative skill in organizing and
managing a corporate undertaking. A corporate undertaking is a form of business organization
which is registered under some statute or Act like a trust registered under the Trust Act, or a
company registered under the Companies Act. These corporate work as separate legal entity. He
is thus an individual who plans, develops and manages a corporate body.
Functions of Entrepreneur
1. Innovation: A very important function performed by entrepreneur is that of innovation. They

analyze the existing state of company’s affairs and try to reach a new level of equilibrium by
trying new and productive combinations of existing resources. They think of creative ideas and
use their managerial and innovative skills to put those ideas into reality. They combine the
productive factors, bring them together and help in the economic development of a nation.
According to Schumpeter, innovation can occur in the following forms: introduction of new
goods, the use of new method of production, the opening of a new market and the reorganization
of any industry.
2. Organizing and Management: An entrepreneur brings together various resources of
production, organizes them properly and converts them into a productive unit. An entrepreneur
manages the following activities :
a) Measuring the suitability of business idea.
b) Market Research and Selection of Product Line: The next important function of the entrepreneur
is market research and product market research is the systematic collection of data regarding the
product which the entrepreneur wants to manufacture. Entrepreneur has to undertake market
research persistently in order to know the details of the intending product, i.e., the demand for

the product, selection of product line, the price of the substitute product, the size of the customer,
etc. while starting an enterprise.
c) Studying the government rules, regulation and policies.
d) Performing government formalities.

e) Determination of Objectives: The next function of the entrepreneur is to determine and lay down
the mission, vision, objectives and goals of the business. In other words, entrepreneur should be
very much clear about future prospect of the venture.
f) Managing of Funds: Fund raising is the most important function of an entrepreneur. All the
activities of a business depend upon the finance and its proper management. It is the responsibility
of the entrepreneur to raise funds internally as well as externally.
g) Procurement of Raw Material: Entrepreneur has to identify the cheap and regular sources of
supply of raw materials, which will help him to reduce the cost of production and face the
competition.
h) Procurement of Machinery: The next function of the entrepreneurs is to procure the machineries
and equipment for establishment of the venture.
3. Assumption of Risk: Entrepreneurs assume the risk of success or failure of the enterprise
that they wish to launch. Such risks are not insurable. If they materialize, the entrepreneur has to
bear the loss himself. Thus, risk-bearing or uncertainty-bearing still remains the most important
function of an entrepreneur which he tries to reduce by his initiative, skill and good judgment.
4. Idea Generation: Entrepreneurs do not immediately think of ideas and put them into
practice. Ideas can be generated through market survey. It is the function of the entrepreneurs to
generate as many ideas as he can for the purpose of selecting the best business opportunities. They
think of a variety of ideas, apply quantitative techniques to test their applicability, supplement them
with empirical findings, arrive at the best alternative and apply it in practice.
5. Decision Making: Arther H. Cole has described the entrepreneur as a ‘decision maker’. He
takes various decisions regarding following matters:
a) The development of an organization, including efficient relations with subordinates and all
employees
b) Securing adequate financial resources, and maintaining good relations with the existing and
potential investors.
c) The requisition of efficient technological equipment and the revision of it as new machinery
appeared
d) The development of a market for the products and the devising of new products to meet or
anticipate consumer’s demand.
e) The maintenance of good relations with public authorities and with the society at large
6. Leading: As an entrepreneurial venture flourish, an entrepreneur takes on a new role of a

leader. He acts as a visionary leader. The entrepreneur’s leading function is drawing the best out of
his human resources. He must create teamwork, motivation among employees. As a leader,
entrepreneurs must shift from the command-and-control style of managing to a coach-and-
collaboration style.
7. Managing Growth: The entrepreneur must manage the enterprise’s growth. It includes such
activities as developing and designing appropriate growth strategies, dealing with crises, exploring
various ways for financing growth and placing a value on the venture.
8. Support to Social Environment: Social environment is characterized by social customs,

culture, values and beliefs. Changes are not easily acceptable in a given socio-economic
environment of a country. Entrepreneurs discover new sources of materials, new markets, and new
opportunities and establish new and more profitable forms of organizations. This is a reflection of
their will power, enthusiasm and energy and helps in overcoming the society’s resistance to change.
9. Economic Development: Entrepreneurs play an important role in accelerating the rate of

economic development of developed and under-developed countries. They exploit the country’s
resources (land, labor, capital and technology) and optimize their utilization to result in
development of that country.
Barrier to Entrepreneurship
1. Finances: Finance is the major barriers to entrepreneur. And getting a sound financial
investment or funding can be one of the biggest Barriers to Entrepreneurship as many of banks,
private investors and organizations find it quite difficult to believe in the start-up ideas owing to
the risk of failure and losing their money.

2. Fear of not to be a success: We all go through the fear of failure. And if the fear is associated
with the risks and stakes taken in the stream of business and entrepreneurship, the level of fear
increases
3. No strategic plan in place: Lack of proper planning and strategy in place is one of the most
common Barriers to Entrepreneurship. Many of us think to build a business out of a hobby
without having any sort of long term and short term vision and plan in mind. Running a fully-
fledged business or being an entrepreneur requires a huge amount of skill set, passion for
excelling, strategic vision, the mission to accomplish the goals, market research, and a lot more.
Right from the target market, finances, human resources and proper strategic plan is required to
build a successful business or a brand in the market.
4. Human resource issues: Entrepreneurs cannot handle and run a business alone by themselves.
They require the support of human resource to carve a niche in the market. Employees with the
required knowledge, expertise, and experience are needed for the efficiency of the business
processes and high levels of productivity. First of all, it is quite difficult to find the employees
that share the same vision and wavelength of the business. And secondly, it is also difficult to
manage human resources as each of us work with a different mindset and perspective. Hence,
human resources and employees can be as one of the Barriers to Entrepreneurship.
5. Stringent rules and regulations of the market: It is not very easy for entrepreneurs to enter
the new market as there are quite many rules and regulations imposed by the government
authorities. Apart from, there are various laws and compliances to be adhered to such as taxation,
environmental regulations, licenses, property rights, and much more than act as the Barriers to
Entrepreneurship.
6. Fewer opportunities: Even though there is a lot of talent and ambiguous entrepreneurs having
with the ideas, but the opportunities presented to them are quite less and fewer which are become
the main Barriers to Entrepreneurship.
7. Lack of capacity: Even if there are opportunities presented to the wiling entrepreneurs, there is
a lack of capacity in some them to accept the opportunities with open arms. The reasons can
vary from lack of knowledge, lack of education, lack of willingness, lack of strategic knowledge,
and cultural barriers amongst others; but the factor of motivation and zeal gets missing. To start
a new business venture amidst all the risks and market-related issues, it requires a lot of hard
work, passion, and high capacity to handle all of it.

8. Less market experience: The experts always mention that one should never rush in setting up
a business. It is quite necessary to gain a relative amount of work experience by working in the
industry domain or sector of choice and as per the education levels. It also helps to sharpen the
required expertise and find the ground in the career graph. Once the person is ready to take risks
and have a relative amount of market exposure, he is ready to take the entrepreneurial challenge.
9. Lack of risk-taking capacity: It is always said that entrepreneurs never sail in safe waters and
are never confined to their comfort zones. Lack of risk-taking capacity is the psychological
mindset and perspective towards the business and acts as one of the major Barriers to
Entrepreneurship. The budding entrepreneur has to have a structured and organized approach
towards the various business elements and should risks rather than averting them.
10. Corrupt business situations: If the business situations and the environment are not very
supportive and corrupt for the young and aspiring entrepreneurs, it acts as one of the top Barriers
to Entrepreneurship. Bribing, rampant corruption, unfriendly ties of government with other
nations, inconsistent laws, stringent compliances, and enforcing regulations that are unhealthy
and negative in their approach hamper the growth of businesses in the country. Russia is one of
the examples of having an unhealthy and unsupportive business environment.
11. Inadequate training: With no proper education, development, training, entrepreneurial skills,
and technical knowledge an entrepreneur cannot be succeed and that will become the Barriers
to Entrepreneurship.
12. Lack of practical knowledge: Having a strong educational background is just not enough to
pursue business as it requires practical knowledge as well to stay relevant amidst the various
market cycles. And many entrepreneurs lack practical knowledge.
Entrepreneur vs. Manager
The difference between entrepreneur and manager can be drawn clearly on the following grounds:
• A person who creates an enterprise, by taking a financial risk in order to get profit, is called
an entrepreneur. An individual who takes the responsibility of controlling and administering
the organization is known as a manager.

• An entrepreneur focuses on business startup whereas the main focus of a manager is to
manage ongoing operations.
• Achievements work as a motivation for entrepreneurs. On the other hand, the primary
motivation of manager is the power.
• The manager’s approach to the task is formal which is just opposite of an entrepreneur.
• An entrepreneur is the owner of the enterprise while a manager is just an employee of the
company.
• A manager gets salary as remuneration for the work performed by him. Conversely, profit
is the reward for the entrepreneur.
• The major driving force of an entrepreneur is creativity and innovation. As against this, a
manager maintains the existing state of affairs.
• While entrepreneur is a risk taker, the manager doesn’t take any risk.
• Entrepreneur works as a single person while manager works as a team.
• Entrepreneur sets goal while manager executes to achieve the goal.
• He takes full risk of losses while manager is not directly responsible for losses.
• He gets full return of profit while manager may not get profit.
• An entrepreneur is not getting involved in fraudulent behavior while a manager may involve
or cheat by not working hard.
• An entrepreneur is an innovator while manager is the executor.
Forms of Business Ownership:
There are different forms of business organization depending on how they have been started and
managed which are given below:
A) Sole –Proprietorship
B) Partnership
C) Joint Hindu Family

D) Cooperative Society
E) Joint Stock Company (Private Limited Company, Public Limited company and Public
Sector Undertakings)
A) Sole–Proprietorship: Sole Proprietorship in simple words is a one-man business

organization. Furthermore, a sole proprietor is a natural person (not a legal person/entity)
who fully owns and manages this type of entity. In fact, the business and the man are the
same, it does not have a separate legal entity.
Features:
1) Lack of Legal Formalities
A sole proprietorship does not have a separate law to govern it. And so there are not
many special rules and regulations to follow. Furthermore, it does not require registration of any
kind. In fact, in most cases, it need only the license to carry out the desired business.
2) Liability
Since there is no separation between the owner and the business, the personal liability of
the owner is also unlimited. So if the business is unable to meet its own debts or liabilities, it will
fall upon the proprietor to pay them. For instance, he may have to sell all of his personal assets (like
his car, house, other properties etc.) to meet the debts or liabilities of the business.
3) Risk and Profit

The business owner is the only risk bearer in a sole proprietorship. Since he is the only one
financially invested in the company. As a result, he must also bear all the risk. In other words, if the
business fails or suffers losses he will be the one affected. However, he also enjoys all the profits
from the business. He does not have to share his profits with any other stakeholders since there are
none. So he must bear the full risk in exchange for enjoying full profits.
4) No Separate Identity
In legal terms, the business and the owner are one and the same. No separate legal identity
will be bestowed upon the sole proprietorship. So the owner will be responsible for all the activities
and transaction of business.

5) Continuity
As seen above the business and the owner has one identity. So a sole proprietorship is
entirely dependent on its owner. The death, retirement, bankruptcy, insanity, imprisonment etc will
have an effect on the sole proprietorship. In such situations, the proprietorship will the business
will come to an end.
SOLE PROPRIETORSHIP ADVANTAGES
• Owner receives all the profits.

• Owner makes all decisions and is in complete control of the company (could also be a
disadvantage)
• Easiest and least expensive form of ownership to organize.

• Proprietor will have complete control of the entire business. Thus this will facilitate quick
decisions and freedom to do business.
SOLE PROPRIETORSHIP DISADVANTAGES

• One of the biggest limitations of a sole proprietorship is the unlimited personal liability of
the owner. If the business fails it can wipe out the personal wealth of the owner as well as
affect his future business prospects too.
• Another problem is that a sole proprietor has access to limited capital. The money he can
borrow from his own personal savings may not be enough to expand the business.
• A sole proprietor also has limited managerial ability. He cannot be an expert in all the fields
of the business. As a result, the business may suffer from mismanagement and poor decision.
B) Partnership
In a Partnership, two or more people share ownership of a single business.
Features
The essential features and characteristics of a partnership are:

1) Agreement: The partnership arises out of an agreement between two or more persons.
2) Profit sharing: There should be an agreement among the partners to share the profits of
the business.
3) Lawful business: The business to be carried on by a partnership must always be lawful.
4) Membership: There must be at least two persons to form a partnership. The maximum
number is 20. But in case of banking business the maximum is 10 members.
5) Unlimited liability: The liability of every partner is unlimited, joint and several.
6) Principal-agent relationship: Every partner is an agent of the firm. He can act on behalf
of the firm. He is responsible for his own acts and also for the acts done on behalf of
the other partners.
7) Collective management: The firm and the partners are one. When a contract is made in
the name of the firm all the partners are responsible for it individually and collectively.
8) Non-transferability of shares: A partner cannot transfer his share of interest to others

without the consent of the other partners.
Advantages
1. Ease of Formation: It is easy to form a partnership. No elaborate legal

procedures are needed to bring a firm into existence. There is no need for registering
a firm. Even when required, a firm can be registered quite easily. Likewise, one can
close down a firm relatively easily.
2. Financial Resources: Partners can pool their resources and expand the
financial base of a firm. Creditors would be more willing to extend credit facility to a
firm based on the reputation of partners and the soundness of business carried out by
the partners.
3. Talent can be Pooled: Partners can divide work among themselves,

depending on their individual skills, and talents. This helps the firm to grow quickly.
4. Flexibility: Partners can carry out day-today activities in a flexible way. The
nature and place of business can be altered at will. New partners can join a firm when

required. Partners can change hats depending on situational requirements. Capital
infusion, profit sharing, pricing policies, etc., can be altered in sync with market
demands.
5. Reward for Effort: Partners can work jointly and severally for improving
business and get adequately rewarded. Since there is no separation of ownership from
management, everyone can work hard, and take the firm to commanding heights.
6. Informed, Balanced and Careful Decisions: Partners can bring their skills,
knowledge, and expertise to the table. Since they are jointly held responsible for
losses, they are compelled to take a careful, cautious path. They are forced to take all
the necessary steps for the benefit of the enterprise.
7. Secrecy: Partners can keep business secrets close to their chest. They need
not reveal them to anyone. The firm need not even get its accounts published and
audited.
Disadvantages
1. Unlimited liability – The liability of partners in a firm is unlimited. Partners
are said to be individually and jointly liable. This means that in case, the assets
of the firm are insufficient to settle the claims against it, the personal assets of
the partners may be utilized for the same.
2. Limited resources – The Partnership Act places a restriction on the number of
partners that may run a firm. Consequently, it may be difficult for a firm to raise
capital beyond a certain limit in order to finance its expansion plans.
3. Possibility of conflicts – In a partnership firm the right to decision making and
control is shared among all the partners. Sometimes, there may be difference of
opinions among them which may not only lead to delay in decision making
but also result in conflicts.
4. Lack of continuity – Partnership is not considered to be a very stable form of
business organization. This is because the death, retirement, insolvency or
insanity of any partner can bring the business to an end.
5. Lack of public confidence – It is generally believed that a partnership firm
does not enjoying confidence of public in its working. This outlook is based on

the fact, that a firm is not expected to publish its books of account. Hence, that
can very easily hide its true financial status from general public.
6. Uncertain Future: The firm may be closed down in case of death, failure,
madness of any one of the partners. New partners can be inducted into a firm,
only when all existing partners agree unanimously.
7. Not a Legal Entity: A partnership firm has no legal entity separate from the
members. It dies upon the death of a partner or upon separation between them.
Partners are responsible for all the debts of the firm.
Types of partners
1. Active Partner: This type of partner is found in all partnerships. Such partners not
only contribute capital but also takes part in the day-to-day running of the business
and also takes active participation in the conduct and management of the business
firm.
2. Sleeping partner: This type of partner is also known as “Dormant partner”. Such a
partner contributes capital to the partnership firm but does not take active part in the
management of partnership. Such a partner has no voice in the management. But the
liability of such partner is unlimited.
3. Nominal partner: Such a partner neither contributes capital to the firm nor takes
active part in the management of the partnership firm. This type of partner does not
get any direct profit from the partnership.
4. Partners in profit only: There are some partners who may be interested in the profits
of the partnership only but they are not share the losses. Such partner usually
contribute capital but are not allowed to take active part in the management of the
partnership firm.
5. Partner by Estoppel: A partner by estoppel is a partner who displays by his words,
actions or conduct that he is the partner of the firm. In simple words, even though he
is not the partner in the firm but he has represented himself in such a manner which
shows that he has become a partner by estoppel.
6. Minor Partner: A person below 18 years of age is treated as minor. Hence a minor
person can be admitted to partnership. He can contribute s capital to the partnership

firm but cannot take active part in the day to day management of the firm. He shares
the profit and loss of the firm.
C) Joint Hindu Family

The Joint Hindu Family Business or the Hindu Undivided Family (HUF) is a unique
type of business entity. It is governed and dictated by the Hindu Law, which is one of the
several religious laws prevalent in India. The business of Joint Hindu Family is controlled
under the Hindu Law instead of Partnership Act. The membership in this form of business
organization can be acquired only by birth or by marriage to a male person who is already a
member of Joint Hindu Family. The business of the Joint Hindu Family is controlled and
managed by one person who is called ‘Karta’ or ‘Manager’. The Karta or manager works in
consultation with other members of the family but ultimately he has a final say. The liability
of Karta is unlimited while the liability of other members is limited to their shares in the
business. It refers to a form of business organization which is owned and carried on jointly
by the members of the Hindu Undivided Family (HUF).It is also known as Hindu Undivided
Family Business.
Features:
Formation
• There should be at least two male members in the family to form a HUF.
• Ancestral property should have been inherited by members of HUF.
• All of the members enjoy this property and have an equal share in that Property.
• Thus, any child taking birth in that family becomes a member of the HUF.
• There is no requirement for an agreement to become a member.
Liability
• There is limited liability of all the members or co-parceners in the Hindu Undivided Family
business.
• All the co-parceners have equal rights and shares in the property of Hindu Undivided Family
business
• The Karta has unlimited liability.

Control
• Karta is the person who has full control over the Hindu Undivided Family business.
• Karta can take advice from all the members but he is not bound to accept their decisions.

Continuity
• After the “Karta” is deceased, the very next eldest member takes up the position of Karta in
Hindu Undivided Family business.
• The business can be divided and ended up by the mutual consent of the members.
• Minor Members
• The person who has taken birth in Hindu Undivided Family can be a member of the family
business.
• Therefore, a minor can also be a member of the family.

Advantages
Effective Control
• The Karta has full control over the business activities and takes a decision quickly.
• No one can interfere in the decision of Karta as every member is bound to accept his decision.
• Hence, it avoids clashes among the members and results in very speedy decision making.
Continued Business Existence
• After the death of Karta, the next eldest member takes up his position. So, it does not affect
the activities of the business.
• Hence, all the business activities are done smoothly, continuously without any threat.
Limited Liability of Members
• As all the liability of the members is restricted to the extent of their share in the business.
• But the Karta has unlimited liability due to his complete hold on the business.
• Hence, in case of dissolution of the business, Karta’s personal assets and his share will be
liable.
Expanded Loyalty and Cooperation
• All the business operations are carried on by the members of a family jointly.
• So, this increases loyalty and cooperation with each other without any hindrance.
• Therefore, all the targets of the business can be achieved by the cooperation among the
members and the Karta.
Disadvantages
Limited Resources

• All the members of Joint Hindu Family Business totally depend upon the ancestral property
due to their limited liability.
• Many commercial banks resist extending the credit limit due to the weak financial position
of the business.
• Hence, this will result in limited expansion and growth of the business.
Unlimited Liability of Karta
• All the important decision regarding management of various business activities are taken by
Karta.
• But there is a disadvantage with the Karta that he has unlimited liability.
• Hence, all the business debts are paid by using the personal assets of the Karta.
Dominance of Karta
• The Karta takes all the decisions individually and manages the business
• He also involves other members in decision making.
• But Karta is not bound to accept the decisions of the members which may create conflicts
between the Karta and the other members.
• Hence, due to clashes in decision making, lack of cooperation between Karta and other
members occurs.
Limited Managerial Skills

• Sometimes the members suffer due to unfair decisions taken by the Karta in respect of
business operations.
• Unfair decisions are taken due to the lack of managerial skills.
• So, the Karta cannot be knowledgeable or proficient in all managerial functions.

• Nowadays the joint Hindu family business is declining due to the decreasing number of joint
Hindu families in the nation.
D) Cooperative Society
A cooperative society is a voluntary association of persons who join together with the motive of
welfare of the members. A cooperative is a private business organization that is owned and
controlled by the people who use its products, supplies or services. In other words it may be
defined as Co-operative organization is a voluntary association of usually economically weaker

sections of society; who join together to achieve a common objective by fighting against some
social evil through working collectively according to established principles of co-operation or
in other words it may be defined as “ when a group of persons belonging to a particular class or
category or group associate themselves and start a business for their mutual benefit, it is called
Cooperative society”.
Features:
1. Registration: A co-operative society must be registered under the Co-operative Societies

Act, 1912 or under a State Co-operative Societies Act. On registration, the society
becomes a body corporate, having a separate legal entity of its own, with perpetual
succession and limited liability of its members.
2. Voluntary Association: A co-operative organization is a voluntary association of
persons. Everyone having a common interest is free to join a co-operative society;
irrespective of caste, c religion. No person can be forced to become the member of a co-
operative society or continue as a member. A member after giving proper notice can
leave the society; and will get back his capital according to the rules of the co-operative.
But no member can transfer his shares to another person.
3. Minimum Ten Persons Needed: A minimum of ten adult persons are needed to form a
cooperative organization. Maximum number of members is 100, in a co-operative credit
society; with no such limit in non-credit co-operative societies.
4. Service-Motive: The primary aim of a co-operative society is to provide some service
or benefit to its members (or even general public’s) by fighting against some social evil.
5. Finance: The capital of a co-operative is raised from members through issue of shares.
A co-operative can also obtain loans from the Central or State Co-operative Banks.
6. Limited Liability: The liability of each member of a co-operative is limited to the extent
of the value of shares held by him, in the share capital of the co-operative.
7. Democratic Management: Business of a co-operative society is managed by a
managing committee; which is elected by the members. The members lay down the broad
policy guidelines within which the managing committee manages the affairs of the co-
operative society. The managing committee usually consists of the following office-
bearers: 1. President 2. Vice-president. 3. Secretary 4. Joint Secretary 5. Treasurer.

8. State Control: Government exercises control over co-operatives to protect the interests
of members of co-operatives; who, otherwise, are economically quite weak. Every co-
operative society must furnish annual accounts and reports to the Registrar of Co-
operatives. Further, accounts of all co-operatives are subject to compulsory audit.
Advantages
1. Easy to Form: A co-operative society is easy to form. Its registration is very simple and
does not involve many legal formalities.
2. Universal Brotherhood: Membership of a co-operative is open to all having a common
interest; irrespective of caste and religion. Any member may leave the society, after giving
proper notice. There is no compulsion to stick to the cooperative against one’s will.
3. Fully Democratic Management: Managing committee of a co-operative is elected, by
members. Further, ‘one-man one-vote’ principle is followed in all co-operatives. As such,
each member has equal rights and equal voice in the management of the co-operative.
4. Perpetual Succession: After registration, a co-operative society acquires a separate legal
status with perpetual succession. Its life is not affected by the death, insolvency or lunacy of
members. Co-operatives exist for long periods benefiting members and the community.
5. Limited Liability: Liability of members of a co-operative society is limited to the extent of
the value of their shares. Members do not run personal risk; while being members of the co-
operative. This fact encourages even poor people to join co-operatives.
6. Governmental Patronage: As a matter of social welfare policy, Government extends all
support to co-operatives e.g. loans at low rates of interest, relief in taxation etc.
7. Internal Financing: A large part of the profits of a co-operative is transferred to general
reserve every year. Through ploughing back of profits, a co-operative can undertake schemes
for its growth and expansion.
8. Lower Operating Costs: Operating costs of a co-operative are quite low; because:
a) Office bearers offer honorary services.
b) There is no expenditure incurred on advertising and marketing activities.
9. Social Welfare Aspect: Co-operatives are non-business organizations. They spread ideals
of co-operation in society. They promote feelings of equality, independence, hard work
among people in a society and help them morally upgrade themselves.

Disadvantages
1. Limited Capital: Co-operative organizations have very limited capital; because of the
following reasons:
(a) Members of a co-operative are economically backward, in most of the cases.
(b) Co-operatives do not give more than 10% interest on capital invested. This provides not much
incentive to invest huge amounts in co-operatives.
(c) The principle of ‘one-man one-vote’ discourages people to buy a large number of shares in a
cooperative organization.
All told, limited finances stand in the way of growth of activities indulged in by a co-operative.
2. Inefficient Management:
Management of a co-operative organization is called inefficient. In fact, members of managing
committee are part-time and inexperienced people. They usually possess no specialized knowledge
of modern management principles and techniques. Because of limited financial capacity, a co-
operative is unable to hire the services of professional managers; who charge very high for their
services, in the present-daytimes.
3. Rift among Members:
Co-operatives are started with a sense of lot of enthusiasm about co-operation; over a period of time,
differences develop among members as to how to run the society. Selfish interests of dominating
members prevail upon the genuine interests of poor members. Differences among members usually
lead to a decline of co-operative activities.
4. Rigid Rules and Regulations:
Co-operatives have to function according to rigid rules and regulations. They are subject to
excessive Governmental control over their functioning. The result is lack of flexibility of operations
in the functioning of co-operatives; which does not permit their growth in view of environmental
opportunities.
5. Political Interference:
Government also invests in co-operative organizations. There are, then, members in managing
committee, who represent interests of political parties. In fact, members of political parties dominate
the working of the co-operative; and the co-operative organization very often turns into a political

organization. Thus the very purpose and philosophy of co-operation, which is the basis of a co-
operative organization meets with frustration.
6. Lack of Motivation:
The office-bearers of a co-operative are honorary officials. They have no incentive to work hard for
the co-operative. In the absence of remuneration, they just work minimum and justify their status,
in the eyes of the members.
E) Joint Stock Company:

When many persons start a business, it may be a joint stock company. Joint-stock companies are
most popular form of business organization not only in India but also worldwide. It is governed and
regulated by an Act in the Parliament known as “The Indian Companies Act, 1956”. It is owned by
its investors, with each investor owning a share based on the amount of stock purchased. In other
words a joint stock company is a voluntary association formed for the purpose of carrying on some
business. Legally, it is an artificial person and having a distinctive name and a common seal. Lord
Justice Lindley of England has defined joint-stock company as “an association of many persons
who contribute money or moneys’ worth to a common stock and employ it for a common purpose.
Features:
1. Flexible: A joint stock company is treated as an independent and separate body apart from
its members. It enjoys separate legal status. It is treated as an individual in the eye of law. It
can enter into agreement with anybody. It can purchase properties in its name. Anyone can
file case in the name of joint-stock company and the joint stock company can also file case
in the name of any individual. Even the owner of the company can file case in the name of
joint stock company and vice versa. A joint stock company enjoys all the privileges. A joint
stock company can be penalized or rewarded as needed.
2. Perpetual succession: Once a joint stock company formed, it continues to carry on its
activities for an unlimited period of time. No events like the death or insolvency of any or
all members can lead to the closure of joint-stock company. This is known as perpetual
succession.

3. Limited Liability: The liabilities of all members of a joint stock company are limited to the
extent of their share in the company. If they have paid the full value of shares they cannot
be called upon to pay any further amount.
4. Minimum Number of Members: Forming a public company minimum 7 persons are
required and maximum is unlimited and for forming a private company at least 2 persons
are required and maximum is fifty. If not registered it would be treated as illegal association.
5. Transferability of shares: The shares of a joint stock company are freely transferable and
any one can become a member of a joint stock company by purchasing the shares of that
company.
6. Artificial legal person: The shareholders of a company are the members, who are the
owners of that company. But the owners do not take active part in the management of the
company. They elect a group of persons among themselves who manage the company on
behalf of all the members.
7. Govt. control: A joint stock company collects a large amount of money from the general
public, so the Government usually puts more control over the working of the joint stock
company.
8. Certificate for registration: The promoter of joint stock company have to get certificate of
registration from the Registrar of companies and they have to apply for certificate for
commencement of business when the company becomes ready to start its business.
Private Limited Company
Private limited company is held by few individuals privately having a separate legal entity. In this,
the shareholders cannot trade publicly shares. It restricts its number of shares to 50. Shareholders
cannot sell their shares without the approval of other shareholders. It is a company which restricts
the right of its members to transfer its shares and it doesn’t send the invitation to the public for
subscription of its shares.
Features:

1. Members– To start a company, a minimum number of 2 members are required and a
maximum number of 200 members as per the provisions of the companies act 2013.
2. Limited Liability– The liability of each member or shareholders is limited. It means that if
a company faces loss under any circumstances then its shareholders are liable to sell their
own assets for payment. The personal, individual assets of the shareholders are not at risk.
3. Perpetual succession– The company keeps on existing in the eyes of law even in the case
of death, insolvency, the bankruptcy of any of its members. This leads to the perpetual
succession of the company. The life of the company keeps on existing forever.
4. A number of directors– When it comes to directors a private company needs to have only
two directors. With the existence of 2 directors, a private company can come into operations.
5. Prospectus– Prospectus is a detailed statement of the company affairs which is issued by a
company for its public. However, in the case of a private limited company, there is no such
need to issue a prospectus because in this public is not invited to subscribe for the shares of
the company.
6. Name– It is mandatory for all the private companies to use the word private limited after its
name.
Public Limited Company

According to the Companies Act 2013, a public limited company is a separate legal entity. Further,
the members of such a company have limited liability. Also, a public company offers shares to the
general public.
Features
1. Paid-up Capital – There is no requirement of a minimum paid-up capital. Hence, you can
incorporate a public company with any amount of capital.
2. Minimum number of Directors – You need a minimum of 3 directors to incorporate a
public company with a maximum of 15 directors. However, no. of directors can exceed 15
after obtaining Special Resolution.
3. Minimum number of Shareholders – You need a minimum of 7 members to incorporate
a public company.

4. Name of the company – Every public company must have the word “Limited” at the end
of the company name.
5. Transfer of shares – There are no restrictions on the transfer of shares in a public company.
6. Liability – The liability of each member of a public company cannot exceed the amount of
investment in shares of the member. This limit is non-extendable.
7. Issue of securities – There is no restriction on the issue of securities to the public. The
company can issue the same via an initial public offer (IPO) or a bonus issue through private
placement. Also, the company needs to issue the securities in the Dematerialized format.
8. Quorum – Every public company must have at least five members personally present to
form a quorum to constitute the meeting.
9. Managerial Remuneration – In a public company, the managerial remuneration paid to the
director and manager and that should not exceed 11% of the net profits of the company
subject to other provisions of the law.
Types of Industries
Depending on the nature of industrial activities, industries can be classified in to five categories such
as:
• Manufacturing Industries,
• Extractive Industries,
• Genetic Industries,
• Construction Industries and
• Service Industries.
Manufacturing Industries
Manufacturing industries are understood to be the factories and mills where raw materials are
introduced and finished product are found out through the help of men and machines. Examples
are Toyota, Yamaha, Panasonic, LG, Samsung and Tata Motors.

Extractive Industries
Extractive industry can be defined as a processes that involve different activities that lead to the
extraction of raw materials from the earth and nature such as mining of ore, metals, mineral,
collection of forest products etc. This type of industries directly depend on nature and their
activities are directed towards exploitation the nature to collect something useful for their
business activities.
Genetic Industries
Genetic industries are those industries which are engaged in re-production and multiplication of
species of plants and animals with the sole objective of sale. These industries are engaged in
activities such as animal breeding, cattle breeding, etc. Dairying and poultry are the example of
genetic industry.
Construction Industries
This type of industries are engaged in the construction of various infrastructure like road, dam,
bridge, canal, flyover, building, factory etc. Such types of industries carry on their activities at
the sites where the structure is required.
Service Industries
This type of industries provide services of various types to the people, to the industries and to
the other organizations. Such industries do not produce any commodities but produce or create
services for the needy. Examples are service stations, garage for automobiles, hotels, hospitals,
internet, telephone service, courier service etc.
Small Scale Industries (SSI)

Small scale industries are those industries in which the manufacturing, production and rendering of
services are done on a small or micro scale. These industries make a one-time investment in
machinery, plants, and industries, but it does not exceed Rs 1 Crore. Examples and Ideas of Small
Scale Industries are Bakeries, School stationeries, Water bottles, Leather belt, Small toys, Paper
Bags, Photography, Beauty parlours.
Characteristics of SSI
• Ownership: SSI ’s generally are under single ownership. So it can either be
a sole proprietorship or sometimes a partnership.

• Management: Generally both the management and the control is with the
owner/owners. Hence the owner is actively involved in the day-to-day
activities of the business.
• Labor Intensive: SSI’s dependence on technology is pretty limited. Hence

they tend to use labor and manpower for their production activities.
• Flexibility: SSI’s are more adaptable to their changing business

environment. So in case of amendments or unexpected developments, they
are flexible enough to adapt and carry on, unlike large industries.
• Limited Reach: Small scale industries have a restricted zone of operations.

Hence, they can meet their local and regional demand.
• Resources utilization: They use local and readily available resources which
helps the economy fully utilize natural resources with minimum wastage.
Role in the Economy

• Employment: SSI’s are a major source of employment for developing
countries like India. Because of the limited technology and resource
availability, they tend to use labor and manpower for their production
activities.
• Total Production: These enterprises account for almost 40% of the total
production of goods and services in India. They are one of the main reasons
for the growth and strengthening of the economy.
• Make in India: SSI’s are the best examples for the Make in India initiative.
They focus on the mission to manufacture in India and sell the products
worldwide.
This also helps create more demands from all over the world.
• Export contribution: India’s export industry majorly relies on these small
industries for their growth and development. Nearly half of the goods that
are exported from India are manufactured or produced by these industries.

• Public Welfare: These industries have an opportunity to earn wealth and
create employment. SSI’s are also important for the social growth and
development of our country.
Objectives of SSI
The objectives of the small scale industries are:
• To create more employment opportunities.
• To help develop the rural and less developed regions of the economy.
• To reduce regional imbalances.
• To ensure optimum utilization of unexploited resources of the country.
• To improve the standard of living of people.
• To ensure equal distribution of income and wealth.
• To solve the unemployment problem.
• To attain self-reliance.
• To adopt the latest technology aimed at producing better quality products at
lower costs.
Advantages of small scale industries

1. Equitable distribution
Large scale industries lead to inequalities in income distribution and concentration of economic
power. But small scale industries distribute resources and wealth more equitably. It is because
income is distributed among more number of workers since it is labor intensive. This results in both
economic and social welfare.
2. Use of domestic resources

Small Scale Industries use locally available resources in a productive manner which would have
otherwise gone waste. Small amounts of savings which would have remained idle is channelized
into setting up of small enterprises. This increases capital formation and investment in the economy.
3. Opportunities for entrepreneurship

Small Scale Industries provide opportunities for entrepreneurs with limited capital. Setting up of
an SSI requires less capital and lower investment in technology and machines when compared to
large scale enterprises. Therefore small entrepreneurs can start Small Scale Industries easily and

succeed. Japan which was devastated by the Second World War became a major economic power
because of many small entrepreneurs, who contributed greatly to the nation’s development.
4. Cost efficiency
Small scale units can adopt lean production method which offer better quality and more variety at a
lower cost. They can be more cost efficient when compared to large scale units because their
expenses are lower.
5. Requirement of less capital
Small Scale Industries require less capital when compared to large scale industries. India is a capital
scarce country and therefore Small Scale Industries are more suitable in the Indian context. They
can be started and run by small entrepreneurs who have limited capital resources
6. Potential for large employment

Small Scale Industries have potential to create employment opportunities on a massive scale. They
are labor intensive in character. They use more labor than other factors of production. They can be
set up in short time and can provide employment opportunities to more number of people. This is
important for a labor abundant country like India.
7. Contribution to industrial output
Products manufactured by Small Scale Industries form a significant portion of the industrial output
of the country. They produce a number of consumer goods as well as industrial components in large
quantities and satisfy the needs of consumers. The consumer goods produced by Small Scale
Industries are cheaper and satisfy the requirements of the poorer sections.
8. Contribution to exports
Small Scale Industries contribute nearly 40 per cent to the industrial exports of the country.
Products such as hosiery, knitwear, hand loom, gems and jewellery, handicrafts, coir products,
textiles, sports goods, finished leather, leather products, woolen garments, processed food,
chemicals and allied products and a large number of engineering goods produced by the SSI sector
contribute substantially to India’s exports. Further products produced by Small Scale Industries are
used in the manufacture of products manufactured and exported by large scale industries. Therefore
they contribute both directly and indirectly to exports and earn valuable foreign exchange.

9. Cost efficiency
Small scale units can adopt lean production method which offer better quality and more variety at
a lower cost. They can be more cost efficient when compared to large scale units because their
expenses are lower.
10. Suitable for non-standardized products
Large scale enterprises are suitable for manufacturing standardized products on a large scale
whereas Small Scale Industries are more suitable for manufacturing non-standardized products
11. Flexibility in operation

Small scale enterprises are more flexible. They can adapt themselves to changing market
requirements very fast and benefit from new opportunities.
12. Quick decisions

Since the enterprise is small and there is not much hierarchy, quick decisions. can be taken. Quick
decisions are helpful in solving problems in the initial stages and also to exploit market
opportunities.
13. Adaptability to change
Small Scale Industries can understand the changing requirements of the customers and adapt
themselves much quickly. They can change their procedures, methods and techniques faster and
cater to new requirements of their customers.
14. Small market size

In case the market size is small, producing products on a large scale would not be feasible. In such
cases, Small Scale Industries are more suitable since they produce limited quantities.
Disadvantages of small scale industries

1. Difficulty with meeting demand: When products are in high demand, small scale industries
can often struggle to increase their output sufficiently to meet that demand.
2. Geographically restricted: Small scale industries may be concentrated in a particular town

or even in one single building. This can limit their ability to become household names across the
globe.
3. Less financial power: Small scale industries usually deal with less money (both in terms of
ingoing’s and outgoings) than larger factories and so have less financial weight.

4. Access to machinery: Small scale industries usually do not have the space or the money to
use large scale machinery. However, they may have access to expensive, specialized equipment.
5. A niche business: What makes the products of small scale industries attractive to some –
i.e. their niceness and uniqueness – may make them less attractive to others. Small scale industries
often do not have the capacity to please all tastes.
Ancillary Unit:
An ancillary unit is the unit which supplies not less than 50% of its production to the parent unit.
That means an ancillary unit providing necessary support to the primary unit. The examples are
manufacturing automobiles, railway engines, tractors, etc.
A tiny unit is the business enterprise whose investment in plant and machinery is not more than Rs.
25 lakh. Investment limit in such unit is Rs. 25 lacs. The examples are small shops, STD booths,
photocopy centers etc.
Difference between Tiny Unit and Ancillary Unit:

Tiny Unit
1. It is that type in which machinery and investment of plant is not more than 25 lac.
2. Its investment limit is almost 25 lac.
3. There is no assistance required.
4. It cannot do its business by itself.
5. It is of large scale.
Ancillary Unit:
1. It is that type in which its supplies its 50 % production to the parent unit.
2. Its investment limit is almost one crore.
3. There is assistance required from parents by providing technical and financial support.
4. It can do its business by itself.
5. It is of small scale.
Service Sector Unit: The Service Sector, also called tertiary sector, is the third of the three
traditional economic sectors. Activities in the service sector include retail, banks, hotels, real estate,
education, health, social work, computer services, recreation, media, communications, electricity,
gas and water supply.

Concept of Start-ups
The term startup refers to a company in the first stage of its operations. Startups are founded by
one or more entrepreneurs who want to develop a product or service for which they believe there
is a demand.
Features:
 Risk taking is the first and foremost trait of entrepreneurship. Starting any business involves
a considerable amount of risk of failure. Therefore, the courage and capacity to take the said
risk are essential for an entrepreneur.
• An innovation plays an essential role in the success of a startup, so entrepreneurs should

seriously consider this aspect.
• An entrepreneur should be flexible and open to change according to the situation.

• Another quality of successful startups is their ability to adjust to feedback. Whether the
feedback comes from investors, advisors, mentors, or customers, successful startups extract
value from feedback to help improve their product, service, or business model.
• When starting from the ground up, especially with a small team, they should concentrate on
a limited product according to market demand instead of introducing many products.
• Now a days in the present competition market work culture plays a vital role for the existing
of the enterprise. So, the entrepreneurs put emphasis on work culture.
• In a long term a start-up company may turn into a bigger one.

Entrepreneurial support agencies at National, State and District level (Source)
Industrialization plays a significant role in the economic development of any country. The
industrial structure of a country consists of large, medium, and small scale industries. Of these
three types of industrialization, the role of small scale industries in the industrial development
of a country is of paramount importance.

The following institutions or agencies are the principal financial institution for the promotion,
financing and development of industry in the small, tiny and cottage sectors such as DIC, NSIC,
OSIC, SIDBI, NABARD, Commercial Banks and KVIC.
District Industries Centre (DIC)

A District Industries Center is an institution established at the district level so as to provide them to
set up small and village industries there. Before the setting up of DIC, a prospective entrepreneur
has to go to several agencies, many of them far from his district, in order to get the necessary
assistance and facilities. This caused considerable delay, waste of time and money. Now suitable
powers have been delegated by several departments of the State Government to the District
Industries Center. Thus an entrepreneur can get all the assistance he needs from a single agency
itself i.e. DIC.
Functions of DIC
• The District Industries Center conducts survey of the existing traditional and new industries
and raw materials and human resources.
• It makes market forecasts of various products.

• The District Industries Center also conducts training courses for the entrepreneurs of small
and tiny units.
• It acts as an intermediary between the entrepreneurs and the small industries in order to
introduce new and quality product developed by the latter to the former.
• The District Industries Center indicates the locations where from machinery and equipment
can be acquired and also arrange for supply of machinery on hire purchase basis.
• The District Industries Center obtains the details regarding the materials required by various
units and arrange for purchase of the same in bulk.
• Thereby it enables the small units to get their raw materials at reasonable prices.
• It makes the necessary arrangements with Lead Banks and other Financial Institutions in
order to provide financial assistance to the entrepreneurs.
• The District Industries Center conducts market surveys and market development programs.
• It also organizes marketing outlets, contact with Government procurement agencies and
make the entrepreneurs well informed of the market intelligence.
• District Industries Centers gives special attention to the development of khadi and village
industries and other cottage industries.
• It also keeps close contact with the State Khadi Board and organize training programs for
rural artisans.
National Small Industries Corporation (NSIC)

The National Small Industries Corporation Ltd (NSIC) was set up in 1955 as a central government
undertaking, the main aim of which is to fulfill the requirement of machinery and equipment for the
development of the small entrepreneurs. It is observed that the main constraint faced by the
entrepreneurs is the dearth or shortage of investible funds to purchase machinery and equipment.
Non-availability of finance deprives many new entrepreneurs from availing entrepreneurial
opportunities.
Functions of NSIC
• The National Small Industries Corporation Ltd (NSIC) was set up in 1955 as a central
government undertaking, the main aim of which is to fulfill the requirement of machinery
and equipment for the development of the small entrepreneurs.
• Assists in marketing of the products of SSIs.

• Helps in exporting the product of SSIs.
• Provides training to workers of SSIs in various trades.
• Helps in the development and up gradation of technology and modernization of the
industries.
• Undertakes construction of industrial estates.

• Purchases huge quantity of important raw materials and distribute the same to SSIs at
reasonable rates.
• Develops prototype machines and equipment to pass on to SSIs for commercial production.

• Sets up small scale industries in other developing countries on turn-key basis.
Odisha Small Industries Corporation (OSIC)

OSIC was established on 3rd April, 1972 as a wholly owned Corporation of Government of Odisha.
The basic objective of the Corporation is to assist and promote the MSMEs in the State for their
sustained growth and development to gear up the industrialization process in the State.
Functions of OSIC
• This is the only corporation in the state exclusively engaged in the development of MSMES
which form the back bone of industrial sector in the state.
• The basic objective of the Corporation is to assist and promote the MSMEs in the State.
• It acts as the facilitator for the industrial growth of the MSMES of the state.
• To provide quality raw material to MSMEs of the state.
• To provide quality building material to MSMEs sector of the state.

• To assist in marketing the product of the MSMEs sector.
• To market the MSMES produces by creating common brand name with quality assurance.
• Examples of MSME are napkins, tissues, chocolates, toothpick, water bottles, small toys,
pens(Micro and Small scale), cotton, textile, jute textile, iron & steel industry etc.(Medium
scale)
Small industrial Development Bank of India (SIDBI) is a development financial institution in

India, headquartered at Lucknow and having its offices all over the country. Its purpose is to provide
refinance facilities and short term lending to industries, and serves as the principal financial
institution in the Micro, Small and Medium Enterprises (MSME) sector. SIDBI also coordinates the
functions of institutions engaged in similar activities. It was established on April 2, 1990, through
an Act of Parliament. It is headquartered in Lucknow. SIDBI operates under the Department of
Financial Services, Government of India.

Functions of SIDBI
• SIDBI offers indirect assistance by providing Refinance to PLIs (Primary Lending

Institutions), comprising of banks, State Level Financial Institutions, etc. with an extensive
branch network across the country.
• The key objective of the refinancing scheme is to raise the resource position of Primary
Lending Institutions that would ultimately enable the flow of credit to the MSME sector.
• Small Industries Development Bank of India offers microfinance to small businessmen and
entrepreneurs for establishing their business.
• Small Industries Development Bank of India refinances loans that are extended by the PLIs
to the small-scale industrial units and also offers resources assistance to them
• It also helps in expanding marketing channels for the products of SSI (Small Scale
Industries) sector both in the domestic as well as international markets.
• It offers services like factoring, leasing etc. to the industrial concerns in the small-scale
sector.
• It promotes employment oriented industries particularly in semi-urban areas for creating
employment opportunities and thus checking relocation of people to the urban areas
• It also initiates steps for modernization and technological up-gradation of current units
• It also enables the timely flow of credit for working capital as well as term loans to Small
Scale Industries in cooperation with commercial banks
National Bank for Agriculture and Rural Development (NABARD)

NABARD stands for National Bank for Agriculture and Rural Development. It was established on
12 July 1982 by an act of parliament to implement the National Bank for Agriculture and Rural
Development Act 1981.
It is an apex development bank that provides a facility to credit flow for development of small
industries, agriculture, cottage industries and other small businesses in rural areas. NABARD is

headquartered in Mumbai, Maharashtra and its branches are located all over the country. Functions
of NABARD
• It refines and regulates the financial institutions which finance the rural sector.
• It regulates the cooperative banks.
• It provides training facility to the institutions which work for rural development.
• It also promotes research in rural banking and agriculture and rural development.
• It provide financial support for the commercial banks and Regional Rural Banks, and the
training institutes of cooperative banks.
• It communicates and consults the RBI in matters such as issuing of licenses for new banks
and to open the branches of rural banks.
• Help banks to improve their MIS System, modernize their technology, and develop human
resources.
• It promotes rural industries, small scale and cottage industries by providing loans to
commercial and Co-operative banks.
• During natural calamities, such as droughts, crop failure and floods, the bank helps by
refinancing commercial and cooperative banks, so that the farmers are tied over their tough
period.
• NABARD gives foremost priority to projects formed under the Integrated Rural
Development Program (IRDP).
• NABARD is an apex institution which has the power to deal with various matters
concerning policy, planning and operation in providing credit for agriculture and other
economic activities in the rural areas.
Commercial Bank
The term commercial bank refers to a financial institution that accepts deposits, offers checking
account services, makes various loans, and offers basic financial products like certificates of
deposit (CDs) and savings accounts to individuals and small businesses. A commercial bank is
where most people do their banking. Commercial banks make money by providing and earning

interest from loans such as mortgages, auto loans, business loans, and personal loans. Customer
deposits provide banks with the capital to make these loans.
Few examples of commercial bank in India are.
• State Bank of India (SBI)

• Housing Development Finance Corporation (HDFC) Bank
• Industrial Credit and Investment Corporation of India (ICICI) Bank
• Dena Bank
• Corporation Bank
Functions of Commercial Bank
• The bank takes deposits in the form of saving, current, and fixed deposits.
• Another critical function of this bank is to offer loans and advances to the entrepreneurs and
business people and collect interest.
• The bank offers you with the facility of selling and buying the securities.
• Bank provides lockers facility to the customers to keep their valuable belonging or
documents safely. Banks charge a minimum of an annual fee for this service.
• Collection and payment of rent, interest and dividend.

• Collection and payment of cheques and bills.
• Payment of insurance premium and subscriptions.
• ATM card, credit card and debit card facility.
• Issue of demand draft, pay order and traveler’s cheque.
• Internet and mobile banking
• Sale of application forms of competitive exams.
• Banks assist in the transfer of funds from one person to another or from one place to another
through its credit instruments.
Khadi and Village Industries Commission (KVIC)

The Khadi and Village Industries Commission (KVIC) is a statutory body formed in April by
the Government of India, under the Act of Parliament, 'Khadi and Village Industries
Commission Act of 1956' with the objective to plan, promote, organize and implement the

programs for development of khadi and village industries in rural areas. Examples are dhoti,
kurta, handloom sarees, tussar silk etc.
Functions of KVIC
• To plan, promote, organize and implement the programs for development of Khadi and
village industries in rural areas.
• Creating and managing reserves of raw materials and supplying them to producers, creating
common service facilities for processing of raw material and semi-finished goods.
• To promote sales and marketing of Khadi Products.

• To encourage and promote research in the production techniques and equipments in Khadi
Industries.
• To plan and organize training of persons employed or desirous of seeking employment in

Khadi and village industries.
• To promote the sale of marketing of Khadi or products of Village Industries or handicrafts

and for this purpose and keep links with established marketing agencies wherever necessary
and feasible.
• To build up reserves of raw materials and supply them to persons engaged or likely to be
engaged in production of handspun yarn or Khadi or Village Industries at such rates as the
Commission may decide.
• To undertake experiments or pilot projects which in the opinion of the Commission are
necessary for the development of Khadi and Village Industries.
• To encourage and promote research in the technology used in Khadi and Village Industries,
including the use of non-conventional energy and electric power with a view to increasing
productivity.

Department of science and technology has set up many technology business
incubators(TBI) and science and technology entrepreneurship parks(STEPS) across the
country in premier academic institutions to nurture entrepreneurs in various knowledge
and technology field. These incubators and parks provide modern infrastructure,
facilities and useful guidelines to the entrepreneurs.
Technology Business Incubation (TBI)

Technology Business Incubation (TBI) is one of the strategies identified by Department of
Science and Technology (DOST) to promote innovation and techno-entrepreneurship for the
Country’s socio-economic development. TBI involves an ecosystem where innovation is
promoted and supported towards commercialization. It aims to help startup technology based
businesses by providing a range of resources, services and facilities, furnished office space,
mentoring support in developing stage of entrepreneurs.
Objective of TBI
• To promote new technology/knowledge/innovation based startups.
• To provide cost effective, value added services to startups like mentoring, legal, financial,
technical services.
• It also provides office space, business meeting or conference room, training room and storage
room.
• They provide Networking activities

• They provide Marketing assistance.
• Incubators help in Market Research.
• They provide High-speed Internet access.
• Incubators Help with accounting/financial management.
• They help in providing Access to bank loans.
• Incubators help with presentation skills.
• They organize Comprehensive business training programs.
• They act as Advisory boards and mentors.
• They provide Technology commercialization assistance.

Science & Technology Entrepreneurship Parks (STEPs)
The Science Parks and similar initiatives help in creating an atmosphere for innovation and
entrepreneurship; for active interaction between academic institutions and industries for sharing
ideas, knowledge, experience and facilities for the development of new technologies and their rapid
transfer to the end user or entrepreneur.
A STEP creates the necessary climate for innovation, information exchange, sharing of experience
and facilities and opening new avenues for students, teachers, researchers and industrial managers
to grow for starting a successful economic venture. The major objectives of STEP are to establish
linkages among academic and R & D institutions on one hand and the industry on the other and also
promote innovative enterprise through S &T persons. Some of the examples of STEP are Amity
Business Incubator, Noida, and Society for innovation and entrepreneurship, Mumbai, Technology
Business Incubator, Chennai etc.
Objectives
• To build a close linkage between universities, academic and R&D institutions on one hand
and industry on the other.
• To promote entrepreneurship among Science and Technology persons.

• To provide R&D support to the small-scale industry mostly through interaction with research
institutions.
• To promote innovation based enterprises.

• It offers facilities such as nursery sheds, testing and calibration facilities, central workshop,
prototype development, business facilitation, computing, library and documentation,
communication, seminar hall/conference room.
• It also provides common facilities such as phone, telex, fax, photocopying.

• It offers services like testing and calibration, consultancy.
• It also provides Training, technical support services, business facilitation services, database
and documentation services and quality assurance services.

UNIT 2
MARKET SURVEY AND OPPORTUNITY IDENTIFICATION (BUSINESS PLANNING)
What is Business planning? A business plan is a blue print of the step by step procedure that would
be followed in order to convert a business idea into a successful venture. It involves the following
tasks:
• Identifying business opportunities and an innovative idea.

• Researching the external environment opportunities and threats.
• Identifying the internal strengths and weakness.
• Assessing the feasibility of that idea.
• Allocating resources in the best possible manner.
• Process of Business planning
Objectives of Business Planning:

• Dedicating enough time for planning
A workable business plan cannot be created overnight. It is bound to take its own time to
develop. So, a perfect business plan will attempt to spend enough time and hard work to
achieve successful implementation. This should be one of the crucial stages in a business
plan.
• Create goals and objectives

An organization depends heavily on the business plan to arrive at the description of business
it performs. There are several areas that a company will focus on if it wants to realize its
objectives, understand the market that it is planned to operate in and the strategy to achieve
the goals.
• Evaluating Performance
A business needs proper planning and control over the activities for enhanced performance.
It will be an essential step towards achieving the long term survival of the organization as
a whole. The business plan also comes with a financial part to it and used for comparing
the actual performance with the estimated one.

• Gauging business strategy and applying due correction
A Business plan does assist entrepreneur in assessing the efficiency of his strategies for
achieving business goals. In an ideal condition, a business needs to have the planned results
with which the actual results can be compared, and the way forward is decided. If any of
the strategies are found to be unsuccessful in achieving the relevant results, it may be a
perfect idea to modify the strategy or take corrective actions. It is wise to have a good
business plan so that the management does have a reference with which it can have a healthy
comparison of the actual result achieved.
• Arranging financial resources
A business plan can be much helpful and instrumental in acquiring adequate business
financing. Banks and lenders look for a proper business plan before giving any sort of
finance to the entrepreneur. A business plan should be prepared in such a manner that the
banks will have a clear understanding of the business perspective before giving any finance.
• Stay Consistent
This should be yet another objective that a business plan needs to be focused with is being
consistent. A good business plan should place proper value on the exact process and its
adherence to the planned goals. Through consistent schedule the enterprise can achieve the
goals effectively. This will also help the employees and other staff to fall into a proper
routine. This will help the concept of planning to be a part of the business culture.
• Keep the goals ‘SMART’
The goals in the business plan should be SMART (Specific, Measurable, Actionable,
Realistic, and Time-Bound) to achieve success. This will help the entrepreneurs to achieve
the business goals as laid out in the business plan effectively and efficiently. It would be
practical to have the team member of the enterprise to analyze the goals set so that the
entrepreneur will get back to a realistic approach.
• Performing SWOT analysis

SWOT Analysis is one of the best options you would want to go with when it comes to focus
on an effective business plan. Having perfect knowledge of the strengths and weaknesses of
your organization helps you come up with a better insight into the realistic goals. The SWOT
analysis also takes into account the opportunities and threats that the organization can come

to face to face. This will assist you to focus on the positive factor and take corrective actions
against the negatives.
• Marketing analysis
Marketing analysis is an integral part of a business and so does with the business plan. This
part of the business plan should be focused on determining the potential of the product or
service. The marketing analysis part of the business plan should ideally provide the
entrepreneur with a means of understanding their industry as a whole.
Process of Business Planning
1. Recognizing Need for Action
An important part of the planning process is to be aware of the business opportunities in the
firm’s external environment as well as within the firm. Once such opportunities get recognized the
managers can recognize the actions that need to be taken to realize them. A realistic look must be
taken at the prospect of these new opportunities and SWOT analysis should be done.
2. Setting Objectives
• This is the second and perhaps the most important step of the planning process. Here we
establish the objectives for the whole organization and also individual departments.
Organizational objectives provide a general direction, objectives of departments will be
more planned and detailed.
• Objectives can be long term and short term as well. They indicate the end result the
company wishes to achieve. So objectives will percolate down from the managers and will
also guide and push the employees in the correct direction.
3. Developing Premises
Planning is always done keeping the future in mind, however, the future is always uncertain.
So in the function of management certain assumptions will have to be made. These assumptions
are the premises. Such assumptions are made in the form of forecasts, existing plans, past
policies, etc. These planning premises are also of two types – internal and external. External
assumptions deal with Factors such as political environment, social environment, the
advancement of technology, competition, government policies, etc. Internal assumptions deal

with policies, availability of resources, quality of management, etc. These assumptions being
made should be uniform across the organization. All managers should be aware of these
premises and should agree with them.
4. Identifying Alternatives
The fourth step of the planning process is to identify the alternatives available to the managers.
There is no way to achieve the objectives of the firm, there is a multitude of choices. All of these
alternative Courses should be identified. There must be options available to the manager.
5. Examining Alternate Course of Action

The next step of the planning process is to evaluate and closely examine each of the alternative
plans. Every option will go through an examination where all there pros and cons will be weighed.
The alternative plans need to be evaluated in light of the organizational objectives. For example, if
it is a financial plan. Then it that case its risk-return evaluation will be done. Detailed calculation
and analysis are done to ensure that the plan is capable of achieving the objectives in the best and
most efficient manner possible.
6. Selecting the Alternative

Finally, we reach the decision making stage of the planning process. Now the best and most feasible
plan will be chosen to be implemented. The ideal plan is the most profitable one with the least
amount of negative consequences and is also adaptable to dynamic situations. The choice is
obviously based on scientific analysis and mathematical equations. But a manager’s intuition and
experience should also play a big part in this decision. Sometimes a few different aspects of
different plans are combined to come up with the one ideal plan.
7. Formulating Supporting Plan
Once you have chosen the plan to be implemented, managers will have to come up with one or more
supporting plans. These secondary plans help with the implementation of the main plan. For
example plans to hire more people, train personnel, expand the office etc are supporting plans for
the main plan of launching a new product. So all these secondary plans are in fact part of the main
plan.
8. Implementation of the Plan

And finally, we come to the last step of the planning process, implementation of the plan. This is
when all the other functions of management come into play and the plan is put into action to achieve

the objectives of the organization. The tools required for such implementation involve the types of
plans- procedures, policies, budgets, rules, standards etc.
Advantages of Business Planning

• It makes an entrepreneur consider every aspect of the startup so they can try to eliminate
failures.
• It makes the entrepreneur aware of what skills they are missing so that they can hire experts
in that particular field.
• Venture capital may be available to the business if investors like the business plans.
Disadvantages of Business planning

• The business plan is only a plan and does not guarantee success. For example, sales may be
lower than predicted as they can be affected by a range of issues.
• If the plan is too rigid some problems may arise, it must be flexible to adapt to market
changed.
• High sales expectations may cause overspending in other areas such as stock and staffing.
Time Schedule Plan: Time scheduling is the art of planning the activities. So that the entrepreneur
can achieve his/her goals. In other words Scheduling is the process by which the entrepreneur can
make plan to complete his assignments within that time schedule (Daily/weekly). Follow this six-
step process to prepare the schedule:
• Identify the time: Start by establishing the time the entrepreneur wants to make available
for his/her work. How much time they spend at work should reflect the design of their job.
• Block in the essential task: Next, block in the actions the entrepreneur must take to do a
good job. These will often be the things they are assessed against. For example, if they
manage people, make sure that they have enough time available to deal with team members'
personal issues, coaching, and supervision activities.
• Schedule high-priority urgent tasks: In the time schedule the entrepreneur should keep
some time for urgent activities like schedule meeting to discuss different issues related to
their business.

• Block in appropriate contingency time to handle unpredictable events and
interruptions: The entrepreneur should keep some time for emergency activities like
sudden policies changes and strike by employees etc.
• Schedule the activities that address the priorities and personal goals in the time that
remains: The entrepreneur should keep some time for any types of personal work like attend
marriage or birthday party or any other activities.
• Analyze your activities to identify tasks that can be delegated, outsourced or cut
altogether: In this the entrepreneur has to analyze the entire activities if necessary they can
modify the time schedule according to the priority of their assignments.
Assessing the demand and supply

What is demand? Demand is the amount of goods or services that consumers are willing to pay at
each price point. It is based on wants and needs and the ability to pay. If consumers are unable to
pay for goods and services, demand does not exist. When the price of a good or service rises, demand
decreases. Conversely, if the price of a good or service falls, demand goes up. This law of demand
represents an inverse relationship between price and quantity demanded.
What is supply? Supply is the amount of goods or services available or produced, based on a
number of factors such as input resources, labor, technology and regulations.
The followings are factors to be considered for assessing the demand and supply:
Price Fluctuations
Price fluctuations are a strong factor affecting supply and demand. When a product gets expensive
enough that the average consumer no longer feels it is worth it to buy the product, then the demand
declines. This leads to cuts in production that will hopefully stabilize the product’s value. Lowering
the price of a product may increase demand, indicating that the public feels the product is suddenly
a great value. This may also cause changes in production to increase to keep up with the demand.
Income and Credit

Changes in income level and credit availability can affect supply and demand in a major way. The
housing market is a prime example of this type of impact. During a recession when there are fewer
jobs available and there is less money to spend, the price of homes tends to drop. Also, the

availability of credit may be less because of the average person’s inability to qualify for a loan. To
help encourage those who can afford to buy, prices fall which can boost sales, and even more so if
interest rates decrease. When there is an economic boom, unemployment is very low and people are
spending money readily, the price of homes and other major purchases tends to rise and so do
interest rates.
Availability of Alternatives or Competition

When an alternative product hits the market, the competition between the existing product and the
new one can cause demand to drop for the existing product. Just as many people may be buying the
product, a large portion of them may elect to buy the alternative brand. This leads to price wars that
ultimately lower the price of the product and may require a cut in supply to fall in line with the
decrease in demand.
Trends or Tastes and preferences

Demand rises and falls on trends in many cases. Consumer tastes are constantly changing, and
demand for products rises and falls as a result. For example If the customers are interested to wear
jeans, the demands for jeans will increase.
Prices of substitutes.
An increase in the price of one product can increase the demand for its substitute. Coca-Cola and
Pepsi are excellent examples of this effect. If Pepsi increases its price, consumers will quickly
switch to buying more Coke.
Commercial Advertising
Commercials on television, internet and radio have an effect on supply and demand in that they
make more people aware of the availability of a product. People do not buy what they don’t know
is for sale. If it is an appealing ad, there is a good chance of both demand and supply will increase.
Seasons
The seasons can affect supply and demand drastically. The supply and demand for toys peaks around
Christmas and Fireworks boom during Dewali etc.
Potential areas of growth

Growth potential is an organization's future ability to generate larger profits, expand its workforce
and increase production. In the business sense, an organization's growth potential depends heavily
upon its leadership's expectations for success, and the quantitative and qualitative measures used to

determine expansion readiness. Growth potential can be gauged from an organization's planned
movement into new markets, the development of new product lines, the adaptability of more
effective marketing techniques, or other methods that grow a business from a niche market to a
more volume operation.
The following are the potential area to be developed:
1. Keep Financial Score: The businesses organization should keep their financial status daily,
weekly, and monthly and that should be maintained regularly. It's vital that to spend the necessary
time keeping current on cash flow. If necessary the entrepreneur should appoint an accountant for
this activities.
2. Set Goals
Setting goals and objectives is an essential part of the business success. So in this regard the
entrepreneur should gather all the information related to the business and apply appropriate
methodology to fulfill the objective for the organization.
3. Use High-Impact Marketing

Wasting money on ineffective marketing is easy. The entrepreneurs should implement low-budget,
high impact marketing strategies to improve their small business. Test one or two new tactics and
see which perform best before adding them to their marketing strategy. Social media is an excellent
low-cost and low-risk way to promote your business. LinkedIn, Facebook, Twitter, and Instagram
are a few good tools to build a social presence and attract attention to the business.
4. Sharpen the Selling Skills
A high-return area for business improvement is the sales function. In this regard the entrepreneur
should implement different methods for sales improvement by appointing efficient sales team along
with sales Manager.
5. Find Best Practices

Keeping everything transparent is an important activities. That means, communicating effectively,
testing, and monitoring and approving the processes in order to keep everything running smoothly.
Example is documenting the processes to avoid any miscommunication

6. Motivate Staff
Talented and motivated staff members can bring on big improvements in business. So, the
entrepreneur should apply different strategies to motivate the potential employees by giving some
bonus or incentives so that the employees will think that the organization is ours.
7. Customer satisfaction
Employee satisfaction is key for a business' success, but customer satisfaction is critical. The
customer’s satisfaction with the product / service or company is another strong indicator of the
business performance. The entrepreneur should Conduct regular customer satisfaction surveys as
part of his customer relationship management program, and determine of customer satisfaction
changes over time.
Identify the business opportunity:

There are a lot of opportunities available in the world of business, but they are not visible to
everybody. They are visible only to those who constantly remain in search of them. Opportunity
does not come to any one by chance, but the entrepreneur has to struggle for it. The entrepreneur
has to collect necessary resources to convert the opportunity into a successful business venture.
Business opportunity can be described as an economic idea through which the entrepreneur can
make a business and earn profits. He has to collect the information from external environment and
analyze them so that he will be able to select best opportunity related to his business.
A business opportunity will be considered on the following factors:

1. A good market scope for the product he is going to produce: The entrepreneur has to
analyze the gap between demand and supply of the product in which he is going to make business.
The demand must be higher than the supply. He should consider not only the present demand and
supply of the product but also he should put emphasis on the future forecast demand and supply. In
this regard the entrepreneur has to establish new units and inter regional flow of commodities to
analyze the demand and supply.
2. An attractive, acceptable and adequate rate of return on the investment: The next
opportunity is the rate of return. If the rate of return on the investment is not attractive the
entrepreneur cannot move forward. So, the rate of return must be higher which can cover the
remuneration of the entrepreneur, salary of employees, maintenance, loan payment along with other

payments and also receives some extra money so that that can be used for expansion, modernization
and for launching new projects and products.
3. Feasibility or practicability of the idea: The idea adopted by the entrepreneur must be
feasible and practicable. If a business opportunity has all the ingredients but the idea is not feasible
or cannot be put into practice, it is useless. If permission or license is not available due to some
reasons the entrepreneur may abandon the idea.
4. Competence of the entrepreneur to convert the idea into real business practice. : The
entrepreneur is the main element of an enterprise. So, the entrepreneur must be capable of turning
the ideas into economic activities. Different business activities require different levels of skill,
knowledge, ideas etc. He must have the competence to overcome the hurdles.
5. Assurance for future growth: Lastly there must be an assurance for a prosperous future
and steady growth of the activities of the entrepreneur and enterprise. If all the components
discussed above are there but there is a lot of uncertainties about the future prospects of the
enterprise the entrepreneur cannot consider it to be a good business opportunity. Apart from an
attractive and acceptable rate of return on investment and a good market scope the entrepreneur has
to study several other factors for the project relating to technical, production, managerial and
feasibility point of view. These factors are so interlinked that a decision about one affects the others.
So, the identification of a business opportunity for an entrepreneur requires intensive efforts and
special skill. To collect all the information necessary to select an appropriate business opportunity,
the entrepreneur has to remain in close touch with a number of entrepreneurs, institutions, and
business publications so that he acquires a lot of knowledge and gain exposures on his projects.
Major criteria for final selection of a business opportunity

Before arriving at a conclusion on a business opportunity, an entrepreneur has to collect a lot of
information on various business opportunities and examine all the opportunities minutely. He has
to examine the business environment, present scenario and trend in a business, impact of changes
in technology and behavior of the target group for whom the product is going to made. To make a
final decision on business opportunities, various types of products and services available in the
market, their merits and demerits, the expectation of the consumers should be studied. He should
see if he can make a product best suited to the market, consumers, dealers and environment.

Although the amount of investment and nature of technology play an important role in the final
selection of a business opportunity, yet the entrepreneur has to first select the enterprise, product
and project.
Selection of Enterprise
After collecting all the required information and analyzing the information, the entrepreneur has to
select the industry he may establish. He may select industry relating to consumer goods, producer
goods or intermediate goods. While deciding the industry, the entrepreneur has to study the present
business environment and industrial climate for the particular industry. What would be the expected
future of the industry must be examined? While deciding the industry, he has to think for
diversification, modernization and flexibility of the industry in future. While deciding the industry
the entrepreneur may take into account his preferences, technical capabilities, familiarizes and
support from others in the same line. He has also to take into account Government policies for the
industry. He has to see the present position of such industry in the country as well as abroad forecast
the future. On the basis of the above information, the entrepreneur may decide the industry.
Selection of product or Final Product Selection

After the selection of an industry, the entrepreneur has to select the product to be manufactured by
him. While doing so, he has to make a comparison of all the products he has thought in mind.
Producing a product is less important than marketing the product. So he has to select a product
keeping an eye on the market. Market survey plays an important role in the selection of a product.
Entry point into the market is important for the entrepreneur. For a new entrepreneur it is always
better to enter the market with an essential commodity of daily use, so that he finds a ready market
for his product and entry will also be easier. However, he may select any product which may be
classified as essential items, luxury or comfort items. But, before making a selection, the
entrepreneur has to study the behavior of the competitors and consumers for a new entrants.
Similarly, the entrepreneur has also to take into account all the probable factors which may influence
the future business activities. He has to analyze the market scope of the product and the rate of
return on the investment before finally selecting a product.
Selection of Project
After the selection of an industry and product, the next problem for the entrepreneur is to select the
project. The selection of a project depends upon the personal preferences of the entrepreneur,
earnings of the entrepreneur, returns on investment and future prospects of the product. How much

cash the entrepreneur can invest in his enterprise also plays an important role in the selection of a
project. He should also study the Govt. policies for the particular project. All the formalities,
licenses or permissions needed for the project should be examined by entrepreneur. Whether such
licenses or permissions are available easily or not should also be examines. The entrepreneur has
also to see if any restriction or control is there for the raw materials, finished products, the price of
raw materials and finished product and their movements etc. which may affect the prospects of the
project. He should also examine the possibility of restrictions on such matters in future. The project
should be viable and acceptable to all the agencies. Again the entrepreneur has to examine the future
prospects of his project. Examine the future includes study of the technology, possibilities of
changes in technology, changes in the taste, fashion and custom of people. These factors will
influence the future demand and prospects of the product and project.

UNIT 3
PROJECT REPORT PREPARATION
Project Report: After the selection of the industry and product, the entrepreneur should prepare
the project report on his project. This project report is necessary to get registration, license,
permission and loans from financial institutions for his project. Project report is the mirror through
which one can see the entire picture of an organization in advance. Project report can be of two
types i.e. Preliminary Project Report (PPR) and Detailed Project Report (DPR).
Preliminary Project Report : A preliminary project report is a brief summary of a project

describing the expected inputs and outputs like finance , manpower, materials, machinery,
technology, expenses, production, profits, sales etc. of a project before the project is actually
implemented. A preliminary project report justifies the techno-economic feasibility of a project. An
entrepreneur may make few preliminary project report on different products to see which one is
more suitable to be accepted. So, a PPR is a rough estimate of the project through which the
entrepreneur make a detailed project report and start working on it. A PPR may be the picture of a
project in the mind of the entrepreneur which has been put into paper in a desired manner to
convince others regarding its viability. It is a short description of the project by the entrepreneur.
A Performa of a Preliminary Project Report is given below:
PRELIMINARY PROJECT REPORT
1. Introduction
A. Information about the Entrepreneur:
Name:
Date of birth:
Address:

Age:
Sex:
Presently monthly income: RS.___________

Educational Qualification: ____________
Special training, if any: ____________
Work experience: ____________
Category : SC/ST/ Ex-military/NRI/Physically handicapped/General:

___________
B. Information about the proposed product/project
Product: __________
Location of the project: ______
Type of organization: ______
Name of the firm: _______
2. Financial Details:
A. Land and Building
Area Value
i ) land
ii) Building

B. Details of Machinery and Equipment
Sl No Description of machinery No required Price Total value Name &

address of
suppliers
1. ____ _____ ___ ___ ____
2. _____ _____ ____ ___ _____
Total value in Rs. _______
C. Miscellaneous Fixed Assets
1. Tools RS. ______

2. Furniture Rs. ______
3. Office Equipments Rs. ______
Total Rs. ______
D. Preliminary and Preparative Expenses : This includes the amount to be spent by the entrepreneur
to get registration, license, permission, security deposits along with travelling expenses and also
mention the total expenses
a) Raw materials RS. ______
b) Salaries and wages of labor/staff per month Rs. ______
c) Utilities: Electricity, water, coal, oil, LPG Rs. ______
d) Other Contingent Expenses: Repair and Maintenance, Transport, postage and stationary,
telephone, rent, Advertising Rs. ______

Importance of Preliminary Project Report
A Project Report represents what the business is all about or what it intends to be over the
time. It offers guideline to start-ups and existing businesses too.
• A Project Report is essential for those, who are seeking financial assistance from different
financial institutions and banks, for their business.
• It acts as a guide in the all business operations, taking all financial decisions related to the
business.
• It gives full visibility of every activity related to that particular business, and it will give full
insights of the business.
Benefits:
Tracking: Through tracking the entrepreneur can track the current progress of the project against
the original plan. Which include Tasks, Issues, Risks, budget, schedule, and overall project
activities. Identifies risks: Identifying risks is a key step to better projects. With the right reports,
the entrepreneur can spot a risk early on and makes it easier for the team to work on the problem.
Cost management: Cost management is tricky. But with regular reporting, it’s easy to view the
expenditure clearly and manage the budget with full visibility.
Visibility: Reporting increases the amount of visibility of the projects and will give full insight into
how the project is performing, be it good or bad.
Control: Reporting puts the project under control. It allows to see the progress, stagnation, or
regress of certain elements, how team members are performing, and the quality of work completed.
Learning: Information provided by project reporting on completed tasks can inform future actions.
For example, the entrepreneur may figure out that project communication was an issue and make
changes to the communication plan for the next project.
Detailed Project Report (DPR)

Detailed project report is nothing but a detailed elaboration of each and every information and
estimate mentioned in the Preliminary Project Report .While preparing a detailed project report the
entrepreneur may take the help of experts to do the job. Preparation of the DPR requires a lot of
time.

A DPR is a final, detailed appraisal report on the project and a blue print for its execution and
eventual operation. It provide details of the basic program the roles and responsibilities, all the
activities to be carried out and the resources required and possible risk with recommended
measure to counter them.
Objectives of DPR
• The report should be with sufficient details to indicate the possible fate of the project when
implemented.
• The report should meet the questions raised during the project appraisals, i.e. the various
types of analyses—be it financial, economic, technical, social etc.—should also be taken
care of in the DPR.
Contents of DPR:
The project report contains detailed information about Land and buildings required, Manufacturing
Capacity per annum, Manufacturing Process, Machinery & equipment along with their prices and
specifications, Requirements of raw materials, Requirements of Power & Water, Manpower needs,
total Cost of the Project.
Difference between PPR and DPR

 PPR is a brief summary of each and every information related to business while DPR is a
detailed elaboration of each and every information mentioned in the PPR.
 Preparation of PPR requires less time while it takes more time to prepare DPR.
 PPR can be easily prepared while it is a tedious task for preparing DPR.
 PPR can be prepared for getting license and permission to start a project while the status and
future prospects depend on DPR.
Advantages:
• The entrepreneur can monitor operations procedures within the enterprise.
• Allowing managers to use the reports to review and corrective actions that are not effective.
• Supplying upper management important information to make decisions.
• Offering insight into the attitude and motivations of their employees.
• Providing employee performance evaluations to determine that work is being done properly
and efficiently.
• Evaluating investment proposals.

Disadvantages:
• Reports are time-consuming to create.
• They are expensive to research and write.
• Technical reports can be difficult to understand.
• Implementing report recommendations can prove difficult.
Techno Economic Feasibility: It is a report which is determine the technical feasibility and
financial viability of the project, assess the risks associated with the project and implement actions
that are required to be taken.
It is a methodology framework to analyze the technical and economic performance of a process,

product or service. In other word s we can say that
 It refers to the estimation of project and choice of optimal technology.

 It is an analysis on the existing market and technology.
 It analyze the project on individual criteria on different aspects and set the stage for detailed
design development.
Factors to be considered for Techno economic feasibility report
 Objective and scope of the report.

 Product characteristics.
 Market position and trends.
 Raw material requirement, prices, sources and properties of raw materials.
 Manufacturing processes, selection of process, production schedule and techniques.
 Plant and machinery.
Objectives:
 It determine the technical feasibility and financial viability of the project.
 It assess the risks associated with the project.
 It execute the action that are required to be taken for the betterment of the project.
Benefits:
 The entrepreneur can get the idea about the total costs associated with the project.
 The entrepreneur can execute the most appropriate technology to manufacture the products.
 The entrepreneur can analyze the existing market and technology.
 The entrepreneur can get an overall information about the project and then it will be easy
for him to go for detailed design development.

Project viability:
Viability for a project refers to the assessment of whether the project has the capacity to meet the
defined objectives and in addition to generate significant financial and economic gains to the
stakeholders and to the economy in general.
Project viability depends on a number of factors which are given below:

Cost:
A project is not typically considered viable if its value exceeds its costs. Sometimes the cost viability
of a project can change over the course of the project’s development or implementation. For
example, if you have a particular amount of money designated for a project, and it appears actual
costs will exceed the budget, the project is likely to lose its viability. Many factors can impact costs,
such as an increase in the cost of supplies or materials or the scope of the project.
Time:
A project that is not on track from a deadline perspective can lose its viability. For example, if you
have a project to design and print invitations for a grand opening event, if time delays result in the
invitations going to print the day before the event, the project loses its viability. Invitations issued
after an event has taken place are worthless, and continuing to pursue their production wastes time
and money. Likewise, delays that result in additional fees -- such as rushed late printing fees -- may
also render a project nonviable.
Manpower:
Losing key members or staff can cause a project to lose its viability. For example, if the entrepreneur
has a graphic designer who is developing new logo, and that person quits without notice, the project
may lose its viability, because the manpower anticipated for the role no longer exists. The project
has the potential to regain its viability if someone else can take over the task or it can be effectively
outsourced to another party.
Quality:
If the quality of a project is not attainable as anticipated, it can lose its viability. For example, if an
entrepreneur own a small construction business and provide an estimate for building a custom home,
that estimate is based largely on the current price of home-building materials. If the price goes up
suddenly or the same quality of materials is no longer available, the project, as planned, loses its
viability. It can regain its viability if materials of equal quality and similar price can be obtained.

UNIT 4 MANAGEMENT
PRINCIPLE
Definition of Management:
 Management may be defined as the art of getting work done through people with satisfaction
of employer, employees and the public.
 Management is a process for getting the work done through the efforts of other people, it is
necessary to guide, direct, coordinate and control human efforts towards the fulfillment of
the goals of the enterprise.
 Management is an art because management means coordinating and getting work done
through others.
Principle of Management:
The fourteen principles of management created by Henri Fayol also known as “father of modern
management theory” are explained below:
1. Division of Work - According to this principle the whole work is divided into small tasks
and it is also based on the theory that if workers are given a specialized task to do, they will become
skillful and more efficient in it which leads to specialization and specialization helps to increase
efficiency and efficiency which results in improvements on the productivity and profitability of the
organization.
2. Authority and Responsibility - Authority and responsibility should go together and must
be related. Authority means the right of a superior to give enhance order to his subordinates and
responsibility makes them responsible for the work done under their guidance or leadership.
Responsibility without authority or vice versa is meaningless.
3. Discipline - Without discipline, nothing can be accomplished. It is the core value for any
project or any management. Good performance and sensible interrelation make the management
job easy and comprehensive. Employees good behavior also helps them smoothly build and
progress in their professional careers. Discipline is absolutely necessary for efficient functioning of
all enterprises.

4. Unity of Command - This principle states that each subordinate should receive orders and
be accountable to one and only one superior. If an employee receives orders from more than one
superior, it is likely to create confusion and conflict.
5. Unity of Direction. This means all the person working in a company should have one
goal and motive which will make the work easier and achieve the set goal easily. It implies that
there should be one plan and one head for each group of activities having the same objective.
That means there should be one common plan for an enterprise as a whole.
6. Subordination of Individual Interest-This indicates a company should work unitedly
towards the interest of a company rather than personal interest. That means the interests of an
individual persons should not be permitted and this is necessary to maintain unity and to avoid
friction among employees.
7. Remuneration - Remuneration is the price paid to the employees for the services
rendered by them for the enterprise and this is also a chief motivation of employees and
therefore it puts influences on productivity. The quantum and methods of remuneration payable
should be fair, reasonable and bring maximum satisfaction to both employees and the employer.
8. The Degree of Centralization: Centralization implies that the decision making process
should be taken at top management. In any company, the management or any authority responsible
for the decision-making process should be neutral. However, this depends on the size of an
organization. Henri Fayol stressed on the point that there should be a balance between the hierarchy
and division of power.
9. Line of Authority/Scalar Chain - This refers to the chain of superiors ranging from top
management to the lowest rank. The principle suggests that there should be a clear line of authority
from top to bottom linking all managers at all levels. This is necessary so that every employee
knows their immediate senior and also they should be able to contact any, if needed.
10. Order -. A company should maintain a well-defined work order to have a favorable work
culture. The positive atmosphere in the workplace will boost more positive productivity. Material
order ensures safety and efficiency in the workplace. Order should be acceptable under the rules of
the company.

11. Equity - Employees must be treated kindly, and Managers should be fair and impartial
when dealing with employees, giving equal attention towards all employees. This will make
employees more loyal and devoted towards the management or enterprise.
12. Stability of Tenure of Personnel - Stable and secure work force is an asset to the enterprise
because unnecessary labor turnover is costly. An employee delivers the best if they feel secure in
their job. It is the duty of the management to offer job security to their potential employees.
13. Initiative - Initiative of employees can add strength and new ideas to an organization.
Initiative on the part of employees is a source of strength for organization because it provides new
and better ideas. Employees are likely to take greater interest in the functioning of the organization.
In this regard manager should encourage his subordinates to take initiative.
14. Esprit de Corps/Team Spirit - It is the responsibility of the management to motivate their
employees and be supportive of each other regularly. Developing trust and mutual understanding
will lead to a positive outcome and work environment. This refers to the need of managers to ensure
and develop morale in the workplace; individually and communally. Team spirit helps develop an
atmosphere of mutual trust and understanding. Team spirit helps to finish the task on time.
Functions of Management: Broadly speaking, management includes everything which is

necessary for the performance of work. All the activities performed by managers at various levels
to get the desired result may be the functions of management. Usually, there are nine major functions
of management such as Forecasting, Planning, Organizing, Staffing, Coordination, Directing,
Motivation, Communication and Control.
1. Forecasting: Forecasting is the first thing in the management process through which plans
are made and actions are taken. Forecasting forms the base for planning process. The efficiency of
planning depends on the accuracy of forecasting. Forecasting is nothing but the prediction on the
future or estimate the future events by comparative study and analysis of various factors and forces.
Forecasting is based on the analysis of the past, study of the present and estimate of future.
Forecasting helps to add certain level of to the future events and helps to meet the future challenges.
Forecasting may be for short run or long run. A short run forecast is likely to be more accurate than
the long run forecast. In case of long run forecast may be required for revision due to changes in

different factors and forces. Result of forecast should be made available to all the planners to plan
the activities suitably.
2. Planning: Planning is the most important among all the managerial functions. It is the
function of management usually performed by all the managers at all the levels of work. If planning
is wrong or defective, the entire work shall be defective and all the efforts shall be fruitless. Planning
is considered to be the foundation of work. Planning means deciding a future course of action to be
performed by all the employees in the management process. Planning involves study of future. It
also includes selection of the best alternatives among the alternatives Available. Selection of the
best alternative requires study, analysis and comparison of various alternatives. So, planning
involves selection of the best alternative for the entire organization. Planning is deciding in advance
the work to be performed in a desired manner in future. Planning also involves deciding what to
do? When to do? Where to do? How to do? Planning aims at maximum result at minimum possible
efforts.
3. Organizing: Organizing is the management process which helps to carry out the plans.
Organizing Includes putting life to plans by bringing together the physical facilities, executives,
personnel, workers, capital, machineries, materials, services to carry out the plans. When all these
resources are assembled then the organization comes to life. Organizing provides for the
establishment of relationship among posts, departments, section, units, resources, jobs etc. and
creates routes for delegation of authority and responsibility. Organizing is a managerial process
through which a manager groups his men to get the things done effectively and efficiently to achieve
the best possible result. Organizing is an effective mechanism for management for achieving the
plans. Organizing also defines the relationship among the persons and decides who will do what for
the implementation of the plans and for the achievement of the goals.
4. Staffing: Organization creates a structure of duties and functions to be performed by various
persons in the organization. So, staffing is nothing but filling up the positions created in the
organization structure. Staffing functions include recruitment, selection, training, placement,
transfer, promotion, etc. Staffing aims at optimum utilization of human resources of an organization.
It is the duty of management to fill up the vacancies created in the organization by appointing
competent, qualified, efficient and appropriate persons for each job.
5. Coordination: Coordination is the function of management which ensures that different

departments and groups work in synchronization to achieve the common objectives of the

organization. Therefore, there is unity of action among the employees, groups and departments.
Unity of efforts cannot be achieved automatically. So, a manager has to coordinate the activities of
all the individuals to provide unity of action for the achievement of common goal. Coordination
includes division of work and distribution of duties and responsibilities among various individuals
and groups working in the
Organization. Coordination ensure that all the individuals and groups work together effectively,
economically and harmoniously to achieve common goal of the enterprise. Coordination is a
function linking all the functions of management through unification of both human and other
resources.
6. Directing: Simply appointing competent persons in different positions is not enough to get
good results. They need direction that means proper orders and instructions as per requirement. So,
directing is entirely a human functions which involves managing the managers and workers through
motivation, proper leadership, effective communication and coordination. A manager with the help
of leadership and motivational qualities has to direct and guide all his subordinates and get the work
done through them. To direct and guide the subordinates a manager must develop his abilities to
command people. A manager must know how to direct, how to issue orders and instructions to the
subordinates without creating confusion. Directing helps the plans to convert into performance. It
is the process through which people are made aware as to what and how they are expected to do.
7. Motivation: Without motivation things do not move smoothly. Motivation is nothing but
creating an internal desire in the mind of a person to do something. In the management process
motivation is a powerful tool to achieve the goal effectively. Motivation can set into motion a
person to carry out some activities. To carry out the plans properly and smoothly a manager has to
make use of motivation as a tool to motivate the subordinates to get the work done through them.
Motivation’ is the process of inspiring people in order to intensify their desire and willingness for
executing their duties effectively and for cooperating to achieve the common objectives of an
enterprise. The manager should adopt different methodology to motivate the subordinates in the
form of adequate financial Incentive, proper working environment, provision for promotion, non-
monetary facilities like travelling, medical treatment, education etc.
8. Communication: Communication is the management process which refers to the
transmission of messages, news, information, suggestion, instruction and ideas from one person to
another. Through communication an effective link is created and maintained among all the

employees of the organization. Communication is always objective oriented. There are various
modes of communication but oral or verbal communication is the best form of communication. The
communication may be from the bottom to top or top to bottom. The manager has to develop good
communication skill and he should be a good communicator and should ensure that there is no
communication gap. So, it is the duty of the manager to see that the information or messages are
properly communicated to the appropriate persons or not.
9. Control: Control is a continuous process. Controlling is one of the important functions of

a manager. In order to seek planned results from the subordinates, a manager needs to exercise
effective control over the activities of the subordinates. In other words, the meaning of controlling
function can be defined as ensuring that activities in an organization are performed as per the plans.
Controlling also ensures that an organization’s resources are being used effectively & efficiently
for the achievement of predetermined goals. Managers at all levels of management top, middle &
lower – need to perform controlling function to keep control over activities in their areas. Therefore,
controlling is very much important in an educational institutions, military, hospital, or in any
business organization. A good control system helps an organization in the form of accomplishing
organizational goals, judging accuracy of standards, making efficient use of resources, improving
employee motivation, ensuring order & discipline and facilitating coordination in action. Control
helps realization of the plans as per expectation.
Level of management in an organization: According to duties and responsibilities the level of

management in an organization is broadly classified into three categories as
1. Top-Level Management/ Administrative level,

2. Middle-Level Management/ Executory and
3. Low-level Management/ Supervisory.
1. Top Level of Management

It consists of board of directors, chief executive or managing director. The top management is the
ultimate source of authority and it manages goals and policies for an enterprise. It devotes more
time on planning and coordinating functions.
The role of the top management can be summarized as follows -

• Top management lays down the objectives and broad policies of the enterprise.

• It issues necessary instructions for preparation of department budgets, procedures, schedules
etc.
• It prepares strategic plans & policies for the enterprise.
• It appoints the executive for middle level i.e. departmental managers.
• It controls & coordinates the activities of all the departments.
• It is also responsible for maintaining a contact with the outside world.
• It provides guidance and direction.
• The top management is also responsible towards the shareholders for the performance of the
enterprise.
2. Middle Level of Management

The branch managers and departmental managers constitute middle level. They are responsible to
the top management for the functioning of their department. They devote more time to
organizational and directional functions. In small organization, there is only one layer of middle
level of management but in big enterprises, there may be senior and junior middle level
management. Their role can be emphasized as -
• They execute the plans of the organization in accordance with the policies and directives of
the top management.
• They make plans for the sub-units of the organization.

• They participate in employment & training of lower level management.
• They interpret and explain policies from top level management to lower level.
• They are responsible for coordinating the activities within the division or department.
• It also sends important reports and other important data to top level management.
• They evaluate performance of junior managers.
• They are also responsible for inspiring lower level managers towards better performance.
3. Lower Level of Management
Lower level is also known as supervisory / operative level of management. It consists of supervisors,
foreman, section officers, superintendent etc. Their activities includes:
• Assigning of jobs and tasks to various workers.

• They guide and instruct workers for day to day activities.
• They are responsible for the quality as well as quantity of production.

• They are also entrusted with the responsibility of maintaining good relation in the
organization.
• They communicate workers problems, suggestions, and recommendatory appeals etc to the
higher level.
• They supervise & guide the sub-ordinates.

• They are responsible for providing training to the workers.
• They arrange necessary materials, machines, tools etc for getting the things done.
• They prepare periodical reports about the performance of the workers.
• They ensure discipline in the enterprise and motivate workers.
• They are the image builders of the enterprise because they are in direct contact with the
workers.

UNIT 5
FUNCTIONAL AREAS OF MANAGEMENT
A) Production Management: Production management means planning, organizing, directing and

controlling of production activities. Production management deals with converting raw materials
into finished goods or products. It brings together the 6M's i.e. men, money, machines, materials,
methods and markets to satisfy the wants of the people. Production management also deals with
decision-making regarding the quality, quantity, cost, etc., of production. It applies management
principles to production. Production management is a part of business management. It is also called
"Production Function." Production management is slowly being replaced by operations
management. The main objective of production management is to produce goods and services of
the right quality, right quantity, at the right time and at minimum cost. It also tries to improve the
efficiency. An efficient organization can face competition effectively. Production management
ensures full or optimum utilization of available production capacity.
Functions:
1. Selection of Product and Design: Production management first selects the right product
for production. Then it selects the right design for the product. Care must be taken while selecting
the product and design because the survival and success of the company depend on it. The product
must be selected only after detailed evaluation of all the other alternative products. After selecting
the right product, the right design must be selected. The design must be according to the customers'
requirements. It must give the customers maximum value at the lowest cost. So, production
management must use techniques such as value engineering and value analysis.
2. Selection of Production Process: Production management must select the right production
process. They must decide about the type of technology, machines, material handling system, etc.
3. Selecting Right Production Capacity: Production management must select the right
production capacity to match the demand for the product. This is because more or less capacity
will create problems. The production manager must plan the capacity for both short and long term's
production. He must use break-even analysis for capacity planning.
4. Production Planning: Production management includes production planning. Here, the

production manager decides about the routing and scheduling. Routing means deciding the path of

work and the sequence of operations. The main objective of routing is to find out the best and most
economical sequence of operations to be followed in the manufacturing process. Routing ensures
a smooth flow of work. Scheduling means to decide when to start and when to complete a particular
production activity.
5. Production Control: Production management also includes production control. The
manager has to monitor and control the production. He has to find out whether the actual production
is done as per plans or not. He has to compare actual production with the plans and finds out the
deviations. He then takes necessary steps to correct these deviations.
6. Quality and Cost Control: Production management also includes quality and cost control.
Quality and Cost Control are given a lot of importance in today's competitive world. Customers all
over the world want good-quality products at cheapest prices. To satisfy this demand of consumers,
the production manager must continuously improve the quality of his products. Along with this, he
must also take essential steps to reduce the cost of his products.
7. Inventory control: Production management also includes inventory control. The

production manager must monitor the level of inventories. There must be neither over stocking nor
under stocking of inventories. If there is an overstocking, then the working capital will be blocked,
and the materials may be spoiled, wasted or misused. If there is an under-stocking, then production
will not take place as per schedule, and deliveries will be affected.
8. Maintenance and Replacement of Machines: Production management ensures proper

maintenance and replacement of machines and equipment. The production manager must have an
efficient system for continuous inspection (routine checks), cleaning, oiling, maintenance and
replacement of machines, equipment, spare parts, etc. This prevents breakdown of machines and
avoids production halts.
Activities:
1. Accomplishment of firm's objectives: Production management helps the business firm to
achieve all its objectives. It produces products, which satisfy the customers' needs and wants. So,
the firm will increase its sales. This will help it to achieve its objectives.
2. Reputation, Goodwill and Image: Production management helps the firm to satisfy its
customers. This increases the firm’s reputation, goodwill and image. A good image helps the firm
to expand and grow.

3. Helps to introduce new products: Production management helps to introduce new products in
the market. It conducts Research and development (R&D). This helps the firm to develop newer
and better quality products. These products are successful in the market because they give full
satisfaction to the customers.
4. Supports other functional areas: Production management supports other functional areas in an
organization, such as marketing, finance, and personnel. The marketing department will find it
easier to sell good-quality products, and the finance department will get more funds due to
increase in sales. It will also get more loans and share capital for expansion and modernization.
The personnel department will be able to manage the human resources effectively due to the
better performance of the production department.
5. Helps to face competition: Production management helps the firm to face competition in the
market. This is because production management produces products of right quantity, right quality,
and right price at the right time. These products are delivered to the customers as per their
requirements.
6. Optimum utilization of resources: Production management facilitates optimum utilization of

resources such as manpower, machines, etc. So, the firm can meet its capacity utilization
objective. This will bring higher returns to the organization.
7. Minimizes cost of production: Production management helps to minimize the cost of

production. It
Tries to maximize the output and minimize the inputs. This helps the firm to achieve its cost
reduction and efficiency objective.
8. Expansion of the firm: The Production management helps the firm to expand and grow. This is
because it tries to improve quality and reduce costs. This helps the firm to earn higher profits.
These profits help the firm to expand and grow.
Productivity:
Productivity is commonly defined as a ratio between the output volume and the volume of inputs.
In other words, it measures how efficiently production inputs, such as labor and capital, are being
used in an economy to produce a given level of output. Productivity is typically measured by
comparing the amount of goods and services produced with the inputs used in production.

Benefits:
1. Higher profit: Higher productivity enables the company to produce more output. This
results in more profit to it. This profit can be used for expansion and other activities.
2. Employee’s welfare: Higher productivity brings more profit to the company. This profit
can be used to provide better facilities and working conditions to the employees. So, it results in
welfare of the employees.
3. Better return: The Company gets better return on investment due to higher productivity.
So, they pay a better dividend (share of profit) to the shareholders. The market price of the share
will also increase.
4. Nice relations: Higher productivity results in nice relations between the management and
the employees. Good working conditions, facilities and incentives motivates employees to give their
best to the organization.
5. Customer satisfaction: Higher productivity results in better customer satisfaction. This is

because customers are provided with good-quality products at low prices. Satisfaction of customers
will result in their loyalty towards the company.
6. Good credit rating: Higher productivity results in a good credit rating by financial
institutions. This will enable the company to get cheap funds from the market to meet working and
fixed capital requirements.
7. Goodwill: Due to higher productivity, the company will have a good corporate image
(goodwill) in the minds of social entities. This includes: The shareholders, government, suppliers,
financial institutions, customers, etc.
8. Better credit terms: Higher productivity helps the company to get better terms from the
suppliers. The suppliers may give better credit terms due to its goodwill.
9. Low turnover: Higher productivity enables the company to provide better facilities and
working conditions to the employees. This will make the employees loyal. Hence, employee
turnover and absenteeism will reduce.

Quality Control:
Quality control (QC) is a process through which a business seeks to ensure that product quality is
maintained or improved. Quality control requires the business to create an environment in which
both management and employees strive for perfection. This is done by training personnel, creating
benchmarks for product quality and testing products to check for statistically significant variations.
Quality is a relative concept. It is related to certain predetermined characteristics such as shape,
dimensions, composition, finish, color, weight, etc. In simple words, quality is the performance of
the product as per the commitment made by the producer to the consumer. J. M. Juran (1970) who
is considered the father of quality research has defined quality as “the performance of the product
as per the commitment made by the producer to the consumer.”
Objectives of Quality Control

1. Establish the desired quality standards which are acceptable to the customers.
2. To discover flaws or variations in the raw materials and the manufacturing processes in order to
ensure smooth and uninterrupted production.
3. To evaluate the methods and processes of production and suggest further improvements in their
functioning.
4. To study and determine the extent of quality deviation in a product during the manufacturing
process.
5. To analyze in detail the causes responsible for such deviation.
6. To undertake such steps which are helpful in achieving the desired quality of the product.
Advantages of Quality Control

1. The brand products build up goodwill or image which ultimately increases sales.
2. It helps the manufacturers/ entrepreneurs in fixing responsibility of workers in the production
process.
3. Quality control also helps in minimizing the costs by increasing efficiency, standardization,
working conditions, etc.
4. It also enables the entrepreneur to know the cost of his / her product quite in advance which helps
him in determining competitive prices of his product.

5. Last but not the least; the entrepreneur can confirm whether the product manufactured by him /
her is in accordance with the standard set by the Government. It further facilitates the
entrepreneur to take necessary actions to comply with the standard set.
Methods of quality control:

Inspection:
Inspection means checking the product through visual or testing examination, at the input stage,
transformation stage or output stage, against standards. The task of carrying out inspection is
inspection function and the people who perform inspection are called inspectors. Inspectors measure
quality of goods against standards and separate acceptable units from the non-acceptable ones. It is
divided into two type’s i.e.
• Product inspection which relates to the final product sent into the market. The main
purpose of product inspection is to ensure that the products sent into the market comply
with the set standard for quality. In other words, it is to ensure that the product ready for
sale is perfect and free of defects.
• Process Inspection: Process inspection proceeds to product inspection. It is aimed at

ensuring that the raw material and machines and equipment’s used in the production process
are of prescribed quality and mark.
Statistical Quality Control:

It is an advanced method or technique used to control the quality of a product. This method is based
on statistical techniques to determine and control the quality. Sampling, probability, and other
statistical inferences are used in this method for controlling the quality of a product. It is widely
used in process control in continuous process industries and in industries producing goods on a
mass scale.
Production Planning and Control: Production planning and control is a predetermined process
that plans, manages and controls the allocation of human resource, raw material, and machinery to
achieve maximum efficiency. Production planning is a sequence of steps that empower
manufacturers to work efficiently and optimize their production process in the best possible manner.
Production planning and control programs involves the function of planning, directing and

regulating the orderly movement of materials through the entire manufacturing cycle from the
requisitioning of raw materials to the delivery of finished goods and ensure proper customer
satisfaction by maintaining minimum inventory with maximum efficiency.
What is Production? Production is nothing but the conversion of raw materials into finished
products. It is an organized activities of organization through which raw materials with the help of
other inputs are transformed into finished products.
What is Planning? Planning is nothing but forecasting and deciding in advance a future course of
action. Planning is essential to carry out certain activities in the best possible manner. It involves
selection of desired course of action to achieve the goal of the enterprise. Planning makes
uncertainties into certainties and makes the target achievable. Planning involves study of future and
taking appropriate steps to ensure success. Planning involves the selection of best alternatives
among the alternatives available.
Production Planning: Production planning can be defined as the forecasting or deciding in

advance as to when, by whom and how the raw material shall be converted into finished product.
Production planning ensures smooth flow of production programs to achieve economy and
efficiency.
What is Control? Controlling involves checking and ensuring that the plans are carried on as per
expectation. Control also includes checking and ensuring that the actual performance does nor
deviate from the standard set earlier. Control helps the realization of the plans in the best possible
manner.
Without control things may not happen as per wish.

What is Production Control? Production control guides the flow of production. So, that products
of desired quality are produced at the appropriate time in the most economical manner. The main
aim of production control is to facilitate the task of manufacturing and ensure that all the production
activities are carried on as per plans.
Importance of Production Planning and Control: The following are the importance of production
planning and Control:
1. Production planning and control program helps to increase productivity by means of

planning production and controlling production at each and every stage to ensure speedy,

economical and efficient use of all available resources. An efficient production planning and control
technique helps to reduce the idleness of men, machines, materials and money.
2. Production planning and control program arranges the production process in such sequences
that production target is achieved in time.
3. Production planning and control is an important tool for the management in case of
continuous industries where production is continuous and units produced are identical in nature.
But it is not suitable in the industries where varieties of products are produces as per order however
this tool ensures proper utilization of all available resources to achieve efficiency, economy and
performance of work as per plans.
4. Production planning and control program is highly essential for cost control purposes. A
well-organized production planning and control mechanism ensures optimum utilization of men,
machines, materials and money so that they can work at their full capacity.
5. Production planning and control program helps in regulating production and maintain
quality. It controls the production activities and ensure orderly flow of materials from one process
to another and also ensures timely supply of tools and equipment to achieve full utilization of all
the available resources.
6. Production planning and control program brings many benefits to many persons. The
manufacturers achieve increased production, higher productivity, delivery of goods to customers in
time, qualitative production, low cost production and higher profits. It will help the producer to
have better control over the production activities. The customers get quality products at cheaper
price and also in time. The workers get adequate wages, stable employment, job security, improved
working condition and timely payment of wages. Similarly, the investors get an adequate rate of
return on their investment and security of their investment.
Steps in production planning and control: The following steps are adopted for implementation
of the production planning and control program such as planning, routing, scheduling, loading,
dispatching, follow up and inspection.
1. Planning: It is the first step in production planning and control program. Under this the
management has to prepare a broad plan for the production activities of the organization. At this
stage the management decides the products to be produced. It will also decide the ingredients, raw
materials, size, color, design, shape, quality, specification, quantity of production and cost of

production. Planning also includes planning for the procurement of all the resources required to
carry on the production plan.
2. Routing: Routing determines the way or the exact path through which all the raw materials
will flow from one process to another until its completion as finished products. Routing decides in
advance the path over which the work will flow from one stage to another. The main aim of routing
is to find out the best and cheapest way of production. Routing also includes the selection of men,
machines, and processes to carry out the work in desired manner.
3. Scheduling: After the exact route is decided, the next step is to make a schedule i.e. a list
or time table for the production activities. Scheduling involves fixation of time and date for starting
and completion of each operation. Determination of time for each operation is possible when the
entire work is divided into many parts and assign each part of the work to a particular person by
allocating responsibilities and accountabilities for the performance of the work. Scheduling
provides a time table for manufacturing and all the other activities starting from the procurement of
raw materials to the delivery of finished goods to the customers as per schedule.
4. Loading: It is associated with the quantity of works assigned to a machine or worker to be

done or performed by that machine or individual. Loading of works to different machines,
processes, sections, departments and individual is essential for proper distribution of duties as per
the capacities of the departments or machine or individual. There should be neither be over load or
under load of works to anyone. There should be a perfect balance between the both. If there is
overload it will lead to dissatisfaction and mismanagement. On the other hand under load will lead
to idleness of resources which is loss. Under load or over load may be due to improper planning of
activities and improper evaluation of load bearing capacity.
5. Dispatching: Dispatching involves actual execution of the plans in the manner prescribed
and route decided. It also includes issue of order and instructions to carry on the work as per plans.
Dispatching functions includes the following :
a. Issue of necessary materials to different individuals, jobs, process, departments or sections.

b. Allocation of appropriate labor force and required machinery for the performance of the
work.
c. Issue necessary tools and equipment to individuals in time.
d. Maintenance of records for all the orders issued from time to time.

6. Follow up: It involves checking the progress of the work and see whether the work is being
performed as per plans. Follow up ensures the progress of work according to plans. If there is any
deviations at any stage it has been taken into account and corrective measures should be taken to
ensure smooth performance of work as per plans. It also includes evaluation efficiency of men,
machines and materials while the work is in progress.
7. Inspection: Inspection is the last stage of production planning and control. It involves
checking the quality of goods produced and ensure that the quality of standard is up to mark. This
can be done by comparing and testing the completed products with the help of the standards already
established.
B) Inventory Management: Inventory management is a systematic approach to sourcing,

storing, and selling inventory—both raw materials (components) and finished goods (products).
In business terms, inventory management means the right stock, at the right levels, in the right place,
at the right time, and at the right cost as well as price. In other words Inventory management is a
systematic process to control and maintaining the storage of stock, controlling the amount of product
for sale and order fulfillment. Today, inventory management has become vital for the survival of an
organization. If entrepreneurs don’t have good control over their inventory, the day is not far when
they will lose control of their profits.
Need for Inventory Management

1. Tracking Inventory
A good system will help the entrepreneurs keep track of their inventory and offer a centralized
view of stock across sales channels – how much is in stock, and where. It will also allow
allocating inventory to specific sales channels, which is important if they have warehouse and
distribution centers at multiple locations, thus, enabling Warehouse management.
2. Control costs
Keeping reports about their inventory it helps them understand what stocks are doing well, versus
which are just taking up shelf space. Lack of the right inventory at the right time can mean back
orders, excess inventory etc. which drive up costs.

3. Improve delivery
Late delivery due to stock-outs is bound to give them a bad reputation. For tracking, it is important
for them to know when the vendor is shipping inventory and when it will arrive. This helps them
manage customer expectations by delivery as, when and where they want.
4. Manage planning and forecasting

The software can help them improve demand forecasting by analyzing data trends from well-
performing stocks. This minimizes their holding and handling costs, improves revenues and frees
up cash flows.
Also, by planning and forecasting – they can deliver on customer expectations better.
5. Reduce the time for managing inventory
With a good inventory management solution, the entrepreneurs can reduce the time taken to keep
track of all the products they have on hand and on order. Additionally, the entrepreneur scan save
the time taken up in inventory recounts if their records are in place.
6. Accurate: The entrepreneurs will always have accurate reports with a computerized inventory
system. There is always that possibility that errors can occur when inventory is done by hand and
it could easily be overlooked. Wrong calculation could mean losses or additional expenses.
7. Customer satisfaction
It is difficult to gain customer loyalty when the entrepreneurs cannot satisfy their needs when they
want it. A good computerized inventory system allows them to quickly meet customer demands by
having the right products as soon as their potential customer comes to order them.
8. Organize
Through proper inventory system the entrepreneurs cab able to organize their inventory activities.
They can Keep or maintain all the products information that means they can find out which
products enjoy the highest sales, so they can group them together for easier access. They can even
categorize their stock for better identification and order processing.
Models/Techniques of Inventory Management

The following are the techniques of inventory management:
1. Economic Order Quantity: It is the order size that minimizes the sum of ordering and holding
costs related to raw materials. In other words, it is the optimal inventory size that should be ordered
with the supplier to minimize the total annual inventory cost of the business. The economic order

quantity is computed by manufacturing companies. Manufacturing companies compute it to find
the optimal order size of raw materials inventory. The two significant factors that are considered
while determining the economic order quantity (EOQ) for any business are the ordering costs and
the holding costs.
The ordering costs are the costs that are incurred every time an order for inventory is placed with
the supplier. Examples of these costs include telephone charges, delivery charges, invoice
verification expenses and payment processing expenses etc. The total ordering cost usually varies
according to the frequency of placing orders. Mostly, it is directly proportional to the number of
orders placed during the year which means if the number of orders placed during the year increases,
the annual ordering cost will also increase and if, on the other hand, the number of orders placed
during the year decreases, the annual ordering cost will also decrease.
The holding costs (also known as carrying costs) are the costs that are incurred to hold the
inventory in a store or warehouse. Examples of costs associated with holding of inventory include
occupancy of storage space, rent, shrinkage, deterioration, obsolescence, insurance and property
tax etc. The total holding cost usually depends upon the size of the order placed for inventory.
Mostly, the larger the order size, the higher the annual holding cost and vice versa.
The ECQ is an order quantity that minimizes company’s optimal its total costs related to ordering,
receiving and holding inventory. ECQ formula: Q = √(2SD/H) where ,
Q = ECQ units, D = Demand in units annually, S = Order cost(per purchase

order) H = Holding cost(per unit per year) . For examples
• For a company X, annual ordering costs are Rs. 10000 and annual quantity demanded
is
2000 and holding cost is Rs.5000. Economic Order Quantity is Calculated as: √(2SD/H)
• EOQ = √2(10000)(2000)/5000
• EOQ = √8000
• EOQ = 89.44
So, the ideal order size is 89.44 to meet customer demands and minimize costs. It is also the
reordering point at which new inventory should be ordered.

2. FIFO and LIFO.
FIFO, or First in, First out, assumes the older inventory is sold first. FIFO is a great way to keep
inventory fresh. In other words A FIFO is a warehouse or inventory management system in which
the first or oldest stock is first used and the stock or inventory most recently produced or received
is only used or dispatched until all the oldest stock in the warehouse or store is used or dispatched.
This system ensures a company that its oldest stock is used first and eventually minimizes the costs
of obsolete inventory. FIFO inventory system is even considered as the ideal stock rotation system,
and most commonly used in a variety of industries.
LIFO, or Last-in, First-out, assumes the newer inventory is typically sold first. LIFO helps prevent
inventory from going bad. In other words it is an inventory valuation method which assumes
that the last items placed in inventory are the first sold during an account year.
3. Just-in-time inventory management:

Just-in-time (JIT) inventory management is a technique that arranges raw material orders from
suppliers in direct connection with production schedules. JIT is a great way to reduce inventory
costs. Companies receive inventory on an as-needed basis instead of ordering too much and risking
dead stock. Dead stock is inventory that was never sold or used by customers before being removed
from sale status.
4. Demand forecasting:
Demand forecasting should become a familiar inventory management technique to retailers.
Demand forecasting is based on historical sales data to formulate an estimate of the expected
forecast of customer demand. Essentially, it’s an estimate of the goods and services a company
expects customers to purchase in the future.
5. Safety Stock Inventory: Safety stock inventory management is extra inventory being ordered
beyond expected demand. This technique is used to prevent stock outs typically caused by incorrect
forecasting or unforeseen changes in customer demand.
6. ABC analysis. In inventory management, ABC analysis is an inventory categorization technique.

ABC analysis divides an inventory into three categories—"A items" with more important and
accurate records, "B items" with important and good records, and "C items" with less important and
minimal record. Examples:

• 'A' items – 20% of the items accounts for 70% of the annual consumption value of the items
(Laptop)
• 'B' items – 30% of the items accounts for 25% of the annual consumption value of the
items(Tablet)
• 'C' items – 50% of the items accounts for 5% of the annual consumption value of the
items(Desktop)
7. Minimum order quantity.

On the supplier side, minimum order quantity (MOQ) is the smallest amount of set stock a supplier
is willing to sell. If retailers are unable to purchase the MOQ of a product, the supplier won’t sell it
to them. In other words we can say that minimum Order Quantity is the minimum amount or order
quantity set by a supplier that can be ordered by a company. This means a retailer or business owner
cannot order any given quantity they desire, but they have to adhere to the MOQ threshold or
estimated value. For example, let us say, an entrepreneur of a company wants to buy 20 units of
Toys. But as the MOQ is set at 50 units or for Rs. 5000/-, so, in this case the entrepreneur cannot
order anything less than the set MOQ.
C) Financial Management: Financial management is all about planning, organizing, controlling,

procurement, utilization and directing various activities of the organization related to finance. There
are three elements of financial management required in an organization: investment decision,
financial decision and dividend decision. These elements together ensure proper financial
management of organizations. Financial management is the custodian of funds of an organization.
Objectives of Financial Management
• There must be a regular inflow and outflow of funds for the proper functioning of every
activity in the organization.
• In the availability of the funds, the amount must be used in the best possible way with
minimum wastage.
• An organization must ensure safe investment so that a high rate of return can be achieved in
the invested amount.
• The shareholders who have invested in the organization must be given high return which
eventually depends upon the share’s market price, their expectations and earning capacity.

• An organization must ensure that there is an equal balance in the firm’s debt and equity
level.
Functions of Financial Management
1. Financial Planning and Forecasting

• It is the financial manager’s responsibility to plan and estimate the business’s financial
needs. He needs to provide details regarding the amount of money that would be required
to purchase different assets for the company.
• The management through the financial manager needs to know what they need to spend on
working capital and fixed assets for the business too.
2. Determination of capital composition

Once the Planning and Forecasting have been made, the capital structure has to be decided. The
mix of debt and equity used to finance the company’s future profitable investment opportunities is
referred to as capital structure.
3. Fund Investment
The financial manager has to ensure that funds made available to the business are used adequately
to grow the business. The cost of acquiring the said fund and value of the returns need to be
compared and balanced. The financial manager also needs to look into the channels of the business
that is yielding higher returns and improve them.
4. Maintain Proper Liquidity

Cash is the best source for maintaining liquidity. The business requires it to buy raw materials, pay
salaries, and tackle other financial needs of the company. However, the financial manager has to
determine if there is a demand for liquid assets. He also has to arrange these assets in a manner that
the business won’t experience scarcity of funds.
5. Disposal of Surplus
Selling surplus assets and investing in more productive ways will increase profitability and therefore
increase the ROCE (Return on capital employed).

6. Financial Controls
Financial management monitors and controls the finances of business for maintaining a balance
between risk and return. It exercises to minimize the risk and expenses associated with undergoing
the required operations. Not only its plans, procures, and utilizes the funds efficiently but also
monitors the overall finance of the business.
7. Estimates Capital Requirement

Financial management is concerned with the estimation of an adequate amount of funds required
for an organization. The finance manager takes into account organization goals, objectives, and
costs associated with them for determining the fund requirements. Future growth policies and
programs of an organization are also considered by the finance manager. Proper estimation helps in
procuring and utilizing required funds efficiently thereby improving the revenue of the business.
Management of Working Capital
What is Working Capital?
The amount of money invested by the business in the current assets and to meet day to day expenses
is known as working capital. Investment in working capital is made to meet the day to day expenses
of the business. Working capital is utilized to purchase raw materials, pay salaries, wages, spent
on transport, advertising, insurance premium, pay for telephone and postage. Working capital is a
financial concept describing the difference between current assets and current liabilities of a
business. If current liabilities are greater than current assets, a business has a deficit of working
capital, which means it could not pay off its current liabilities using its current assets. Thus, a healthy
business should have a surplus of working capital.
How to manage working capital?

The following are the management of working capital:
1. The management has to properly forecast the working capital needs of an organization and
the working capital needs may be decided keeping in mind the budgets prepared for each and every
element of working capital which includes cash budgets, production budgets, purchase budget,
sales budget, maintenance budget, advertisement budget etc.

2. If there is a mismanagement of working capital the management may face difficulty to pay
the payment to different parties like employees, advertisers, suppliers bankers , government and
other agencies which leads the company may lost their goodwill or image. So, in this regard the
entrepreneur should assess the working capital properly and arrange the funds accordingly.
3. The requirement of working capital fluctuated throughout the year. So, how much working
capital will be required at different periods that have to be estimated in advance and that should be
done properly.
4. If the organization labor-oriented, working capital requirement is more because the workers
have to be paid wages and salaries as well as incentives. If the production activities is computerized,
the labor force will be reduced and as a result the working capital will be reduced.
5. The inventory policies puts direct effect on the working capital because if an organization
wants to maintain huge stock of raw materials and finished products, it is required huge investment
on working capital. If the stock will be maintained properly then the investment in working capital
may be reduced.
6. Proper management of each and every steps of operating cycle which includes cash—raw
materials— work-in-progress---finished goods---sales---debtors---cash is essential for ensuring
smooth management of the working capital. All the activities of the operating cycle have to be
performed with higher degree of accuracy and efficiency then the working capital can be properly
managed.
7. If the time required to process the raw material to converted to finished product is more,
the working capital will be considered high because a lot of raw material and other material shall
be blocked for a long time and the machineries, tools, equipment, workers and employees shall be
busy for a long time and as a result it puts effect on working capital .So in this regard the
management should make proper planning for processing the raw materials timely to manage the
working capital properly.
8. Working capital requirement also depends upon the nature of products. If the products
produced are small in size and low priced in nature, the working capital requirement shall be less.

9. Ensure high return on capital: To improve the funds of working capital the management or
the entrepreneur should introduce different loan facility scheme and that they should provide loan
to the debtors and ensure to collect the interest in time.
Advantages of working capital
1. Solvency of the Business:

Adequate working capital helps in maintaining solvency of the business by providing uninterrupted
flow of production.
2. Goodwill:
Sufficient working capital enables a business concern to make prompt payments and hence helps in
creating maintaining goodwill.
3. Easy Loans:
Concern having adequate working capital, high solvency and good credit standing can arrange loans
from banks and others on easy and favorable terms.
4. Cash Discounts:
Adequate working capital also enables a concern to avail cash discounts on the purchases and hence
it reduces costs.
5. Regular Supply of Raw Materials:

Sufficient working capital ensures regular supply of raw materials and continuous production.
6. Regular Payment of Salaries, Wages and Other Day-to-day Commitments:
A company which has ample working capital can make regular payment of salaries, wages and
other day-to-day commitments which raises the morale of its employees, increases their efficiency,
reduces wastages and costs and enhances production and profits.
7. Ability to Face Crisis:

Adequate working capital enables a concern to face business crisis in emergencies such as
depression because during such periods, generally, there is much pressure on working capital.

Costing
• Costing is any system for assigning costs to an element of a business. Costing is typically
used to develop costs for any or all of the following:
• Customers, employees, products, processes, entire companies, distribution channels etc.

• Costing may involve only the assignment of variable costs, which are those costs that vary
with some form of activity (such as sales or the number of employees). This type of costing
is called direct costing. For example, the cost of materials varies with the number of units
produced, and so is a variable cost.
• Costing can also include the assignment of fixed costs, which are those costs that stay the
same, irrespective of the level of activity. This type of costing is called absorption costing.
Examples of fixed costs are rent, insurance, and property taxes.
• Costing is used for two purposes:

• Internal reporting. Management uses costing to learn about the cost of operations, so that it
can work on refining operations to improve profitability. This information can also be used
as the basis for developing product prices.
• External reporting. The various accounting frameworks require that costs be allocated to
the inventory recorded in a company's balance sheet at the end of a reporting period. This
calls for the use of a cost allocation system, consistently applied.
Break even analysis

• A break-even analysis is an economic tool which is used to determine the cost structure of
a company or the number of units needs to be sold to cover the cost. Break-even is a
circumstance where a company neither makes a profit nor loss, but recovers all the money
spent.
• Break-even analysis is used to examine the relation between the fixed cost, variable cost,
and revenue. Usually, an organization with low fixed cost will have a low break-even point
of sale.
Importance of Break-Even Analysis:

• Manages the Size of Units to be Sold- With the help of break-even analysis, the company
or the owner comes to know how much units need to be sold to cover the cost. The variable

cost and the selling price of an individual product and the total cost are required to evaluate
the break-even analysis.
• Budgeting and Setting Targets- Since a company or the owner know at which point a
company can break-even, it makes it easy for them to fix a goal and set a budget for the firm
accordingly. This analysis can also be practiced in establishing a realistic target for a
company.
• Manage the Margin of Safety- In financial breakdown, the sales of a company tends to
decrease. The break-even analysis helps the company to decide the least number of sales
required to make profits. With the margin of safety report, the management can execute a
high business decision.
• Monitors and Controls Cost- Companies profit margin can be affected by the fixed and
variable cost; therefore, with break-even analysis, the management can detect if any effects
are changing the cost.
• Helps Design Pricing Strategy- Break-even point can be affected if there is any change in
the pricing of a product. For example, if the selling price is raised, the quantity of the product
to be sold to break -even will be reduced. Similarly, if the selling price is reduced, a company
needs to sell extra to break-even.
Components of Break-Even Analysis:

• Fixed Cost- These costs are also known as an overhead cost. These costs materialize once
the financial activity of a business starts. The fixed price includes taxes, salaries, rent,
depreciation cost, labor cost, interest, energy cost etc.
• Variable Cost- This cost fluctuates, and will decrease or increase according to the volume
of the production. This cost includes packaging cost, cost of raw material, fuel, and other
material related to production
Uses of Break-Even Analysis:

• New Business- For a new venture, break-even analysis is essential. It guides the
management with pricing strategy and be practical about the cost. This analysis also gives
an idea if the new business is productive.

• Manufacture New Product- If an existing company is going to launch a new product, they
still have to focus on break-even analysis before starting, and see if the product adds
necessary expenditure to the company.
• Change in Business Model- Break-even analysis works even if there is a change in any
business model, like shifting from retail business to wholesale business. This analysis will
help the company to determine if the selling price of a product needs change.
• Break-Even Analysis Formula

• Break-Even Point = Fixed Cost / Price Per Cost – Variable Cost Example of Break-
Even Analysis
• Company X sells a pen. The company first determined that the fixed costs of Company X
are a lease, property tax, salaries, which make a sum of Rs.1,00,000. The variable cost linked
with manufacturing one pen is ₹2 per unit. So, the pen is sold at a premium price of RS.10.
• Therefore, to determine the break-even point of Company X premium pen will be:
• Break-Even Point = Fixed Cost / Price Per Cost – Variable Cost
• = RS.1,00,000 / (Rs.12 – Rs.2) = 10,000
• Therefore, given the variable costs, fixed costs, and the selling price of the pen, Company
X would need to sell 10,000 units of pens to break even.
Book Keeping
Bookkeeping is the systematic recording and organizing of financial transaction in a Company.
Bookkeeping is the recording, on a day-to-day basis, of the financial transactions and information
pertaining to a business. It ensures that records of the individual financial transactions are correct,
up-to-date and comprehensive. Accuracy is therefore vital to the process of financial transactions
in a company. Each transaction, whether it is a question of purchase or sale, must be recorded
clearly. In other words we can say that the maintenance of all financial transaction record is
known as book keeping. Book means record and keeping is maintaining.
Accounts
Almost all business organizations maintain their financial records under double entry system. To
facilitate the maintenance of accounts under double entry system of book keeping. And all the
accounts have two sides each. The left side of an account is known as the debit side shortly known
as Dr. side and the right side is known as credit side shortly known as Cr. Side.

For personal account the rule is Debit the receiver and credit the giver: That means if anyone
is receiving anything, it will be recorded on debit side of his account and if someone is giving
anything it would be recorded on the credit side of his account. For example, the business gives
some goods to Mr. Ram on credit. It would be recorded in the debit side of Ram’s account as Ram
is the receiver of goods. And the goods are going out of business, so it would be recorded on the
credit side of goods account. If later on Mr. Ram gives cash of Rs.5000/- to the business for the
goods taken by him earlier , in this transaction ram is the giver, so his account shall be credited and
the cash account shall be debited as cash is coming in to the business.
Dr.
Cr.
_______________________________________________________________________________
______
Date Particulars J.F. Amount Date Particulars J.F.
Amount
_______________________________________________________________________________
______
2.4.2020 Ram’s a/c 2.4.2020 Goods a/c
7.4.2020 Cash A/c Rs.5000/- 7.4.2020 Ram’s a/c Rs.5000/-
For Nominal account the rule is Debit all expenses and losses and Credit all incomes and gains:
That means all the expenses are written on the debit side of that expense a/c and all gains and profits
shall be recorded on the credit side of that account. For example, suppose salary is paid of Rs. 5000/-
.Here salary is an expense so it would be recorded on the debit side of salary account and the cash
is going out so it would be recorded on the credit side of cash account. Similarly if interest of Rs.500
is received it would be recorded on the credit side of the interest account as interest here is an
income and the cash is going out it would be recorded on the debit side of cash account.

Dr. Cr.
_______________________________________________________________________________
______
Date Particulars J.F. Amount Date Particulars J.F.
Amount
_______________________________________________________________________________
______
5.1.2020 Salary a/c Rs.5000/- 5.1.2020 Cash a/c Rs.5000/-
5.2.2020 Cash a/c Rs.500/- 5.2.2020 Interest a/c Rs.500/-
Journal Entry
Whenever a transaction takes place, it has to be recorded in the journal first which is known as the
book of primary entry. Hence all the transactions are recorded in the journal and for that all the
entries made in the journal are known as journal entry. The above rules of debit and credit are known
as the rules of journalizing. All the journal entries have to be made as per the above rules. For
example, suppose salary is paid of Rs. 5000/- .Here salary is an expense so it would be recorded on
the debit side of salary account and the cash is going out so it would be recorded on the credit side
of cash account. Similarly if interest of Rs.500 is received it would be recorded on the credit side
of the interest account as interest here is an income and the cash is going out it would be recorded
on the debit side of cash account.
Specimen of a Journal
----------------------------------------------------------------------------------------------------------------------
--------------------
Date Particulars L.F Debit(Amount) Credit(Amount)
----------------------------------------------------------------------------------------------------------------------
---------
-----------
5.1.2020. Salary A/c Dr Rs.5000
To cash A/c Rs.5000
5.2.2020. Cash A/c Dr Rs.500
ToInterest A/c Rs.500

Cash Book: The cash book is a register which contains two sides divided vertically from the middle
of the register. The left side is the debit side also called the receipt side and the right side is the
credit side called the payment side. All the cash receipts are recorded on the debit side or the receipt
side of the cash book and all the payments are recorded on the credit side or the payment side of
the cash book.
Petty Cash Book: The petty cash book is in addition to the main cash book which records all small
or petty cash transactions below Rs.100/-. So, all cash transactions of Rs.100 and less are recorded
in the petty cash book so that the main cash book is used only for big transaction only. In this petty
cash book the petty cashier receives some amount of money from main cashier and goes on spending
the amount. The amount received is recorded on the debit side of the petty cash book and all the
expenses is recorded in the credit side of the petty cash book along with the voucher no.
Specimen format of petty cash book

Dr Cr.
----------------------------------------------------------------------------------------------------------------------
--------------------
----------------------------------------------------------------------------------------------------------------------
--------------------
Amount Rs. Cash book Folio Date. Particulars. Voucher no.
Amount Rs.
----------------------------------------------------------------------------------------------------------------------
-------------------- 35 2020
April.1.ByTelegramA/c Rs.7.00
ByPostage A/ c Rs.8.00
2.ByCarriage A/c. Rs.10.00
By Stationery Rs.10.00
---------- ---
---------
35.00
Rs.35.00
---------- ----------
---

Profit and Loss account: Profit and loss account has two sides i.e. the left side is the debit side
and the right side is the credit side. If there is a gross profit it is written in the credit side of the
profit and loss account. On the other hand if there is gross loss it is written on the debit side of the
profit and loss account. All other expenses are written on the debit side of the profit and loss
account. Similarly all other incomes are written on the credit side of the profit and loss account.
The items written on the debit side of the profit and loss account are gross loss(if any), salaries ,
rent , advertisement, interest paid, commission paid, telegrams, insurance premium, electricity
charges, printing and stationary, repairs and maintenance of machineries. The items written on the
credit side are gross profits, interest received, commission received and any other incomes related
to business. The profit and loss account is always calculated for the year ending. If the total of the
credit side is more than the totals of the debit side the difference is a “net profit” which is written
on the debit side of the profit and loss account. On the other hand if the total of the debit side is
more than the total of credit side the difference is a “net loss” which is written on the credit side of
the profit and loss account. The net profit is transferred to the balance sheet and added to the capital
or is shown separately in the liabilities side.
Specimen format of profit and loss account
Profit and loss account of X Company for the year ending 31st March, 2020
-------------------------------------------------------------------------------------------------------------
-------------------
Rs.
Rs.
To salaries 1,50,000 By gross. Profit. b/d. 450,000
To wages 80000 By Interest received. 50,000

To insurance. 50000
To commission 20000
To Net profit
Transferred to general reserve. 2,00,000
--------------
------------
5,00,000
5,00,000

Balance Sheet: Balance sheet is prepared at the end of the year only after preparation of trading
and profit and loss account. Balance sheet reflects the exact financial position of a business on a
particular day. Balance sheet is a statement and not an account. It reflects how much belongs to the
business, how much to the owners and how much to the outsiders on that particular day.
Balance sheet has two sides i.e. the left side is the liabilities side and the right side is the asset
side. In the asset side of the balance sheet, all the assets of the business are recorded in a classified
manner. All the assets are classified into three categories such as current assets, fixed assets and
fictitious assets. Current assets includes cash in hand, cash at bank, sundry debtors, short-term
investments, rent receivable etc. Fixed assets include land, building, plant, machinery, tools and
equipment's, furniture's, long term investments etc. Fictitious assets include preliminary expenses,
extra losses, advertisement expenses etc. On the liabilities side, besides the capitals all other
liabilities are classified in to two categories such as long term liabilities and short term liabilities.
The items recorded on the liabilities side are capital, reserves and surplus, long term loans, short
term loan and advances, sundry creditors, bills payable, bank draft, salary payable, rent payable,
electricity bill payable, interest payable, commission payable etc. If there is a profit in the profit and
loss account, it is added to the capital or added to the reserve. If there is a loss, it may be deducted
from the capital.
Specimen of. Balance sheet :

Balance sheet of XYZ Co. Ltd as at March 31, 2020
----------------------------------------------------------------------------------------------------------------------
--------------------
Liabilities Amount Rs. Assets Amount Rs.
----------------------------------------------------------------------------------------------------------------------
---------
Capital 3,00,000 Cash in hand 10,000
General. Reserve 30,000 Cash in Bank 25,000
Long term loan 2,00,000 sundry debtors 20,000
Short term loan 40,000 Raw materials 10,000
Bank overdraft 10,000 Finished goods 8,000
Sundry creditors 45,000 Rent receivable 5,000

Salary payable 40,000 Commission receivable 5,000
Rent payable 10,000 Interest receivable 5,000
Interest Payable. 25,000 Short term Investment 12,000
Commission payable 5,000 Long term Investment 50,000
Wages payable 20,000 Plant and Machinery 2,40,000
Electricity charges payable. 15,000 Land and building 3,00,000
Furniture and fitting 50,000
---------------- -------
-----
7,40,000 7,40,000
---------------- ----
-------------
---------------- -----
-----------
D) Marketing Management: Market is a place where buyers and sellers often meet together to
decide the terms and conditions of purchase and sale. It is also the place where the actual exchange
of goods and services takes place. So marketing involves the flow of goods and services from the
producer to the consumers through the ps of exchange or distribution. It can also be defined as the
process of exchange between buyer and seller. Marketing is the need of buyers and selling is the
need of the sellers.
Marketing management can be described as a combination of marketing and management.

Marketing management may be defines as the process of ascertaining consumer needs and wants
and converting them into products and services and then moving the products and services to the
final customers to satisfy such needs and wants.
Importance of Marketing Management:

1. Marketing management helps to create demand and needs in the minds of the people for the
goods and services of the organization.
2. Marketing Management helps to identify markets and prospective markets.

3. A good marketing management helps to create customers and helps to maintain a cordial
relation between the producers and consumers, customers and the middlemen, producer and
middlemen, company and society etc.
4. Marketing management focuses on increased consumer’s satisfaction.

5. Marketing management helps to achieve the goals of the organization.
6. Marketing management helps the sales management to achieve its objectives.
7. Marketing management focuses on the reduction in the cost of marketing thus reducing the
total costs and increasing the profit margin.
8. Marketing management makes possible the forecasting of demand which is essential to

decide marketing strategies and marketing plans.
Marketing Techniques: The marketing concept is the strategy that firms implement to satisfy
customers’ needs, increase sales, maximize profit, and beat the competition. There are 4
marketing concepts that organizations adopt and execute. These are: (1) production concept, (2)
product concept, (3) selling concept and (4) marketing concept.
1. Production concept: The idea of production concept – “Consumers will favour products
that are available and highly affordable.” This concept is one of the oldest Marketing
management orientations that guide sellers.
2. Product concept: The product concept holds that consumers will favor products that
offer the most quality, performance, and innovative features. Here, Marketing strategies
are focused on making continuous product improvements. Product quality and improvement
are important parts of marketing strategies, sometimes the only part.
3. Selling concept: The selling concept holds the idea- “consumers will not buy enough of
the firm’s products unless it undertakes a large-scale selling and promotion effort.”
Here the management focuses on creating sales transactions rather than on building long-
term, profitable customer relationships.
4. Marketing concept: The marketing concept holds- “achieving organizational goals

depends on knowing the needs and wants of target markets and delivering the desired
satisfactions better than competitors do.” Here marketing management takes a “customer
first” approach. Under the marketing concept, customer focus and value are the routes to
achieve sales and profits.

Concept of 4 Ps: The Four Ps (product, price, promotion and place) are four considerations known
as a marketing mix. Attention to these four factors is necessary for maximizing the chance a product
will be recognized and bought by customers.
• Product: The item or service being sold must satisfy a consumers need or desire.
• Price: An item should be sold at the correct price for consumer expectations; neither too
low nor too high. Price refers to the real amount the end user is expected to pay for the
product. The price of a product affects how it performs on the market.
• Promotion: The public needs to be informed about the product and its features in order to
understand how it fills their needs or desires. The promotion plan comprises of the marketing
communication strategies and techniques. These may entail advertising, sales promotions,
special offers, as well as public relations. Regardless of the channel used, the promotion
should be appropriate for the product, the price as well as the targeted end user.
• Place: The location where the product can be purchased is important for optimizing sales.
That means how the product will be provided to the customer is what determines the place
or its placement. Thus, a product’s distribution is a major element in determining a products
placement. The placement strategy can be helpful when it comes to assessing the most
suitable channel of distribution to be used.
E) Human Resource Management:
Functions of personnel management may be discussed under two broad categories:

• i) Managerial Functions
• ii) Operative Functions
i) Managerial Functions:
• Management aims at getting things done by others. Managerial functions deal with planning,
organizing, directing, coordinating and controlling the activities of employees in an
enterprise.

These functions are discussed as follows:
1. Planning:
Planning involves thinking in advance. It is the determination of strategies, programs, policies,
procedures to accomplish organizational objectives. Planning is a difficult task which involves
ability to think, to predict, to analyze and to come to decisions. In the context of personnel
management, it requires the determination of human resource needs.
2. Organizing:
Organization is a process of allocating the task among its members for achieving organizational
objectives. This is done by designing the structure or relationship among jobs, personnel and
physical factors. For achieving enterprise goals a number of plans, policies and programs are
decided upon. Organization is a channel for implementing them and achieving good results. The
assignment of tasks and fixing of responsibilities will be the function of personnel management.
3. Directing:
It is the basic function of managerial personnel. Directing means telling people to do a particular
work. It does not mean only issuing orders to employees but also ensures that they perform as per
the directions. The employees are also given instructions for carrying out their task. The orders and
instructions should be clear and precise so that these are obeyed properly.
4. Coordinating:
Organizational objectives will be achieved only if group activities in the enterprise are coordinated
effectively. There may be a problem of each group or department trying to pursue its own goals
without bothering about overall objectives. A coordinated approach will help in achieving common
goals.
Coordination of personnel is required at all levels of management.

5. Controlling:
Controlling is the act of checking, regulating and verifying whether everything occurs as per the
standards set and plans adopted. The performance of persons is regularly reviewed to find out
whether it is going according to the standards or not. In case, performance is low then steps are
taken to improve it in future.

Controlling function involves reviewing performance and taking corrective
measures.
ii) Operative Functions:
These functions are related to the procurement, developing, compensating, integrating and
maintaining a work-force for attaining organizational goals. These functions are also known as
service functions.
Various operative functions are discussed as follows:

1. Procurement:
This function relates to the procuring of sufficient and appropriate number of persons for carrying
out business work. The needs of the organization should be assessed to find out the requirements of
persons. Besides number, the procurement of suitable persons is also essential. For this purpose, the
requirements of various jobs should be studied for fixing the educational and technical experience
of persons expected to man those jobs. Only the right type of persons will be able to give satisfactory
results.
2. Development:
The development function is concerned with the development of employees by increasing their skill
and proficiency in work. The persons are given proper training through various methods so that
their performance is better in undertaking the jobs. Proper job description will enable the employees
to know their weak points in performing various jobs. Training programs are made suitable to cover
up deficiencies in workers’ performance.
3. Compensation:
It is concerned with securing adequate and equitable remuneration to persons working in the
organization. Job analysis will enable in fixing the remuneration for various jobs. The needs of the
jobs and qualifications of persons who will take up those jobs should be taken into consideration
while fixing remuneration. If the employees are paid less than they should have got, they may leave
the job at an earliest opportunity. So compensation should be fixed in such a way that it is able to
attract and retain suitable persons in the organization.

4. Integration:
It involves infusing among employees a sense of belonging to the enterprise. The employees should
identify their personal interest with that of the organization. They should have a feeling that
everything good of the enterprise will also be in their interest. This will bring about harmony of
interests both of employees and the organization. There should be proper communication channel
at all levels.
5. Maintenance:
This function deals with sustaining and improving conditions that have been established. Better
conditions of work should be maintained at all times. The employees will feel happy to work under
such conditions. These conditions include establishment of health, sanitation and safety standards.
If working conditions deteriorate, then employees will be prompted to leave the enterprise.
Manpower Planning: Manpower Planning which is also called as Human Resource Planning
consists of putting right number of people, right kind of people at the right place, right time, doing
the right things for which they are suited for the achievement of goals of the organization. Human
Resource Planning has got an important place in the arena of industrialization. Human Resource
Planning has to be a systems approach and is carried out in a set procedure.
Importance of Manpower Planning:

o Key to managerial functions- The four managerial functions, i.e., planning,
organizing, directing and controlling are based upon the manpower. Human
resources help in the implementation of all these managerial activities.
Therefore, staffing becomes a key to all managerial functions.
o Efficient utilization- Efficient management of personnel's becomes an
important function in the industrialization world of today. Setting of large
scale enterprises require management of large scale manpower. It can be
effectively done through staffing function.
o Motivation- Staffing function not only includes putting right men on right
job, but it also comprises of motivational programs, i.e., incentive plans to
be framed for further participation and employment of employees in a
concern. Therefore, all types of incentive plans becomes an integral part of
staffing function.

o Better human relations- A concern can stabilize itself if human relations
develop and are strong. Human relations become strong trough effective
control, clear communication, effective supervision and leadership in a
concern. Staffing function also looks after training and development of the
work force which leads to co-operation and better human relations.
o Higher productivity- Productivity level increases when resources are
utilized in best possible manner. Higher productivity is a result of minimum
wastage of time, money, efforts and energies. This is possible through the
staffing and it's related activities ( Performance appraisal, training and
development, remuneration)
Need of manpower Planning:
Manpower Planning is a two-phased process because manpower planning not only analyses the
current human resources but also makes manpower forecasts and thereby draw employment
programs.
Manpower Planning is advantageous to firm in following manner:

o Shortages and surpluses can be identified so that quick action can be taken wherever
required.
o All the recruitment and selection programs are based on manpower planning.
o It also helps to reduce the labor cost as excess staff can be identified and thereby
overstaffing can be avoided.
o It also helps to identify the available talents in a concern and accordingly training
programs can be chalked out to develop those talents.
o It helps in growth and diversification of business. Through manpower planning,

human resources can be readily available and they can be utilized in best manner.
o It helps the organization to realize the importance of manpower management which

ultimately helps in the stability of a concern.
Recruitment: In human resource management, “recruitment” is the process of finding and hiring
the best and most qualified candidate for a job opening, in a timely and cost-effective manner. It

can also be defined as the “process of searching for prospective employees and stimulating and
encouraging them to apply for jobs in an organization.
Recruitment Process:
Recruitment is a process of finding and attracting the potential resources for filling up the vacant
positions in an organization. It sources the candidates with the abilities and attitude, which are
required for achieving the objectives of an organization. Recruitment process is a process of
identifying the jobs vacancy, analyzing the job requirements, reviewing applications, screening,
shortlisting and selecting the right candidate.
Steps of Recruitment Process:

1. Recruitment Planning: Recruitment planning is the first step of the recruitment process, where
the vacant positions are analyzed and described. It includes job specifications and its nature,
experience, qualifications and skills required for the job, etc. A structured recruitment plan is
mandatory to attract potential candidates from a pool of candidates. The potential candidates should
be qualified, experienced with a capability to take the responsibilities required to achieve the
objectives of the organization.
2. Recruitment Strategy: Recruitment strategy is the second step of the recruitment process, where
a strategy is prepared for hiring the resources. After completing the preparation of job descriptions
and job specifications, the next step is to decide which strategy to adopt for recruiting the potential
candidates for the organization. The steps involved in developing a recruitment strategy include −
• Setting up a board team

• Analyzing HR strategy
• Collection of available data
• Analyzing the collected data
• Setting the recruitment strategy
3. Searching the Right Candidates: Searching is the process of recruitment where the resources
are sourced depending upon the requirement of the job. Searching involves attracting the job
seekers to the vacancies.
Sources of Manpower: The sources are broadly divided into two categories: Internal Sources and
External Sources. Internal sources consists of Transfer, Promotion and own training centers.

Promotion: Under this system positions or posts are filled up by upgrading persons to higher status
by offering them promotions to higher posts. It is a process of filling vacancies of higher posts by
individuals from lower grade to higher grade within the organization.
Transfer: Transfer usually does not involve any extra financial benefits to an employee. Employees
are simply shifted from one job to another or one place to another for administration convenience.
Own Training Centers: A large no of organizations have opened their own training centers where
they take trainees on a regular basis to develop skilled manpower as per their own need so that they
can be recruited as and when they are required.
External sources consists of the following:
1. Advertisement: Under this system applications are invited from eligible candidates for different
posts through open advertisement in newspapers, magazines, employment news, TVs etc. Such
advertisements are drafted carefully to create interest in the eligible candidate. This type of
advertisement reaches a large number of people spread over a large area.
2. Campus Interview: Now a days recruiters go to different technical, professional and

management institutions for the purpose of selecting young and fresh talent for their manpower
requirement. The placement cells of such institutions provide all necessary steps to conduct test,
interviews in the institution itself. Such selected candidates are usually appointed as trainees for a
defined period and after successful completion of their training/probation, posted or appointed as
regular employees.
3. Walk-in-Interview: Under this system the venue, date, eligibility criteria and other formalities
are advertised in the local newspapers earlier and the applicants come to the centers to face the
selection process. There is no need of prior applications or information by the candidates. They
simply bring their bio-data and submit just before the interview. Under this system urgent manpower
requirement can be solved.
4. Employment fair/ Job Mela: A number of employers or consultants combined together to

organize the fair in the important cities and towns giving wide publicity to the event to attract large
no of job seekers. The employers/consultants open stall insides the Mela where they display their
requirement. Eligible interested candidates come and approach the stall to make queries about the
vacancies. They submit their bio-data at the stall and after preliminary screening they may called
for interview at a specified place and time.

5. Employment Consultant: Employment consultant remain in touch with number of
organizations to collect their orders for manpower supply. They also remain in touch with various
sources of different types of manpower. They advertise, conduct tests and interviews to select the
appropriate candidate and submit the lists of selected candidates to the employers for issue of
appointment letters.
6. Employment Exchange: This is very old sources of recruitment of manpower. Government

employment exchange are there throughout the country and employers take advantage of this
source. Job seekers go to employment exchange and get their names registered and employers can
readily get the information about various types of manpower. The employment exchange does not
charge any fees to the employers or to the job seekers.
7. Unsolicited Applications: Many candidates submit applications for different posts at different
times even if there is vacancy in the organization. Such applications can be called in for the purpose
of recruitment whenever there is vacancy in the organization. The personal department usually
maintain s record of such applications. This is a common practice in private sectors.
8. Recommendations: Sometimes appointments are made based on the recommendations made by

committees, important persons, friends and relatives, employees, retired employees.
9. Labor Contractor: Large scale industries usually require a large no of unskilled workers but do
not appoint them rather they hire their services through labor contractors. The labor contractors
supply such unskilled workers in sufficient numbers as and when required. The contractors appoint
them and make their pay roll. Such contractors make payments to the workers at their own rate
agreed and collect the payment from the organizations at timely intervals. They are usually
registered contractors with the organizations.
Selection Process:
The selection process can be defined as the process of selection and short listing of the right
candidates with the necessary qualifications and skill set to fill the vacancies in an organisation. The
selection process varies from industry to industry, company to company and even amongst
departments of the same company.

The selection criteria has to be decided by the Personal manager. The selection process includes:
Inviting applications, screening the application received, conducting tests and interviews,
conducting physical and medical fitness examination, collecting references and checking the
antecedents, verifying the certificates and issue of selection letters after final selection.
1. Inviting Applications: The first step in the selection process is to invite applications from the
eligible candidates. Application form may be designed and supplied to the applicants on the request
or the Performa may be advertised according to which the applicants shall apply. The application
format may be designed in such a manner that the applications have to give the details of their
education, training, experience, age, family back ground, previous employment, previous salaries,
hobbies etc.. The Performa may be designed depending on the post and the information required.
2. Screening the application: A number of applications may be received and all the applicants
may not be called for tests or interviews. Some of the applications may be rejected at the application
stage due to any reasons. Hence, there is the need of making a preliminary screening of the
applications received. The main idea behind this sort of screening is to minimize the number of
applicants to make the selection process easy and effective.
3. Conducting Tests/Interviews: After the preliminary screening is over, the short listed applicants
may be called for employment tests which may include a written examination, interview, group-
discussion etc. to test the skill, intelligence, knowledge, aptitude, personality etc. There are a
varieties of tests to examine the specific qualities and abilities of the applicants. Such tests may be
designed depending on the type of persons required for specific posts. Usually the applicants found
suitable in the written examinations are called for interviews because conducting interviews is a
time taking affair. So, only a limited number of successful candidates of the written examination
may be called for interview. Finally the interviewer shall make a list of suitable candidates for the
posts in order of their merit.
4. Conducting medical/physical test: All the candidates qualified in the interviews should be
called for a test of physical fitness to be conducted by a group of experts. The physical tests may
include running, swimming, jumping, driving, cycling etc. The physical examination may depend
on the nature of job to be handled by the individual. Apart from the physical test there may be a
medical examination of the candidates to check the Eyesight, ears, heart, kidney etc. The purpose

of the medical test is to handle the job efficiency and ensure that the candidate’s fitness meets the
job requirement.
5. Collecting References and Checking the Antecedents: After the medical and physical test is
over, there is a need of making a collection of information about the candidates from the list of
references. Usually, the applicants give the names of those persons who will give favorable report.
Apart from that the employer may write to the former employer of the applicant, to the institutions
where he was reading or to any other person who might be knowing the person well. There is also
the need of checking the past records of the applicant including the report of the local police stations
where he had been staying in the past.
6. Verifying the Certificates: After all the above processes are over, the applicant may be called
once again with his original certificates for the purpose verification to see that the certificates
furnished are authentic or not.
7. Issuing of Selection Letters after Final Selection: All the successful candidates are to be ranked
in order of their merit and final selection may be made depending on the number of posts lying
vacant. Appointment letters may be issued to the successful applicants in order of their rank and
may be given a time limit to report for joining. If any candidates fails to turn up, the next rank-
holder may be issued selection letter. So, the merit list prepared shall be helpful to issue selection
letters to the next best candidates.
Method of Testing:
Tests are of twelve types. These tests are conducted by many organizations. It does not mean
that every organization conducts all of these tests. Some organizations may not conduct a few
tests. However, brief descriptions of these tests are mentioned below:
1. Written tests: Written tests are tests that are administered on paper or on a computer (as an
Exam). A test taker who takes a written test could respond to specific items by writing or
typing within a given space of the test or on a separate form or document.
2. Achievement tests: To verify how he can achieve the target. Past experience can help the
employees to satisfy the recruiters.
3. Intelligent tests: The employee’s intelligent level is determined here.
4. Performance tests: Whether the employees perform well or not.

5. Honesty or polygraph (lie detector) tests: The use of lie detector for verifying information on
the application form can only be used for specific jobs, such as police officer, finance managers
etc.
6. Aptitude tests: Whether the employee is interested in the job or not can be determined by this
test.
7. Psychological tests: The psychology of the employee is determined. The employees who are
psychologically strong and do not get nervous do well.
8. Graphology (Handwriting analysis) tests: It has been said that an individual’s handwriting
can suggest the degree of energy, inhibitions, and spontaneity to be found in the writer,
disclosing idiosyncrasies and elements of balance and control from which many personality-
characteristics can be inferred.
9. Physical tests: To examine whether the candidate is physically fit for the job.
10. Personality tests: Through these tests a mental and behavioral quality i.e. personality level is
measures.
11. Trainability Tests: For jobs in which training is necessary due to the skill level of the job
applicants or the changing nature of the job, trainability tests are useful. Essentially, the goal is
to determine the trainability of the candidate.
12. Work Sample: Work Sample tests measure the ability to do something rather than the ability
to know something. These tests may measure motor skills or verbal skills, Motor skills include
physically manipulating various job related equipment and verbal skills include problem solving
and language skills.
Methods of Training and Development: Training is a learning process which imparts skill,
knowledge, attitude, behavior etc. to an individual to make the performance of jobs as per plan.
Training is also regards as the transfer of skill, knowledge, etc. from the trainers to the trainees with
specific objectives. Training is a continuous process from the recruitment till retirement. Training
is always object-oriented. Training helps the employees to cope up with the changing business
environment and challenges of technology. Training is also essential for the old employees
whenever they are put to new assignments due to promotion, transfer, change in the nature of job,
changes in technology etc. There are different types of training adopted for executives, supervisors

and workers. Different methods of training may also be recommended for different types of jobs
handled by the executives, supervisors, workers and others.
The training can be classified into three categories such as
a) on the job training,
b) off the job training and
c) Vestibule training.
a) On-the-Job Training: This training consists of the following methods:

1. Under-studies: Under this method of training, the trainee is placed under an experiences person
as an assistant or sub-ordinates who is to acquire skill, knowledge, experience, by doing the job
under the direct supervision and guidance of the experienced person. Working under an experienced
person will be a good learning process for a new person.
2. Coaching by Experts on the jobs: Under this method the trainees are taken to the spots where
the works are being performed. Different expert trainers of different jobs train the trainees regarding
the performing the jobs. They demonstrate the jobs by performing them in front of the trainees so
that the trainees get the chance of learning on the spots. The trainees are also given chance to handle
the jobs themselves.
3. Job Rotation: Under this system, the trainees get the opportunities of learning different jobs
during their employment. They are not specifically trained only for one job but are trained on
various jobs on rotation basis so that they get through knowledge on different jobs. After they are
trained in one job, they are sent for training to another job and in this process they acquire good
experiences of different jobs of the organization. This is known as job rotation in which the trainees
are periodically rotated from one job to another.
b) Off-the- Job Training: This training consists of the following methods:

1. Classroom training: Under this type of training, training courses are organized for the
employees either inside the organization or outside the organization. Lecturers or instructors act as
trainers who teach the topics and give adequate technical and theoretical knowledge about the

activities to be performed. For such type of training the trainer may use the models, slides, overhead
projectors, video, audio, films, computer etc. to train the employees.
2. Conference: Under this method of training, a small group of trainees are selected and they
work together to train themselves. They make open discussion, exchange ideas and experiences
and share the knowledge. They learn together to come to a conclusions or for solutions to different
problems and develop new techniques, skill etc. in them.
3. Special courses and lectures: Special courses and lectures are either designed by the
company itself or by the management or professional schools. Companies then sponsor their
trainees to attend these courses or lectures. These are the quick and most simple ways to provide
knowledge to a large group of trainees.
4. Selected reading: This is the self-improvement training technique. The persons acquire
knowledge and awareness by reading various trade journals and magazines. Most of the companies
have their own libraries. The employees become the members of the professional associations to
keep abreast of latest developments in their respective fields.
5. Role Playing: In this method, the trainees are assigned a role, which they have to play in
an artificially created situation. For example, a trainee is asked to play the role of a trade union
leader and another trainee is required to perform the role of a HR manager. This technique results
in better understanding of each other's situation.
6. Brainstorming: This is creativity-training technique, it helps people to solve problems in

a new and different way. In this technique, the trainees are given the opportunity to generate ideas
openly and without any fear of judgment. Criticism of any idea or any comments are not allowed.
Once a lot of ideas are generated then they are evaluated.
c) Vestibule Training: Under this type of training, training is conducted neither on the job nor off
the job. Under this method a similar situation to a working condition is created and training is given
to the trainees under such conditions. As far as practicable, actual machineries, actual materials,
actual raw materials are used and actual like working condition is created so that the trainers and
the trainees feel like working in real working situations. This type of training is done without

disrupting the actual activities of the organization. This sort of training make the trainees capable
to handle actual work situations. For example, firemen training for firefighting.
Payment of Wages:
What is wages? Wages is money paid to a worker for work performed, or the price you pay for
doing something. If you make Rs.100 per hour at work, this is an example of your wage.
Procedure for payment of wages: Pay slip is prepared on the basis of the payroll or wages sheet.
Pay slip is prepared for each worker separately. Now, each worker is given his/her pay slip in
advance so that he/she can check the calculations before the actual payment is made. The particulars
of net amount for the wage payment are forwarded to the cashier who draws money from the bank
and arranges payment. After drawing the amount from bank, pay pocket is prepared for each worker
separately and sealed after checking. The pay pocket contains the details like the name of worker,
his/her number, designation and the name of department under which he/she is working. The pay
pocket is handed over to workers under the presence of responsible officer and the department head
under which the worker is working. The signature or thumb impression of an employee is received
in the Wage Payment Register.

UNIT 6
LEADERSHIP AND MOTIVATION
LEADERSHIP
Definition: Leadership is the act of guiding a team or individual to achieve a certain goal
through direction and motivation. Leaders encourage others to take the actions they need to
succeed or in other words we can say that Leadership is the ability of an individual or a group of
individuals to influence and guide followers or other members of an organization.
NEED OR IMPORTANCE:
1. Initiating Action: Leadership starts from the very beginning, even before the work actually
starts. A leader is a person who communicates the policies and plans to the subordinates to start
the work.
2. Providing Motivation: A leader motivates the employees by giving them financial and non-
financial incentives and gets the work done efficiently. Motivation is the driving force in an
individual’s life.
3. Providing guidance: A leader not only supervises the employees but also guides them in their
work. He instructs the subordinates on how to perform their work effectively so that their
efforts don’t get wasted.
4. Creating confidence: A leader acknowledges the efforts of the employees, explains to them
their role clearly and guides them to achieve their goals. He also resolves the complaints and
problems of the employees, thereby building confidence in them regarding the organization.
5. Building work environment: A good leader should maintain personal contacts with the
employees and should clear their problems and solve them. He always listens to the point of
view of the employees and in case of disagreement persuades them to agree with him by giving
suitable clarifications. In case of conflicts, he handles them carefully and does not allow it to
adversely affect the entity. A positive and efficient work environment helps in stable growth
of the organization.
6. Co-ordination: A leader reconciles the personal interests of the employees with the
organizational goals and achieves coordination in the entity.

7. Creating Successors: A leader trains his subordinates in such a manner that they can succeed
him in future easily in his absence. He creates more leaders.
8. Induces change: A leader persuades, clarifies and inspires employees to accept any change in
the organization without much resistance and discontentment. He makes sure that employees
don’t feel insecure about the changes.
QUALITIES OF LEADERS:
1. Ethical and Corporate Social Responsibility (CSR): Leadership sets the standards and
culture for ethical behavior.
2. A Leader is there to serve: A truly successful leader understands that they are there to
serve their team, not to be served.
3. A vision of commitment to the organization: Leadership is about creating a vision that

inspires those who work for and around others to participate actively in key goals, objectives and
the overall mission.
4. From the top to the bottom: Leaders must be able to quickly assess the gap between top
management and all employees, and think of innovations of how to encourage the team to act and
feel satisfied as winners or contributors to the success of the company.
5. Excellent communication: Leaders must have an astute clarity of expression,

communicating thoughts entirely synchronized with the messages delivered AND received. A
leader must have the ability to communicate effectively at every level in your organization.
6. Ability to listen and debate: Rather than simply ‘delivering’ ideas, prepare to engage in
debate around ideas and really listen to every suggestion.
7. Teamwork: The ability to create and maintain trust and respect between team members
quickly and effectively is vital. A leader should be able to spot key problems and empower
management to iron out any issues.
8. Delegation: A senior executive leader must have confidence to delegate work to his or her
team and step back - leaders are there to empower others to become leaders and managers
themselves.

9. Honesty and integrity: Although leaders must be positive, when things are not going well,
the truth must be communicated. Subsequently, leaders must provide the vision and
encouragement to bring the organization forward.
10. A Problem Solver: Leaders must always find solutions or (at least) suggest alternatives to
every problem.
11. Focused: Keep the team on the right track on goals and strategies – ask for reminders of
projects / goals and maintain focus on critical objectives despite endless obstacles.
12. Change Management: Adapt quickly to changes in the marketplace and communicate
these to all members of the organization. Get the entire company behind changes necessary through
visionary leadership.
13. Forward thinking: Beyond adapting to external changes, a leader must enact their own –
an executive leader should be able to see current and future trends, apply them to his or her
organization and stay ahead of the competition.
14. Visionary and Leadership quality- To be successful, the leader should have a clear vision
of his new venture. However, to turn the idea into reality a lot of resources and employees are
required. Here, leadership quality is important because a leader can guide their employees towards
the right path of success.
15. Open-Minded- In a business, every circumstance can be an opportunity and used for the
benefit of a company.
16. Flexible- A leader should be flexible and open to change according to the situation. To be
on the top, a businessperson should be equipped to embrace change in a product and service as and
when needed.
17. Creativity: Leadership starts with an idea. To be successful, a person needs to always be
thinking of new ideas and better ways of doing things.
FUNCTION OF A LEADER:
1. Setting Goals: A leader is expected to perform creative function of laying out goals and policies
to persuade the subordinates to work with zeal and confidence.

2. Organizing: The second function of a leader is to create and shape the organization on scientific
lines by assigning roles appropriate to individual abilities with the view to make its various
components to operate sensitively towards the achievement of enterprise goals.
3. Initiating Action: The next function of a leader is to take the initiative in all matters of interest
to the group. He should not depend upon others for decision and judgment. He should float new
ideas and his decisions should reflect original thinking.
4. Co-Ordination: A leader has to reconcile the interests of the individual members of the group
with that of the organization. He has to ensure voluntary co-operation from the group in realizing
the common objectives.
5. Direction and Motivation: It is the primary function of a leader to guide and direct his group
and motivate people to do their best in the achievement of desired goals, he should build up
confidence and zeal in the work group.
6. Link between Management and Workers: A leader works as a necessary link between the
management and the workers. He interprets the policies and Program of the management to his
subordinates and represents the subordinates’ interests before the management. He can prove
effective only when he can act as the true guardian of the interests of his subordinates.
Manager vs Leader:
1. Leader creates a vision, manager creates goals. Leaders inspire and engage their people in
turning that vision into reality. They activate people to be part of something bigger. Managers
focus on setting, measuring and achieving goals. They control situations to reach or exceed their
objectives.
2. Leaders are change agents, managers maintain the status. Leaders are proud disrupters.
Innovation is their mantra. They understand and accept the fact that changes to the system often
create opportunities. Managers stick with the works, refining systems, structures and processes
to make them better.
3. Leaders are unique, manager’s copy. Leaders are self-aware and work actively to build their
unique and differentiated personal brand. They are comfortable in their own shoes and willing

to stand out. They’re authentic and transparent. Managers copy the competencies and behaviors
they learn from others and adopt their leadership style rather than defining it.
4. Leaders take risks, managers control risk. Leaders are willing to try new things even if they
may fail miserably. They know that failure is often a step on the path to success. Managers work
to minimize risk. They seek to avoid or control problems rather than accept them.
5. Leaders are in it for the long term, managers think for short-term. Leaders have
intentionality. They do what they say and stay worked toward a big and for a long term. They
remain worked without receiving regular rewards. Managers work on shorter-term goals, seeking
more regular acknowledgment or awards.
6. Leaders build relationships, managers build systems and processes. Leaders focus on people
– all the stakeholders they need to influence in order to realize their vision. They know who their
stakeholders are and spend most of their time with them. They build loyalty and trust by
consistently delivering on their promise. Managers focus on the structures necessary to set and
achieve goals. They focus on the analytical and ensure systems are in place to attain desired
outcomes. They work with individuals to fulfill their goals and objectives.
7. Leaders grow personally, managers rely on existing, proven skills. Leaders know if they
aren’t learning something new every day, they aren’t standing still, they’re falling behind. They
remain curious and seek to remain relevant in an ever-changing world of work. Managers rely
on existing skills and adopting proven behaviors.
STYLE OF LEADERSHIP: Based on the behavior of leader, the leadership style is classified
into three categories i.e. Autocratic, Democratic or Participative and Delegative.
1. Autocratic: Authoritarian leaders, also known as autocratic leaders, provide clear expectations
for what needs to be done, when it should be done, and how it should be done. This style of
leadership is strongly focused on both command by the leader and control of the followers. There
is also a clear division between the leader and the members. Authoritarian leaders make decisions
independently, with little or no input from the rest of the group. Authoritarian leadership is best
applied to situations where there is little time for group decision-making or where the leader is the
most knowledgeable member of the group. The autocratic approach can be a good one when the
situation calls for rapid decisions and decisive actions. However this type of leadership style can

be damaging rather than rewarding in the long run as it resembles that of a dictator. It leads to low
employee morale, which in turn may lead to attrition in many cases.
2. Democratic or Participative: Participative leaders encourage group members to participate.

Group members feel engaged in the process and are more motivated and creative. Democratic
leaders tend to make followers feel like they are an important part of the team, which helps foster
commitment to the goals of the group. Democratic leadership, also known as participative
leadership or shared leadership, is a type of leadership style in which members of the group take
a more participative role in the decision-making process.
3. Delegative: In this style the leader allow members to take decisions. While this style can be
useful in situations involving highly qualified experts, it often leads to poorly defined roles and
a lack of motivation. This leadership style tended to result in groups that lacked direction and
members who blamed each other for mistakes, refused to accept personal responsibility, made
less progress, and produced less work.
Motivation:
Definition: Motivation is the word derived from the word ’motive’ which means needs, desires,
wants or drives within the individuals. It is the process of stimulating people to actions to
accomplish the goals.
In other words motivation is the processes that account for an individual’s intensity, direction, and
persistence of effort toward attaining a goal. The main features of motivation are a goal-oriented
continuous process and a psychological phenomenon that converts abilities into performance.
Characteristics:
1. Motivation is need based – If there is no need for an individual, the process of motivation fails.
2. Motivation is a continuous process – Most of the human needs are of recurring nature, some
of the needs of individuals shall always be found to be unfulfilled. Thus motivational process
can be enforced on a continuous basis.
3. Motivation is a planned process-to produce a desired result by stimulating and influencing
human behavior for the best realization of the common objective. Two individuals could not be
motivated in exactly similar manner as people differ in this case of approach to respond to the
process of motivation.

4. Motivation may be positive or negative - A positive motivation promises incentives to people
(pay, rewards, bonus, etc), a negative motivation threatens the enforcement of disincentives
(penalties, disciplinary action, threat of demotion, fear of loss of job, etc).
5. Motivation aims for best attainment of common objectives through best utilization of
resources - Motivated employees make the best utilization of all resources – materials,
machines, technology and other work facilities and put in their best effort towards the
attainment of common objectives of the enterprise.
6. Motivation is an internal feeling - It is a psychological phenomenon, which generates within an

individual.
Importance of Motivation:
1. Effective Use of Resources: Motivation activates human resources and compels employees
to behave in a particular manner. In business, all physical resources need to be used through
human force. Highly motivated employees greatly help in making optimum use of available
resources.
2. Higher Efficiency of Employees: Motivation is directly related to the level of efficiency.
Motivated employees put in their maximum effort for achieving organizational goals.
Motivation improves the work performance by bridging the gap between the ability and
willingness to work. Better performance results in higher productivity and consequently
lower cost of production.
3. Healthy Industrial Relation: Motivation is considered as the backbone of good industrial
relation. Motivation creates friendly and supportive relationships between the employer and
the employees. When the industrial relation becomes better, industrial disputes are reduced.
There will be an atmosphere of confidence between the employer and the employees.
4. Better Organizational Image: Motivation helps in improving an image of the organization.
Employees produce more when they are properly motivated. Highly motivated employees
try to maintain a self- disciplined and productive internal environment in the organization.
This creates a better impression to the outsiders dealing with the organization.
5. High Morale and Satisfaction: Motivation is helpful in increasing the morale of employees.
High degree of motivation may lead to high morale. Highly motivated employees will get

higher satisfaction which may lead to higher efficiency. Motivation improves the quantity as
well as the quality of production.
6. Reduced Labor Turnover and Absenteeism: Motivation leads to job satisfaction of
workers. Employees are punctual and regular in their work schedule, provided they get job
satisfaction. Highly motivated employees are loyal and committed to the organization. They
are sincere and prefer to stay on the job for longer period of time. As a result, labor
absenteeism and turnover are low.
7. Accomplishment of Organizational Goals: Motivation helps in shaping the working
behavior of the employees. It channelizes energy of employees for achieving organizational-
goals. Highly motivated employees are more committed and cooperative for seeking
organizational objectives. Motivation ensures achievement of organizational goals by
meeting individual needs through a satisfactory system of rewards.
8. Introducing Changes in the Organization: Motivation helps the management in
introducing changes in the organization. Normally, employees resist changes for fear of an
adverse effect on their employment. When the employees are given various opportunities of
development, they can easily adapt to new situations. Motivated employees support all
changes that are in the interest of the organization.
Factors affecting motivation:
1. Reward and Recognition: There are many ways to reward employees. The aim of rewarding
and recognizing employees is to encourage and motivate them to exceed within their roles and
promote positive behaviors.
2. Development: Development is very important for motivating employees; studies have shown
that most of the employees prefer career development opportunities and training. Development
makes an employee self-dependent and allows them to contribute more effectively in the
workplace, it also helps employees to enhance their input to the business.
3. Relationship with colleagues: As employees spend one-third of their day at work, relationships
and interactions they have with their colleagues can significantly impact their mood and outlook.
Negative experiences or attitudes will eventually lead to isolation and loneliness, making it more
difficult to find satisfaction from work, which in turn will decrease motivation.

4. Company’s Culture: A company’s culture consists of 6 main elements: work environment,
company mission, value, ethics, expectations and goals. In practice, the culture is just a set of
rules or accepted behaviors that help employees make decisions every day. While every
company would have their own unique set of features, values and beliefs, culture is always about
making sure that the employees have a productive and enjoyable working environment. If the
company’s culture is unstable, in that situation the employees cannot work for a long time and
that leads to low job satisfaction, negative attitude which affects motivation.
5. Processes within the company: The workload, division of responsibilities, access to resources
and accountability all depends on the structure and efficiency of the processes on which the
business runs. Efficient processes stimulate workers, allowing them to work effectively and
efficiently. At each stage of the process an individual should be aware of what’s expected from
them and what resources are available. Making sure that an employee feels responsible for the
outcomes of their work is crucial in building work engagement and stimulating higher
performance.
Maslow theory of motivation: Abraham Maslow’s motivation theory is based on the human
needs. These needs are classified into a sequential hierarchy from the lower to higher order as
five need clusters as given below:
1. Physiological Needs: These needs are of the lowest-order and most basic needs of human beings.
These involve satisfying fundamental biological drives, such as the need for food, air, water,
cloth, and shelter generally expressed in the names of roti, kapada aur makan. These needs exert
tremendous influence on human behavior. Entrepreneur also being a human being has to meet
his physiological needs for survival. Hence, he / she is motivated to work in the enterprise to
have economic rewards to meet his / her basic needs.
2. Safety and Security Needs: The second level of need in Maslow’s hierarchy is emerged once
physiological needs are met. Safety needs involve the need for a secure environment, free from
threats of physical and psychological harm. These needs find expression in such desires as
economic security and protection from physical dangers. Meeting these needs requires more
money and, hence, the entrepreneur is prompted to work more in his/ her entrepreneurial pursuit.
Like physical needs, these become inactive once they are also satisfied.

3. Social Needs: Man is social animal. These needs, therefore, refer to belongingness or affiliation.
All individuals want to be recognized and accepted by others. Likewise, an entrepreneur is
motivated to interact with fellow entrepreneurs, his employees, and others.
4. Esteem needs: These needs refer to self-esteem and self-respect. These include such needs that
indicate self-confidence, achievement, competence, knowledge, and independence. In case of
entrepreneurs, the ownership and self- control over enterprise satisfies their esteem needs by
providing them status, respect, reputation, and independence.
5. Self-Actualization Needs: At the top of the hierarchy is the need for self-actualization or the
need to fulfill what a person considers to be the mission in his life. After all his other needs are
fulfilled, a man has the desire for personal achievement. He wants to do something which is
challenging and since this challenge gives him enough push and initiative to work, it is beneficial
to him and the society. The sense of achievement gives him a sense of psychological satisfaction.
Methods of improving Motivation: The following are the methods for improving
motivation:
1. Create a friendly working environment

The employees spend a large amount of time of their lives working in the office. So try to make
the office look as friendly and appealing as possible. When the entrepreneur create a pleasant
working atmosphere the employees will be more satisfy to go to work every day.
2. Acknowledge employees’ achievement

Everyone wants to be recognized and acknowledged for something they have done. The
acknowledgement of a job well done coming from upper management that increases the morale
of the employees. The entrepreneurs always remember to give credit to their employees when
credit is due.
3. Rewarding employees
It is the responsibility of the entrepreneur to give simple incentives as rewards to the employees
through which they will be motivated. It does not have to be monetary rewards all the time, the
entrepreneur may reward the employee by providing T- shirts or some sweets. Rewarding
employees could also be a part of the company benefits.

4. Positive communication is the key
Positive communication is the best method for improving the motivation of the employees in an
organization. The entrepreneurs spend a short period of time each day to have a word with the
employees; discussing different ideas in a very friendly manner. This will not only make the
employees happy but also the entrepreneur will get all types of support from the employees.
5. Create a career path

When employees will be provided through incentives, they will become motivated. This will lead
to increased commitment towards their employer. The members of the team will be more valuable
to the organization, and to themselves, when they have opportunities to learn new skills. So It is
the responsibility of the entrepreneurs to provide their employees with the training so that they
can increase their potential, skill and also acquire new knowledge on latest technology as a result
they can develop their career which the entrepreneurs can improve their motivation for the
employees.
6. Welcome all ideas
Everyone employee is unique and they might have some good ideas and suggestions. So it is the
duty of the entrepreneurs to allow the employees to participate in the decision making process
and they should listen their suggestions and evaluated them. In this regard the entrepreneurs can
improve the motivation.
7. Encourage creativity
Creativity does not have to be based on the work that the employees are doing. It could be simple
task like giving ideas on different activities related to business or team building exercises.
Importance of communication in business: Communication is one of the most important

functions of management. It may cement an organization or disrupt. It promotes managerial
efficiency and induces the human elements in an organization to develop a spirit of cooperation.
It has become one of the most vital factors in the efficient performance of management. The
importance of communication are given below:
1. Efficient and Smooth Running of an Enterprise: The smooth and efficient functioning of an
enterprise entirely depends upon the effectiveness of the system of communication. It provides

the necessary basis of direction and leadership. It actuates people to action in accordance with
the desires of the management. Without proper communication, performance and achievements
of the goals may not be possible. It is essential to secure cooperation between any two persons.
2. Basis of Decision Making: Communication is the basis of decision making. It helps the
management to take essential decision and conduct vital operations. The quality of decisions
made in an organization entirely depends on the amount and quality of information available
to the management. The quality of information depends upon effective communication, and
the quality of communication exercises considerable influence on the quality of decision
making.
3. Proper Planning and Coordination: Communication is very helpful in planning and
coordinating the activities of business. If the system of communication is good, useful
suggestions will come from the subordinates to the superiors. This would be helpful in the
formation of plans. Participation of employees is now regarded essential for getting the task
done, and this, can effectively be secured only through the media of communication.
4. For Higher Productivity at Minimum Cost: Effective communication between employers
and employees plays a vital role in obtaining maximum production with the minimum of cost.
Effective communication will make the employee feel more secure and more interested in his
work. It will increase the understanding of the employees and secure their willing acceptance
of the business plans. It will increase the productivity on the part of workers.
5. Morale Building: Communication in industry is the basis for morale building. Under an
effective system of communication, it is quite convenient for the employees to bring their
grievances to the notice of the management and get a proper adjustment. It creates mutual trust
and faith, and that ultimately ensures job satisfaction amongst the employees, creates
confidence in the ability of managers and promotes their loyalty towards the enterprise.
6. Democratic Management: Effective communication is the basis for democratic management.
It ensures co-operation through understanding. The management has been forced to recognize
the maintenance of sound system in democracy which necessitates understanding and support
of workers. Adequacy and clarity of communication facilitates effective leadership and
maintenance of man to man relationship.
7. Binds People Together: Effective communication induces the human elements in an
organization to develop a spirit of cooperation and produces the will to do work before actually
doing it. In this way, effective communication binds the people of an organization together.

8. Create mutual trust and confidence: Effective communication creates mutual trust and
confidence between the management and the labor. It gives job satisfaction to the workers. It
is essential for healthy industrial relations. Sharing ideas and experiences with workers
eliminates their fears and misunderstanding and helps in winning over their trust and
confidence.
What is communication? Communication is the act of sharing or transferring information

between two or more individuals or a group of people. Technically, each communication process
requires a sender, a recipient, a message and a medium.
Barriers of communication: The following are the barriers of communication:-
1. Physical Barriers: A communication is a two-way process, distance between the sender and the
receiver of the message is an important barrier to communication. Noise and environmental factors
also block communication.
2. Personal Barriers: Personal factors like difference in judgment, inferiority complex, attitude,
pressure of time, inability to communicate, etc. widen the psychological distance between the
communicator and the communicate. Credibility gap i.e., inconsistency between what one says and
what one does, also, acts as a barrier to communication.
3. Status Barriers (Superior-Subordinate Relationship): Status or position in the hierarchy of an
organization is one of the fundamental barriers that obstructs free flow of information. A superior
may give only selected information to his subordinates so as to maintain status differences.
Subordinates, usually, tend to convey only those things which the superiors would appreciate.
4. Organizational structure Barriers: Effective communication largely depends upon sound
organizational structure. If the structure is complex involving several layers of management, the
breakdown or distortion in communication wall arise. Moreover, information travelling through
formal structure introduces rigidity and causes-delay because of long lines of communication.
Similarly, lack of instructions for further conveying information to the subordinates and heavy
pressure of work at certain levels of authority also act as barriers to effective communication.
5. Barriers Due to Inadequate Attention: Listening is the most neglected skill of communication.
Inadequate attention to the message makes communication less effective and the message is likely

to be misunderstood. Inattention may arise because of over business of the communicate or because
of the message being contrary to his expectations and beliefs. Whatever be the reason,
communication remains only a one-way process and there is no understanding of the message, if
the receiver pays little attention to the message.
6. Resistance to Change: It is a general tendency of human beings to stick to old and customary
patterns of life. They may resist change to maintain status quo. Thus, when new ideas are being
communicated to introduce a change, it is likely to be overlooked or even opposed. This resistance
to change creates an important obstacle to effective communication.
7. Barriers Due to Lack of Mutual Trust: Communication means sharing of ideas in common.
“When we communicate, we are trying to establish a commonness.” Thus, one will freely transfer
information and understanding with another only when there is mutual trust between the two.
When there is a lack of mutual trust between the communicator and the communicate, the message
is not followed. Credibility gaps, i.e., inconsistency in saying and doing, also causes lack of mutual
trust which acts as a basic obstacle to effective communication.
8. Emotional Attitude: Barriers may also arise due to emotional attitude because when emotions are
strong, it is difficult to know the frame of mind of other person or group. Emotional attitudes of
both, the communicator as well as the communicate, obstruct free flow of transmission and
understanding of messages.

UNIT 7
WORK CULTURE, TQM
AND SAFETY
Human relationship and performance in organization:

Four Factors Influencing Human Relations in an Organizations are: (1) work environment (2)
workgroup (3) individual (4) leader. Organization should be viewed as a social system. Human
relations in the organization are determined by work environment, workgroup, individuals &
leader i.
1. Work Environment: Human relations promoted the creation of a positive work environment
where organizational goals are achieved through satisfaction of employees. In general, when
employee needs are satisfied, the work environment is termed positive and when employee needs
are not satisfied, the work environment is termed negative. Positive work environments are
characterizing by such factors like: goals are clearly stated, incentives are properly used to
improve performance, feedback is available on performance, and decisions are timely and
participative.
2. Work Group: The work group is the center of focus of human relations studies. It has an
important role in determining the attitudes and performance of individual workers. Studies
showed that the informal groups apply tremendous influence over the behavior patterns of
workers. The informal groups cancelled official orders quite frequently and played a decisive role
in determining production standards. Work is a social experience and most workers find
satisfaction in membership in social groups. Unless managers recognize the human relations at
work productivity will not improve.
3. Individual: The human being is an important segment of the organization. Behavior of an

individual is affected by his feelings sentiments and attitudes. Motivation of employees should
give due consideration to their economic, social and psychological needs. Thus, motivation is a
complex process.
4. Leader: The human relationships gave great importance to leadership. The leader must ensure
full and effective utilization of all organizational resources to achieve organizational goals. He

must be able to adjust to various personalities and situations. He must behave in a way that
generates respect. A supervisor can contribute significantly in increasing productivity by
providing a free, happy and pleasant work environment where bossism is totally absent and where
members are allowed to participate in decision-making processes. Authoritative tendencies must
give way to democratic values.
Relations with Peers, Superiors and Subordinates:

It is always an experience to interact with the peer, superior and subordinate groups. All the three
groups of people give a different feel and learning, when we interact with them. All the three
groups are important and very much existent in all areas of life. Whether it is family, office,
friends, mentors, teachers, bosses, acquaintances, etc, all of them are typically divided into three-
categories.
Peers:
The first category will always be peers because we respond them very easily and very firstly.
They are typically the same level as us either in intelligent quotient or status or family structure
or in any other way at par with us. We normally tend to be comfortable with them in terms of
talking and interacting. One more reason of a person being comfortable with peers is they have
similar problems and they empathize very well with each other. For example colleagues in office,
friends, cousins etc.
Superiors:
The second category is superiors. The teachers, mentors, bosses, family, etc generally fall in this
category. They are the ones who are higher than us as far as the knowledge or experience or
intellect quotient or relationship goes. They expect a certain kind of respectful treatment from
us, while we deal with them. We normally tend to take time to interact with them directly; more
so, particularly because they also have an expectation barrier to break first with us. They are the
ones from whom you learn effortlessly because we know that they know more than us. For
example uncles, aunts, bosses, mentors, aged consultants, senior- positions-in-anyway,etc.

Subordinates:
The third category opens up the scope of being a mentor to others, as well as taking work from
them or helping them to cope up. They are lesser either by age, experience, knowledge or
relationship and that’s why we feel good dealing with them and sometimes even show them off
our seniority. They are the ones who need our help for their growth but still our responses to them
are important.
TQM
Definitions: Total Quality management is defined as a continuous effort by the management

as well as employees of a particular organization to ensure long term customer loyalty and
customer satisfaction. Remember, one happy and satisfied customer brings ten new customers
along with him whereas one disappointed individual will spread bad word of mouth and spoil
several of the existing as well as potential customers.
TQM Concepts:
1. Continuous improvement of quality: Foremost among TQM concepts is the idea of continuous
improvement of quality. The underlying aim of total quality management is to improve the
quality of products and services in any organization. By so doing, productivity, employability
and customer service are improved. When an organization focuses on this concept of total
quality management, they are able to achieve the best.
2. Focus on the customer: Another TQM concept is a central focus on the customer. The
customers are the internal and external recipients of an organization’s products. Therefore, the
needs of customers and their desires define quality for the organization.
3. Operations improvement: Furthermore, systematic improvement of operations is another
concept of total quality management. Every work done in an organization follows a chain or
process. These processes account for 80-85% of the quality of work and productivity of
employees. This concept establishes that work processes should be studied, through individuals
or teams, to identify lapses or complexities.

4. Human resources: The concept of human resources development is one of the concepts of total
quality management. Organizations that employ total quality management principles are
committed to employee learning and development. These principles require that management
trust that well-trained staff can do the jobs assigned to them properly.
5. TQM leadership: Similarly, another concept of TQM is about management responsibility for
TQM leadership. Managers are responsible to lead the transformation of an organization to
imbibe the culture of quality. They must accept the responsibility for continuous quality
improvements and be dedicated to empowering others.
Quality policy:
A quality policy drives the function of the entire QMS. A brief statement that aligns the purpose
and strategic direction of the company, the policy lays the framework for all future quality
objectives. In addition, it states the commitment to meeting requirements of customers. The
Directors, Management and Staff are responsible for Quality Control through the
Quality Management System seeking improvement by constant review, with suppliers and sub-
contractors being encouraged to co-operate.
Importance of quality policy:

a) It is important because it expresses management commitment to ensure customer satisfaction
through product quality.
b) It is important because it expresses management commitment to ensure customer satisfaction

through product quality and is a basis for quality communication inside the company.
Quality Management:
Quality management is focused not only on product and service quality, but also on the means to
achieve it. Quality management, therefore, uses quality assurance and control of processes as well
as products to achieve more consistent quality. Quality management is the act of overseeing all
activities and tasks that must be accomplished to maintain a desired level of excellence. This
includes the determination of a quality policy, creating and implementing quality planning and
assurance, and quality control and quality improvement. It is also referred to as total quality
management (TQM). . It has four main components: quality planning, quality assurance, quality
control and quality improvement.

Principles of Quality Management:
a Customer Focus
The primary focus of quality management is to meet customer requirements and to strive to
exceed customer expectations. Success is achieved when an organization attracts and retains the
confidence of customers. Every aspect of customer interaction provides an opportunity to create
more value for the customer. Understanding the current and future needs of customers
contributes to the sustained success of an organization.
b Leadership
Leaders at all levels establish unity of purpose and direction and create conditions in which
people are engaged in achieving the quality objectives of the organization. Creation of unity of
purpose, direction, and engagement enable an organization to align its strategies, policies,
processes, and resources to achieve its objectives.
c Engagement of People
It is essential for the organization that all people are competent, empowered and engaged in
delivering value. Competent, empowered and engaged people throughout the organization
enhance its capability to create value. To manage an organization effectively and efficiently, it
is important to involve all people at all levels and to respect them as individuals. Recognition,
empowerment, and enhancement of skills and knowledge facilitate the engagement of people in
achieving the objectives of the organization.
d Process Approach:
The quality management system is composed of interrelated processes. Understanding how
results are produced by this system, including all its processes, resources, controls and
interactions, allows the organization to optimize its performance.
e Improvement:
Improvement is essential for an organization to maintain current levels of performance, to react to
changes in its internal and external conditions and to create new opportunities.
f Relationship Management
For sustained success, organizations manage their relationships with interested parties, such as
suppliers and partners. Benefits:
• greater efficiency and less waste

• better and consistent control of major business processes
• a better understanding of customer needs
• regulation of successful working practices
• improved risk management
• increased customer satisfaction
• improved participation of employees
• better internal communication
• greater consistency in the quality of products and services
• increased profits
• managing growth more effectively Quality System:
A quality management system (QMS) is defined as a formalized system that documents processes,
procedures, and responsibilities for achieving quality policies and objectives. A QMS helps
coordinate and direct an organization’s activities to meet customer and regulatory requirements
and improve its effectiveness and efficiency on a continuous basis.
Accident and safety
Causes: There are a number of factors that can lead to industrial accidents, including everything
from improper lifting techniques to mishandling hazardous materials. Below are some common
causes of accidents in the workplace.
Environmental Causes of Accidents

• Accidents which occur from environmental causes refer to those workplace accidents that
happen because of the working environment. The environmental factors can be both natural
and man-made such as workplace design. Common environmental causes of accidents
include:
• Poor-lighting –
Low visibility is a common cause of slips, trips, and falls.
• Ambient-temperature –

If a workplace is too hot, overheating can occur. If the workplace is too cold, frostbite or
hypothermia can occur.
• Air-pollution –
Breathing issues can develop if a workplace has poor ventilation and/or air pollution.
• Sound-pollution –
The sound in a workplace can cause injury to a worker’s hearing.
Mechanical Causes of Industrial Accidents
• Mechanical causes of industrial accidents are factors that refer to machine or equipment
failure or breakdown. Generally, with proper maintenance and safety processes in place,
these types of accidents are preventable. Common mechanical causes of accidents include:
• Broken-or-damaged-machine – Parts can be easily broken or damaged if made of poor-

quality metal.
• Power-failure –
Total or partial power failure can lead to serious injury.
• Fire-or-explosion –
Cooling failure or a small spark can lead to a mechanical fire or explosion.
• Fair-wear-and-tear –
The older machine, the more wear and tear on the parts which can lead to a higher risk of
mechanical accident.
Human Factors That Cause Accidents

• Accidents caused by human factors refers to incidents in which the accident is directly
attributed to the worker involved in the accident. Common human factors that cause
industrial accidents include:
• Poor-housekeeping –
An unkempt work space can lead to slips, trips, and falls.
• Fatigue
When a body is tired, injury is more likely to occur.
• Overexertion –
Overexertion injuries are the most common type of workplace injury.

 Stress –
Workers who are stressed are often more distracted and of greater risk of injury.
• Dehydration –
It is important to consume enough water to ensure you body functions properly.
• Improper-Lifting –
Lower back strains and shoulder injuries are common among workers who use improper
lifting techniques.
Preventive-measures:
Some of the steps for preventing industrial accidents are as follows: 1. Proper safety measures 2.
Proper selection 3. Safety conscious 4. Enforcement of discipline 5. Incentives 6. Safety
committees 7. Proper maintenance of machines, equipment and infrastructural facilities 8. Safety
training.
1. Proper safety measures:
The proper safety measures should be adopted to avoid accidents Government also provides
guidelines for enacting measures for checking accidents, these should be properly followed.
2. Proper selection:
Any wrong selection of workers will create problems later on. Sometime employees are accident
prone, they may not be properly suitable for the particular jobs. So the selection of employees
should be on the basis of properly devised tests so that their suitability for jobs is determined.
3. Safety conscious:
The employees should be made conscious of various safety measures to be followed. There should
be proper working slogans and advises to the worker for making them conscious.
4. Enforcement of discipline:
Disciplinary action should be taken against those who flout safety measures. There may be
negative punishments like warnings, lay off, terminations of workers.
5. Incentives:
Workers should be given various incentives for maintaining safety. There may also be safety
contrasts among workers. Those who follow safety instructions properly should be given monetary
and nonmonetary incentives.

6. Safety committees:
Safety measures are in the interest of both employers and workers. There should be committees
consisting of representatives of workers and employees for devising and enforcing safety
programs.
7. Proper maintenance of machines, equipment and infrastructural facilities:

Accidents may occur on account of the fault in machines or equipment. There should be proper
maintenance of machines. These should be regularly checked and frequently inspected the
machines.
8. Safety training:
The workers should be given training regarding safety measures. They should know the hazards of
the machines, the areas of accident proneness and the good working possible precautions in case of
some accident.
General safety rules:

• Be sure you know how to perform the job and perform it safely.
• Report all near misses, incidents, injuries and illnesses immediately.
• Wear the required personal protective equipment necessary for the job. Safety glasses are
required as minimum eye protection on all jobsites.
• Never conduct work, unless trained.
• Obey all warning signs and barricades.
• Inspect all equipment, scaffolds, ladders, lifts, etc. before using. If found to be defective
remove from service.
• Report any unsafe tools, equipment or hazardous conditions to your supervisor.
• See that good housekeeping is maintained in your work area.
• Exercise proper lifting techniques.
• Do not perform work under unsafe conditions. Any employee has the right to stop work if
they feel it is unsafe.
• Only authorized personnel shall repair company furnished tools or equipment.

• Firearms on the job are prohibited.
• Always keep a positive attitude. This will make the day go better and make you a safer
worker.
• Do not use ladders as scaffolds and never climb so high that it is impossible to hold the top
step for support.
Personal Protection Equipment (PPE):
• Information on specific components of PPE. Including gloves, gowns, shoe covers, head
covers, masks, respirators, eye protection, face shields, and goggles.
• Gloves: Gloves help protect workers when directly handling potentially infectious
materials or contaminated surfaces.
• Gowns: Gowns help protect workers from the contamination of clothing with potentially
infectious material.
• Shoe and Head Covers: Shoe and head covers provide a barrier against possible exposure
within a contaminated environment.
• Masks: Surgical masks help protect nose and mouth of workers from poisonous smell
before inhale it.

UNIT 8
LEGISLATION
Intellectual Property Rights (IPR): Intellectual property rights are the rights given to persons over
the creations of their minds. They usually give the creator an exclusive right over the use of his/her
creation for a certain period of time. Intellectual property (IP) refers to creations of the mind, such
as inventions; literary and artistic works; designs; and symbols, names and images used in
commerce. Or in other words Intellectual property is the product of the human intellect including
creativity concepts, inventions, industrial models, trademarks, songs, literature, symbols, names,
brands,....etc.. They also entitle him/her to prevent others from using, dealing or tampering with
his/her product without prior permission from him/her. He/she can in fact legally sue them and force
them to stop and compensate for any damages.
What is Patents? Patent is an exclusive right granted by law to an inventor or assignee to prevent
others from commercially benefiting from his/her patented invention without permission or in other
words we can say that anyone who invents or discovers “any new and useful process, machine,
article of manufacture, or composition of matter, or any new and useful improvement thereof” can
apply for society use. Example computer, telephone and Bluetooth.
What is a Trademark? A trademark is a unique symbol or word(s) used to represent a business or

its products
A trademark is a sign that individualizes the goods or services of a given enterprise and distinguishes
them from those of competitors. Examples are Maruti Suzuki symbol, audi factory symbol, adidas,
cocacola etc.
What is copy right? Copyright refers to the legal right of the owner of intellectual property. A
copyright is a formal declaration that the owner is the only one with the right to publish, reproduce,
or sell a particular artistic work. In simpler terms, copyright is the right to copy. This means that
the original creators of products and they give authorization to others to reproduce the work.
Copyright is a legal means of protecting an author's work. It is a type of intellectual property that
provides exclusive publication, distribution, and usage rights for the author. Many different types

of content can be protected by copyright. Examples include books, poems, plays, songs, films, and
artwork.
Feature of factories Act, 1948: The Factories Act, 1948 consolidating and amending the law
relating to labor in factories, was passed by the Constituent Assembly on August 28, 1948. The Act
received the assent of Governor General of India on 23 September 1948 and came into force on
April 1, 1949.
Objective of Factories Act, 1948
The main objectives of the Indian Factories Act, 1948are to regulate the working conditions in
factories, to regulate health, safety welfare, and annual leave and enact special provision in
respect of young persons, women and children who work in the factories.
1. Working Hours:
According to the provision of working hours of adults, no adult worker shall be required or allowed
to work in a factory for more than 48 hours in a week. There should be a weekly holiday.
2. Health:
For protecting the health of workers, the Act lays down that every factory shall be kept clean and
all necessary precautions shall be taken in this regard. The factories should have proper drainage
system, adequate lighting, ventilation, temperature etc. Adequate arrangements for drinking
water should be made. Sufficient latrine and urinals should be provided at convenient places.
These should be easily accessible to workers and must be kept cleaned.
3. Safety:
In order to provide safety to the workers, the Act provides that the machinery should be fenced,
no young person shall work at any dangerous machine, in confined spaces, there should be
provision for manholes of adequate size so that in case of emergency the workers can escape.
4. Welfare:
For the welfare of the workers, the Act provides that in every factory adequate and suitable
facilities for washing should be provided and maintained for the use of workers. Facilities for
storing and drying clothing, facilities for sitting, first-aid appliances, shelters, rest rooms and
lunch rooms should be there.

5. Penalties:-
The provisions of The Factories Act, 1948, or any rules made under the Act, or any order given in
writing under the Act is violated, it is treated as an offence. The following penalties can be imposed:-
(a) Imprisonment for a term which may extend

to one year;
(b) Fine which may extend to one lakh rupees;
or,
(c) Both fine and imprisonment.
If a worker misuses an appliance related to welfare, safety and health of workers, or in relation to
discharge of his duties, he can be imposed a penalty of Rs. 500/-.
Cleanliness {Section 11}

Every factory should be kept clean and free from effluvia arising from any drain, privy or other
nuisance.
Disposal of wastes and effluents {Section12}
Effective arrangements should be made in every factory for the treatment and effluents due to the
manufacturing process carried on therein, so as to render them innocuous, and for their disposal.
Ventilation and temperature {Section 13}

Effective and suitable provisions should be made in every factory for securing and maintaining in
every workroom; adequate ventilation by the circulation of fresh air; and such a temperatures
will secure to workers therein reasonable conditions of comfort and prevent injury to health
Dust and fume {Section 14}

Effective measures should be taken to prevent inhalation of dust and fume that may produce in
the course of manufacturing process.
Artificial humidification {Section 15}
In any factory where the humidity of air is artificially increased, the State Government may make
rules prescribing standards of humidification; regulating the methods used for artificially
increasing humidity of the air; and directing prescribed test for determining the humidity of the
air to be correctly carried out and recorded; and prescribing methods to be adopted for securing
adequate ventilation and cooling of the air in the workrooms.

Overcrowding {Section 16}
No room in any factory should lie overcrowded to an extent injurious to the health of the
workers employed therein.
Lighting {Section 17}
In every part of a factory where workers are working or passing, there should be provided and
maintained sufficient and suitable lighting, natural or artificial, or both.
Drinking water {Section 18}

In every factory effective arrangements should be made to provide and maintain at suitable points
conveniently' situated for all workers employed therein a sufficient supply of wholesome drinking
water.
Latrines and urinals {Section 19}

In every factory sufficient latrine and urinal accommodation of prescribed types should be provided
conveniently situated and accessible to workers, separately for male and female workers, at all times
while they are at the factory.
Spittoons {Section 20}
• In every factory there should be provided a sufficient number of spittoons in convenient

places and they shall be maintained in a clean and hygienic condition.
Employee Safety
• The machinery in every factory should be properly fenced. {Section 21}
• Only the trained adult male worker, wearing tight fitting clothing which should be supplied
by the Occupier, should be allowed to work near the machinery in motion. {Section 22}
• No young person shall be employed on dangerous machinery, unless he is fully instructed

as to the danger arising in connection with the machine and the precautions to be observed
and he has received sufficient training in work at the machine. {Section 23}
• Suitable arrangements should be made to provide striking gear and devices for cutting off
power in case of emergencies. {Section 24}

• Sufficient precautions should be taken with regard to self-acting machines to avoid
accidents. {Section 25}
• To prevent danger, all machinery driven by power should be encased and effectively
guarded. {Section 26}
• Woman worker and children should not be employed in any part of the factory for pressing
cotton in which a cotton-opener is at work. {Section 27}
• Hoists and Lifts in a factory should be periodically inspected by the Competent Person.
{Section 28}
• Lifting Machines, Chains, Ropes and Lifting Tackles in a factory should be periodically
inspected by the Competent Person. {Section 29}
• Where process of grinding is carried on, a notice indicating the maximum safe working
peripheral speed of every grind-stone or abrasive wheel etc., should be fixed to the revolving
machinery.{Section 30}
• Where any plant or machinery or any part thereof is operated at a pressure above
atmospheric pressure, effective measures should be taken to ensure that the safe working
pressure of such plant of machinery or part is not exceeded.{Section 31}
• Floors, stairs and means of access should be soundly constructed and properly maintained.
{Section 32}
• Pits, sumps opening in floor etc., should be either securely covered or fenced. {Section 33}
• No workman shall be employed in any factory to lift, carry or move any load so heavy as to
be likely to cause him injury. {Section 34}
• Necessary protective equipment should be provided to protect the eyes of the workman,
where the working involves risk of injury to the eyes. {Section 35}

• Suitable precautionary arrangements should be taken against dangerous fumes, gases etc.
{Section 36}
• Every practicable measures should be taken to prevent any explosion where the
manufacturing process produces dust, gas, fume or vapor etc. {Section 37}
• Every practicable measures should be taken to prevent the outbreak of fire and its spread,
both internally and externally. {Section 38}
• The Inspector of Factories can ask the Occupier or the Manager of the Factory to furnish
drawings, specification etc., of any building, machinery or a plant, in case he feels that
condition of such building, machinery or the plant may likely to cause danger to human life.
{Section 39}
• The Inspector of Factories can suggest suitable measures of steps to take by the Occupier or
Manager for implementation, when he feels the condition of any building, machinery or a
plant may likely to cause danger to human life. {Section 40}
• Wherein 1000 or more workmen are employed in a factory, the Occupier should appoint
a Safety Officer to look after the safety aspects of the factory. {Section 40-B}
• Adequate and suitable 'washing facilities' should be provided in every factory. {Section 42}
• Provision should be made to provide suitable places for keeping clothing not worn during
working hours and for the drying of wet clothing.{Section 43}
• In every factory, suitable arrangements for sitting should be provided and maintained for all
workers obliged to work in a standing position, in order that they may take advantage of any
opportunities for rest which may occur in the course of their work.{Section 44}
• First-Aid Boxes with the prescribed contents should be provided and maintained so as to
be readily accessible during all working hours at the rate of at least one Box for every 150
workmen. {Section 45}

 The Occupier should provide a canteen for the use of workers in every factory, where
the number of workmen employed is more than 250. {Section 46}
 In every factory wherein more than 150 workers are employed adequate and suitable
shelters or rest rooms and a suitable lunch room, with provision for drinking water,
where workers can eat meals brought by them, should be provided and maintained for the
use of the workers. {Section 47}
 In every factory wherein more than 30 women workers are ordinarily employed there
should be provided and maintained a suitable room for the use of children under the age
of six years of such women. {Section 48}
Ordinarily, a worker should not be allowed to work in a factory for more than 48 hours in
any week. {Section 51}
The workman should have one holiday for a whole day in a week. Where he was asked to
work on his scheduled weekly holiday, he should be given compensatory holiday within
three days of his scheduled weekly holiday. {Section 52}
Features of payment of wages Act, 1936: The Payment of Wages Act, 1936 regulates
payment of wages to employees (direct and indirect). The act is intended to be a remedy
against unauthorized deductions made by employer and/or unjustified delay in payment of
wages.
The Payment of Wages Act 1936 was come in to the force on 23rd April 1936. This Act
was passed to regulate the payment of wages for certain classes of persons employed in
industry. It ensures payment of wages in a particular form and at regular intervals without
unauthorized deductions.
The salient features of the payment of wages act 1936 are as follows:
a) The Act was formed with the intention to regulate timely payment of wages to
specific class of workers employed in industry without any wrongful deductions apart from
what is mentioned in the Act.

b) The Act ensures that the salary be paid by 7th of each month in
factories/establishments having a workforce of less than 1000 workers and by 10th of each
month in other cases.
c) The Act ensures fixing of wage period, time and mode of payment of wages
d) The Act does not cover those whose wage is Rs. 24,000/- or more per month.
e) The Act provides a worker with its duly right as covered under the Act.
f) The Act empowers a worker to file a claim directly or through a Trade Union or
through an Inspector, before with the Authority appointed under the Payment of Wages Act
in case there is a delay in wages or in case of an unauthorized deduction.

UNIT 9
SMART TECHNOLOGY
The Internet of Things (IOT) refers to a system of interrelated, internet-connected objects that are
able to collect and transfer data over a wireless network without human intervention.
Concept of IOT: The Internet of things (IOT) describes the network of physical objects—
“things”— IOT devices are a part of the larger concept of home automation, which can include
lighting, heating and air conditioning, media and security systems.
In other words we can say that The Internet of Things, or IOT, refers to the billions of physical
devices around the world that are now connected to the internet, all collecting and sharing data. The
Internet of Things is making the fabric of the world around us smarter and more responsive, merging
the digital and physical universes.
How IOT works
An IOT ecosystem consists of web-enabled smart devices that use embedded systems, such as
processors, sensors and communication hardware, to collect, send and act on data they acquire from
their environments. IOT devices share the sensor data they collect by connecting to an IOT gateway
or other edge device where data is either sent to the cloud to be analysed locally. Sometimes, these
devices communicate with other related devices and act on the information they get from one
another. The devices do most of the work without human intervention, although people can interact
with the devices -- for instance, to set them up, give them instructions or access the data.
The connectivity, networking and communication protocols used with these web-enabled devices
largely depend on the specific IOT applications deployed.
IOT can also make use of artificial intelligence (AI) and machine learning to aid in making data
collecting processes easier and more dynamic.

COMPONENTS OF IOT:
1. Smart devices and sensors – Device connectivity
Devices and sensors are the components of the device connectivity layer. These smart sensors are
continuously collecting data from the environment and transmit the information to the next layer.
Latest techniques in the semiconductor technology is capable of producing micro smart sensors for
various applications. Common sensors are:
• Temperature sensors and thermostats

• Pressure sensors
• Humidity / Moisture level
• Light intensity detectors
• Moisture sensors
• Proximity detection

2. Gateway:
IOT Gateway manages the bidirectional data traffic between different networks and protocols.
Another function of gateway is to translate different network protocols and make sure
interoperability of the connected devices and sensors. Gateways can be configured to perform pre-
processing of the collected data from thousands of sensors locally before transmitting it to the next
stage. In some scenarios, it would be necessary due to compatibility of TCP/IP protocol. IOT
gateway offers certain level of security for the network and transmitted data with higher order
encryption techniques. It acts as a middle layer between devices and cloud to protect the system
from malicious attacks and unauthorized access.
3. Cloud:
Internet of things creates massive data from devices, applications and users which has to be managed
in an efficient way. IOT cloud offers tools to collect, process, manage and store huge amount of
data in real time. Industries and services can easily access these data remotely and make critical
decisions when necessary.
Basically, IOT cloud is a sophisticated high performance network of servers optimized to perform
high speed data processing of billions of devices, traffic management and deliver accurate analytics.
Distributed database management systems are one of the most important components of IOT cloud.
Cloud system integrates billions of devices, sensors, gateways, protocols, data storage and provides
predictive analytics. Companies use these analytics data for improvement of products and services,
preventive measures for certain steps and build their new business model accurately.
4. Analytics: Analytics is the process of converting analog data from billions of smart devices and
sensors into useful insights which can be interpreted and used for detailed analysis. Smart
analytics solutions are inevitable for IOT system for management and improvement of the entire
system.
One of the major advantages of an efficient IOT system is real time smart analytics which helps
engineers to find out irregularities in the collected data and act fast to prevent an undesired scenario.

Service providers can prepare for further steps if the information is collected accurately at the right
time.
5. User interface:
User interfaces are the visible, tangible part of the IOT system which can be accessible by users.
Designers will have to make sure a well-designed user interface for minimum effort for users and
encourage more interactions.
Modern technology offers much interactive design to ease complex tasks into simple touch panels
controls. Multicolor touch panels have replaced hard switches in our household appliances and the
trend is increasing for almost every smart home devices.
Characteristics of IOT:
1. Connectivity: In the case of IOT, the most important feature one can consider is connectivity.
Without seamless communication among the interrelated components of the IOT ecosystems (i.e
sensors, compute engines, data hubs, etc.) it is not possible to execute any proper business use. IOT
devices can be connected over Radio waves, Bluetooth, Wi-Fi, Li-Fi, etc. We can leverage various
protocols of internet connectivity layers in order to maximize efficiency and establish generic
connectivity across IOT ecosystems and Industry. There may be special cases where the IOT
ecosystem is built on-premises or in an intranet.
2. Dynamic Nature: For any IOT use case, the first and foremost step is to collecting and converting
data in such a way that means business decisions can be made out of it. In this whole process,
various components of IOT need to change their state dynamically. For example, the input of a
temperature sensor will vary continuously based on weather conditions, locations, etc. IOT devices
should be designed this keeping in mind.
3. Safety: One of the main features of the IOT ecosystem is security. In the whole flow of an IOT
ecosystem, sensitive information is passed from endpoints to the analytics layer via connectivity
components. While designing an IOT system we need to adhere to proper safety, security measures,
and firewalls to keep the data away from misuse and manipulations. Compromising any component
of an IOT ecosystem can eventually lead to failure of the whole pipeline.

4. Integration: IOT integrates various cross-domain models to enrich user experience. It also
ensures proper trade-off between infrastructure and operational costs.
5. Heterogeneity: The devices in the IOT are heterogeneous as based on different hardware
platforms and networks. They can interact with other devices or service platforms through
different networks.
6. Enormous scale: The number of devices that need to be managed and that communicate with
each other will be at least an order of magnitude larger than the devices connected to the current
Internet.
7. Security: IOT devices are naturally vulnerable to security threats. As we gain efficiencies, novel
experiences, and other benefits from the IOT, it would be a mistake to forget about security
concerns associated with it. There is a high level of transparency and privacy issues with IOT. It
is important to secure the endpoints, the networks, and the data that is transferred across all of it
means creating a security paradigm.
Categories of IOT:
IOT can be divided into 3 categories based on usage and clients base:
• Consumer IOT includes the connected devices such as smart cars, phones, watches,
laptops, connected appliances, and entertainment systems.
• Commercial IOT includes things like inventory controls, device trackers, and connected
medical devices.
• Industrial IOT covers such things as connected electric meters, waste water systems, flow
gauges, pipeline monitors, manufacturing robots, and other types of connected industrial
devices and systems.
Applications of IOT: The following are the applications of IOT:

1. Smart Cities: Smart cities will promote the use of technology, information and data to enhance
and improve its infrastructure and services. This includes access to resources like water and
electricity. Providing homes that are affordable to all, provision of proper education and health
services, and increase IT connectivity.
Characteristics of Smart City:

A. Smart cities will promote the use of technology, information and data to enhance and
improve its infrastructure and services. This includes access to resources like water and electricity.
Providing homes that are affordable to all, provision of proper education and health services, and
increase IT connectivity.
B. A larger number of government services will be made more accessible to people. Services
will be offered online and will provide more accountability, transparency and more involvement of
the public. Formation of E-groups will allow people to voice their opinions and receive feedback,
monitor programs and activities with the help of cyber tour worksites.
C. An increase in access to public transportation and creative solutions such as smart parking,
intelligent management, and integrated modal transport. Smart cities will be more pedestrian and
cyclist friendly with key administrative services at shorter, walk able distances.
D. Smart cities will redevelop or develop unplanned and poorly planned areas such as slums,
with a vision to make cities safer and less disaster-prone. With the use of video surveillance,
criminal activity will be tracked, and drastic security measures will be taken to protect women,
children, and senior citizen.
E. Urban hear effects will be reduced by creating and maintaining parks, playgrounds, and
recreational spaces. Living spaces will be made to accommodate the growing population and also
enhance its standard of living.
F. Infrastructure will be more sustainable and eco-friendly, by reducing the amount of waste
generated and also through mindful consumption of natural resources.
• adequate water supply, assured electricity supply, sanitation, including solid waste
management,

• efficient urban mobility and public transport,
• affordable housing, especially for the poor,
• robust IT connectivity and digitalization,
• good governance, especially e-Governance and citizen participation,
• sustainable environment,
• safety and security of citizens, particularly women, children and the elderly, and
• health and education.
2. Smart Transportation: Smart transportation, a key internet of things vertical application, refers
to the integrated application of modern technologies and management strategies in transportation
systems. These technologies aim to provide innovative services relating to different modes of
transport and traffic management and enable users to be better informed and make safer and
‘smarter’ use of transport networks.
Smart transportation includes the use of several technologies, from basic management systems such
as car navigation; traffic signal control systems; container management systems; automatic number
plate recognition or speed cameras to monitor applications, such as security CCTV systems; and to
more advanced applications that integrate live data and feedback from a number of other sources.
According to the Intelligent Transportation Society of America, ITS technology makes it possible
to:
• Use a navigation system to find the best route based on real-time conditions
• Alert drivers of potentially hazardous situations in time to avoid crashes
• Be guided to an empty parking space by a smart sign
• Ride a bus that turns traffic lights green on approach
• Detect and respond promptly to traffic incidents

• Reroute traffic in response to road conditions or weather emergencies
• Give travelers real-time traffic and weather reports
• Allow drivers to manage their fuel consumption
• Adjust speed limits and signal timing based on real-world conditions
• Improve freight tracking, inspection, safety and efficiency
• Make public transportation more convenient and reliable
• Monitor the structural integrity of bridges and other infrastructure
3. Smart Home: A smart home allows homeowners to control appliances, thermostats, lights, and
other devices remotely using a smartphone or tablet through an internet connection. Smart homes
can be set up through wireless or hardwired systems. Smart home technology provides
homeowners with convenience and cost savings.
Features of Smart Home:
Light Control: As lighting is an integral part of a building. The user would be able to choose the
time of activation, for example, in the home 7pm when it starts to get dark might be a sensible
option. This could include a specific room in the home or all the rooms. In a voice controlled format
the user can change the color of the light along with switch on or switch off the through Bluetooth
headset.
Security: With the advancements of smart technology, it makes sense to include security features.
The user would be able control the arming and disarming of the alarm, as well as edit specific
settings of the alarm, such as the key code. The user could also have the option to configure intrusion
detection settings. This system would warn the security personnel or house owner of any windows
or doors being forced open, through the use of electronic sensors that are connected to the system.
Temperature: The user would be able to control the heating and cooling of the home, through the
use of both time and parameter-based functions. The user may choose for the heating to come on

when outside conditions drop below a certain temperature, there would be heat-sensitive sensors
placed outside to detect varying conditions.
Appliances: The power supply to all appliances in the home could be controlled using the smart
system. In a large home this would be a very convenient feature because there may be a lot of
electrical appliances that are left on standby, hence the system should contain a feature, which
searches all power supply links in the home to determine where energy can be saved.
Vehicle Detection: When a vehicle approaches the driveway of a home, the system should be able
to alert the homeowner. This is only possible if certain types of smart home technologies are used.
It would work very well with a Bluetooth headset because the system announce the arrival of the
visitor to the homeowner.
Entertainment: For a fully capable smart home, entertainment features would be an innovative
feature to include. The most widely used aspect of entertainment features is that the user can play
his favorite or selected song at the time of requirement.
4. Smart Healthcare: Smart healthcare uses a new generation of information technologies, such
as the internet of things (lOT), big data, cloud computing, and artificial intelligence, to transform
the traditional medical system in an all-round way, making healthcare more efficient, more
convenient, and more personalized.
In the healthcare, IOT plays a very important role in various applications. This criterion is divided
into three phases, such as clinical care, remote monitoring and context awareness. During data
collection, the risks of human error are reduced by means of automatic medical data collection
method. This will improve the quality of the diagnosis and reduce the risk of human errors, who are
involved in the collection or transmission of false information which is dangerous for the patients’
health. There have been efforts for reviewing healthcare with different aspects. smart healthcare is
defined by the technology that leads to better diagnostic tools, better treatment for patients, and
devices that improve the quality of life for anyone and everyone.” The key concept of smart health
includes eHealth and mHealth services, electronic record management, smart home services and
intelligent and connected medical devices.

Ehealth: As mentioned above, one of the key concepts for improving today’s healthcare is eHealth,
i.e. the usage of ICT in care. This is also how the World Health Organization defines the term:
“eHealth is the use of information and communication technology (ICT) for health. Examples
include treating patients, conducting research, educating the health workforce, tracking diseases and
monitoring public health.”
Mhealth: The term mHealth is short for mobile health. This terms has been defined by the WHO
as “a component of eHealth”. Since there is no standardized definition of mHealth, the Global
Observatory of eHealth (GOe) has determined mHealth as “medical and public health practice
supported by mobile devices, such as mobile phones, patient monitoring devices, personal digital
assistants (PDAs), and other wireless devices.” Mobile phones and other devices are used to support
patients and improve healthcare. Besides using mobile phones to make calls and sent text messages,
mHealth also includes more complex features and applications such as general packet radio service
(GPRS), third and fourth generation mobile telecommunications (3G and 4G systems), GPS and
Bluetooth technology.
Helping to Older people: As life expectancy keeps increasing, and more and more countries are
confronted with an ageing society, smart health has to be applied to healthcare of older adults as
well. Ambient Assisted Living, short AAL, is one new approach that aims at helping older people
live as independently as possible.
5. Smart Industry: Smart Industry stands for radical digitalization, connecting products, machines
and people, and the use of new production technology. The optimization of production through the
application of ICT and new production technologies like 3D printing makes manufacturing more
efficient, cheaper and boosts quality.
Features:
Security and safety: Security and safety for Industry includes protecting people from machinery-
related hazards (safety) as well as the protection of production facilities and corporate IT from
attacks and faults from the surrounding environment (security). This involves securing sensitive
data as well as the prevention of intentional and unintentional malfunctions.

Digital life-cycle Management: The comprehensive networking of all automation components,
machines, processes and product data — from development and production to recycling —
decreases development time and therefore development costs, for both completely new smart
manufacturing lines and upgrades to existing platforms. In addition, this also ensures the
application-oriented design of all components.
Fast integration and flexible configuration: With Plug and Produce, people, machines, processes
and the flow of goods are networked together on an ad hoc basis. Software tools simplify multiple
smart manufacturing machine steps: commissioning, integration and (re)configuration, as well as
preventive maintenance of all components, modules and machines.
Distributed Intelligence: intelligent automation components with integrated software perform

their tasks independently, according to the specifications of higher-level systems, and make
autonomous decisions.
People as key players: Digital assistant functions and intelligent workplace design support people
with production-related information and improved ergonomics, thereby
increasing the level of individualization of the work environment.
Open standards: Open Standards that extend across manufacturers and are platform-independent
form the basis for horizontal and vertical integration and thus for the seamless exchange of
information in value-creation networks.
6. Smart Agriculture: The term smart agriculture refers to the usage of technologies like Internet
of Things, sensors, location systems, robots and artificial intelligence on your farm. The ultimate
goal is increasing the quality and quantity of the crops while optimizing the human labor used.
Technology used in smart agriculture is given below:
• Irrigation control and precise plant nutrition
• Climate management and control in greenhouses
• Sensors – for the soil, water, light, moisture, for temperature management

• Location systems – GPS, satellite, etc
• Communication systems – based on mobile connection, LoraWan, etc
• Robots
Features:
Pump Control – remote and automated turn-off control of most electric and diesel irrigation well
pumps used on farms today.
Pump Monitoring – the essential information a farmer needs to know about the operation
condition of his well pumps.
Pump Automation Features – easy-to-use, easy-to-understand automation features that have a
tremendous positive impact on field operations like measuring the moisture level, water level.
Smart Farming: It is an emerging concept that refers to managing farms using modern Information
and Communication Technologies to increase the quantity and quality of products while optimizing
the human labor required.
• The goal of smart agriculture research is to ground a decision making support system for
farm management. By providing them with the benefits of technological advancements,
smart agriculture aims to reduce the heavy workload of the farm workers, hence
improving their quality of life.
• Through IoT it increase the efficiency and helping the farmer to maximize crop production.
• Reduce emission from fertilizer manufacturing
• Through IOT the farmers can easily find out how much pesticide and water are required for
the development of crops.
7. Smart Energy Management: Smart energy management systems allow the coordination
among sensors and lights to automatically keep lights off when not required. The system uses a
combination of technologies to enable data-driven lighting automation. Smart energy

management is a way to understand smart energy and how the systems work most efficiently.
Some smart energy systems are basic like energy saving air conditioners or using smart
appliances.
Features:
• Smart energy management will help you diagnose potential energy losses and existing
problems in your residential, business or commercial premises.
• An energy management feature uses smart technology to identify hours of large energy
usage, wasted electricity,.
• It turns off appliances, lights, and devices when they are not being used.
• Smart Energy Management can truly help the society to save money and reduce the impact
on the environment.
• it makes easier for consumers to monitor their energy consumption and allowing them to
make effective changes.
• Reduce cost: EMS allows the consumer to significantly reduce utility, including heating,
cooling, lighting, and water.
• Improve staff well-being: Both consistent lighting and temperature control through smart
energy management system, it will create energy-efficient workplaces for all, increasing
employee happiness and performance.
• Improve facility performance: Not only EMS improve employee performance, but also it
improves building performance. By reducing energy waste and operating costs, we can save
more money and that can be utilized in other use like business, marketing, promotions,
salaries, and product spends.

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LECTURE NOTES

TECHNOLOGY ENTREPRENEURSHIP & MANAGEMENT

Technology Entrepreneurship & Management

Need of Entrepreneurship: ........................................................................................................................ 6

Characteristics of Entrepreneur ................................................................................................................. 7

Qualities of Entrepreneur: ......................................................................................................................... 8

Types of Entrepreneur ..............................................................................................................................11

Functions of Entrepreneur ........................................................................................................................12

Barrier to Entrepreneurship ......................................................................................................................14

Entrepreneur vs. Manager ........................................................................................................................16

Forms of Business Ownership: ................................................................................................................17

C) Joint Hindu Family ..........................................................................................................................23

D) Cooperative Society ........................................................................................................................25

E) Joint Stock Company:.....................................................................................................................29

Types of Industries ...................................................................................................................................32

Manufacturing Industries .....................................................................................................................32

Extractive Industries ............................................................................................................................33

Genetic Industries ................................................................................................................................33

Construction Industries ........................................................................................................................33

Service Industries .................................................................................................................................33

Small Scale Industries (SSI) .....................................................................................................................33

Characteristics of SSI ...........................................................................................................................33

Role in the Economy ............................................................................................................................34

Technology Entrepreneurship & Management

Advantages of small scale industries ....................................................................................................35

Disadvantages of small scale industries ...............................................................................................37

Ancillary Unit: .........................................................................................................................................38

A tiny unit ................................................................................................................................................38

Service Sector Unit ..................................................................................................................................38

District Industries Centre (DIC) ...........................................................................................................40

National Small Industries Corporation (NSIC) ....................................................................................41

Odisha Small Industries Corporation (OSIC) .......................................................................................42

Small industrial Development Bank of India (SIDBI)..........................................................................42

National Bank for Agriculture and Rural Development (NABARD) ...................................................43

Commercial Bank ................................................................................................................................44

Khadi and Village Industries Commission (KVIC) ..............................................................................45

Technology Business Incubation (TBI) ................................................................................................47

Science & Technology Entrepreneurship Parks (STEPs) .....................................................................48

MARKET SURVEY AND OPPORTUNITY IDENTIFICATION (BUSINESS PLANNING) ..................49

What is Business planning? .....................................................................................................................49

Objectives of Business Planning: .........................................................................................................49

Process of Business Planning ...............................................................................................................51

Advantages of Business Planning ........................................................................................................53

Disadvantages of Business planning ....................................................................................................53

Time Schedule Plan .................................................................................................................................53

Assessing the demand and supply ............................................................................................................54

What is demand? ..................................................................................................................................54

What is supply? ....................................................................................................................................54

Technology Entrepreneurship & Management

Major criteria for final selection of a business opportunity ......................................................................58

Selection of Enterprise .........................................................................................................................59

Selection of product or Final Product Selection ...................................................................................59

Selection of Project ..................................................................................................................................59

PROJECT REPORT PREPARATION ........................................................................................................61

UNIT 4 MANAGEMENT PRINCIPLE.......................................................................................................68

FUNCTIONAL AREAS OF MANAGEMENT ...........................................................................................76

LEADERSHIP AND MOTIVATION .......................................................................................................118

WORK CULTURE, TQM .........................................................................................................................132

AND SAFETY ...........................................................................................................................................132