2014 – Solved Question Paper | Entrepreneurship Development | Previous Year – Masters of Commerce (M.Com) | Dibrugarh University

2014 – Solved Question Paper | Entrepreneurship Development | Previous Year – Masters of Commerce (M.Com) | Dibrugarh University

2014

COMMERCE

Course: 104

(Entrepreneurship Development)

Full Marks: 80

Time: 3 hours

The figures in the margin indicate full marks for the questions.

1. (a) Elucidate the literature description of the term entrepreneur and entrepreneurship.

-> Entrepreneur

An entrepreneur is an individual who creates a new business, bearing most of the risks and enjoying most of the rewards. The entrepreneur is commonly seen as an innovator, a source of new ideas, goods, services, and business/or procedures.

Entrepreneur play a key role in any economy, using the skills and initiative necessary to anticipate needs and bring good new ideas to market. Entrepreneur who proves to be successful in taking on the risks of a start-up are rewarded with profits, fame, and continued growth opportunities. Those who fail suffer losses and became less prevalent in the markets. So, an entrepreneur is:

  • A beginner in the market, who has something new to offer to society and starts right from scratch to establish and run the enterprise.
  • An innovator, who has a thought-provoking idea or concept in his/her mind, that has the capability to lead the marketplace.
  • A developer, who develops a business model, to give shape to the idea.
  • A leader, who provides guidance and support to his/her men, to work in a specific direction or change the same so as to achieve the target.
  • An incharge who is accountable and responsible for the success or failure of the venture, for the decision made by him/her.
  • A promoter, who takes all the relevant steps to turn the dream into reality.
  • A forecaster , who foresees, future opportunities and threats which can affect the venture, possibility or negatively.
  • A risk-taker, who has the ability to anticipate the risk in the future moves, and take the risk, if they are beneficial to the enterprise.

TYPES OF ENTREPRENEUR

Based on the types of business:

1) Trading Entrepreneur – As the name itself suggests, the trading entrepreneur undertakes the trading activities. They procure the finished products from the manufacturers and sell these to the customers directly or through the retailer. These serve as the middlemen as wholesalers, dealers, and retailers between the manufacturers and customers.

2) Manufacturing Entrepreneur – The manufacturing entrepreneurs manufacture products. They identify the needs of the customers and, then, explore the resources and technology to be used to manufacture the products to satisfy the customers’ needs. In other words, the manufacturing entrepreneurs convert raw materials into finished products.

3) Agricultural Entrepreneur – The entrepreneurs who undertake agricultural pursuits are called agricultural entrepreneurs. They cover a wide spectrum of agricultural activities like cultivation, marketing of agricultural produce, irrigation, mechanization, and technology.

Based on the use of technology:

1) Technical Entrepreneur – The entrepreneur who establish and run science and technology-based industries are called ‘technical entrepreneur.’ These are the entrepreneurs who make use of science and technology in their enterprises. Expectedly, they use new and innovative methods of production in their enterprises.

2) Non-Technical Entrepreneur – Based on the use of technology, the entrepreneurs who are not technical entrepreneurs are non-technical entrepreneurs. They are concerned with the use of alternative and imitative methods of marketing and distribution strategies to make their business survive thrive in the competitive market.

Based on ownership:

1) Private Entrepreneur – A private entrepreneur is one who is an individual sets up a business enterprise. He/she it’s the sole owner of the enterprise and bears the entire risk involved in it.

2) State Entrepreneur – When the trading or industrial venture is undertaken by the state or the government, it is called ‘state entrepreneur.’

3) Joint Entrepreneur – When a private entrepreneur and the government jointly run a business enterprise, it is called ‘joint entrepreneurs.’

Based on Gender:

1) Men Entrepreneurs – When business enterprises are owned, controlled, and managed by men, these are called ‘men entrepreneurs.’

2) Women Entrepreneurs – Women entrepreneurs are defined as the enterprises owned and controlled by a woman or women having a minimum financial interest of 51 per cent of employment generated in the enterprises to women.

Based on the Size of enterprise:

1) Small-Scale Entrepreneur – An entrepreneur who has made investment in plant and machinery up to Rs 1.00 crore is called ‘small-scale entrepreneur.’

2) Medium-Scale Entrepreneur : The entrepreneur who has made investment in plant and machinery above 1.00 crore but below Rs. 5.00 crore is called ‘medium-scale entrepreneur.’

3) Large-Scale Entrepreneurs : The entrepreneur who has made investment in plant and machinery more than Rs 5.00 crore is called ‘large-scale entrepreneur.’

CHARACTERISTICS OF ENTERPRENEUR

1. Self-Motivation- One of the most important traits of entrepreneurs is self-motivation. When you want to succeed, you need to be able to push yourself. You aren’t answerable to anyone else as an entrepreneur, and that sometimes means that it’s hard to get moving without anyone to make you. You need to be dedicated to your plan and keep moving forward- even if you aren’t receiving an immediate pay check.

2. Understand what you offer – As an entrepreneur, you need to know what you offer, and how it fits into the market. Whether its product or a service, you need to know where you fit in. This also includes knowing whether you are high end, middle of the road or bargain. Being able to position yourself and then adjust as needed is an important part of entrepreneurship.

3. Take Risks- Successful entrepreneurs know that sometimes it’s important to take risks. Playing it safe almost never leads to success as a business owner. It’s not about taking just any risk, though. Understanding calculated risks that are more likely to pay off is an important part of being an entrepreneur. You’ll need to be willing to take a few risks to succeed.

4. Know How to Network- Knowing how to network is an important part of entrepreneurship. Sometimes who you know is an important part of success. Being able to connect with others and recognize partnership opportunities can take you a long way as a business owner. Figure out where to go for networking opportunities and make it a point to learn how to be effective.

5. Basic Money Management Skills and Knowledge – We often think of successful entrepreneurs as “ big pictures” people who don’t worry so much about managing the day to day. And it’s true that you might have an accountant or other team members to help you manage the business. However, if you want to be successful, you still have basic money management skills and knowledge. Understand how money works so that you know where you stand, and so that you run your business on sound principles.

6. Flexibility – To a certain degree, you need to be flexible as an entrepreneur. Be willing to change as needed. Stay on top of your industry and be ready to adopt changes in processes and product as they are needed. Sometimes, you also need flexibility in your thinking. This is an essential part of problem-solving. You want to be able find unique and effective solutions to issues.

7. Passion- Finally, successful entrepreneurs are passionate. They feel deeply about their product or service or mission. Passion is what will help you find motivation when you are discouraged and it will drive you forward. Passion is fuel for successful entrepreneurship. There are many serial entrepreneurs that create successful businesses, sell them, and then create something else.

Entrepreneurship

The process of launching, developing and running a business venture along with its financial risks is called entrepreneurship. In simple terms, it is willingness to launch a new business venture. It is very important for the economic development of the expanding global marketplace. A person who undertakes entrepreneurship is called an entrepreneur.

Entrepreneurship has been described as the “capacity and willingness to develop, organize and manage a business venture along with any of its risks to make a profit.” While definitions of entrepreneurship typically focus on the launching and running of businesses, due to high risks involved in launching a start-up, a significant proportion of start-up businesses have to close due to “lack of funding, bad business decision, an economic crisis, lack of market demand, or a combination of all of these.”

TYPES OF ENTREPRENUERSHIP

1) Administrative Entrepreneurship- The entrepreneurial activity under this category is centred on administrative techniques and functions. It gives a new option to handle prevailing or future situations in a more effective way that provides advantages and a competitive edge. Total quality management, job redesigning, new techniques of doing things, participative management or management by consensus are a few of the examples of administrative entrepreneurship that increase overall organizational efficiency and that makes the firm successful and sustainable in the competitive market environment.

2) Opportunistic Entrepreneurship– It is the best characteristics of entrepreneurship. Environmental changes always offer new opportunities. But everybody is not equally capable of identifying and to utilize that opportunity on time. The entrepreneurship that identifies exploits and executes that opportunity in the first hand regarded as opportunistic entrepreneurship.

3) Acquisitive Entrepreneurship– The entrepreneurship that learns from other competencies is acquisitive entrepreneurship. It acquires something new of value front, the competitive environment or achieves the competitor’s technical capacities. It keeps entrepreneurship sustainable in a competitive environment. The failure never restraints them from acquisition but motivates them further to discover such a thing with a new visitor.

4) Imitative Entrepreneurship– The entrepreneurship that imitates a good or service operating in the market under a franchise agreement is the imitative entrepreneurship. It is the medium that spread technology over the world. It adopts an existing technology with minor modifications appropriate to the local condition.

5) Private Entrepreneurship– The entrepreneurship that is initiated under the private sector is private entrepreneurship. The government gives various support services through private and public concerns that encourage private initiative in taking entrepreneurial ventures. A mutual relationship between private and public sectors would make economic development speedy and balanced.

6) Public Entrepreneurship– The entrepreneurship that is undertaken by the government through its various development agencies is public entrepreneurship. All countries, developed or underdeveloped, take a public initiative in venture ideas to fulfil the initial deficiency of private entrepreneurs.

7) Individual Entrepreneurship– The entrepreneurship that is undertaken by an individual or a family with the personal initiative is individual entrepreneurship.

8) Mass Entrepreneurship– This type of entrepreneurship emerges in an economy where a favourable climate of motivation and encouragement exists for developing a wide range of entrepreneurship among general mass is mass entrepreneurship. It increases small and medium enterprises in a country.

CHARACTERISTICS OF ENTERPRENEURSHIP

  • Process: Entrepreneurship is a systematic, purposeful, creative and continuous process, which an entrepreneur undertakes to run the business smoothly.
  • Innovation: Innovation is the key feature of the entrepreneurship, which creates a difference in the market place. Indeed, it helps the enterprise to introduce the product quickly, as there is hardly any company which selling the product in the market.
  • Development of Network: Developing strong connections with the parties such as suppliers, distributors, banks, debtors, creditors and many more, which are directly or indirectly related with the business process, to have a good worth, in the market.
  • Profit potential: Profit is something that keeps the organization going; in fact, it acts as a motivation for the entrepreneurs, to do better than before. So, before taking any decision regarding the enterprise, priority is given to the profit potential, i.e. while taking any step further, the entrepreneur identifies whether it is profitable or not.
  • Forecasting of Market Trends and future possibilities: The entrepreneur has to keep a close watch on the market trends and future demands so that the enterprise could continuously work to improve the products or service offered, and grow further.

(b) Explain the parameters entrepreneurs in small firms adopt.

-> Entrepreneurs are people who owns and control their own enterprises. They are almost always focused upon the well-being, survival and development of their enterprises. Their everyday activities are centred on doing business and simply running their enterprise.

If entrepreneurs are seen outside the premises of their enterprise, it is likely to be for a reason that concerns or impacts upon the enterprise. Thus, most typically, they will be seen with customers or potential customers. If they are seen at an ‘event’, it is likely that they are there in order to assess the threat or opportunity presented by the event. Even, they are likely to take up such an invitation only if they see some potential gain as a result of attending. Small firms usually deal with known and established products and services and this small firms owners tend to deal with known risks. Limited growth with continued profitability is what hoped for in most small firms.

Myths about Entrepreneurs:

  • Entrepreneurs take uncalculated and unknown risks without any plans- This myth is partially true; entrepreneurs do take uncalculated and unknown risks, but they keep resources, and plan as much as they can for dealing with the unknown.
  • Entrepreneurs complete extensive research before taking the first step- Unless an existing business is setting up a new business line on a new concept, entrepreneurs start with very limited or no research. However, they do have good awareness about the potential of their offering, which gives them the confidence to assume the risk.
  • Entrepreneurs venture out only after gaining significant experience in the industry- Most entrepreneurs are young, inexperienced individuals who follow their passion.

Entrepreneurs are in business to make money; they strive to achieve security through having enough money to do business and to make profit. Allied to this motivation is a constant constraint and therefore concern surrounding lack of cash and cash flow.

If such a notice is accepted, then it is interesting to compare this primary ‘in-practice’ motivation with some of the literature characteristics and motivations supposedly possessed by entrepreneurs. For example:

Innovative/creative- In practice, entrepreneurs will display these characteristics only if they have a need for new source of money. They will often take on new work in the hope of success and if this is forthcoming, then all is well; if not, then innovation stops.

Opportunistic- In practice, entrepreneurs will display this characteristic in similar circumstances to the above, but only until a barrier occurs and risk is involved.

Risk-Taker- In practice, again, entrepreneurs will display this characteristic in similar circumstances to the above but will take risks only until money is threatened.

Change oriented- In practice, entrepreneurs display this characteristic only because the business is likely to be small, and, as it will always have to grow, change in unavoidable.

It can be argued that, when it comes to understanding good marketing practice by entrepreneurs, much more sensitivity to the unique characteristics of the entrepreneurs is required. Characteristics in which small firms are uniquely different can be summarized as negative attitudes to marketing: the perception of marketing as a cost; distribution and selling treated as uncontrollable problems; and, possibly more significant, the belief that each case is so specific that it cannot be treated with general rules.

A definition of small-firm marketing characteristics would typically acknowledge limited resources, lack of specialist expertise for the small- firm owner to seek a strategy for growth that is sensitive to his or her unique characteristics and circumstances is apparent.

2. (a) What are competencies? Explain five entrepreneurial competencies with the help of an example.

-> Competencies are particular qualities that a company’s recruiters have decided are desirable for employees to possess. During job interviews and assessments, competencies are used as benchmarks against which assessors can evaluate candidates. Competencies are not skills, although they are similar. Skills are learned, while competencies are inherent qualities an individual possesses- combining skills, knowledge and ability. Competencies are of two kinds. Hard-skills competencies and Soft-skill competencies.

Hard-skill competencies refer to those skills which are acquired through academic education or through work experience, e.g. an engineer engaged in designing a gear uses his technical knowledge and skills. However, there could be a difference between a successful engineer and a not so-successful engineer; such a difference arises because of the possession of soft skills. The successful one would think of improving the design, process etc. and that is on the fact that he/she possesses certain soft skills.

Soft-skills are skills which cannot be acquired through education or work experience. They are generally inherent in an individual or are developed by him/her consciously. For example, communication skills, interpersonal skills and entrepreneurial competencies, etc.

There are various types of competencies:-

  • Core Competencies – Internal capability that is critical to the success of business, to be possesses by all individual.
  • Technical/Professional/Functional Competencies – Specific knowledge & skills required to be effective in a job.
  • Behavioural Competencies – Motives, traits & attributes the shape behaviour & reflect “how” one applies one’s knowledge & skills in order to achieve results.
  • Threshold Competencies – Characteristics required by a jobholder to perform a job effectively.
  • Differentiating Competencies – Characteristics which differentiate superior performers from average performer.

The five entrepreneurial competencies are:-

1. Initiative– Initiative of any business activity comes from the entrepreneur. It is the entrepreneur who takes action that goes beyond job requirements or the demand of the situation. He does things before asked or forced by the events.

Example- Ramesh was standing near the sea wall at Marine Drive in Mumbai along with a number of people. A boy who stretched too far out fell into the water and began to drown. People shouted but did not do anything else. Ramesh jumped into the sea, swam out and saved the boy. Ramesh took the initiative which brought out some of his hidden skills.

2. Persistence– An entrepreneur should take repeated actions to overcome the obstacles that get in the way of reaching goals. He/she should never be disheartened by failures.

Example- Ankita decided to set up a unit manufacturing FRP (Fibreglass Reinforced Plastic) products. She purchased land and engaged a firm of contractors for constructing the building. As luck would have it the watchman engaged their got murdered and the contractor’s workers panicked and left the construction work. Somehow, Ankita managed to get the construction completed. By the time she could start production, FRP technology has changed and she hardly had any orders. As a result she defaulted in payment of interest to the financial institution which had extended financial assistance. She sold the land and building, paid back the financial institution, salvaged the machinery, shifted it to a rented place and started again. She is now an established entrepreneur.

3. Communication– Communication is a way to make interaction between people. Entrepreneurs always try to improve their communication skills because it will assist them in sharing their ideas and presenting them clearly and to constantly work in a better way with their staff, team members, clients and colleagues. They understand the role of communication in entrepreneurship and they furnish themselves with some best tips to make their regular interactions effective.

Example- Richard Branson is a motivational speaker which is a good example of communication competency. He has strong communication skills and he inspires other people through their strong communication skills.

4. Networking– Business without network or contacts unable to be successful. Entrepreneurial network is an association of entrepreneurs organized, formally or informally, with the object of increasing the effectiveness of the members’ business activities. Such networks extend from very informal mutual support arrangements on up to national and international membership organizations based on formal rules, substantial membership fees, and often employing professional staffs.

Example- Google Company is one of the examples of networking which is one of a business competency. Google Company have a strong network either formal or informal contacts with many small or big farmers, market dealers, and valuable customers. Networking helps them by sharing updated information and also helps to give recommendation and suggestions to improve their business or products through feedback which ultimately make their business successful.

5. Creativity– A thorough observation of the entrepreneurial process shows that creative thinking is the must have “skill” of an entrepreneur for creation of new ideas. Creativity allows a person to devise interesting processes, which gives so many advantages to entrepreneurs.

Example- Mark Zuckerberg is a student as well as a CEO of Facebook. He owned and manage well reputable network “Facebook” which is a popular web that provides free access networking around the globe. That makes only possible because of his creative skills.

(b) Explain the theory of transaction with the help of an example.

-> The transaction cost approach to the theory of the firm was created by Ronald Coase. Transaction cost refers to the cost of providing for some good or service through the market rather than having it provided from within the firm. Ronald Coase describes in his article “The problem of Social Cost” the transaction costs he is concerned with:

In order to carry out a market transaction it is necessary to discover who it is that one wishes to deal with, to conduct negotiations leading up to a bargain, to draw up the contract, to undertake the inspection needed to make sure that the terms of the contract are being observed, and so on.

More succinctly transaction costs are:

· Search and information costs

· Bargaining and decision costs

· Policing and enforcement costs

Ronald Coase contends that without taking into account transaction costs it is impossible to understand properly the working of the economic system and have a sound basis for establishing economic policy.

The Nature of the Firm (1937) by Ronald Coase:

Ronald Coase observes that market prices govern the relationship between firms but within a firm decision are made on a basis different from maximizing profit subject market prices. Within the firm decisions are made on through entrepreneurial coordination. There are a great variety of arrangements in producing goods. In agriculture often most of the labour force works on a day-to-day basis. In other industries the labour force may be permanent, tied to the firm with long-term contracts. Repair services in some firms may be supplied by an internal organization; in others it is provided by specialized firms from outside. A firm is a system of long-term contracts that emerge when short-term contracts are unsatisfactory.

The unsuitability of short term contracts arises from the costs collecting information and the costs negotiating contracts. This leads to long term contracts in which the remuneration is specified for the contracted in return for obeying, within limits, the direction of the entrepreneur.

Coase notes that the economic theory of the production level of a plant in the short run and long run are well worked out, but the theory of the size of the firm is not well developed. This is clear in the matter of acquisition of companies by other companies.

Ronald Coase gives the origin of the Nature of the Firm as a course in the organization of the business unit which he taught in 1932. He noted that there are inconveniences of market transaction, but it transactions are not governed by the price system there has to be an organization. The object of a bussiness organization is to reproduce the conditions of a competitive market for the factors of production within the firm at a lower cost than the actual market. But if an organization exists to reduce costs then why are there any market transactions at all? Coase gave two reasons:

· The costs of organizing additional transactions rise with scale and are equated with the costs of additional market transactions;

· The organization of bigger firms may not reproduce the effects of market conditions.

Ronald Coase best describes the relationship between internal and external transaction costs and activity of firms: Every company will expand as long as the company’s activities can be performed cheaper within the company. For example, if there is a risk of environment uncertainty, external transaction costs will increase. Consequently, a company will be more eager to keep its economic activity internal. There will be fewer contracts with suppliers and less external meetings and supervision.

Oliver Williamson adds that a transaction costs occurs “when a good or a service is transferred across a technologically separable interface.” He also states that critical dimensions for transactions are 1) uncertainty, 2) frequency and 3) degree of durability. This reflects the initial idea proposed by Coase. In addition to certainty, manager needs to know the potential future outcomes of a decision. The easiest way to understand this theory is to create an example. Imagine that you want to outsource marketing activity to another company. You need to make a decision. Normally you would base your decision based solely on calculations. However, according to Coase, a good manager needs to take into account bureaucratic costs of your company. When the transaction costs of monitoring another company are lower than the bureaucratic costs of your company, you will decide to outsource the activity to the environment.

Transaction Cost Economics :

Economists Ronald Coase and Oliver Williamson are credited for introducing and popularizing the concept of Transaction Cost Economics (TCE). The TCE theory explains the need for companies in a market. If markets operated in a perfect world, companies would not be needed, as market forces would provide the coordination and incentives needed for production activities.

However, in a real market, companies exist with hierarchies and exercise authority that allocates resources efficiently. Markets, on the other hand, use their bargaining power to allocate resources. The TCE theory states that a hierarchy can allocate resources more effectively, or efficiently, than a market due to imperfect information and bounded rationally.

3. (a) How would as an entrepreneur identify and evaluate business opportunities?

-> An entrepreneur would like to evaluate the opportunities for his products, both goods and services, in the market. He needs to take into account various factors based on which he evaluates opportunities and how such factors are likely to influence those evaluations. He should critically access his business ideas to their effectiveness. According to experts, opportunity evaluation is meant to access future opportunities and identify wealth creating resources that can be controlled and utilised by the entrepreneur. The entrepreneur may possess what appears to be an excellent idea, but whether it can be turned into a profitable opportunity has to be explored. The difference between an idea and an opportunity is whether the entrepreneur can turn it into a product/service and take it to market, whether it will attract customers’ attention and bring profits to the entrepreneur. Before pursuing an idea into a commercial opportunity, the entrepreneur must analyze it critically by bringing up all possible questions. He should try to expand his idea, brainstorm and develop it considerably. He should not just follow established rules but question and examine his assumptions and test them. He should innovate and come up with unconventional ideas.

To evaluate opportunities, the entrepreneur has to assess a number of factors. He should ascertain if his product/service is likely to provide a solution to a problem, which the customer is, whether the product/service can bring financial rewards, if there are any barriers to its entry into the market, competition and quality of competition, the cost involved in launching the product/service in the market, marketing strategy, time needed to break even, expected market share and investment opportunities, among other things. The major factor that need to be considered before evaluating an opportunity are the time the entrepreneur is willing to spend on a project, the preliminary investment, the working capital, the daily activities, its cash flow and profitability.

Opportunity evaluation carried out by management experts demonstrated that such activity is future focused, indicating that the entrepreneur evaluates each opportunity as a resource and weighs the wealth that resource can create if it were utilized. Entrepreneurs find opportunities more interesting if such opportunities match their existing skills, knowledge and capabilities. However, they may get equally strongly attracted to opportunities even if they are inconsistent with their abilities if they perceive them to be rare and profitable with least competition. When they face such conditions, entrepreneurs develop the willingness to learn something new and move beyond their existing sphere of activity.

In the final analysis, the entrepreneur must evaluate an opportunity based on the risks and rewards involved in it. He should also assess if the market is ready for the product/service. He should also ensure that his team is the right one for the assignment and the members are knowledgeable in matters related to the business. Ultimately, he has to make sure that business concept matches the objectives of the team to ensure the success of the business opportunity.

Four ways to identify more business opportunities:-

  • Listen to your potential clients and past leads- when you’re targeting potential customers listen to their needs, wants, challenges and frustrations with your industry. Have they used similar products and services before? What did they like and dislike? What are their objections to your products or services?

This will help you to find opportunities to develop more tailored products and services hone your target market and identify and overcome common objections.

  • Listen to your customers- When you’re talking to your customers listen to what they are saying about your industry, products and services. What are their frequently asked questions? Experiences? Frustrations? Feedback and complaints?

This valuable customers information will help you identify key business opportunities to expand and develop your current products and services.

  • Look at your competitors- Do a little competitive analysis to see what other start-ups are doing, and more importantly, not doing? Where are they falling down? What are they doing right? What makes customers go to them over you?

Analysing your competitors will help you identify key business opportunities to expand your market reach and develop your products and services.

  • Look at industry trends and insights- Subscribe to industry publications, join relevant associations, set Google alerts for key industry terms and news and follow other industry experts on social media.

Absorb yourself in your industry and continually educate yourself on the latest techniques and trends.

(b) Explain the multiple aspects of distribution marketing decision making in large companies.

-> The distribution channel influences multiple other marketing decisions – the price, the product development, employee management, organizational structure etc.

Type1. Direct Sales.

Direct sales are a good distribution model for selling any sort of product that is in the middle price range, it is not purchased every day, and has long shelf-life. Stationery, air purifiers, or jewellery to name a few.

Direct distribution would mean that the manufacturer finds a way to directly communicate to customers without using any market intermediaries and will deliver the goods themselves.

Internet and E-commerce has really popularized direct distribution, however, we find E-commerce is very specific and therefore we have allocated a special place for E-commerce at the bottom of this article.

The most important aspect of direct distribution marketing is communication to the end customer. You need to make sure you are sending the right message.

Here are 10 strategies to encourage in direct sales:

  • Features . As soon as you establish contact with a potential customer, they will want to assess if your product can be useful to them. The basis of your conversation needs to centre on the features of your product and its purpose. If the features do not match the customer’s needs they will not be interested.
  • Advantages . If you have captured the customer’s attention, after listing the features you will be in a place to defend your product against the competition. What makes your product unique?
  • Benefits . Give your customers the logic between using your product and finding a solution to their needs. Tell them how it will save them time, how it will make them money, or how it will resolve their organization issues.
  • Intimacy . Establish a personal connection with the user. At this point of the conversation you have grabbed their attention, but you have not necessarily closed the deal. Spend the time to convince them you have their best interest in mind – go off topic if you have to.
  • Reciprocity . Do the customer a favour. Fish for the kind of favour they would respond to – free samples, discounts or affiliation code. Create the feeling the favour is exclusive. Whenever a customer feels you have done them a favour that creates the need to return it. They will feel obliged to do you a favour and this subconscious feeling will create an imbalance in the situation they would like to rectify.
  • Reasoning . Studies have proved giving multiple reasons, even if they are obvious reasons will tip the scales in your favour. Never run out of reasons. Do not just assume the customer can come up with the logic themselves. In other words – do not be afraid to state the obvious.
  • Q&A . Learn more about the customer – when and how they use their training shoes. Tell them how you believe they should be used. Tell them you are not just selling them shoes. You are selling them a pathway to a healthy and beautiful body. Then ask for your favour back and close the deal.
  • Disclaimer . Close the deal by reminding the customer once again they will have a choice. They can buy the item now but then they would have to approve of it upon delivery, or return it to the delivery person. And even then they can return their item in a 30-day period. And even then within the next 60 days they can still get a replacement or store credit. They still have a choice.
  • Small steps . When you are getting one ‘No’ after another, the customer might be unwilling to establish a new connection. Put your foot in the door. Ask just for a meeting. Start a relationship and work on from there.
  • Affiliate . For whatever reason the customer is not willing to take your offer. Establish a good connection and ask for recommendation. Do they know anyone who might be happy to use your service? Ask them for a contact.

Type 2. Brokers and distributers

If a manufacturer chooses to work with agents and brokers, they decide to directly delegate part of their tasks to those Intermediaries. They act as an extension of the producer in the sense they represent them before the end customer.

Let us get the food industry for example.

Before contracting a broker, the food manufacturer would have to offer the stores the production themselves.

And that is usually the case with smaller vendors. However, as the business expands, they would look for alternatives for shipping their produce to the store.

That would be done by a broker to handle the sales, or a distributer, who would take care to ship the goods to shops in various locations.

Advantages of introducing a broker to a distribution channel

If the manufacturer contracts a broker, they would sign a contract and said broker would be responsible for the offerings to the shops. Brokers are normally not responsible for the shipping itself. The broker is mainly responsible to close the sale.

A broker would have a portfolio of manufacturers they work with in a particular geographic area. They have key retailers they work with and their incentive is to completely satisfy the needs of those retailers.

Brokers will be very selective about the portfolio they assemble. They will not offer a manufacturer as a part of their line to a retailer unless they are sure the retailer will list their items. Therefore they usually have quick access to retailers and have well established relationships with them.

The sales costs for vendors would be fixed. And for their taxes they will offer additional services such as invoicing, inventory control, sales reports and others.

Disadvantages of introducing a broker to a distribution channel

Brokers work for a high fee of the invoiced price of the total production – around 5% – 10%.

At the same time, they will not take responsibility over the shipping of the produce.

Brokers do not have a great incentive to get to know a product or introduce it as a new line to a retailer. Their services normally do not include promotion.

If sales of one of the products of the manufacturer slow down, an entire line may be dropped from the broker’s portfolio and be substituted by another, more lucrative line.

The vendor will still be responsible for the logistics, the returns, the invoicing.

Advantages of introducing a distributer to a distribution channel

A store will normally work with several distributers and several dozen independent manufacturers. A distributer will directly buy the produce from the vendor and resell it to a retailer for direct distribution at a 20% – 30% margin, with which they purchase, ship and invoice the goods.

The distributer will work directly with the retailer, they will service their needs they will manage the inventory themselves and they will more often introduce new products since they are incentivized to sell off what they have purchased. They handle returns and product recalls.

Disadvantages of introducing a distributer to a distribution channel

Since distributers do shipping and inventory management, they will have an incentive to defend a particular brand in front of the store, however, they will have a limited time for it.

The manufacturer must ensure the distributer they work with knows their product well and they can increase awareness for it at the retailer in the small amount of time they have allocated to stock, ask questions, answer them and take orders.

Distributers take on the risk of underselling and it is therefore very costly for them if a product is not performing well. Maybe a line is not selling for reasons that have nothing to do with the manufacturer – pricing, shelf placement, location of the store etc.

Type3. Wholesaler/Retailer Working with wholesalers and retailers is usually a preferred distribution chain link because wholesalers and retailers do purchase the product from the manufacturer and therefore they take on the risk if the products do not sell well.

Working with resellers works perfectly for digital products.

Here are several strategies on how to create and maintain the relationship with your resellers:

  • Create a base. In additions to traditional wholesalers and retailers, companies may benefit from asking big buyers if they want to become resellers for the brand. Give them an offer they cannot refuse.
  • Your relationship must be profitable for both sides. Take interest to know how well your resellers are doing and what is their opinion for the connection between their success and the products you are offering.
  • Communication is key. Make sure the tasks and strategies are completely complemented by your reseller’s efforts and workflow. Do not allow everyday business issues to stop you from making sure the products reach the customer smoothly.
  • Build a relationship. Regardless of the scope or the profitability of the reseller, find time to make them feel included, becoming a part of your company culture. Build trust and loyalty.
  • Allow your resellers to know your product . Resellers are often with the mindset they are in the business of sales, not consultation. Prepare short, easy to comprehend presentations or handouts they can absorb or redistribute to their customers.
  • Gather feedback. Resellers and manufacturers have a common goal. To get more product out to the market. Gathering and processing feedback for the manufacturer may improve the brand perception, the development process and customer loyalty.

4(a) Give a module of EDP of a potential target group.

-> Entrepreneurship Development Programme (EDP) is a programme which helps in developing the entrepreneurial abilities. The skills that are required to run a business successfully is developed among the people through this programme. It has become one of the major instruments for the promotion and development of entrepreneurship in India during the last three to four decades. This programme is perfect for them. This programme consists of a structured training process to develop an individual as an entrepreneur. It helps the person to acquire skills and necessary capabilities to play the role of an entrepreneur effectively.

The potential target group refers to the group of persons for whom the EDP is designed and undertaken each and every target group has its own needs, requirements and aspirations.

The programme designed for one group may be useless for other groups. Therefore, the target Group to be trained and developed must be clearly defined before the EDP is designed and started. The following types of target group may be considered before starting and EDP.

1. Technical and other qualified persons:

This group includes the persons having technical knowledge of a particular course. The persons may be degree or diploma holders in science, ITI, engineering and technology.

The government and semi-government agencies operate special EDP and scheme of assistance for this group. The EDP for this group is designed to enable and help them to set-up their own manufacturing units.

The enterprises selected for this purpose are directly related to their technical qualification and experience.

2. Ex-Servicemen:

Ex-servicemen are the persons who are retired from army, navy and air-force. These persons have acquired many useful skills and experience during their service period. They are highly disciplined, hard working, enterprising and innovative. They can also become successful entrepreneurs after proper entrepreneurial training.

The Government of India offer special incentives and facilities in order to rehabilitate them. Many ex-servicemen are operating their manufacturing training and service enterprises successfully in two countries.

3. Business executives:

After getting sufficient business experience, some business executives want to start their independent business enterprises.

They have innovative ideas and may not be satisfied with their present economic and social entrepreneurs after getting entrepreneurial training.

4. Women entrepreneurs:

The Government of India is encouraging women to participate in business activities. Women are entering into business world in large numbers.

Several government and non-government agencies are specially, organizing entrepreneurial training programmes for women.

5. S.C. and S.T., entrepreneurs:

Government of India is committed to uplift the scheduled caste (S.C.) and scheduled tribe (S.T.). Various government and non-government agencies give preference to S.C. and S.T. entrepreneurs to attend EDP.

Special arrangements are made to provide them concessional loans to set up their enterprises.

The characteristics or qualities which make the entrepreneurs successful are known as entrepreneurial competencies. The possession of certain knowledge, skill, trait and quality called entrepreneurial competencies help the entrepreneurs to perform entrepreneurial activities successfully.

In other words, the qualities, traits and characteristics possessed by an entrepreneur which result in superior performance are called the entrepreneurial competencies and are developed through entrepreneurial development programme.

(b) What are the various strategies and approaches for EDPs in India?

-> Entrepreneurship Development Programme (EDP) is a programme which helps in developing the entrepreneurial abilities. The skills that are required to run a business successfully is developed among the people through this programme. It has become one of the major instruments for the promotion and development of entrepreneurship in India during the last three to four decades. This programme is perfect for them. This programme consists of a structured training process to develop an individual as an entrepreneur. It helps the person to acquire skills and necessary capabilities to play the role of an entrepreneur effectively.

The potential target group refers to the group of persons for whom the EDP is designed and undertaken each and every target group has its own needs, requirements and aspirations.

The programme designed for one group may be useless for other groups. Therefore, the target Group to be trained and developed must be clearly defined before the EDP is designed and started. The following types of target group may be considered before starting and EDP.

1. Technical and other qualified persons:

This group includes the persons having technical knowledge of a particular course. The persons may be degree or diploma holders in science, ITI, engineering and technology.

The government and semi-government agencies operate special EDP and scheme of assistance for this group. The EDP for this group is designed to enable and help them to set-up their own manufacturing units.

The enterprises selected for this purpose are directly related to their technical qualification and experience.

2. Ex-Servicemen:

Ex-servicemen are the persons who are retired from army, navy and air-force. These persons have acquired many useful skills and experience during their service period. They are highly disciplined, hard working, enterprising and innovative. They can also become successful entrepreneurs after proper entrepreneurial training.

The Government of India offer special incentives and facilities in order to rehabilitate them. Many ex-servicemen are operating their manufacturing training and service enterprises successfully in two countries.

3. Business executives:

After getting sufficient business experience, some business executives want to start their independent business enterprises.

They have innovative ideas and may not be satisfied with their present economic and social entrepreneurs after getting entrepreneurial training.

4. Women entrepreneurs:

The Government of India is encouraging women to participate in business activities. Women are entering into business world in large numbers.

Several government and non-government agencies are specially, organizing entrepreneurial training programmes for women.

5. S.C. and S.T., entrepreneurs:

Government of India is committed to uplift the scheduled caste (S.C.) and scheduled tribe (S.T.). Various government and non-government agencies give preference to S.C. and S.T. entrepreneurs to attend EDP.

Special arrangements are made to provide them concessional loans to set up their enterprises.

The characteristics or qualities which make the entrepreneurs successful are known as entrepreneurial competencies. The possession of certain knowledge, skill, trait and quality called entrepreneurial competencies help the entrepreneurs to perform entrepreneurial activities successfully.

In other words, the qualities, traits and characteristics possessed by an entrepreneur which result in superior performance are called the entrepreneurial competencies and are developed through entrepreneurial development programme.

He following strategies and approaches are therefore, suggested to be followed for organizing EDPs future:-

EDP objective

Objectives of each type EDP, depending on the target group and its locations as well as the nature of activity to be focused upon, should be decided in the beginning itself. In other words, expectations from an EDP must be outlined at the outset itself. Such expectations would be with regard to raising the motivation level of trained, developing their entrepreneurial skills, personality traits, knowledge and preparedness for the promotion and management of enterprise etc.

Training needs assignment

Keeping in view the objectives of an EDPs the target group and the gaps observed between the expected and existing level f entrepreneurial motivation, skills, traits knowledge, and preparedness etc., the training needs and intensity should be assessed while the expected levels could be the concerned team of organizing that EDP.

Contents and module of an EDP

Based on the training needs, the entrepreneurship development team should identify the topics and activities to be covered and taken up and list them out in the form of contents of EDPs. Also, the learning objectives of each topic and activity should be stated clearly. Formulation of EDPs module shall involve sequencing of the topics and activities to be taken up during the training period and the extent of time required to be devoted to each of the topics. The module should comprise the activities to be performed during the post-training as well.

Training Techniques

Once the content and module of an EDP have been worked out, the next step should be to identify and select the training techniques to be applied. These techniques could be class- room learning, on-the- learning, on- the job learning, lectures, panel, discussion, one to one counselling, group exercises and discussion, case analysis, video shows, motivation/ business/ management games, stimulation and group assignment etc. The identification and selection of training needs, contents as well as he target group.

Training Aids

Based on the content and training techniques to be applied, the training aids, like course materials, work books, scoring sheets and stationary etc. Should identify and developed. Depending on the training techniques, learning tools, like audio visual aids, black/ white board, flip charts instruments, models, simulators, computer manuals scoring sheets etc. Should be identified, acquired or developed. Also, evaluation criteria and evaluation as well as feedback tools for getting participants assessment of training etc should be developed.

Training faculty

One of the most important tasks to be performed in the course of the preparation for an EDP is the identification of the suitable training faculty keeping in view he contents and the target groups. It may be noted that training faculty plays a significant role in making an EDP effective and interesting. Therefore, one must keep in mind, that the chosen training faculty must have the necessary expertise and up-to-date knowledge of the topic(s) be handle and also must able to communicate and interact with the trainees in the same language as understood by them. As such the ED team must have a set of alternatives faculty as well whole services could be availed of as and when required.

Launching of an EDP

In the course of planning, executive and concluding an EDP, the ED team should try to involve the representatives of financial and support agencies as well as responsible social personalities of that are to the maximum extent possible. It would be better if the interaction sessions with the representatives of the concerned financial institutions and promotional agencies as well as local public personalities are arranged, in the beginning itself, to explain the scope and objectives of an EDP due to the organised. This would help build a conducive environment for seeking not only financial and promotional support for the creation of enterprise by the trainees but also sensitize the social environment for extending moral and material support to the potential entrepreneurs.

Post- training activities

Mere completion of the training programme would not be sufficient, and it would be necessary that the post- training follows – ups and monitoring of the training potential entrepreneurs continue or an extended period last 2 years. It may be stated that though such activities are being performed even now, the intensity and effectiveness of such post-training activities are up to the expectation.

It may be pertinent o observed here that most of the time and resources of an EDP are at present devoted to the training component of the purposes of which is developing the entrepreneurial capabilities would on its own lead to the creation of an enterprise however, it must be pointed out that the launching and resourcing of an enterprise. It is high time that an EDP sponsoring organisation as well as ED organisation and adequate attention to the expect.

Post training assessment

Assessing the impact and effectiveness of an EDP during the post-training phase should be an essential part of the whole exercise. It may be desirable to undertake such assessment exercise. It may be desirable to undertake such assessment exercise towards the end of third year from the completion of an EDP and it takes a lot of time or a potential entrepreneur to create an enterprise and sustain it in the initial stage. The scope of such an exercise should not remain confined to the effectiveness of EDP in terms of enterprise creation only but also take into account the impact created by an EDP on the trainees as well as their immediate social environment i.e. family and friends etc.

Growth programmes

During the 3rd and 4th year after the completion of an EDP a series of enterprise growth, programmes and organised to further strength the management skills f the training entrepreneurs who have already set up their enterprises and have been running them successfully or otherwise. In this way a link between the trained entrepreneurs and ED organisation would continue for a longer duration and also improved the health of the enterprise created by them and facility expansion, diversification and modernisation of the enterprises to a certain extent.

5(a) Show the relevance of entrepreneurship in economic development.

-> Entrepreneurship is one of the most important inputs in economic development of a country. In economics, an entrepreneur is an economic leader who possesses the ability to organize opportunities for successful introduction of new commodities, new techniques, and new sources of supply, and to assemble the necessary plant and equipment, management, and labour force and organize them into a running concern whatever be the form of economic and political set-up of the country entrepreneurship is essential for economic development.

Economic development essentially means a process of upward change whereby the real per capita income of a country increases over a period of time. Entrepreneurship has an important role to play in the development of a country. It is one of the most important inputs in economic development. The number and competence of entrepreneurs affect the economic growth of the country. The economic history of the presently advanced countries like USA, Russia and Japan supports the fact that economic development is the outcome for which entrepreneurship is an inevitable cause. The crucial and significant role played by the entrepreneurs in the economic development of advanced countries has made the people of developing and under developed countries conscious of the importance of entrepreneurship for economic development. It is now a widely accepted fact that active and enthusiastic entrepreneurs can only explore the potentials of the countries availability of resources such as labour, capital and technology.

1. Employment opportunities

Entrepreneur’s employee labours for managing their business activities and provides employment opportunities to a large number of people. They remove unemployment problem.

2. Balanced Regional Development

Government promotes decentralized development of industries as most of the incentives are granted for establishing industries in backward and rural areas. Thus, the entrepreneurs to avail the benefits establish industries in backward and rural areas.

They remove regional disparities and bring balanced regional development. They also help to reduce the problems of congestion, slums, sanitation and pollution in cities by providing employment and income to people living in rural areas. They help in improving the standard of living of the people residing in suburban and rural areas.

3. Mobilization of Local Resources

Entrepreneurs help to mobilize and utilize local resources like small savings and talents of relatives and friends, which might otherwise remain idle and unutilized. Thus they help in effective utilization of resources.

4. Optimization of Capital

Entrepreneurs aim to get quick return on investment. They act as a stabilizing force by providing high output capital ratio as well as high employment capital ratio.

5. Promotion of Exports

Entrepreneurs reduce the pressure on the country’s balance of payments by exporting their goods they earn valuable foreign exchange through exports.

6. Consumer Demands

Entrepreneurs produce a wide range of products required by consumers. They meet the demand of the consumers without creating a shortage for goods.

7. Social Advantage

Entrepreneurs help in the development of the society by providing employment to people and paves for independent living. They encourage democracy and self-governance. They are adept in distributing national income in more efficient and equitable manner among the various participants of the society.

8. Increase per capita income

Entrepreneurs help to increase the per capita income of the country in various ways and facilitate development of backward areas and weaker sections of the society.

9. Capital formation

A country can attain economic development only when there is more amounts of investment and production. Entrepreneurs help in channelizing their savings of the public to productive resources by establishing enterprises. They promote capital formation by channelizing the savings of public to productive resources.

10. Growth of capital market

Entrepreneurs raise money for running their business through shares and debentures. Trading of shares and debentures by the public with the help of financial services sector leads to capital market growth.

11. Growth of infrastructure

The infrastructure development of any country determines the economic development of a country. Entrepreneurs by establishing their enterprises in rural and backward areas influence the government to develop the infrastructure of those areas.

12. Development of Trader

Entrepreneurs play an important role in the promotion of domestic trade and foreign trade. They avail assistance from various financial institutions in the form of cash credit, overdraft, short term loans, secured loans and unsecured loans and lead to the development of the trade in the country.

13. Economic Integration

Entrepreneurs reduce the concentration of power in a few hands creating employment opportunities and through equitable distribution of income. Entrepreneurs promote economic integration in the country by adopting certain economic policies and laws framed by the government. They help in removing the disparity between the rich and the poor by adopting the rules and regulation framed by the government for the effective functioning of business in the country.

14. Inflow of Foreign Capital

Entrepreneurs help to attract funds from individuals and institutions residing in foreign countries for their businesses.

(b) Describe some social and institutional uses for the growth of entrepreneurship in North East India.

-> Training and Research done by brought out a number of social and institutional issues that need to be addressed to have better impact of the efforts to promote entrepreneurship. Socio cultural environment and values have an important bearing in the emergence of entrepreneurship in any society. While the individual may like to take up and opinion career the family may not like to encourage him/her to take up such a career. It is a fact that majority of parents want their children to take up salaried employment. Preference for salaried employment is not peculiar to the states of the Northeast. This can be found in other states also. But preferences for salaried jobs in northeast are very high. There are of course, youth taking up entrepreneurial career against the wishes of the parents. But their number is very small.


It is also social cultural environment that has been hindrance in the growth of entrepreneurship in the region. It is social status that comes most while making a choice in career. It is a fact that salaried jobs enjoy better social status in the society, besides enjoying security of jobs, assured income, less hour of work and lesser degree of responsibilities. The Northeast is not an expected to this phenomenon. However, preference for self employment has gone to such an extent that unemployment youth are prepared to pay for a job that to utilise that amount of money for self employment and all these are due to social environment. They feel that would get job because of their proximity to public man.
The value orientation to work and leisure, initiation talking innovativeness etc. Are some other aspects that are influenced by social environment? To become an entrepreneur a person must be hard working. But in the north east leisure orientation is more than the work orientation. Preference for leisure than or work is a role rather than an exceptions. This is reflected in the growing tendency or observing band. A change in this orientation is necessary to bring about change for growth of entrepreneurship in the North east.

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