UNIT-1

Entrepreneurship

What is entrepreneurship?

Essentially, entrepreneurship is the process of developing, organizing, and running a new business to generate
profit while taking on financial risk.

Most often, the types of entrepreneurships are broken into four categories:

 Small business.
 Scalable startups.
 Large company.
 Social entrepreneurship.

An entrepreneur is an individual who identifies a need in the market place and works to fulfill it.

Entrepreneurship and its Scope?

 Entrepreneurship moves even beyond the closed system of an enterprise.

 Entrepreneurship is generating revenue for the entrepreneur.
 Entrepreneurship provides jobs for the society and develops communities.
 Entrepreneurship promotes the new business and provides opportunities to improve the new business
sectors.

Need of Entrepreneurship?

Passion, Perseverance & Persistence: -

Passion is a strong and uncontrollable emotion that is based on something higher to achieve than what the person
is carrying within himself. Perseverance is a mature emotion that comes through experiences. While persistence
is the sail that will row the boat of an entrepreneur through the toughest of climates.

2. Big Dreamer: -

Dreaming big further strengthens an entrepreneur with his ability to dream and see the wide picture

3. Good Listener: -

The ability to truly listen to the customers and employees is actually what makes a difference.

4. Financing Partner: -
Choosing a financing partner who understands the business needs is very much essential.

Entrepreneurial Competencies:

Entrepreneurship is the oldest form of business organization. It is in fact entrepreneurs that bring innovation into
our economy with new products and services. They drive a nation’s economy towards development and progress.
Let us explore some of the traits and characteristics of an entrepreneur. Entrepreneurship competencies combine
creativity, a sense of initiative, problem solving, the ability to marshal resources, and financial and technological
knowledge.

These competencies enable entrepreneurs and entrepreneurial employees to provoke and adapt to change. The
following are the various behavioral competencies required by an entrepreneur.

• Initiative

• Systematic planning

• Creativity and innovation

• Risk taking and Risk Management

• Problem solving

• Persistence

• Quality performance

• Information management

1. Vision and Passion

An entrepreneur must have a very clear vision of his business. So, he must have the ability to plan out his long
term and short-term goals and objectives. He must able to map out his future plans in an articulate and efficient
manner.

2. Innovative
One of the main characteristics of entrepreneurship in innovation. The entrepreneur looks for the opportunity in
the market and capitalizes on it. He is the one who introduces new products and services in the market trying to
fulfil customer needs. The innovation can also be in a production process, new marketing strategy, innovative
advertising etc.

3. Risk Taker

A risk is an integral part of any new business. But it is an especially important factor in entrepreneurship
because here the entrepreneur bears the entire risk of the business. So it is necessary that the entrepreneur has an
adventurous and risk-taking personality.

4. Leader

One of the other important qualities of a successful entrepreneur is leadership. All good entrepreneur are good
leader. They have the ability to motivate and lead their employees to success. They also have the tenacity.
knowledge, and skill to pull their businesses from a tight corner like good leaders.

5. Persistent

A good entrepreneur is always persistent by nature. A business is never an overnight success. It takes immense
hard work and also a little bit of luck. But a persistent entrepreneur makes his own luck. He can create
opportunities if they are not presented to him. So a persistent entrepreneur that works tirelessly always has a
greater chance of success.

6. Ethical
 Ethics and integrity are the cornerstones of any successful business in the long term. A sustainable business
cannot be run by someone with compromised morals. So, any credible business must have at its head an ethical
entrepreneur who upholds the letter of the law and the integrity of the business.

7. Competitive Spirit

The business world is a very cut-throat space. Thousands of new businesses born and die every day. So the
competition is always going to be fierce and intense. Such an environment is better suited to someone who is
already competitive by nature and thrives in such situations of pressure.

8. Resilient
And finally one of the most important traits in a successful entrepreneur is resilience. There is no smooth
straightforward path to success.

Factor affecting entrepreneurial development:

Entrepreneurship is a human skill, which can be developed. Due to entrepreneurship development, living
standards of society can tend to rise, new opportunities of employment can be created and rapid economic and
industrial development become possible. There are a number of factors affecting entrepreneurship or motivating
entrepreneurs as follows:

 Individual
Entrepreneur is an individual having specific knowledge, skills and efficiency. Any new enterprise is created by
an individual or group of individuals. The creativity of an individual encourages him to establish a new
enterprise. Creativity consists of innovation, search and research. Personality, social conditions, social support,
education and training etc. factors lay an important role for developing such skills and motivate an individual to
become an entrepreneur.

 Industrial development
More suitable the industrial environment in a nation, more rapid development of entrepreneurship. More
favorable industrial environment is one, where transportation, communication, electricity, labour, water, raw
materials etc. are easily available. Such industrial environment by and large affect entrepreneur development.

 Social environment

Social system plays a vital role in social environment. As an individual is born and developed in a family and
society, social values, ethical standards, family structure, caste and religious attitudes of social environment
affect entrepreneurship development.

 Economic environment:
The economy in which enough capital fund is available for establishing an enterprise and market incentives are
also available, encourages entrepreneurship development. Banking, education, industrial policy, economic
policy, Exim policy interest rate etc. Factors of economic environment affect entrepreneurship development.
Thus economic soundness and free economy motivate entrepreneur development.

 Technological environment
Technology is an art of converting the natural resources into goods and services more beneficial to society. Due
to technological development new product, new production process new raw material, new researches are
encouraged for modernization.
  Political environment
Government also plays an important role in entrepreneurship development. Due to Globalization, Indian
economy has adopted free industrial policy, restrictions on industries have been minimized and MRTP act
has been cancelled, which has motivated many entrepreneurs to establish and to develop industries in
Indian economy.

 Incentives
Incentives are also one of the important factors affecting entrepreneurship. If motivating loans, policies,
organizations are developed, it leads to rapid entrepreneurship development.

 Profit making
It is the profit that induces the prospective entrepreneurs to get into the business and start new activities. Profit,
therefore, is a factor which induces the entrepreneur to engage and utilize the factors of production and for
development.

Entrepreneurial Motivation Theory (McClelland’s Theory)

MOTIVATION: Motivation is derived from the word 'Motive' which denotes a person's need, desires, wants
or urges. It is the process of motivating individuals to take the action in order to achieve a goal

Mc Cleland’s motivation theory:

* David McClelland was an American psychologist.

* He gave the 'Need theory' in 1961 also popular as three need theory.

* He said that these motivators are not inherent they are developed through our

culture and life experiences.

Mc Cleland’s motivation theory states that every person has one of three main driving motivators

(a) Need for achievement .

(b) Need for affiliation.

(c) Need for power.

1. Need for Achievement :-

>> challenging task.

>> want feedback.

>> setting moderate and difficult goal.

2.Need for Affiliation :-

>> perform better in team.

>> Informal relationship.

>> Cooperative

>> Interact with others, mix with them and make friends.

>> They prefer co-operative environment rather than competitive.

3. Need for Power :-

>> Wants to control others.

>> Ability to influence others

>> Clear about group goal and also push their team members to achieve their goal.

>> View situation from a win-lose perspective.

Conceptual model of entrepreneurship

The above given model has been developed by John Kao. John Kao has developed a conceptual model of
entrepreneurship in his article: Entrepreneurship, creativity and organization in 1989.According to Kao, the most
successful entrepreneur is one who adapts himself to the changing needs of the environment and makes it
hospitable for the growth of his business enterprise. This ECO (Entrepreneurship, creativity ad organization)
analysis frame work developed and conceptualized by John J. Kao contributes a great deal to the emergence as
well as sustenance of entrepreneurship and entrepreneurial talent in the prevailing business environment.

This model has four main aspects:

1. Entrepreneurial Personality:

The overall success of a new venture largely depends upon the skill, qualities, traits and determination of the
entrepreneur. The entrepreneur is central to entrepreneurship because without the key individual who makes the
thing happen in an enterprise, there will be no positive result.

2. Entrepreneurial Task:
It is a role played by entrepreneur in an enterprise. The major task of the entrepreneur is to recognize and exploit
opportunities. He should have the ability to perceive opportunities where normal person do not.

3. Entrepreneurial Environment:

It involves the availability of resources, infrastructure, competitive pressures, social values, rules and regulations,
stage of technology etc. The world surrounding organization may help or hinder the growth of entrepreneurship.

4. Organizational Context:

It is the immediate setting in which creative and entrepreneurial work takes place. It involves the structure, rules,
policies, culture, human resource system, communication system.

Entrepreneur vs Intrapreneurship

 Entrepreneur- Entrepreneur is an individual who, rather than working as an employee, runs a small
Business and assumes all risks and reward of a given business venture, idea, goods or services offered for
sale . Entrepreneurship is commonly seen as a Business leader and Innovator of new ideas, and business
process.
The word ‘Entrepreneur’ originates from the French word Entrepreneur which means “to undertake”. In
business terms, it means to start a business.

Intrapreneurship : Entrepreneurship is simply entrepreneurship is an existing organization.

In many ways, intrapreneurship is easier for an individual than entrepreneurship because it has the support of an
existing organization. However, there are both facilitators and barriers to intrapreneurship.

How Intrapreneurship Benefit Workers:

When you are innovative is an existing organization, you have a support system that entrepreneurs don't have. If
you fail, you won't suffer financially. Usually, a failure is a developmental experience that prepares you for your
next venture. Intrapreneurship is entrepreneurship with a safety net.
If you are a successful intrapreneur, you can always take your innovative skills and strike out on your own as an
entrepreneur when you are ready to take the plunge. Or perhaps your organization will put you in charge of a
new venture, particularly if you developed the idea for it.
I have found that in a typical organization, approximately 20% of employees will have 80% of the innovations.
Why is that? Because that 20% group is curious and passionate about improving their environment. They aren't
afraid of failure. Indeed ,they expect to fail on the road to success.
They are resilient because they know that inventors rarely get it right on the first try.
Start Thinking Like an Intrapreneur:
At Elmhurst University we have created a one -year part -time graduate program in Innovation and
Entrepreneurship that develops one's ability to be an entrepreneur or intrapreneur.
Our hands-on emphasis includes business mentoring ,a start-up incubator/accelerator, an entrepreneur-in-
residence, and other innovation support.
Classification of Entrepreneurs: -
A) On the basis of Economic Development: -

1) Innovative Entrepreneurs-

a) Introduce new products, new methods to produce.

b) Discover new markets & recognizes the enterprise.
c) Build Modern capitalism.
 d) Aggressive in nature(it doesn’t means shouting anyone it means that sometimes by doing same work it’s
frustrating or irritating.)

e.g.- Watt Disney built theme park then it converted into Disney Land. Steve Jobs founder of Apple.

2 Imitative Entrepreneurs-

a) Other name Adaptive Entrepreneurs.

b) Sometimes called copy cat for copy suitable innovations made by innovative entrepreneurs.
c) Organizers of factors of production rather than creators.
d) Helped underdeveloped economies.

e.g.- Opening a well established restaurant business as a franchise.

3) Fabian Entrepreneurs-

a) Shy and lazy.

b) Non –risks takers.
c) Second generation entrepreneurs in a family business enterprise.
d) Imitate only when they are sure that failure to do so would result ina loss of the relative position in the
enterprise.

4) Drone Entrepreneurs-

a) They start business and will not like innovative things.

b) They are just like keep on going.
c) Refuse to copy or use opportunities coming their way.
d) Conventional in approach.
e) Resist changes and suffer losses.
B) On the basis of Business Development: -

1) Business Entrepreneurs-

They conceive idea for a new product or service and then create to convert their idea into reality.

2) Industrial Entrepreneurs-

These entrepreneurs are essentially manufactures who identifies the needs of customers and creates products or
services to serve them.

3) Corporate Entrepreneurs-

These entrepreneurs used their innovative skill in organizing and managing and corporate undertaking.

4) Agriculture Entrepreneurs-

It undertakes agricultural activities of through mechanization irrigation and application of technologies to

produce the crop.
 C) On the basis of Use of Technology: -

1) Technical Entrepreneurs-

These may enter business to commercially exploit their invention and discoveries.

2) Non-Technical Entrepreneurs- They are concerned only with developing alternative marketing and
promotional strategies for their product or services.

ENTREPRENEURIAL DEVELOPMENT PROGRAM: -

Building a good enterprises requires excellent entrepreneurs and excellent entrepreneurs requires

Fabulous Entrepreneurial development program.

Entrepreneurial development program are absolutely important in providing the correct environment

and skillset to the young budding minds of India to become the leading entrepreneurs of the future.

Entrepreneurial development program is a program which helps in developing entrepreneurial abilities

among individuals.

The main objective of entrepreneurship development programs are:

1.To develop small and medium scale enterprises which helps in generating employment.

2.To develop Entrepreneurial qualities among individuals i.e. Motivation , leadership etc.

The phase of Entrepreneurship development program is summarized in three

parts namely:

1.Pre- training phase: It is an introductory phase in which Entrepreneurial development program are
launched i.e. it identifies the suitable location where the operation can be initiated and selection of individuals is
done who coordinator the entrepreneurial development programs activities, organizing the facilities related to
programs.

2.Training phase: The main function of this is to give training to the future entrepreneurs and guiding them
for establishing the enterprises duration of this phase is 4-6 weeks and it is usually a full time course.

3.Post training phase: This phase is also referred as the phase of follow up assistance. In this phase, the
candidates who have completed their program successfully are provided post training assistance and other
activities which include,

a) Review the pre- training work

b) Review the process of training programs

c)Review post training approach.

 Knowing the importance and potential in entrepreneurship, government launched some entrepreneurial
development programs to fulfil the requirements:

1) Start- up India: It is a initiative of the government of India, which helps in building a strong ecosystem
for nurturing innovation and startups in the country that will drive sustainable economic growth and generate
large scale employment opportunities.

2). Atal Innovation Mission (AIM): Its objective is to develop new programs and policies for increasing
innovation in different sectors of the economy, provide platforms and collaboration opportunities for different
stakeholders.

3). Pradhan Mantri Kaushal Vikas Yojana (PMKVY): It is skilled based training scheme started by
the government of the India. Indain nationals can join skill- based training courses and pursue education with
free of cost.

There are various problems faced by Entrepreneurial development programs:

1). No clear Objectives: Majorities of institutions engaged in Entrepreneurship development programs are
themselves not convinced and certain about the task they are supposed to perform and objectives to achieve.

2). Poor follow – up: Institutions providing entrepreneurial development programs do not show much
concern for objective identification and selection of entrepreneurs.

3). Non – availability of Infrastructural Facilities: Entrepreneurial development programs are not
successful due to non – availability of adequate infrastructural facilities required for the conduct of
Entrepreneurship development programs.

4). Lack of Commitment and involvement by the Corporate Sector: Corporate Sector shows less
concern for the successful conduct of Entrepreneurship development programs. They lack of commitment and
involvement in Entrepreneurship development programs.

5). No clear policy at the national level: In lack of proper policy the growth of the entrepreneur stopped
due to unsupportive attitude of the agencies like bank, financial Institutions and other supporting agencies.
 UNIT-2
Innovation
Innovation is the practical implementation of ideas that result in the introduction of new goods or services or
improvement in offering goods or services. It also implies a value system which seeks to derive a positive
outcome from the inventive act. For a business, innovation is a product, process or business concept or
combinations that produce profits and growth for the organization. True innovation is an advancement of what is
done normally. Therefore, something is an innovation not because it is new, but because it is useful.

Classification of innovation:
On the basis of degree of novelty (change) of market and technology innovation classified as:

1. Incremental Innovation:

Incremental innovation utilizes your existing technology and increases value to the customer (features, design,
changes, etc.) within your existing market.

2. Disruptive Innovation:

Disruptive innovation, also known as stealth innovation, involves applying new technology or processes to your
company’s current market.

3.Archit ectural Innovation:

Architectural innovation is simply taking the lessons, skills, and overall technology and applying them within a
different market.

4.Radical Innovation:

Radical innovation involves the creation of technologies, services, and business models that open up entirely new
markets.

Entrepreneurial Idea Generation and Business opportunities

An Entrepreneur has to be very quick in recognizing business opportunity. This deals in systematic manner the
process of converting idea in to an enterprise.

Before understanding the concept of idea generating ,we have to understand the basic difference between Need,
Want and Demand. Its sounds similar but, each word has its own meaning.

NEED-In ancient times the three basic need of human were Food, Clothing and Shelter ,with passage of time
,Education and Healthcare also became the integral part of our need, as they improve the quality of life.
therefore, if needs are not satisfied in time, we may fall ill or even die.

WANT-A want is a choice, a desire which a person may or may not be able to get all desires. the want that can
be satisfied with goods and services are want. you can classify want into three broad categories.

1) Necessities- these are absolutely essential for living and surviving and include Food, Water, Clothing and
Shelter etc.
EX: if a cart driver buys his lunch (bread & vegetables) it falls in this category.

2) Comforts- they are not as essential or urgent as necessities. They make life comfortable and satisfying. just
like washing machine, A.C. ,electricity, banking etc.

EX: if the cart driver buys pizza and burger for his lunch, they all came in this category.

3) Luxuries- these are goods that gives human pleasure and prestige in society.

EX: Items like car(BMW,ROLLS ROYCE,MERCIDIES), diamond jewellery, expensive designer clothes.

DEMAND-The desire of a consumer for a product is not demand, demand refers to willingness and ability of
consumer to purchase a given quantity of good or service .for full fill demand we have to be financially strong.

EX: if someone bought a iPhone instead of a smart phone ,it means that we have transformed our need into a
demand.

TOOLS and TECHNIQUES for generating Ideas

1) BRAINSTORMING: this techniques means using the brain or thinking deeply to aspects of a issue or
problem.

2) FOCUS GROUP: the group consist of 6 to 12 members belonging to various science and economic
backgrounds. they are formed to focus on some particular matter like a new product idea.

3) GAP ANALYSIS: gap analysis is a useful tool to help a team establish their current situations and establish a
future desired state. gap analysis help what is missing and what needs to be done.

4) OPPOSITE/REVERSE THINKING: it is a technique that can help you question long held assumptions
related to your business.it is reversing of the process of adopting the logical, normal manner of looking at a
challenge.

BUSINEES OPPORTUNITY:

Turning idea into your business possibility-

a) Figure out what problem is being solved

b) Find your market

c) Find your support

d) Create a financial model and plan the first phase

Entrepreneurship management skill:

1.Time management skill

2.business planning skill

3. Employee management skill

4. Financial management skill

5.Customer Management skill

1. Time management skills: - the time management skill is the very important skill for entrepreneur for
manage any entrepreneurship or business. this skill is not only important for intrapreneur but also for everyone to
manage their time, because time is money. once it goes never it comes. In the world there are lot of problems and
topics and everyone a run to find the solution but it is important who make it first, who make it fast .first and fast
is the important factor in the starting of entrepreneurship and in running business how short time you update and
improve the quality of your product according to choice of Costumers this is also play a important factor hence
the management skill of time is necessary for an entrepreneur.

2.Business management skill: - the planning for business are also necessary for any entrepreneur to
manage entrepreneurship like how to start business how to run execute business they have perfect planning for
business because without a perfect planning no any entrepreneurship or business or kept succeed so we can say
that business planning skill or necessary for entrepreneur.

3.Employ management skill: employee or worker are play also a important role in entrepreneurship or any
big business we are need of Lord of people for work hence we can see that in entrepreneurship management of
employee or an important factor for good growth and profit of company like how to manage employee how to
hack the employee with their salary and allowance like Holi Diwali Dussehra Valentine S Valentine Alliance you
can use this new Idea new phone business for your employee so the say that for any entrepreneur they also take
care about their employee they are happy with your company behavior and they want to connect your company
for long term

4.Financial management skill:- financial status or turn over of a company is present positive about your
company so for an entrepreneur in his entrepreneurship financial management skills are play a important role
because like to manage import export machinery charge employee salary related to money because due to lack of
financial management you make lot of profit and growth

5.Customer Management skill:- three important quotes which are motivate you first is satisfied customer
is the best business strategy of all second streets the customer as if you are that customer third you are most
unhappy customer are your greatest source of learning so according this type of things Customer Management
thought about your product or aur service is you understand all these think about customer Dam sevar you make
a lot of profit and big business like jio Reliance Ambani Tata Birla Adani skills for any entrepreneur to manage
their entrepreneurship.

Meaning of value creation

Value creation is the starting point for every business small or large scale. It entails making products and
providing services that customers find consistently useful. Value creation is the process of turning labor and
resources into something that meets the needs of others. That includes, for example, farmers growing crops,
workers building something in a factory, as well as other intangible goods like computer code and creative ideas

Managing for value creation:-

Organizations may take a variety of approaches to increase their overall profitability and long term success. One
strategy companies can use is managing for value, which encourage business leaders at all levels of an
organization to implement techniques that increases values.
Understanding this approach and its purpose can allow organizations to determine whether it can help improve
their business performance.

How does managing for value work ?

Managing for value works by ensuring that a business' management processes incorporate leaders within all
levels of a company who can make value-adding decisions. This approach requires executives and leaders to
have a thorough understanding of which performance variables increase value for a company. For example,
managing for value requires an organization's decision-makers to know whether the most effective way to add
value is to improve margins or whether it's more impactful to increase revenue growth. When internal
communication focuses on value creation, professionals can use strategies such as goal setting, incentive systems
and performance management to reach this objective.

1.Collect internal and external feedback:-

Organizations can add value to their companies and products by contacting their consumers and employees to
receive feedback regarding internal processes, production and product delivery. This can help business leaders
identify new operational strategies according to employees' suggestions or concerns. It may also allow them to
receive insights regarding which product features may add value for the consumers and increase revenue and
profit. This can also increase customer rapport and improve the brand's image and popularity among its target
audience.

2.Review production methods to minimize costs:-

Companies may be able to increase their revenue and value by reviewing their production methods and adjusting
them when necessary. Business leaders and managers can consider cost-effective manufacturing strategies and
analyze whether an organization's methods may benefit from improvement or advancement. As long as an
organization can maintain product function and quality, using alternative methods for production can help a
company save time, labor and money.

3.Focus on inbound and outbound logistics:-

Reviewing an organization's inbound and outbound logistics can help it add value by reducing wasted time and
maximizing productivity. For example, assessing the company's inbound logistics may involve making sure that
inputs arrive at the facility on time and as specified to minimize the waiting time during the production process
and increase the organization's overall efficiency. Alternatively, reviewing outbound logistics can help an
organization ensure that its management processes help products meet customers' quality standards and that they
reach consumers on time.

4.Develop new services or products: -

Another way a company can add value is to create innovative services or products that address clients' priorities
and requirements. Employees within an organization can perform market research strategies, including surveys
or focus groups to understand what items they may look for or what services may improve their quality of life
and support their concerns. Developing new products or services can add value and increase revenue and profits
for an organization.

5.Consider alternative supply sources: -

In addition to reducing costs internally, identify whether there are external variables, such as suppliers, that may
help cut costs. This involves evaluating current supply sources and reviewing whether alternative organizations
could provide the same materials for a lower cost. You may be able to identify suppliers that can provide an
organization with resources to meet or exceed production requirements for a reduced cost. This allows the
company to increase its revenue and financial value by maximizing its return on investment.

Creating and Sustaining Enterprising Model & Organizational Effectiveness

The following steps are involved in process of creating a new enterprise :

1. Identification of business opportunity : The process of identifying opportunity involves identifying

the needs and wants of the customers, scanning the environment, understanding the competitor's policy etc.

2. Generation of business idea : The ideas that provide value for the customer, profit for the entrepreneur
and benefit for society and can be transformed into products of services are called business ideas.

3. Feasibility Study : Feasibility study is a detailed investigation of the proposed project to determine
whether the project is financially economically and technically viable or not.

4. Preparation of a business plan : In this step an entrepreneur prepares a good business plan, designs and
creates the organizational structure for implementation of the plan.

5. Launching the enterprise : At this step the entrepreneur hunts for suitable location, design the premises
and install machinery and full fill some legal formalities like:

i . Acquiring license.

ii Permission from local authorities.

iii. Approvals from banks and financial institution.

iv. Registration etc.

Different strategies for sustainable enterprising model :

1. Hire the right people : With hardworking employees dedicated to your company's success, your business
will be better equipped for continued growth.

2. Focus on established revenue sources : Rather than trying to acquire new customers, direct your
attention to the core customers you already have.

3. Reduce your risks: Risk is an inevitable part of starting and growing a business, but there are many ways to
limit internal and external threats to your company and it's growth.

4. Be adaptable: One trait that many successful start ups have in common is the ability to switch directions
quickly in response to changes in the market.

5. Boost your customer service : Another great method of growing your business is to focus on providing
superior customer service.

6. Research your competitors : While this might not result in immediate growth, but researching your
competitors is one of the most important steps in launching your business.
7. Always think ahead : Thinking ahead helps in reviewing all ongoing contracts, like comparing rates and
seeing if you can negotiate a better deal.

Organizational Effectiveness :-

1. Make Use of Human Resources:

The human resources department of any company plays a key role in the organizationaleffectiveness of a
company. According to Forbes, human resource personnel provide assistance with organizational effectiveness
by helping with the design of new business strategies.

2. Focus on Education and Growth :

Organizational leadership requires active measures to work with different groups and individuals. A leader must
understand the strengths and weaknesses of different professionals before making a plan of action to improve the
effectiveness of the organization.

3. Keep the Customers in Mind :

Organizational effectiveness only works well when evaluating the needs and interests of the customers. If a
professional does not provide a quality product or service, then customers look for alternatives for their needs
and goals. Ask customers to fill in surveys or answer questions about the services provided.

4. Work on Quality Services or Products :

Although clients play a role in the effectiveness of a company, a business must also identify an appropriate level
of quality for the products or services provided. The key is focusing on a balance of quality with cost effective
solutions. The goal of any business is improving the products without exceeding a set budget or price range.

5. Use Technology :

Technological tools play an essential role in the efficiency and effectiveness of a company. Make use of
computers, tablets or smartphones to improve the efficiency of the company. Use software or sharing tools to
keep different members of a team up-to-date with the state of a project, even when they are not actively working
on a specific portion of the project.
 UNIT -3
Project Management: Meaning, Scope & Importance

Project:
According to Project Management Institute, Project is a temporary and one time endeavor undertaken to create a
unique product or services which brings about beneficial changes.

In general, we can say that, Project is set of related tasks which have a specific goal.

Why Project is Selected:

There can be many reasons for this -

 Market Demand
 Business Need
 Customer Request
 Technological Advance etc.

Types of Projects:
According to work and task project may be divided into many types -

 National and International Project

 Industrial and Non-Industrial Project
 Project based on size:
o Small scale project
o Medium scale project
o Large scale project
o Project based on need etc.

Management:
Management is a multi purpose organ that manage a business in a particular way.

Project Management:

Project Managements is the discipline of organizing and managing resources in such a way that the project is
completed within defined scope, quality, time, and cost constraints.

Project Management Phases:

The phases of project management may be divided into five broad phases -

 Phase 1. Project Initiation

 Phase 2. Project Planning
 Phase 3. Project Execution
 Phase 4. Project Performance/Monitoring
 Phase 5. Project Closure
Scope in Project Management:

 The Project Management scope is defined the features and function of the project or the scope of work
needed to finish the project.
 Scope involves getting information required to start a project including the features the product needs to
meet its owner's requirements.
 Scope is define as -
o Desired outcomes of the project.
o Define what functionality project has.
o Defines what requirement a project must fulfill.
o It defines project boundaries.
o It also determines what is included in the project and what is not included in the project etc.

Importance of Project Management:

The importance of project management is as follows-

 Clear Project Plan and Process.

 To Establish Plan and Schedule.
 Team work.
 To Maximum Resources.
 To Keep Control of Costs.
 To Manage Quality.
 Continuous Oversight.

Role of Project Manager

Project manager has always been an important function in business and entrepreneurship. In the broadest sense
project manager are responsible for planning, organizing and directing the completion of specific project for an
organization while ensuring these projects are on time, on budget and within scope.

By overseeing complex projects from inception to completion, project manager have the potential to shape an
organization’s trajectory, helping to reduce cost, maximize company efficiencies, and increase revenue.

Across the company board, all project managers share responsibilities across what’s commonly referred to as the
“project life cycle“

Which consist of five phases.

1. Initiating

2. Planning

3. Executing

4. Monitoring and Controlling

5. Closing

1. Initiating:-
Project manager is being each new project by defining the main objectives of the project, its purpose and scope.
They also identify key internal and external stakeholders, discuss shared expectations and gain the required
authorization necessary to move the project forward.

2. Planning:-

Once the charter is approved project manager work with key stakeholders to create an integrated project plan
focused on attaining the outlined goals. The plan established during this process helps project managers oversee
scope, cost, time lines, risk, quality issues and communications.

3. Executing:-

During this phase, team members complete the work that has been identified in the project plan in order to
reach the goal of the project. The project manager’s role is to assign this work and to ensure that task are
completed as scheduled. The project manager will also typically.

 Protect the team from distractions.

 Facilitate issue resolution.
 Lead the team in working through project changes.

4. Monitoring and Controlling:-

In this phase a project manager’s work includes:

 Monitoring the process of a project managing the project’s budgets.

 Ensure that key milestones are reached.
 Comparing actual performance against scheduled.

5. Closing:-

In this phase project manager make sure the all activities necessary to achieve the final result are completed.

During the close of a project, project manager will:

 Work with client to get formal sign-off that the project is complete.
 Release any resources (budget or personnel), who are no longer needed for the project.
 Review the third party vendors or partners in order to close their contracts and pay their invoices.
 Archive project files for future reference and use.

Project Life Cycle

The Project Life cycle is the sequence of phases through which a project progresses. It includes initiation,
planning, execution, and closure. Learn more. The Project Life cycle is the sequence of phases through which a
project progresses.
Project life cycle is categorized in following five phase:-

1. Project Initiation- This is the start of the project. It may involve many sub-activities including: a
feasibility study, identifying the scope, identifying deliverable, identifying project stakeholders, developing a
business case, creating a statement of work, and possibly initial costs, price, and timeline for work to be
done.
2. Project Planning- Once the project is approved from the initiation phase, it moves into planning. This
phase involves creating a project plans, including the tasks, schedule, resources, and constraints on the
project. The budget for the project is also created in this phase. In addition, risk should be anticipated and
identified at this stage, as well as mitigation plans.
3. Project Execution-This phase is where the work gets done. Task owners begin work and the project
manager oversees that tasks are done in a timely manner and workflow continues smoothly. Monitoring and
Controlling (managing the work and financial) are a big part of this phase, as issues will always arise and
require quick adjustments as the project progresses.
4. Control and Monitor-As the project moves forward, the controlling and monitoring phase runs in
parallel with the execution phase. Here project managers need to manage resources and perform progress
status meetings with stakeholders and teammates.
5. Project Closure –Once the team has completed all the tasks, and the project owner signs off that all
deliverable are complete, the project is closed. Any documentation is handed over to the project owner and if
required to an ongoing maintenance organization. The project is then analyzed for performance to determine
whether the project’s goals were met (tasks completed, on time and on budget).

Importance of project life cycle includes:

Structure a Project- With a project life cycle, one can divide the project into several stages, making the
structure easier to understand and monitor.

The employees know which task to perform, and the management knows when to expect completion of a sub-
task of the project, which enhances the project’s overall efficiency.

Better Communication-With the better structuring and planning of a project, the project life cycle helps in
better communication between employees and management. The employees know in advance which tasks to
perform on which date and when to complete them.

Helps in Tracking Progress-With the task’s divisions and prior finalization of schedule and cost, the
project life cycle helps evaluate how competitive project work has been going with planning and where the pace
is required, or cost-cutting is essential
Helps in Better Project Management- It helps in managing the project time, cost, resources, and efforts
of employees. With the use of the project life cycle, each aspect of a project is identified and planned initially,
which helps strategize each sub-task at a low cost.

Helps in Cost Controlling-with the completion of tasks as planned and allocated resources, the project life
cycle helps in cost controlling a project. When projects get delayed, their cost and resource usage increase.

Final Thoughts-The project life cycle is of great importance for project management and better project results.
Project Appraisal
Project appraisal is a cost and benefits analysis of different aspects of proposed project with an objective to
adjudge its viability.

An entrepreneur needs to appraise various alternative projects before allocating the scarce resources for the best
project.

For appraising a project, its economic, financial, technical market, managerial and social aspects are analyzed.
The effects of a project appraisal are long reaching and have very definite long-term effects because of the
capital investment that is always required in any project.

Financial institutions carry out project appraisal to assess its creditworthiness before extending finance to a
project.

Project Appraisal Objectives:

 Assessment of a project in terms of its economic, social and financial viability
 Decide to Accept or reject a Project
 It is a tool to check the viability of a Project Proposal

Aspects of project appraisal

The aspects of project appraisal are inclusive of following

 Location and site

 Capacity of plant
 Tools and equipment of technology
 Layout and building
 Proper availability of resources
 Labour
 Project planning and scheduling
 Effluent treatment
 Foreign collaboration
 Commercial feasibility
 Financial feasibility

Types of Project Appraisal

 Technical appraisal
 Economic appraisal
 Financial appraisal
 Legal appraisal
 Organizational or management appraisal
Methods of Project Appraisal
 Economic analysis
 Financial analysis
 Credit score management
 Market analysis
 Technical feasibility
 Managerial competence or management competence

Process of Project Appraisal

o Concept analysis
o Concept briefing
o Project organization
o Project approval
o Project appraisal and financing

Financial aspects of project appraisal involve the following important

aspects:
 Revenue concentration
 Revenue growth
 Revenue per employee
 Gross profit margin
 Net profit margin
 Operating profit margin
 Accounts receivables turnovers
 Turnover of inventory
 Equity return
 Debt Return
 Current ratio
 Liquidity

PROJECT FEASIBILITY REPORT CONTAINING TACHNICAL APPRAISAL

PROJECT REPORT – It is a document which provide details on the project’s overall status or specific
aspects of its performance.

It is prepare to analyze different angle i.e. technical angle, commercial angle and viability of given project.

In project management, project report is also known as feasibility report because it tells feasibility of our project
(word feasibility means possibility).

Some basics feasibility are:-

1) Technical feasibility – It is concerned with specifying equipment and software that will successfully
support the task required.
2) Economic feasibility – It is the most frequently used technique for evaluating the effectiveness of
proposed system. More commonly known as cost/benefit analysis.
3) Financial feasibility –If the required capital or funds for the business idea are so large that these
cannot be arranged within the available means, then it is said to be financially unfeasible.

Based on these feasibility we can decide whether we can work on given project or not.
 PROJECT APPRAISAL- It is a detailed examination of several aspects of given project before
recommending of same project.

It is a part of project initiation from project life cycle.

The group or project promoter has to satisfy in all aspect before taking step ahead in the starting of project.

Several aspect of appraisal are:-

TECHNICAL APPRAISAL –It is the technical review to ascertain that the project is sound with
respect to various parameter such as technology, plant capacity, raw material, location, manpower
availability, etc.

It ensures that the project is technically feasible i.e. all the inputs required to set up the project are available.

Aspects of technical appraisal are:-

1) Selection of process/technology
2) Scale of operations
3) Raw materials
4) Technical know how
5) Collaboration agreements
6) Product mix
7) Selection and procurement of plant and machinery
8) Location of the project
9) Project scheduling and implementation

 Selection of process/technology:
1. For manufacturing a product more than one process/technology may be available. Cement can be
manufactured either by wet process or dry process
2. The choice of technology depends upon the quality and quantity of the product. If the quantity is very
large mass level production can be done. If the quality of the product is very high sophisticated
technology is required.
 Scale of operations:- signifies the size of the plant. The plant size depends on the market for the
output of the project. Economic size of the plant for given project can be analyzed by operating and
capital cost .other factors like special problems of fabrication of equipment, transportation and
erections of equipment, problems with the availability of production of inputs
 Raw material: a product can be manufactured using alternative raw materials and with alternative
process. Since the machinery/equipment to be used depend upon raw materials. For example precipitated calcium
carbonate can be produced either by using lime stone or shell lime. Shell lime will be available near sea shore but
lime store will be available in areas with lime stone deposit.
 Technical know how:-when technical know how for the project is provided by experts consultants it
must be ascertained whether the consultant has requisite knowledge and experience and whether he has already
executed similar projects. Necessary agreement should be executed between the project promoter and know how
supplier
 Collaboration agreements
1. If the project promoters have entered into agreements with foreign collaborators, terms and
conditions of the agreement
2. Competency and reputation of the collaborator
3. Imported technology should suit Indian conditions
4. Necessary approval of the government
5. Availability of the design for fabrication
6. Clause dealing with dispute
7. Does not infringe any copy right issue
8. Better to have buy back arrangement with the collaborator
 Product mix:- produce goods of varying size nature and quality as per requirement of customer.

 Selection and procurement of machinery:-

1. The machinery and equipment required for the project depends upon the proposed technology
proposed to be adopted and the size of the plant proposed. Capacity of each machinery is to be decided by
making rough estimate. Apart from the main process of machinery, equipment required for the supply of
utilities, quality control ,effluent disposal, material handling.
2. Procurement of the machinery from the reliable supplier
3. Adequate number of tools and spares parts
4. Stand by arrangements
5. In case of second hand machinery, working conditions, estimated future life
 Location of the projects:
1. Raw material
2. Proximity to market
3. Availability of labour
4. Availability of supporting industries
5. Availability of infrastructure facilities
 Project scheduling:-scheduling is nothing but the arrangement of activities of the project in the
order of time in which they are to be performed

Environmental Appraisal
-For finding business's available opportunities and risks, environmental appraisal is needed.

According to A bell :
"Environmental appraisal is the identification, measurement, and assessment of environmental impacts".

Environmental Appraisal is the process of identifying opportunities and threats facing an organization

By analyzing the external environment of a business the marketers are able to identify and highlight the
opportunities from the threats and strengths from the weaknesses.

Concept of Environment:

 Environment literally means the surroundings, external objects, influences or circumstances under
which someone or something exists.
 The environment of any organization is “the aggregate of all conditions, events and influences that
surround and affect it”
Characteristics of Environment :-

 Environment is complex
 Environment is dynamic
 Environment is multi-faceted
 Environment has a far-reaching impact

SWOT Analysis:
It is a systematic approach to understanding the environment. Business firms undertake SWOT analysis to
understand the external and internal environment.

 External Environment:- Includes all the factors outside the organization which provide
opportunities or pose threats to the organization.
 Internal Environment :- Refers to all the factors within an organization which impart strengths or
cause weaknesses of a strategic nature

Through such an analysis, the strengths and weaknesses can be matched with the opportunities and threats
operating in the environment so that an effective strategy can be formulated.

Another well-known technique for analyzing the internal and external environment of business is "SWOT" or
"Strengths, Weaknesses, Opportunities and Threat" analysis. It is a simple tool that is helpful in studying the
internal strength and weaknesses, and the external threats and opportunities of a company. SWOT analysis
involves identifying the business objectives and defining the significant internal and external factors for
achieving the identified objectives.

The main aim of conducting a SWOT analysis is to help the business in protecting itself against the threats and to
exploit the potential business opportunities. This analysis is essential for formulating strategies as is provides a
base for strategy formulation. SWOT analysis helps in studying the overall soundness of the business.
MARKET APPRAISAL
Market appraisal is a kind of advice given by the agent to the owner of any particular property. This advice that
is provided by the estate is generally in quite a proximity to the actual value of that property in the market.

The term market appraisal is used to refer to the review that is carried out by the various kinds of financial
institutions or the recommendations that are offered by the agents who deal with the estate business.

Components of Market Appraisal

There are majorly two main aspects of the market appraisal. These are as follows-

1. Demand analysis
2. Market analysis

1) The demand analysis

When any products are decided on to be manufactured, it requires to analyze an extensive collection of
valid data and information.

Now there are a few things that are required by the market appraisal for the demand analysis to be carried
out effectively. These are as follows-

1. The whole description of the product

2. Application area of the product.
3. Future scope of the product.

2) Market Analysis

Market analysis is one of the aspects of market appraisal. In this, the market analysis studies the various
issues of the segmented market. Market analysis takes into consideration multiple things like
the positioning of the product, the promotional strategies, the strategies adopted for the distribution of the
product and also the analysis of the competition.
 The primary objective of market analysis is to accurately define their targeted customers and the market
that they will be completing it and then define it in terms of the size, the various opportunities for growth,
the latest trends, and the sales potential.

What is Managerial Appraisal?

Managerial appraisal is the evaluation of managers' performance in the company. Professionals conduct these
evaluations to raise productivity to an optimum level. Organizations conduct manager appraisals to help both
managers and the company reach a common ground and work toward the company's development. These
appraisals also play a determining role in offering promotions and salary increases.

Deciding the time and categories of review are the first few steps toward organizing a manager appraisal.
Including managers in this decision creates space for communication, which helps each party understand the
other's expectations and perspectives. The number of appraisals conducted in a year depends on company
policies and other decision-makers.

Different ways to conduct Manager Appraisal :-

Here are some different methods professionals use to conduct manager appraisals:

1. Target – Oriented Appraisal :-

This is a result-oriented method where the reviewer and manager under review set objectives together using the
SMART method (Specific, Measurable, Achievable, Realistic, and Time-sensitive). Then, the reviewer
evaluates the manager's performance periodically based on these target goals.

2. 360 Degree Evaluation :-

The 360-degree evaluation combines feedback from many sources. This allows this method of appraisal to be as
unbiased as possible. The essential elements of this method are peer review, self-assessment, supervisor review,
and customer review.

3. Conventional Performance Appraisal :-

A conventional approach involves a review by senior staff members. Companies often assign a specific senior
member of management to perform these evaluations to ensure consistency in reviewing standards. Professionals
base their reviews on the analysis of all the available proof of performance.

4. Assessment Centre Review :-

The assessment centers method is another process of assessment that uses a series of exercises to quantify the
skills of the manager under assessment. Supervisors or assessors commonly used this method, as it provides a
deeper insight into employees' potential than an interview. During the assessment, managers may perform duties
related to their job and answer hypothetical questions about how they would address certain situations.

5. Appraisal with Behaviorally Anchored Rating Scale (BARS) :-

Many reviewers use BARS to rate the performance of the manager. These help reviewers gather data for a robust
assessment. This performance measurement allows for consistent results, as each manager is set to the same
standard of performance measures.
 6. Future Assessment Appraisal :-

Also known as psychological appraisal, this method focuses on the future assessment of the employee's
potential by evaluating the candidate's soft skills like emotional quotient and interpersonal skills. Psychologists
conduct future assessment appraisals. This is a beneficial method for companies interested in learning their
managers' full potential rather than just their current performance. Future assessment appraisals are also valuable
team-building tools.

7. Cost – Based Evaluation :-

In this method, the reviewers consider the cost of keeping the employee in the company. Also known as the cost
accounting method, this method factors in the contributions of the manager to the company in monetary terms.
This allows the reviewer to determine if the manager is a monetary asset to the company.
 UNIT-4

Project cost estimation and working capital requirement

What is Cost Estimation in Project Management?

Project managers play an integral role in many organizations, ushering projects from inception all the way
through to completion. To be effective in their roles, project managers perform a number of important duties and
responsibilities throughout each stage of the project life cycle.

Each stage of the project life cycle is, of course, important. But perhaps none are as integral to the overall
success of the project as the planning phase, which establishes a number of frameworks by which the project
must be completed. These include the project’s scope, timelines, and budget.

A project’s budget has the potential to impact nearly every facet of the project, making it one of the most critical
responsibilities of a project manager. A poorly designed budget leads to improper asset allocation, unrealistic
expectations, and potentially, a failed project.

Simply put, a budget must be accurate for a project to succeed. Cost estimation is one of the most effective tools
in the project manager’s tool belt for planning an accurate budget.

What is Cost Estimation?

In the field of project management, cost estimation is the process of estimating all of the costs associated with
completing a project within scope and according to its timeline.

Initial, high-level estimates are often used in the earliest stages of project planning and can determine whether or
not a project is ultimately pursued. Once a project is approved and an organization chooses to move forward with
it, more detailed and granular cost estimates become necessary in order to appropriately allocate various
resources.

A thorough cost estimate should include both the direct and indirect costs associated with bringing a project
through to completion. Depending on the specifics of the venture, this will likely include various overhead costs
(utilities, labor, etc.), labor costs (including both time and wages paid), materials and equipment costs, vendor
fees (if the project requires third-party workers, freelancers, or other contractors), and more.

4 Project Cost Estimation Techniques

How exactly project managers completing a cost estimate depends upon a number of factors. Some
organizations, for example, require all projects to be budgeted for according to very specific policies; others may
defer to the expertise of the project manager. Similarly, many organizations might work off of rough estimates in
the earliest stages of project planning compared to later stages where more exact estimates are required.

Below, we explore four of the most common cost estimation techniques that you can leverage.
1. Analogous Estimating

Through analogous estimating, a project manager calculates the expected costs of a project-based upon the
known costs associated with a similar project that was completed in the past. This method of estimation relies
upon a combination of historical data and expert judgment of the project manager.

Because no two projects are exactly the same, analogous estimating does have its limitations. As such, it is often
leveraged in the earliest stages of project planning, when a rough estimate can suffice. Analogous estimating can
also be used when there is relatively little information about the current project available.

2. Parametric Estimating

In parametric estimating, historical data and statistical modeling are used to assign a dollar value to certain
project costs. This approach determines the underlying unit cost for a particular component of a project and then
sales that unit cost as appropriate. It is much more accurate than analogous estimating but requires more initial
data to accurately assess costs.

Parametric estimating is often used in construction. For example, an experienced construction manager might
understand that the typical new home will cost a certain number of dollars per square foot (assuming a particular
margin of error). If this average cost, the margin of error, and the square footage of a new project are known,
then parametric estimating will allow them to identify a budget that should accurately fall within this range.
Other examples might include estimating the cost per unit to print and bind a book or to build an electronic
device.

3. Bottom-Up Estimating

In bottom-up estimating, a larger project is broken down into a number of smaller components. The project
manager then estimates costs specifically for each of these smaller work packages. For example, if a project
includes work that will be split between multiple departments within an organization, costs might be split out by
department. Once all costs have been estimated, they are tallied into a single larger cost estimate for the project
as a whole.

Because bottom-up estimating allows a project manager to take a more granular look at individual tasks within a
project, this technique allows for a very accurate estimation process.

4. Three-Point Estimating

In three-point estimating, a project manager identifies three separate estimates for the costs associated with a
project. The first point represents an “optimistic” estimate, where work is done and funds spent most efficiently;
the second point represents the “pessimistic” estimate, where work is done and funds spent in the least efficient
manner; and the third point represents the “most likely” scenario, which typically falls somewhere in the middle.

Three-point estimating relies on a number of weighted formulas and originates from the Program Analysis and
Review Technique (PERT).
Working capital requirements
Everything you need to know about working capital requirement (WCR): method, calculation, analysis working
capital requirement is a concept that anyone starting a company has to know and understand. To ensure the
success of their company, it is vital for leaders and financial executives to have a handle on any discrepancies
between incomings and outgoings. In this article, we will help you learn about working capital requirements
(frequently known as WCR), a term that is unique to the world of finance. What exactly is it? How do you
calculate it? How do you interpret it and what actions do you take?

1. Defining working capital requirement

Working capital requirement (WCR) is the amount of money required to cover your operating costs. It
represents your company’s short-term financing requirements.

These requirements are caused by gaps in your cash flows (money coming in and out) corresponding to cash
inflow and cash outflow linked to your business operations, in other words your company’s primary activity.

👉 What is Working Capital Requirement (WCR) ?

There are three main reasons that these gaps can appear:

Lead times for selling inventory

When a company produces a certain quantity of goods, it often takes time to liquidate this inventory. The
result is a time lag between the points when money is spent on production and the cash flows in after the goods
or services are sold.

Client payment periods

Although payment may be earned and specified at a given moment in time, you often have to wait a while
before it is settled. This means that a company can spend money to produce goods or provide services but may
not receive the amount owed to it for another few days, weeks or months.

Payment periods for suppliers

Companies rarely produce their goods from scratch – they often rely on suppliers to source raw materials. If this
is the case, once the production cycle has started, the company is indebted to these external parties for the period
that it takes to receive the money from selling its products or services. In certain circumstances, however,
suppliers may claim repayment before the company has received sufficient funds to cover its costs. A premature
cash outflow such as this will increase the company’s WCR.
Why should you calculate your working capital requirement?

There are two main reasons for calculating and monitoring WCR.

Ensuring your business launches successfully

Calculating WCR is an indispensable step when starting a business. In fact, one of the main reasons that new
companies fail is that they have inaccurate WCR estimates. Too large a gap between cash inflow and cash
outflow must be anticipated to avoid any complications that could, in extreme cases, lead to bankruptcy.

This is why a well-calculated WCR is an essential piece of data for your business plan. To include WCR in
your business plan, simply add a dedicated row containing a WCR estimate that is as accurate as possible.

Being able to make the right decisions throughout the life cycle of your company

Estimating your WCR before launching your business does not mean that you can save yourself from doing this
at a later point in time. That’s right: WCR has to be calculated throughout the life cycle of your company. This is
because it’s a key indicator of your company’s financial health, so has to be calculated as you go, and its
performance has to be anticipated if you are to make the most appropriate decisions for your situation.

Key calculations for working capital requirement

Finally, let’s look at the specifics for calculating WCR. WCR is part of the information calculated in your
company’s balance sheet. It shows the difference between your current assets and current liabilities.

WCR = current assets − current liabilities

Be careful: here we are looking both at non-cash current assets and non-cash current liabilities. More
specifically, current assets include inventory and client receivables, while current liabilities are made up of
payables and tax and social security liabilities. You should also note that some amounts will be posted with taxes
included and some will not. This is due to the fact that there can be delays between paying tax and receiving tax
rebates. Remember that when calculating your WCR the aim is to be able to visualize this potential gap, for
example when you receive your VAT and when you pay this to the relevant authorities. Another interesting step
may be to calculate your company’s days working capital (DWC).

DWC = (WCR/annual turnover)*365

This calculation can seem a bit abstract at first glance, so let’s look at an example to understand how it is
used:

If your DWC number is 50 days, this indicates that your company should, on average, use the revenue it will
generate in a period of 50 days to cover its operating cycle costs.

How do you interpret your working capital requirement?

There can be three different scenarios, depending on the difference between your current assets and your current
liabilities.

If your WCR is positive, your company has to find a way to finance its short-term requirements. Therefore, you
have to be vigilant and anticipate that you may need to go in search of funding. We will look at the different
ways of financing a company’s WCR later in this article. You might also like to read: Elevated WCR: how to
anticipate and better manage your cash flow

If your WCR is zero, your company has enough operational resources available to cover all requirements. Your
company does not need any additional financing, nor does it have a surplus. Although we mention it in this
article, having a WCR of exactly zero is rare in reality.

If your WCR is negative, your company has no short-term financial requirements, so can free up resources to
fund its net cash flow.

How do you get a handle on your working capital requirement?

To truly have an overview of your WCR, there are three different parameters that you can adjust: supplier
payment periods, client payment periods and inventory turnover.

Adjust supplier payment periods

If you choose to take control of your WCR by focusing on supplier payment periods, you are
essentially extending these by negotiating with your supplier. Doing this will allow you more time to receive the
cash you need to repay your debts. It’s best to try your luck with your longer-time partners first, though, because
they will be more likely to give you the extra time that you need.
When explaining the reasons for the extension request, you can, for example, emphasize your reputation as a
reliable customer or the fact that you order large volumes from the supplier (if this is in fact the case). If your
supplier agrees to extend your payment period, it can be a good idea to pay your bill just a few days before it is
due – the aim is to preserve your cash for as long as possible.

Adjust client payment periods

If you decide to focus on client payment periods to manage your WCR, you will be looking at shortening the
payment period. The aim here is to receive payments more quickly. For example, if you usually stipulate a 60-
day payment period, you could choose to shorten this to 30 days to receive payments sooner. However, you
should be careful that changing a payment period does not damage your relationship with your client.

Another solution may be to propose a discount – this can help you get around significant gaps in your cash flow.
Alternatively, if an invoice deadline has passed, you can forward the invoice to an online collection platform.
This is a way of simplifying and speeding up the recovery of your client’s debts while keeping the situation
amicable.

Adjust inventory turnover

The third option for managing your WCR is to reduce inventory turnover. However, while this does not involve
negotiating with external parties, it isn’t actually as simple as it seems: by reducing your inventory turnover,
you risk being faced with inventory shortages. The just-in-time inventory management approach requires an
extremely precise analysis of your anticipated sales in order to minimize potential complications.

How do you finance your working capital requirement?

Since managing your WCR is a rather complex task, you will often be asked to look for ways to finance your
WCR, depending on how high or low your WCR is. There are four options available to suit your situation.

Financing WCR through cash

If you are fortunate enough to have cash reserves in your company, you may be able to use these to finance
your WCR (as long as this isn’t too high). This is one of the reasons that keeping your cash flow table up to date
is so vital.

Financing WCR through a bank overdraft

If you don’t have enough cash to finance your WCR but it is still relatively low, you may be able to afford to
have a short-term bank overdraft. This should only be a one-off solution that you use for a short period of
time, otherwise it is risky for your business – especially since unexpected things can happen at any time.

Financing WCR through current account contributions

Another solution is to make use of a current account contribution. This is a short-term contribution that is
paid back at a later point in time with a fixed rate of additional compensation.

Financing WCR through working capital

Finally, you can also finance your WCR via surpluses of long-term resources, mainly consisting of capital
contributions and bank loans. These resources are often referred to as working capital.

You can calculate the amount using the following calculation:

Working capital = permanent capital − fixed assets

Here are more details to help you better understand the calculation above:

Permanent capital = equity + long-term borrowings (with a term of longer than one year) Fixed assets =
intangible assets + tangible assets + financial assets There you have it – you’re now ready to calculate, interpret
and take control of your own working capital requirement.

If you want to learn more, discover free of charge and obligation how Arica’s cash flow management software
can help you efficiently track your company’s financial situation in real time.

Sources of funds

Fund-:
 Funding refers to the money which is required for start and run a business.
 It is a financial investment in a company for product development, Manufacturing, sales and marketing.

Classification of Sources of Funds

Based on period-:

1. Long term sources-:

Long-term sources of funds fulfill the needs of any business for a long period that is for a period exceeding
5 years. Long-term funds are generally used for purchasing fixed assets. Examples of a long term sources of
funds are shares, debentures, bonds, long-term loans from banks, etc.

2. Medium term sources-:

The funds which are required for more than one year but less than five years. These include public
deposits, borrowing from banks, lease financing, etc.

3. Short term sources-:

The funds which are required for less than one year is termed short-term sources of fund. These kinds of funds
are easily available and are easy to repay also. For Example, short-term loans from commercial banks, trade
credit, factoring and commercial paper.
On the basis of ownership-:

 Owner's fund-:
As the name suggests, owner’s funds are those which are provided to the firm by its owners. The owner can be a
sole trader, a shareholder of the company, or a partner.
 Borrowed fund-:
As the name suggests, it is a fund which is borrowed from different financial institutions or raised through the
issue of bonds debentures. These sources provide a firm with different sources of funds for a fixed period and
come with a fixed amount of interest, which a company has to pay whether it is making a profit or not. Usually,
the borrowed funds are provided to the firms by keeping some fixed assets as security.

For Example, public deposits, loans from a bank, debentures bonds, etc.

On the basis of source of generation:

 Internal sources-:
Every business organization has some funds which are kept aside for future uncertainties and needs. When the
funds are generated internally, then they are said to be internal sources of funds.

For example, equity share capital, retained earnings, etc.

 External sources-:
When a large amount of funds is required by a business enterprise, then it opts for external financing. Therefore,
external sources of finance are the sources that are obtained from outside the business. The cost of raising funds
from external sources is more than the cost from internal sources. Sometimes, an organization has to mortgage its
assets as security. For example, lease financing, factoring, preference shares, Commercial papers, etc.

Capital Budgeting
Budgeting is a strategy for controlling and planning your future tasks. Thus, capital budgeting is the practice
of controlling and planning an enterprise’s upcoming activities utilizing management tools. It comprises the
strategies for saving, investing, borrowing, and so on, as well as the capital finance required by managers for
its initiatives.
You must assess capital planning, project benefits, expenses, and future project feasibility. As a result,
capital budgeting assists you in planning the income and expenses associated with your budget and its
ambitions.
In short, capital budgeting, also called investment appraisal, is the process of analyzing investments
and large expenditures to maximize investment returns.

Capital Budgeting: Features

 Massive funds: Capital budgeting entails the current investment of funds in order to reap future
rewards.
 High risk: Making decisions that have a large financial impact might be costlyfor the company.
 Tough decisions: When the growth is dependent on capital budgeting judgments,
management finds it difficult to seize the best investmentopportunity.
 Impacts future competitive potential: The benefits of the future are spread out across several years.
Sensible investing can boost a company’s competitiveness, whilst poor investing can lead to corporate
collapse.
  Estimation of large earnings: Each project entails a large sum of money with the hope of obtaining
good profitability.
 Irrevocable decision: Capital expenditure choices are permanent because they include the purchase of
a high-value asset that may not be traded at the verysame price at which it was obtained.
 Long-term impact: The impact of decisions made will be seen in the future orover time.
 Influences cost structure: Capital budgeting may raise fixed expenses such as insurance, interest,
depreciation, and rent.

Capital Budgeting: Objectives

Capital expenditures are significant and have a long-term impact. As a result, when conducting a capital
budgeting study, a company must keep the following goals in mind:

Choosing lucrative projects

A company frequently comes across successful projects. However, due to capital constraints, a company
must select the correct mix of successful projects that willgrow the wealth of its owners.

Controlling capital expenditure

The primary goal of capital budgeting is to identify the most viable investment. Controlling capital costs, on
the other hand, is a critical objective. The foundation of budgeting is forecasting capital spending requirements
and planning for them, as wellas ensuring that no investment opportunities are missed.

Finding the correct sources of funding

Another essential goal of capital budgeting is determining the amount of capital and the resources from which
they will be obtained. An important objective of Capital Budgeting is to find the right balance between
borrowing capital and investment gains.

Types of techniques for Capital Budgeting

Various strategies based on the analysis of cash inflows and outflows are available to aid the company in
selecting the optimum investment.

Method of Payback Period

The entity determines the time needed to gain the initial
investment of the giveninvestment using this technique. The briefest project or investment is chosen.

Net Present Value

The net present value is derived by subtracting the present value inflows from the present value of cash
outflows throughout time. The investment with the most positive net present value (NPV) will be selected.

Accounting Return Rate

To determine the most viable investment, the net income of an investment is divided by the initial or mean
investment.
Internal Rate of Return (IRR)
A discount amount is employed to compute the NPV. The IRR is the pace by which the NPV approaches
zero. Typically, the project with the highest IRR is chosen.

Index of Profitability
The Profitability Index is the ratio of the project’s present value of the cash flows to the project’s original
investment.
Each technique has its own set of pros and downsides. A company must employ the most appropriate
budgeting strategy. It can also choose several strategies and analyse the outcomes to determine the most
profitable ventures.

Capital Budgeting: Limitations

 Cash flow: Forecasting cash flow is difficult because future revenues and current up-front expenses
are used. If costs are understated and revenues are overstated, this suggests that actual expenses were
not really accounted for. Similarly, underestimating revenues and overestimating costs can result in a
non-profitable project.
 Time value: Capital budgeting calculation approaches, such as the Payback method, do not
account for money’s time value, rate of interest on loans,actual changes in cash value, or inflation.
 Time horizon: Because cash flows are based on current value and are merely an estimation of
future revenues, changes in the long timeframes involved canimpair your predictions.
 Discount rates: It is an expected rate, and any modifications to it in the future affect the
capital budgeting decision process.

Capital budgeting is the decision-making process that revolves around how a given company can spend
money to maximize the return on investment and the return to your investors and stockholders.

It all comes down to risk and return. That's precisely what capital budgeting measures. It's about deciding
whether to accept or reject an investment, how to rank projects according to profitability and figure out which
investment is the best move at a given moment.

Why is Risk management and uncertainty important?

1. Risk and uncertainty are threats to project success.

2. Project managers need strategies and plans for dealing with them.

Risk: Where there is more than one outcome, and the possible outcomes are understood.

Uncertainty: where the possible outcomes are not understood.

Risk Management:

1. Large projects are riskier than small ones.

2. Complex projects are riskier than simple ones.

3. Projects involving new technology are riskier than projects involving established technology.

Risk Management Process:

1. Risk management planning

2. Risk identification
3. Risk evaluation
4. Risk response planning
5. Risk monitoring and control

Benefits of using project risk management are:

1. More rational risk taking

2. Increased probability of success
3. Improved customer satisfaction by making projects more predictable
4. A better planning
5. Better investment decisions
6. Improvement to future projects through lessons learned

Project where risk management should be used:

1. Involve a high level of uncertainty

2. Are strategically important
3. Potentially interrupt crucial revenue streams
4. Have large capital outlays
5. Use new technology
6. Involve sensitive issues
7. Involve political or regulatory issues

Response to risk:

1. Avoidance
2. Elimination
3. Reduction
4. Sharing
5. Contingency
6. Acceptance
Types of Project Risk:

Some important project risks are as under: -

1. Completion: If the project seems not to be completed in time.

2. Technical Risk: If it seems failure to meet a particular performance.
3. Social Risk: Seems to have social cost/against customers or society.
4. Economic: Increase in inflation, policies, income level etc.
5. Political Risk: Political instability, change in policy, trade restriction.
6. Production Risk: Shortage in inputs, increase in costs.
7. Marketing Risk: Failure of product in satisfying the demand.
8. Financial Risk: Bad debts, change in interest rate, wrong investment.

Uncertainty:

1. Uncertainty in scheduling
2. Uncertainty in cost
3. Technological uncertainty
4. Others

Projected financial statements:-

Financial projections are the estimates of the future financial performance of a business.

Planning out and working on your company’s financial projections could be one of the most crucial things you
do for your .

Balance Sheet:-
The Balance Sheet is a summary of the assets and liabilities and equity of a business at a specific point of time.
In addition it provides a picture of the financial solvency and risk bearing ability of the business.

Income Statement:-
The Income (Profit and Loss) Statement, commonly referred to as the P&L statement, summarizes the revenue
and expenses for a specific time period (one month, one quarter, one year, etc.) The Projected Income Statement
is a snapshot of your forecasted sales, cost of sales, and expenses.

Cash flow projections:-

Once you have made your sales projections based on volume, calculate the cash flow projections by converting
your sales volumes into income.
How to Forecast an Income Statement:-
Small businesses can develop a pro forma income statement to forecast the company’s profits or losses for a
specific time period.

Project Income Statement

Company’s financial performance idea is depend on financial statement.

Financial statement has 3 major components:-

1-Project Balance sheet

2-Project Cash Flow statement

3-Project Income statement

By this 3 we can identify financial position.

Income Statement:-
It tells about income and expenditure.

It is published frequently.

As financial statement is published in early but income statement published in quarterly and monthly by which
investor or a businessman see the growth of project.

By income statement they can identify small problem of company.

Income statement include expenses-

Past expenses, future expenses and it also include which parts of project are under budget and over budget.

Expenses include repairs, rent, salary, workers rising, supply buying, business promote cost.

Analysis of the company- Over analysis can be done by invested by the income statement or Bank can
also check overview by income statement and Bank can decide that they can trust the company or not they can
give loan or not.

Major components of a income statement:-

1. Revenue/Sales- Which come from sales and services it is in the mention it is mention in
the top.
2. Cost of Good Sold (COGS)-Company raw material /material cost.

Parts Cost & Labor Cost.

 3 Gross Profit- Selling and services cost.

4 General & Administrative expenses- In this all indirect expenses comes. Salaries,
Wages, room rent/office expenses, insurance & travel expenses.

5 Interest- This is mention in different section. It includes revenue generated from interests.

6 Gains- It is not regular gain. It is suddenly gain by positive events. This is non business
activity like un useful vehicle sale or land etc.

EBT- Earning Before Tax Before interest and tax company’s income is mentioned in EBT.

PROJECT FUNDS
Fund Flow statement
Fund flow statement is a method to study changes in the financial Position of a business enterprise between
beginning and ending financial statements dates.

It is a statement showing sources and uses of funds for a period of time.

Fund flows are a Reflection of all the cash that is flowing in and out of a variety of financial assets.

Fund flow is usually measured on monthly or quarterly Basis.

The performance of an asset or fund is not taken into account only share redemption, or outflow & share
purchases, or, inflow.

Net inflows create excess cash for manages to invest which theoretically creates demand for securities such as
stocks and bonds.

Financial Position: The account status of a firm or enterprise.

Financial statements: Written records that convey the business activities & the financial Performance of a
company.

Asset: Property (wealth)

Stock: The Supply of things

Bond: Debt security

Cash flow statement
 A cash flow statement is a financial statement that summarize the cash or cash equivalents entering and
leaving a company.
Cash equivalents -cash at bank, cash in hand or short term investment
 Provides information about cash inflows and outflows.
 Inflows-you add any item
 Outflows- you subtract any item

Three main sections of cash flow statement –

Cash flow from operating activities:-CFO indicates the amount of money a
company brings in from its ongoing regular business activities such as manufacturing
and provide goods and services to the customer.

Cash flow from financing activities:-Cash flow from financing activities (CFF)
is a section of a company’s cash flow statement, which shows the net flows of cash that
are used to fund the company. Financing activities include transactions involving debt,
equity, and dividends.

Cash flow from investing activities –Cash flow from investing activities
involves long-term uses of cash. The purchase or sale of a fixed asset like property,
plant, or equipment would be an investing activity.

Methods of calculating cash flow statement

1. Direct Method - In this method add up all the various types of cash payments
and receipts including cash paid to supplier, cash receipt from customers and
cash paid out in salaries.
2. Indirect Method -In this method cash flow statement calculated by adjusting
net income by adding and subtracting the differences resulting from the non cash
transactions.

Objectives of Cash flow statement –

 Measurement of cash
 Generating inflows of cash
 Classification of activities
 Prediction of future
 Evaluation of cash flow
 Supply necessary information to the users.

Step to prepare cash flow statement –

1. Start by collecting basic document and data.

2. Compute the balance sheet changes.
3. Add each balance sheet change to the cash flow statement.
4. Adjust non cash expenses from the profile loss statement.
5. Base on other data, adjust all non cash transactions.
6. Cross check all the steps with respect to changes in balance sheet.
7. Do final check.
DETAILED PROJECT REPORTS

 Detailed Project reports are the documents created for Planning, Decision Making,
approval of the projects.
 In other words, DPRs are the documents used to guide the project execution and the
project control.
 There are several types of DPRs created in different departments in different stages
of a project Execution.
 DPRs are always created according to the guidelines and standards of respective
companies and departments.
 A detailed project report is a very extensive and elaborative outline of a project.

Contents of a detailed project reports

A detailed project report must include the following information:

 Brief information about the project.

 Experience and skills of the people involved in the promotion of the
project.
 Details and practical results of the industrial concerns of the
promoters of the project.
 Project finance and sources of financing.
 Government approvals.
 Raw material requirement.
 Details and practical results of the industrial concerns of the
promoters of the project.
 Project finance and sources of financing.
 Government approvals.
 Raw material requirement.
 Details of the requisite securities to be given to various financial
organizations.
The Importance of Detailed Project Report includes:

1. Managing the budget:

Managing the budget or expenditure is not an easy task, especially when you must look
at so many aspects of your project.
Hence a DPR comes to your rescue and helps your plan and manage your budget in such
a manner that you do not go over your set budget.
 2. Project progress follow-up:
One of the most important aspects of a detailed project report is to have a control of the
project progress.
Accordingly, one can keep track of the schedule of the project and eliminate the
problems, if any.

3. Holdover the project:

Project reporting maintains hold the higher authority, such as managers, over the project
so that they can keep a check on progress and eliminate factors that cause a halt in the
progress of project.
The performance of the team members and their quality of the work is also checked.

Project Finance
Project finance is the funding (financing) of long-term infrastructure, industrial projects
and public services using a non-recourse or limited recourse financial structure. The debt
and equity used to finance the project and paid back from the cash flow generated by the
project. Project finance is especially attractive to the private sector.

Stages of Project Financing:

There are three stages of project financing which are as follows:-

1. Pre-financing stage
2. Financing stage
3. Post-financing stage
1. Pre-financing stage:
This stage involves the processes which are as follows:-
 Identification of project plan:-
This process includes identifying the strategic plan of the project and
analyzing whether its plausible or not. In order to ensure that the project
plan is in line with the goals of the financial services company, it is
crucial for the lender to perform this step.
 Recognizing and Minimizing the Risk:-
Risk management is one of the key steps that should be focused on before
the project financing venture begins. Before investing, the lender has
every right to check if the project has enough available resources to avoid
any future risks.
 Checking Project Feasibility:-
Before a lender decides to invest on a project, it is important to check if
the concerned project is financially and technically feasible by analyzing
all the associated factors.
2. Financing stage:
This stage involves four processes which are as follows:-

 Arrangement of Finance:-
In order to take care of the finances related to the project, the sponsor
needs to acquire equity or loan from a financial services organization
whose goal are aligned to that of the project.
 Loan or equity Negotiation:-
During this step, the borrower and lender negotiate the loan amount and
come to a unanimous decision regarding the same.
 Documentation and verification:-
In this step, the terms of the loan are mutually decided and documented
keeping the policies of the project in mind.
 Payment:-
Once the loan documentation is done, the borrower receives the funds as
agreed previously to carry out the operations of the project.
3. Post-Financing stage:
This stage involves three processes which are as follows:-
 Timely Project Monitoring:-
As the project commences, it is the job of the project manager to monitor
the project at regular intervals.
 Project Closure:-
This step signifies the end of the project.
 Loan Repayment:-
After the project has ended, it is imperative to keep track of the cash flow
from its operations as these funds will be, then, utilized to repay the loan
taken to finance the project.
Sources of finance
Sources of finance for business are equity, debt, debentures, retained earnings, term
loans, working capital loans, letter of credit, euro issue, venture funding, etc.
Based on time period:

Long-Term Sources of Finance-

Long-term financing means capital requirements for a period of more than 5 years to 10, 15, 20 years or maybe more
depending on other factors. Capital expenditures in fixed assets like plant and machinery, land and building, etc .of
business are funded using long-term sources of finance.

Eg: shares, debentures, retain earing, lease financing

Medium Term Sources of Finance-

Medium term financing means financing for a period of 3 to 5 years and is used generally for two reasons. One, when
long-term capital is not available for the time being and second when deferred revenue expenditures like
advertisements are made which are to be written off over a period of 3 to 5 years.

Short Term Sources of Finance:

Short term financing means financing for a period of less than 1 year. The need for short-term finance arises to finance
the current assets of a business like an inventory of raw material and finished goods, debtors, minimum cash and bank
balance etc. Short-term financing is also named as working capital financing.

E.g. Trade credit, fixed deposit ,bill discounting, installment.

Based on ownership and control

Owned Capital

Owned capital also refers to equity. It is sourced from promoters of the company or from the general public by issuing
new equity shares

 Equity
 Preference
 Retained Earnings
 Convertible Debentures
 Venture Fund or Private Equity

Borrowed Capital-
Borrowed or debt capital is the finance arranged from outside sources. These sources of debt financing include the
following:

 Financial institutions,
 Commercial banks or
 The general public in case of debentures.
ACCORDING TO SOURCE OF GENERATION:
Based on the source of generation, the following are the internal and external sources of finance:

Internal Sources:

The internal source of capital is the one which is generated internally by the business. These are as follows:-

Retained profits.

Reduction or controlling of working capital.

Sale of assets etc.

External Sources:

An external source of finance is the capital generated from outside the business. Apart from the internal sources of
funds, all the sources are external sources.
 UNIT 5

 Social sector perspective and social entrepreneurship

 Social entrepreneurship opportunities and successful models
 Social innovations and sustainability
 Marketing management for social ventures
 Risk management in social enterprises
 Legal framework for social ventures
 Projected financial statement
 Risk and growth of entrepreneur

Social Sector Perspective and Social Entrepreneurship

Social sector:

Social sector usually define as dealing with social and economic activities carried out for the purpose of benefiting
society, and in the main non -profit, not for profit and nongovernmental organizations are associated with this sector.

What does Social Sector includes :-

The term social sector refers to all those sets of activities which contribute to human capital formation and human
development. Thus Education, Health, Medical Care, Water Supply and Sanitation, Housing etc. have been considered
as factor contributing to human development.

Some Scheme for Social Sector Development-

(1) PM Gramin Awas Yojna:

PMAY-G Launched in 2016, restructuring Indra Awas Yojna. The objective of “housing for all” implemented by
ministry of Rural Development. Till 29 November2021 a total 1.65crore PMAY-G house have been constructed.

(2) Sarva Shiksha Abhiyan (SSA):

SSA launched in 2001 by Ministry of Education. Main purpose was universalization of Elementary Education from 6-
14 years of children.

(3) Mid-Day Meal Scheme:

Launched in the year 1995 August 15, by PM P.V. Narasimha Rai under Ministry of Education. In September 2021,
the Mid-Day meal scheme was renamed as ‘PM POSHAN’.

(4) Mahatma Gandhi National Rural Employment Guarantee Act:

Launched in August 2005, by Ministry of Rural Development. The most ambitious project of the govt. of India. The
Act provides 100 days assured employment every year to every rural household.

(5) Ayushman Bharat:

Launched on 23September 2018, by Ministry of Health and Family Welfare. It will provide a health cover Rs 5 lakhs
per family per year for medical treatment.

Social Entrepreneurship :-
A person who tries to solve social problems using entrepreneurial skill known as social entrepreneur.Social
entrepreneur works for social culture & environment causes and find solution of that. Social entrepreneurs not focus on
profit they focus on providing help and support to undevelopment people.Social entrepreneur focus on decrease
poverty, Better healthcare, better education.

Different types of Social Entrepreneurship:

(1) Trading Enterprises:

Cooperatives, partnership firms, and worker or employee-owned firms are a part of trading enterprises. The working of
these organizations is the same as the traditional corporations. They might differ in size, but the social motive remains
the same.

(2) Financial Institutions:

Financial institutions like banks and credit companies also constitute social businesses. For example, various credit
unions provide higher deposit rates and lower interest rates to the public. Also, some banks work on a cooperative and
microcredit basis to cater the customer needs.

(3) Non-Governmental Organizations:

NGOs are charity groups that aim to help and donate to social action. They operate on both small and large-scale
levels. They receive certain grants from governments and investors to fulfill their purpose.

(4) Community Organizations:

These are registered social corporations that form a part of a community. These enterprises aim at serving the public
through commercial profits. The members of the enterprise also support the cause.

SOCIAL ENTREPRENEURSHIP -
• Social entrepreneurship is all about recognizing the social problems and achieving a social change by employing
entrepreneurial principles, processes and operations.

Opportunities of social entrepreneurship

1.Waste Management

2.Cleaning Service
3.Green Infrastructure

4.Water Management

Waste Management
In any country like India, solid and liquid waste Management are undoubtedly the corner stone of clean and green
India.

● Entrepreneurial opportunity in solid waste Management are available in the area of waste collection, waste
sorting, waste transformation and energy recovery from waste.

Cleaning Services

● To keep the world clean and green we have to contribute ourselves towards it u And aspiring social
entrepreneurs this is great sector to tap.

Green Infrastructure

● It connecting life support system for urban environment.

● It includes parks and reserves, green ways, transport corridor, water way and living walls

Water Management

● Water is the one of the most important element of life.

● In today’s time, to access the clean water is the biggest achievement of any family living in remote areas of
country.
● You being a entrepreneur’s, can look this matter and figure out the best way to solve this problem with the help
of entrepreneurial skills.

Successful Model for Social entrepreneurship -

A successful Model for Social entrepreneurship doesn’t just have a good idea – they also have the practical business
knowledge to turn that the idea into a reality.

1.Study Hall Education Foundation (SHEF)-

● It is an organization dedicated to offering education to the most disadvantaged girls in India.

● It has worked with over 900 schools and change the life of 1.5L with the program.

2.Selco-

● It is a company that delivering sustainable energy sources to rural regions of country.

● This project was the first rural solar financing program in India.

3.Childline-

● It’s aim to provide help in form of health-care and police assistant, especially for street children.
4.Goonj-

● It is social enterprise that collect the clothes from the urban areas and they sort them and later distribute among
the poor and needy.
● The relief work was done by Goonj during the natural calamities in Tamilnadu, Kerala and Gujarat.

5.Pipal tree –

● It worked to create job opportunity for unemployed youth in rural India.

● It was started as a company that aim is provide formal training to youths and provide them with reputable job in
companies across the country.

6.Frontier Market-

● It’s aim to provide the best technology solutions to the remote villages in India at the cheapest price possible.

 It supplies solar energy power products to rural areas.

Social innovations and sustainability

SOCIAL INNOVATION

We live in a system on a planet in a country in an environment that humans had created. We have created a system to
help us like Government, justice, education, health, economy, and transportation many have benefited from the system
we have created but some have been left out rated and endurable like poverty, homelessness, addictions, and
discrimination. Social innovation is the result of the intentional work of people trying to make positive change happen
by addressing these complex problems at their roots. Social innovation processes are designed to engage the creativity
of all sectors, bringing many perspectives and different resources to bear on a problem. Successful social innovations
have durability, scale, and transformative impact.

There are three sectors of social innovation:

1. Private sector
2. Social sector
3. Public sector

Types of Social Innovation

There are numerous types of social innovation in the world. From socio-political to socio-cultural, different types of
social innovation impact different sets of people. Here are a few types of social innovation that you need to be aware
of.

1. Socio-technical innovation: It refers to a process of change in the structure of the socio-technical system and
the relationship among the members of the system.
2. Socio-cultural dimension of innovation: The role of culture in determining the innovation capacity (crucial for
economic development) of society refers to socio-cultural innovation
3. Socio-analytical innovation refers to innovation involving analytical and sense-making frameworks.
4. Socio-ecological innovation: Innovation of human-environment interaction. An example is citizen science.
5. Socio-political innovation: Innovation of governance, politics, law, etc., like adding more citizens through a
referendum.
 6. Socio-ideological innovation: Innovation of ideological frameworks, mindsets, paradigms, etc. An example is
the reformation movement.
7. Socio-juridical innovation involves the innovation of legal frameworks and laws, etc. For example, the
introduction of the citizen jury.

Socio-ethical innovation: This involves the innovation of normative/ethical frameworks. An example is corporate
social responsibility.

8. Socio-economic innovation involves the innovation of economic and business models, etc. An example of this
can be value chains.
9. Socio-organizational innovation: This involves innovation of organizational arrangements, etc.

Social Innovation is not just limited to a specific field but consists of different spheres of human interaction that play a
vital role in our lives. For making an impact, you need to choose a certain type of social innovation to make a mark.

SUSTAINABILITY
Sustainability consists of fulfilling the needs of current generations without compromising the needs of future
generations. While ensuring a balance between economic growth, environmental care, and social well-being.

Sustainability improves the quality of our lives protects our ecosystem preserves natural resources for future
generations.

Some ways to live sustainable life-

 Recycle properly.
 Ditch plastic water bottles and invest in a reusable bottles.
 Minimize single-use plastic in your life.
 Reduce your water uses.
 MARKETING MANAGEMENT FOR SOCIAL VANTURE
INTRODUCTION OF MARKETING

A market survey must be conducted to ascertain the true demand and supply position. Information on other
entrepreneur’s planning to enter the same field must be collected.
Once it is established that there is good possibility of the unit being able to established itself, a pre-production market
development program should be undertaken. This is to ensure that the enterprise does not face the problem of want of
sales after commencement of production. The role of marketing starts even before a decision to set up a manufacturing
unit.

MARKETING ACTIVITIES
1. Research
2. Planning
3. Branding
4. Pricing
5. Distribution
6. Selling
7. Packaging
8. Merchandising
9. Warehousing
10. After-sales service
11. Sales promotion
12. Advertising
13. Credit control

Now we have write the explanation of each topic related to marketing activities.

1.Market research is a continues activities .it starts with a market survey to establish demand and supply position for
the product.

2.During establishment of the enterprise, planning, market development, packaging development, warehousing, short
term and long’s term sales planning are to carried out.

3.Branding is a essential for costumer products, costumer durables as well as industrial product likes for the
manufacturer, retailer and consumer.

4.Pricing associated with value, status, quality, durability. Like methods and factors of products.

5The distribution network should make available goods conveniently to largest number of consumers in required
quantities, where and when needed like agents, stockists, whole sales, distribution etc.

6.converting goods into cash called sales. No sale is compliment till the goods have been delivered and their value
recovered. Most effective method of selling is through own trained staff.There are some important points like
compensation to own salesman, motivationMethod s, maintenance of effective control etc. which helps to grow the
selling method of the costumer.

7. The type of packaging should meet the above requirements. However, the selection of design of packaging should
also take into the account the cost factor.

8. Merchandising is the art of displaying products at a point of sale in order to catch

the attention of the customer and highlight the plus points of the product. Methods of merchandising is also the
important part of this.
9. Warehousing is to store goods for safety against theft, weather, rodents and insects. There are so many reasons of
warehousing like storage of the products outside octroy limits results in financing saving.

10.After sales service is the most important activity usually ignored by many organizations. Dissatisfaction of
customer can very seriously affect future sales.

11. Sales promotion is required to create temporary spurt in sales to raise finance is short times.

12. Adverting in dialing and magazines and on radio and television is most popular but expansive.

13. Credit policy is very critical for the survival of a small-scale unit. There are so many things like turnover, facilities,
behavior etc.

Social marketing management (SMM) tools equip organizations with the ability to orchestrate and manage a wide
range of social communication efforts across various marketing teams and social platforms within a single tool. These
software solutions help marketing leaders monitor, collect and analyze social data; develop, publish and promote
content; identify and engage with their audience; and track the performance and impact of these communications.
 ADVANTAGE OF MARKETING
 Choosing the appropriate magazine or newspaper to advertise and market your business allows you to appeal to
a specific audience and demographic. Targeting your adverts at the right audience to maximise its
effectiveness.
 Often an advantage of marketing via print media is the flexibility. The size, placement and type of advert can
be adopted and changed according to your needs.
 Another advantage marketing this way is the repeated display of your advert over time. Multiple appearances in
various issues of the paper or magazine will improve chances of your brand sticking with the customers and
also the results you will see in terms of sales leads

DISADVATAGE OF MARKETING
 Cost can be prohibitive. The bigger the advert the more the cost. Magazines and newspapers with a wider
audience generally cost more to advertise in and marketing over time in this manner may be too expensive for
some businesses.
 Competition in the marketing space may be another disadvantage. You want your advert to stand out, but
unless you can afford to pay for a full page spread you will be competing with the other businesses scrambling
for attention.
 Magazines are often released on a monthly basis, meaning it can take longer for your advert to take hold in a
potential customers mind.

SOME BASIC INFORMATION ABOUT MARKETING IN FIELD OF SOCIAL

 As the world of marketing drifts towards digital with time spent on mobile & digitally connected devices seeing
a multi fold rise year-on-year while they gradually decrease on traditional mediums, digital has become a one-
stop platform for people to socialize, learn, work, play, and get entertained in the current times.
 The digital marketing program from NMIMS Global will equip you with top-of-the-line marketing skills to
become a multi-faceted marketing wizard. Realise your goals at NMIMS Global, India's Top Ed-tech
university, with Digital Marketing Programs powered by Student the world’s leading provider of digital
courseware.

Risk Management in Social Enterprise -

Social Enterprise:

A social entrepreneur is an entrepreneur that starts a business to create social change and possibly solve certain social
issues and problems Examples of social entrepreneurs are wide and varied. It could be someone who builds mobile
apps designed to report crimes or creates a business that aims to bring resources to underprivileged communities. At
the end of the day, social entrepreneurs are known for following their hearts.

Risk in Social Enterprise:

Obtaining finance:
Most entrepreneurs require some sort of funding when they start their entrepreneurial projects. Whether they plan to
obtain their funding from a private lender or a bank, the fact of the matter is that starting a business involves
overcoming many costs. The problem with social entrepreneurship is that the business models don't often turn over
massive profits. This, coupled with the fact that social entrepreneurship is widely misunderstood, makes lenders wary
of lending large amounts to social entrepreneurs. Being constantly rejected by lenders can be extremely disheartening.
That is why it is so important to have a solid business plan and a dependable way in which you plan to turn over
profits.

Backlash:
If you are fighting for a certain cause, in many cases, there will be people fighting against it. The more controversial
your cause, the more backlash you can expect to get.

Not focusing on profit:

Many social entrepreneurs are so caught up in their cause that they do not focus on creating a profit However, making
a profit is very important when it comes to satisfying your investors, maintaining a successful business, as well as
putting food on your table.

Burnout:

Burnout is a genuine risk for social justice entrepreneurs. Because they often put their heart and soul into their work,
social entrepreneurs work themselves to the bone and work long hours. Like with all types of entrepreneurs, there are
no set working hours, so entrepreneurs find their personal lives and their work lives amalgamating. It is very important
to ensure that you maintain a healthy work/life balance to avoid burnout which can affect both your physical and
mental health.

Lack of public knowledge:

Although social entrepreneurship is growing and expanding, the majority of the general public do not have a clear idea
of what social entrepreneurship is exactly. This can make it difficult for your cause to gain support, and support from
the general public and local communities is often imperative to your success as a social entrepreneur.

Marketing:

Marketing a social business definitely comes with its challenges. Unfortunately, many social entrepreneurs do not put
enough emphasis on effective marketing and may not have the resources, time or funds to put into marketing, which
could act as a massive risk and challenge.

How to eliminate risks as a social entrepreneur:

1. Risk Identification:
Government legislation, policies and regulation, inadequate funding, technological challenges, security and safety,
withdrawal of grants and donations, legal restrictions, norms and culture, climate hazards.
2. Risk impact assessment:
the social enterprise asses the frequencies and consequences of each identified risk. Assessment criteria are used to
measure the impact of these risks.
3. Developing the approach and plan:
It determines the process techniques tools and team role. Plan will describe how to manage the risk and perform the
project.
When you look at the risks involved in becoming a social entrepreneur, it can be disheartening, but there are ways to
minimize these risks, including:

 Speak to any successful social entrepreneurs that you know of. Their advice and guidance will be very valuable
to you and may guide you on the best route to take with your venture.
 Come up with a detailed business plan that covers everything you plan to do with your project
 Focus on effective marketing that engages with the public and informs them of your social business. The more
public knowledge out there,
 social entrepreneur, it can be disheartening, but there are ways to minimize these risks, including:
 Speak to any successful social entrepreneurs that you know of. Their advice and guidance will be very valuable
to you and may guide you on the best route to take with your venture.
 Come up with a detailed business plan that covers everything you plan to do with your project.
 Focus on effective marketing that engages with the public and informs them of your social business. The more
public knowledge out there, the better!
• Priorities making profits. The more aware you are of the risk involved in social entrepreneurship, the more
likely you are to avoid these risks. Therefore, ensure that you inform yourself and keep your feet firmly planted
on the ground as you embark upon your journey towards social entrepreneurship.

Legal framework for social ventures –

WHAT IS LEGAL FRAMEWORK?

1. The rules, rights and obligations of companies, governments, and citizens are set forth in a system of legal
documents called a legal framework.
2. Documents in the legal framework include a country’s constitution, legislation, policy, regulations and
contracts.
3. Laws and policy are supposed to have more authority than a contract. However, contracts can also be written to
explicitly override the laws and regulations.
4. Legal documents that cover broad principles, like constitutions, are generally more difficult to change. More
specific documents, like laws and contracts, can often be more easily amended.
5. Countries with detailed laws and policies often have more stable and predictable legal frameworks than those
that leave more aspects open for negotiations in individual contracts.

LEGAL FRAMEWORK NECESSITIES IN BUSINESS: -

a. Maintain Order: A better set of rules and regulations helps a business enterprise in maintaining order
within the organization.
b. Resolve Disputes: A legal framework helps in resolving disputes within the members of same organization
and also between two co-functioning organization.
c. Establish Generally Accepted Standards: Establishing generally accepted standards for the business
sector allows the groups to act more efficiently and without any collision of different ideas.
d. Protect Rights and Liberties When it Comes to Business: Protect the general rights of the
employee and the other people working with the organization.
 e. Protect Relation to other Businesses, Government Authorities, and the Customers: Having
better rules and laws protect the relation of a business organization with the other co-working bodies.

What are Projected Financial Statements?

Projection of the financial statement means to estimate the statements like Income statement, Balance sheet, and
statement of cash flow. The projection of financial statements emphasizes the current trends and expectations to arrive
at the perfect financial picture that management wants to attain in the future.

Projected financial statements show the summary of the statement of income, balance sheet, and cash flow statement
which helps the managers to take future decisions accordingly.

Explaining projected financial statements

The financial projection is all related to the assumptions taken for forecasting the data of financial statements. Mostly,
assumptions are made based on past data and knowledge. Projections are not exactly correct as predictions are not
100% accurate at the future performance of an organization. All businesses require projected financial data to present
to their investors and creditors.

For managing the business properly, financial projections play a vital role. Making projected financial statements
seems a boredom work for small businesses but it is as easy as creating normal financial statements.

Types of projections

Short term projections

Short term projections mainly cover one year and breaks into monthly projections. This type of projection is mostly
useful for small businesses where the only plans related to increasing sales and revenue are considered.

Long term projections

Long term projections cover mainly the next three to five years and is used in large businesses for creating strategic
plans for expansion and development are made. It also attracts investors so that they invest a large amount in their
business.

Importance of projected financial statements

It helps to find out the additional requirement, which is there for assets to support increased revenue and also create a
positive impact on the financial statement.

It helps in predicting the future outcomes of any business.

It supports the business planning process.

Business growth becomes easy as financial projections help to measure how much debt or equity will be required for
the business in the future.

Businesses never run out of cash as it generates additional cash and revenue whenever required.

For applying for a loan from banks or any other institution, Projected financial statements are very much important.
As well as creditors also ask for projected statements to know the capability of the business to reimburse the debts.

Important data and statements required for financial

Historical financial information

Historical data regarding various financial ratios like return on equity, liquidity ratio, profitability ratios, etc. are
analyzed before preparation of financial projections. Past year's data is very much useful to estimate future outcomes of
the balance sheet of previous years.

Previous years data such as current company.

and non-current assets, short-term and Long-term liabilities, current and non-current liabilities, etc. are used to analyze
and prepare projected balance sheets.

The income statement of previous years

Previous years' data such as sales, expenses, cost of goods sold, gross profit, net profit, depreciation, etc. are used to
analyze and prepare projected income statements. By using sales forecast and expense budget, projection of income the
statement is made.

Cash flow statement of previous years

Cash inflows and outflows of previous years help to estimate the future requirements of cash in the business.

Market conditions and possible changes

Market conditions play a vital role in the projection of financial statements. Market structure is analyzed for projection
and business plan is made accordingly. Demand and supply of goods and services, amendments and business reforms,
inflation and deflation, etc.

Risk and growth of entrepreneur :

Risk and growth of entrepreneur -

Risk-

o Risk is an unplanned events that may affect one or some of the project objectives if it occurs.
o Risk of entrepreneurship
o Entrepreneurs face multiple risks such as bankruptcy, financial risk, competitive risks, environmental
risks, reputational risks, and political and economic risks. Entrepreneurs must plan wisely in terms of
budgeting and show investors that they are considering risks by creating a realistic business plan.
o There are five kinds of risk that entrepreneurs take as they begin starting their business. Those risks are:
founder risk, product risk, market risk, competition risk, and sales execution risk.
o Founder risk considers who the founders of the company are, if they get along, and how they will work
for the company.
o Product risk takes into account the engineers creating new product for the business and how they will
recruit other product engineers.
o Market risk looks at the problem you’re solving with your product and how consumers will react.
o Competition risk looks at how you differ from other similar organizations and companies.
 o Sales execution risk helps you look at how to sell your product to consumers by presenting them a
solution to their problem

How can an entrepreneur minimize risk?

1.Know yourself

2.Develop the competencies you need.

3.Seek information and help.

4.Do the financial calculations preferably yourself.

5.Do market research. 6.be clear about your objectives – goals.

7.Think big

Growth of an entrepreneurial
The process of improving entrepreneurial skills and knowledge among individuals with the help of providing well-
organized training and developing supporting institutions is called entrepreneurial growth.

The term entrepreneurial growth means organization plans to achieve its objective to grow and expand a business by its
quality, quantity, and turnover. Entrepreneurial growth can be in terms of innovators, business developers, radicals,
expanders, customers etc. An entrepreneur who undertakes the risks, and effort to grow the business will certainly have
entrepreneurial growth whereas the person who is not willing fails to achieve objectives

The steps that we know will lead to success are:

-Find your passion. Social entrepreneurs believe and trust that a first step can lead to change. …

-Build a team culture. …

-Get started. …

- at it (how to stay motivated and persevere in difficult times) …

-Fund your venture and grow organically. …

-Scale up.