Unit 2
Promotion of a Venture
Introduction:
Promotion simply means an act of producing or developing or starting an enterprise. Venture means a business project or an undertaking especially a commercial one involving certain degree of risk and uncertainty.
Promotion of a venture is the process of starting an enterprise. It begins when an idea of forming or establishing a venture conceived either by a person or a group of persons and thereafter, go for identifying the scope, nature and size of the proposed enterprise.
Opportunities analysis
Opportunity is an advantageous fashion in outside surroundings. It is an appealing challenge concept which an entrepreneur accepts as a foundation for his funding choice. Finding out the opportunities of an enterprise is typically concerning as identity of enterprise possibility. A mere "opportunity" is to be outstanding from enterprise "possibility". Good enterprise thoughts need to be able to being transformed into possible projects. Entrepreneurs typically have exceptional opportunities and choose handiest maximum praise paying likely for execution. Thus, an enterprise opportunity might also additionally take the form enterprise possibility match proves as industrial value.
MEANING OF OPPORTUNITY ANALYSIS
Before taking a choice to enforce new thoughts, it's far essential to enforce new thoughts, it's far essential to take a look at extensive their profitability and viability in order that the project can be a hit and there can be affordable go back on funding. Such researches are referred to as possibilities evaluation and that is completed in diverse ways. While deciding on a challenge, a potential entrepreneur as to keep in mind diverse factors like input, output, social value and benefits. An entrepreneur is usually on seeking out capacity worthwhile possibilities and exploits them withinside the exceptional hobby of his enterprise. Various elements consisting of monetary incentives furnished with the aid of using the authorities, availability of markets and environmental elements etc. also are taken into consideration with the aid of using the possible entrepreneur withinside the manner of possibility evaluation.
OBJECTIVES OF IDENTIFICATION OF BUSINESS OPPORTUNITIES
An entrepreneur desirous of making an investment on a challenge has a search for appropriate possibilities. This isn't always simple, when you consider that he has a totally huge choice, and the scale of the selection are: product/provider, technology, equipment, scale of manufacturing, marketplace, time-phasing and area. The huge variety of possibilities can be summarised follows:
(i) To examine the opportunities of making use of bodily sources of a specific location from technical angle.
(ii) To pick out the ones industries which aren't primarily based totally on nearby sources.
(iii) To pick out the commercial prospects especially location and u . s . as a whole.
(iv) To estimate the capital, labour, transport, electricity, fuel, uncooked fabric for possible industries.
(v) To discover the improvement opportunities of the location almost about agriculture, minerals, labour, irrigation etc.
FACTORS OF OPPORTUNITY ANALYSIS OR SOURCES OF OPPORTUNITIES ANALYSIS
Following elements or reassets are protected withinside the possibilities evaluation:
(1) Market and Demand Analysis: Success of a enterprise unit now no longer relies upon on the quantity of manufacturing however particularly at the reality that what quantity of products it is able to be bought withinside the marketplace. Therefore, marketplace and call for evaluation is taken into consideration foundation of possibility evaluation.
(2) Resource Analysis: Entrepreneur has to peer whether or not ok quantity of sources consisting of land, uncooked fabric, machines, technology, monetary reassets, man-electricity etc. are to be had or now no longer. If the ok quantity of those sources isn’t to be had then challenge can be assumed as come to an end. On the contrary, if sources are to be had then an entrepreneur has to peer the reasserts and approach of obtaining those sources.
(3) Technical Analysis: Technical opportunities for organising a challenge are analysed withinside the technical evaluation. If it's far observed that from the technical factor of view challenge status quo isn't always possible then no doubt arises to keep in mind different elements.
(4) Business Environment Analysis: Business surroundings evaluation is essential earlier than status quo of a brand new enterprise. A vital component of the enterprise surroundings affecting funding possibilities is the authorities’ coverage framework.
(5) Financial Analysis: Financial evaluation is a vast beneath which availability of monetary sources and profitability of a challenge is analysed. Various elements consisting of value of challenge, value of uncooked-fabric, technical value, advertising and marketing value, operating value etc. are taken into consideration withinside the monetary evaluation.
(6) Risk Analysis: Various forms of dangers are observed in a specific enterprise wherein monetary dangers, social danger, environmental danger, technical danger etc. are the primary danger. With the alternate of enterprise surroundings, nature and volume of danger additionally get changed. An entrepreneur has to determine the identity of possibility evaluation that what quantity of danger is worried in availing possibility and up to what volume danger reputation will show worthwhile to him.
(7) Plant Location and Layout Situation: The predominant item of plant area evaluation is to discover the location in which plant is to be established. The choice of plant area relies upon up on different factors consisting of, availability of uncooked fabric, labour, electricity supply, transportation centers, conversation and financial institution centers, social amenities, provider centers, marketplace etc. The authorities additionally permits sure incentives and concession for industries improvement in backward regions consisting of concessions in taxes, centers of training, mild and land at inexpensive rates, monetary subsidies, centers for import of uncooked-fabric etc. an entrepreneur have to think about these kinds of elements even as identifying the plant area. An entrepreneur has to additionally put together exceptional format in order that he can produce most manufacturing at decrease value.
(8) Evaluation Analysis: It is the closing degree of possibility evaluation. Following are protected withinside the assessment evaluation:
(i) Evaluation of diverse factors of challenge.
(ii) Evaluation of monetary profitability.
(iii) Evaluation of Social profitability.
(iv) Evaluation of value of challenge,
(v) Evaluation of availability of important sources.
(vi) Evaluation of present opposition.
(vii) Evaluation of opposition in worldwide marketplace.
(viii) Evaluation of results of their outside elements.
External environmental analysis economic, social, and technological
The word "External Environment Analysis" has been made up of two words 'External Environment' and 'Analysis'. The first word 'External Environment' means elements or factors outside the institution of the entrepreneur, like - economic, social, cultural, political, physical, educational, technical, religious, ethical and international, etc. which affects his business. The other word, 'Analysis' means reactions towards those factors or elements or issues, neglect thereof or taking of decisions by predicting the opportunities.
Hence, in composite form, external environment analysis means such process through which decision is taken, by assessing economic, socio-cultural, political, physical, educational, technical, religious, ethical and international environment or factors or element, or issues and also opportunities.
External environmental analysis or evaluation is a process through which strategic planner (entrepreneur) evaluates economic, social, official, supply, technological and market conditions to determine the opportunities and challenges for the enterprise and according to which he adjusts his strategy and objectives.
FACTORS AFFECTING ENVIRONMENTAL ANALYSIS
(1)Economic Factors: The economic environment exercises perhaps the most direct and immediate influence on business environment. They include capital, labour, raw-materials and markets etc. Further, type of economy whether developed, developing or underdeveloped, rates of savings and investment, growth rate of G.N.P. Per capita income, volume of exports and imports, balance of payment position, price level, rates of inflation, deflation, and reflation, means of transport and communication also affect the economy of the country. For example, capital is one of the most prerequisites for establishing a business enterprise. It is regarded as the lubricant to the process of running a business enterprise. The new economic is the process of running a business enterprise. The new economic policy of liberalisation, privatisation and globalisation has given impetus to the development of trade, business commerce and industry in our country.
(2) Social Factors: Social external environmental factors in a country also exercises a significant impact on the emergence of entrepreneur in a country. Social factors in a country determine the exact and level of industrialisation, as they influence, the demand of a product or service at a given point of time. Social factors are bound to have deep influence on consumer taste, temperament, life and living. They include social mobility, social security, social values, family tradition, customs, culture, traditions, spending habits, level of education, size of population, density and sex ration of population, speed of urbanisation etc. The analysts are required to have a detailed social environmental analysis and make necessary suggestion for their improvement.
(3) Technological Factors: The most dynamic force, shaping entrepreneurs density is technology. Technological factor in a country also exercise a significant influence on external environmental analysis. Technology means method, procedure, processor system of production. Technology is not fixed but it is always changing. New technology will mean new ideas, new products and new marketing efforts. This requires the entrepreneur to keep on eye on the fast changing technology. Every new technology is a force for create work. Change in technology may affect production and distribution of goods. Technological environmental analysis leads to -
(i) Increase in production capacity
(ii) Economy of resources
(iii) New discovery, researches, inventions in field of production and resources,
(iv) Increase in competitive power
(v) Improvement in quality
(vi) cost reduction
(vii) Increase sales
(viii) Improvement in the standard of living
(ix) Innovation
(x) Increase in profits etc.
Competitive factors
Competitive analytics market by entering through product or service gaps in areas where competitors are marketing their business, or where they are not or well serviced. You need to provide entrepreneurs with information on how to penetrate. More importantly, competitive analysis helps entrepreneurs develop competitiveness that helps them generate sustainable revenue streams. Large companies like Wal-Mart, for example, are primarily competing for price. The internal efficiency and mass sales available to large companies like Wal-Mart are not available to SMEs, so SMEs usually cannot compete for price, but with other important variables such as better service, better, etc. You may be able to compete well with Wal-Mart-a high quality product, or a unique buying experience.
When preparing your competition analysis, identify your competitors by product line or service segment. For entrepreneurs, this activity can be difficult if the industry does not yet exist. For Bee Love, Palms Barber had no direct competitors, but there were related competitors for traditional skin care products. Her unique idea of honey-based all-natural skin care products has created a new market. Competitive analysis may need to focus on alternative products rather than direct competitors. There are two main tools used to analyze competitors. Competitive analysis grid and "three circles" approach.
Competitive factors also affect external environmental analysis. Competitive play an important role in the conduct of business in his business activities in accordance to the behaviour of his competitors. Competition may be of the following types:
i) Desire competition
Ii) Genetic competition
Iii) Product size competition
Iv) Brand competition
v) Quality competition
Vi) Price competition
Vii) Market competition.
Legal requirements for establishment of a new Unit-, and raising of funds
Meaning
Given the current trends in liberalization, globalization, privatization competition and policy, the government has decided to reduce the number of permits and procedures required. However, certain procedures are required.
1. Obtaining a statutory license: Municipalities / town committees / Gaon Panchayat will issue a trade license or a certificate without objection. The parties must apply for a trade license or undisputed certificate with the appropriate authorities, along with the fees stipulated in such license. If satisfied after scrutinizing the application, the authorities will issue a certificate.
2. License: To carry out industrial activities, either license or registration is required. Large numbers of small / auxiliary units and medium-sized units fall into the tax exemption category based on certain conditions below and do not require an industrial license.
a) Industries are not reserved for the public sector (list of reserved industries is in Appendix-1)
b) does not comply with special regulations (list of specially regulated industries can be found in Appendix-2)
c) Industrial businesses are not subject to 20A and the Monopoly and Restricted Trade Practices (MRTP) Act.
d) The annual foreign exchange requirement for medium-sized units for raw materials (excluding steel and aluminum) or parts and components (after 3 years of production) shall exceed 15% of the annual production or factory value of Rs. It will not be. 7.5 million.
3. Small Industry Registration: Registration as an SSI unit is not strictly required, but it is recommended that you register as a small unit at the district industrial and commercial center in the area where the project is located. Registration is required by the government for the purpose of recording for planning future requirements of the industry. In addition, registration has the right to take advantage of the incentives and benefits available to the SSI sector. DIC grants a temporary registration valid for 5 years, and if the unit goes into production within this period, a permanent registration will be granted.
4. Pollution Control Clearance: If the project is at risk of pollution, the parties must obtain a "No Objection Certificate" (NOC) from the State Pollution Control Board. The Board first stipulates in the NOC certain conditions to ensure the establishment of facilities to control air and water pollution before obtaining permission to start operations.
5. Business structure: means whether to start a unit in the form of sole proprietorship, partnership, limited company, or public limited company. It usually depends on the size of the project and the degree of risk associated with it.
6. Design Registration: Under the Design Act of 1911, the design of an article shall be newly and originally registered in the features and shapes, configurations, patterns or decorations given to the article by any industrial process or means. I can.
7. Trademark Registration: A trademark is a visual symbol that applies to goods or merchants, and a trademark is a word, letter, number, number, or combination thereof, such as a device (such as Butterfly) or (Binaca or Dalda). Consists of such a feature. Trademarks apply to all goods for the purpose of showing the purchaser that the goods originate from a particular producer.
Anyone who claims to be the owner of a trademark for or proposed to use and wishes to register shall apply to the Trademark Registrar in the prescribed form with the necessary fees. Fees can be paid in cash, bank check, or postal order. For the purpose of trademark registration, the goods are classified into 34 classes. Trademark registration applications should be limited to only one class.
The legal requirements for establishing a new unit / company and raising funds are as follows:
i) Company registration: Before operating, the company must be registered in order to comply with constitutional requirements.
Ii) License Registration: The company requires a license to operate locally, nationally and internationally by the government.
Iii) Sales Permit: A company requires a license to sell goods in the market after being approved by the government.
Venture capital sources and documentation required
The concept of venture capital was originated in the U.S.A. Now it has become a worldwide concept in the field of risk financing of industrial projects. The development of venture capital in India is still in infancy, being about a decade old. It is a growing capital market. In fact in India, 'risk financing is still in a evolutionary stage. The funds available to Indian venture capital industry are small. What is the need or relevance of venture capital in India when there are commercial banks and financial institutions to provide funds to industrial enterprise, small or large? In developed countries, where there is highly progressive industrial environment as well as advanced entrepreneurial culture, it is common for entrepreneurs to set up companies to produce new products by obtaining funds from venture capitalists. On the other hand, in India and also in other developing countries, 'risk' financing of this type is yet in its infant stage. Of course, there are a large number of commercial banks and financial institutions in India, which provide 'traditional' (non-risk) financing mainly to those enterprise that use proven or established technologies with minimum level of risk. Such financing is collateral-security oriented and asset based. It involves uniform payment of fixed instalment. It is security oriented rather than risk oriented.
MEANING OF VENTURE CAPITAL:
Venture Capital refers to investments in new and untried enterprises which are lacking stable record of growth. Venture Capital involves financial investment on high-risk entrepreneurial business with expectation of earning a high rate of return. It is an alternative form of equity financing for small business. It is the form of capital needed for formation of forms with new ideas or technologies, having a high risk but having potential for rapid growth
Venture Capital is long term financial assistance provided to small enterprises, high technology and risky venture. Venture capitalist takes huge risk in anticipation of future high returns hence venture capital is also known as 'risk capital'.
METHOD OF FINANCING
The entrepreneur has not only to plan his total financial requirement but also work out the strategies to make adequate finance available at various stage. The type of financial support an entrepreneur requires is both long-term as well as short-term to ensure proper financing of his firm. The financial requirements will be in the form of fixed and working capital. Whatever may be the type of capital, there are mainly two methods of raising funds- owned capital and borrowed capital. The sources of owned capital of an enterprise are sale of shares and raising of internal resources and in case of borrowed capital are- sale of debentures, acceptance of public deposits and assistance from different financial institutions etc. But it is always a bit difficult to raise finance from outside sources for a new enterprise. The various sources of raising finance for different types of enterprises are shown below.
(a) Equity Financing: If the new enterprise is in the company form of organisation, it can issue share to the public with proper approval from the Company Law Board and thereby procure necessary capital for the enterprise.
(b) Creation of Internal Resources: The source mobilised in large size and existing concern but has no use in case of new companies. This source covers provision for taxation, provision for depreciation and reserve fund.
(c) Debt Financing: The enterprise may procure capital by sale of debentures. For an established organisation, it is easy to procure debt capital. Here risk of return is less and so the people prefer to purchase debentures.
(d) Public Deposit: The large and established company, with the object of procuring medium-term capital take up term deposit from the public. The public are given deposit certificate. Though it if one of the most important source of finance, but it is difficult to take up the opportunity for new companies.
(e)Financing by Commercial Banks: The commercial banks supply short term financial requirement through discounting of bill, cash credit, advance payment and overdraft. These banks supply capital for meeting financial requirement of both short term and long term capital.
(f) Financing by Government Financial Institution: There are government financial institutions to undertake shares and debentures of the company and assume the role of guarantor on behalf of the concern taking loans from other institution. These financial institutions are Industrial Finance Corporation of India (IFCI), Industrial development bank of India (IDBI), Industrial Credit and Investment Corporation of India, State Finance Corporation etc.
(g) Financing by Other Investment Institution: There are number of financial institutions in public and private sector to supply finance to the new enterprise. Life Insurance Corporation of India, General Insurance Corporation of India, Unit Trust of India etc.
(h) Personal Finance: The entrepreneur provides himself for supplying capital by investing his own or family savings. These include cash and personal assets that can be converted into cash.
(i) Government Grants: In specific sectors and areas, there are provisions for grants from government to be financed to new enterprises. Government usually provides adequate finance as grants and subsidy to those cases which are in the list of priority sectors. Thus, by means of grant and subsidy from government, capital is supplied to the entrepreneurs.
(j) Others: Besides the sources stated above, the indigenous money lenders or bankers supply capital on condition basis to the entrepreneur. This may be procured from venture capital firm also. Capital may also be provided by lease financing.
DOCUMENTS FOR OBTAINING VENTURE CAPITAL
1. Project Report: The project report should be a self explanatory document capable of evoking positive response. It should contain the following items of information about the project.
a) Name of the project
b) Address of the unit.
c) Product to be manufactured.
d) Target of the production- monthly, quarterly and yearly etc. (in terms of quality and value both).
e) Principal raw material to be used.
f) Covered area of workshop- square meter
g) Power requirement- Horse power, K. Watt
h) Employment- No. Of skilled and unskilled labour.
i) Cost of Project:
i) Fixed capital
Ii) Working capital
Iii) Total of both capital.
j) Sales Turnover expected monthly, quarterly or yearly sales proceeds.
k) Expected profit in total and expected profit as percentage of expected sales or capital invested.
l) Breakeven point and chart,
m) Project Profit and Loss A/C, Balance Sheet, Cash Flow Statement, Fund Flow Statement etc.
n) Profit at the various level of capacity utilisation.
o) Gestation period etc.
2. Details of Promoters: Educational, business, experience back ground and information relating to assets and liabilities.
3. Land documents
4. No objection certificate about the technology and product from the concerned authority.
5. Market Survey report.
6. Detail of source of Plant and Machinery regarding indigenous or imported
7. Detail source of raw materials.
8. Qualification for various items.
9. Details of consultants and marketing tie up organisation, if any.
10. Income tax clearance certificate of the promoter.
Key takeaways:
- Promotion simply means an act of producing or developing or starting an enterprise.
- Opportunity is an advantageous fashion in outside surroundings.
- An entrepreneur desirous of making an investment on a challenge has a search for appropriate possibilities.
- The predominant item of plant area evaluation is to discover the location in which plant is to be established.
- The word "External Environment Analysis" has been made up of two words 'External Environment' and 'Analysis'.
- The economic environment exercises perhaps the most direct and immediate influence on business environment.
- The most dynamic force, shaping entrepreneurs density is technology.
- Competitive analytics market by entering through product or service gaps in areas where competitors are marketing their business, or where they are not or well serviced.
- When preparing your competition analysis, identify your competitors by product line or service segment. For entrepreneurs, this activity can be difficult if the industry does not yet exist.
- Registration as an SSI unit is not strictly required, but it is recommended that you register as a small unit at the district industrial and commercial center in the area where the project is located.
- A trademark is a visual symbol that applies to goods or merchants, and a trademark is a word, letter, number, number, or combination thereof, such as a device (such as Butterfly) or (Binaca or Dalda).
- The concept of venture capital was originated in the U.S.A. Now it has become a worldwide concept in the field of risk financing of industrial projects.
- The entrepreneur has not only to plan his total financial requirement but also work out the strategies to make adequate finance available at various stage.
- The project report should be a self explanatory document capable of evoking positive response.
References:
- Srivastava S.B: A Practical Guide to Industrial Entrepreneurs; Sultan Chand and Sons, New Delhi.
- Prasanna Chandra: Project Preparation, Appraisal, Implementation; Tata McGraw Hill, New Delhi.
