MBAI

V–EDUNI
TIV

ProjectManagement -meani ng,objectivesandhow t ochosea

project.Technical
,Fi nanci
al,Mar keti
ng,Per sonnelFeasi bi
li
ty.
Estimating and Financing f
unds r equirement,Si gni
fi
cance and
determinantsofwor kingcapit
al,venturecapi t
alfunding,Schemes
offeredbythecommer ci
albanksandf inanciali
nst
ituti
ons.

Pr
oject
:Webst
erDi
cti
onar
ydef
inesapr
ojectasascheme,
desi
gn,
apur poseofsomet hingintendedordev ised.Proj
ectrepor
tora
business plan i
s a wr it
ten report or stat
ement of what an
entrepr
eneurproposestotakeup.Itisakindofguidethatt
ell
swhat
theentrepr
eneurhopestoachi eveandhowhepr oposestoachi
eve
i
t.Itisawelldefi
nedcourseofaction.

Cont
ent
sofaRepor
t:

1.Gener ali nf ormat ion:Thi s cont ains the gener alinformation

regardingpr oductpr of
il
eandpr oductdet ail
.
2.Promot er:Theeducat i
onalqual ifi
cat i
onandwor kexperi
enceof
theent repreneur .
3.Location:Theexactl ocat i
onoft hepr ojectandi t sadvantages.
4.Land & Bui lding:Land ar ea,const ructi
on ar ea and t ype of
construct i
onet c.
5.Plant&Machi ner y:Detail
sofmachi neryrequi r
ed, capaci
ty,cost,
vari
ousal ternat iv
esav ailable,costofmi scell
aneousasset s.
6.Product ion pr ocess: Descr i
ption of pr oduct ion process,
processchar ts,technical knowhow, t
echnol ogy, etc.
7.Util
it
ies:Wat er,power ,compr essed ai rr equirements,cost
esti
mat es, sour cesofut il
iti
es.
8.Transpor tandcommuni cation:Mode, possibili
tyandpr oblems
andcost .
9.Raw mat er ial:Li stofr awmat erialrequired,sour ces,cost,tie-
upar r
angement s, al
ter
nat ives,ifany .
10. Manpower :Manpowerr equi r
ement .Skill
ed,semi -ski
ll
ed,
sources, cost , t
raining.
11. Pr oduct s;Pr oduct mi x,est imated sal es,di st
ri
bution
channel s,compet iti
ons,st andar dsi n-put/out -
putr ati
o,product
substitute.
 12. Market:Endusers,distr
ibuti
onofmarket–local,nat
ional
,
i
nter
nat
ional
,tradepracti
ces,salespromot
ion,r
esearch.
13. Requir
ementofwor kingcapital
:
14. Requir
ementoff unds:sour ceandamount.
15. Costofpr oduct
ion:
16. Break-
evenanal ysi
s
17. Scheduleofimplement ati
on

Howt
oChooseaPr
oject
:

Therear ev ar i
ousf act orst hatwi llhel pt odeci dewhi chpr ojectt o
sel
ect;
Thesef actor scanbebr oadl ybecl assifiedi ntoI nter nalf act orsand
Ext
ernal Fact ors.
1.I nternalFact or s:
a)Cost :Ifat ot all
ynewent erpr i
sei sbei ngt houghtof ,thecost
willbev eryhi ghasi tincl udescostofr esear chandpr oduct
dev elopment .Initi
ali nv est ment sonnewmachi nery ,training
to empl oy ees and r aw mat erialwi llal so hav et o be
consi dered.I f,howev er,t heent erpr i
sei sj ustamodi fication
ofanyexi stingpr oductorcompany ,thecostwi l
lbemuch
less.Theabi li
tyt ospendwi lldet er minet het ypeofpr oduct
orent erpriset obechosen
b)Exper ience:Costbenef i
t sar eenj oy edbyt hosewhoent er
into a busi ness f irst or who hav e exper i
ence i nt he
technol ogyr equired.Thepi oneer ingcompani esest abli
sha
goodl eadandst ayi nt hef orefront .Inaddi tion,compani es
thatar eal readyex per i
encedi nsi mi larfieldshav eaposi t
ive
edgeov erot her swhodonot .
c)Di fferent i
ation:An ent repr eneurshoul d sel ecta pr oduct
whi ch i s di sti
nct ly di fferentf r
om hi s compet itor s.The
diff
er ence need not be r ealor act ual .I t has t o be
psy chologicalt hati ti s super i
orf r
om al lot herbr ands
becausei tisdi fferent .
d)Fi nanci alst rength:I fa l uxur y pr oducti s sel ect ed f or
product ionl ikel uxur ycar s,j ewel l
er y,etc,av er yhi ghi nitial
invest mentwi llber equired.Thi scal lsforf i
nancef rom ot her
sour ces than ones own.Such sour ces maybe f inanci al
instit
ut i
ons, banks, shar es, loanset c.
 e)Functional Depar tments:Al
lthedepart
ment si nanent erprise
haveani mpactont heentrepr
eneur’
spl ansand act ions.
Beforemaki ngadeci si
on,hehast oconsul tandgett he
suppor tofhi sot herdepart
mentsl i
keFi nance,Pr oduct i
on,
Mater i
alset c.
f)PersonalFact ors:The nat ure ofan ent repreneural so
decideswhatpr oducthei sgoingtopr oduce.I fhei ssel f
-
confident,opt i
mi sti
candabl etotakerisks,reactsposi t
ively
to new chal l
enges,he can t ake up pr oduction of a
compl etel
ynew pr oduct.Ot
herwise,itisbet tertot akeup
productst hatar ealreadyexi
sti
nginthemar ket.

2.Ext
ernalFact or s:
a)DemandofConsumer s:Successf ulent repr eneur sar et hose
whor ecogni zeandr espondpr ofitablyt ounmetdemands
andt r
endofconsumer sneeds.Ent repreneur scanmakea
fortunei ftheycanmeetsomel ongpendi ngorpr essingneed
l
ikemedi cinesf orcancerorment al diseases.
b)Compet it
ion:Anent r
epr eneuri sal way ssur roundedbyhi s
compet itors. Compet i
tors hav e t o be i dent i
fied and
moni tor edt ocapt ureandmai ntaincust omerl oyalty.The
entrepr eneurhast odecidewhatki ndofmar kethei sfaci ng.
Whet heri ti spur ecompet iti
on,monopol isticcompet it
ion,
Oligopol y(af ewl argeint er dependentf ir
mst hataccountf or
the bul k of i ndustry’
s sal es) or pur e monopol y. An
entrepr eneurwi thinnov ativ ei deas andgoodandr esear ch
facili
ti
escani nv entsomet hingnew andcapt ur et hemar ket
himsel f.
c)Suppl i
er s:Ent repreneurs hav et o keep a check oft he
availabilit
yofr aw mat er ialf orhi spr oduct sand al so f or
futureexpansi on.Hehast ocheckuponv arioussuppl i
er s
andupont hei rreli
abil
it
yofdel iveryandqual ityofmat erial
.
d)Technol ogi calimpr ovement :Anent repr eneurshoul dkeep
pacewi ththel atesthappeni ngsandt echnol ogy.Heshoul d
thi
nkofsel ect i
nganewpr oductorev enanexi sti
ngpr oduct
afterincor por ati
ngt helatestt echnol ogyOt her wi sehewi l
l be
outdat edev enbef orehest ar ts.
e)Demogr aphi cf actors:Mar ketmeans peopl e.He shoul d
study f actors ofhuman popul ation and i ts di stri
but i
on
structur e.Heshoul dtakei ntoconsi der ationsi ze, growt hrat e,
 educat ion,geogr aphi caldi str
ibuti
on,occupat i
on and age
distribut i
onTheeconomi cabi li
tyoft hepopul ationoft he
area under consi der ati
on shoul d also be t aken into
consi der ati
on.
f)Nat ur alenv ir
onment :Nat uralenv i
ronmentconsi st sofraw-
mat erial,energy,pollutionandt heGov ernmentpol i
ciesand
i
nt erfer ences. These aspect s shoul d be st udied v er
y
car efullybeforedeci dingupont hepr oj
ect.
g)Pol it
icalandLegalAspect s:Pol i
ti
calandlegalaspect sand
rulesar edi f
ferentinev erycount ry.Anent r
epreneurshoul d
beawar eoft her ul
esandr egulati
ons,especial
lyt hosethat
concer nhi spr oject
,i nt hatpar ti
cularcountrywher ehei s
tryi
ngt oest abli
shhi sent erpri
se.

Theimpor t
antaspecttobelookedint
obeforechoosingapr oj
ecthas
beenindicated.Nextistodeci deont heprojectitsel
f.Thereare
vari
ousnetwor ktechni
questhatareusedt ofi
ndoutt hesequences
tobetakenandhowmucht i
mei tisli
ket
ot akeforcompleti
on.

1.PERT( Progr ammeEv aluati

onandRev i
ewTechni que)
PERTi sapopul art echni queusedf orpr ojectpl
anningandcont r
ol.I
t
schedulesthesequenceofact i
viti
est obecompl etedi nordert o
accompl i
shthepr ojectint heshor t
estpossi bl
etime.I thel
psr educe
bothtimeandcostoft hepr oject.
Steps:
1.The act i
viti
es i nv olved int he pr ojectare dr awn up i na
sequentialrelationshi ptoshowwhatact i
vel
yf ollowswhat .
2.Thet i
mer equi redf orcompl etingeachact iv
ityi sestimatedand
notedont henet wor k.
3.Thecriti
cal act i
viti
esoft heproj ectaredeter
mi ned.
4.The var i
abili
tyoft he projectand compl etion t ime can be
esti
mat ed.

Advantages:
1.Itdeterminestheexpectedti
mer equi
redforcompl eti
ngeach
acti
v i
ty.
2.Ithelpscompleti
ngtheproj
ectwi
thinagivenper i
odofti
me.
3.Ithel ps managementhandle uncert
ainti
es involv
ed inthe
project.
4.Ithelpsmanagementt omakeopt imum allocati
onofl i
mit
ed
 resources.
5.Itpressesfort
her i
ghtact
ivi
tyt
obedonei
nther
ightsequence
andatt heri
ghtti
me.

Li
mi t
ati
ons:
1.Iftheest i
mat esoft i
mer equi
redismi scalculat
ed,thent he
enti
rer esul
t swill
bewrong.
2.Thet echniquedoesnott akeintoconsiderati
ont hediff
erent
resourcesr equir
edduringtheprocess.
3.Thet echniquer equi
redfrequentupdat
ingandr evi
sionofPERT
Calculati
ons.

2.CPM (
Cri
ti
calPat
hMet
hod)
:

TheCPM di f
ferent
iat
esbetweenplanni
ngandschedul
ingofaproj
ect.
Planningref
erstothedeter
minati
onofacti
vi
ti
estobeaccomplished,
scheduli
ngr ef
erstot heti
mesetf oreachacti
vi
ty.Thedurat
ionof
diff
erentact
ivi
ti
esaredeter
mined.

Advantages:
1.Ithelpsinascert
aini
ngt het i
meschedul eofaproj
ect
.
2.Itmakescont rol
easierfort hemanagement .
3.Iti dent
if
ies t
he mostcr i
ti
calelements ofthe pr
oject
.The
managementkeepsi tselfaler
tont hesepoi
nts.
4.Itmakesbet t
eranddet ailedplanni
ngpossibl
e.

Li
mi t
ati
ons:
1.CPM operatesont heassumptionthatthereisapr eciseknown
ti
mef oreachelement.Thi
smaynotbet r
ueinact ualpract
ice.
2.CPM timeestimatesarenotbasedonst atist
icalanal
y si
s.
3.Itcannotbeusedasacont rol
lingdevicebecauseanychange
made, wi
llupsett
heentir
estructureofnetwor k.

TECHNOLOGI
CALFEASI
BILI
TY:

Technology i
nvol
ves t
he use of t
ool
s,machi
nes,mat er
ial
s,
techni
quesandsourcesofpowert
omakeworkeasierandwork
mor eproduct ive.I ndust ri
al t
echnol ogyhel pspeopl eachi evegoal s.
Technol ogyi mpl iest heknowhow,desi gnandi nt ell
ect uali nputof
doingthi ngsi nt hepr operway .Itref erst othepr act i
calappl ication
of the pr inci ples of sci ence f orday t o day i ndust rialand
commer ci aluse.
Witht her api dchangei nt echnol ogy ,anent repr eneurneedst o
remaini nt ouchwi tht hel atestandal soensur et hathi stechnol ogy
andmachi ner yhav enotbecomeobsol ete.
Consider at i
oni nsel ect ingt echnol ogy :
1.Invest mentcapaci ty: Hi ght echnol ogyr equi resheav ycapi tal
invest mentwhi ch i sof t
en bey ond t he reach ofsmal l-scale
entrepr eneur s. Ther efore,smal lscal e ent repr eneur s of ten
dependonmanual operat i
ons.
2.Volumeofpr oduct ion:Desi redv olumeofoutputdependson
thesi zeoft hemar ketandt hedemandf orthepr oduct .I ncase
ofsmal lscal ei ndust ri
es, themar keti softenl ocalandl owt ech
plantsar esuf ficient .
3.Nat ureofpr oduct :Somepr oduct s,likemat ches,det ergentet c,
lowandsl owpr ocesst echnol ogyi ssuf fi
cient.Formanuf act ure
ofhi ghpr eci sionmachi nesandt ools,hight echequi pment s
maybeneeded.
4.Manuf actur ingst rategy :Incaset hemanuf act uringst rategyof
theent erpr iser equi reshi ght echmachi nery,suchmachi neswi l
l
hav et obepr ocur ed.
5.Economi cev aluat i
on:Ret urnoni nvest mentwi llalsodet ermi ne
thet echnol ogyusedandi tssophi sticati
on.
6.Soci alconsi der at i
on:Env i
ronment ,legalandcul turalaspect s
wi l
lal sodet er mi net het echnol ogyused.Ast heGov t.andt he
publ i
car ebecomi ng mor eand mor eawar eand concer ned
aboutpol lut i
on, needf orant i
-pollut i
ont echnologyi si ncreasi ng.

Benefi
tsofTechnol ogytotheIndustry
:
1.Increased pr oduction: Through i mproved technol
ogy
,
entrepreneur
s are ablet o produce much mor
et han t
hei
r
predecessorswer eablet
o.
2.Reducedl abour:
3.Impr ovedproducts:
4.Higherl i
vi
ngstandards.

Needf
orFi
nanci
alPl
anni
ng:
 Fi
nancei soneoft hemosti mpor t
antrequisi
testostartan
ent
erpri
se.Iti
sf i
nancet hathel pshistobringtogetherland,
materi
almanandot herr
esour cestost ar
thisproduction.
1.There shoul d be adequat e money t o pay t he pur chase
considerat
ions.
2.Thereshoul dbesuf fi
cientcapitalt
osuppor tthebusi nesstil
li
ts
gestati
onper i
od.
3.Enough pr ovision should be made t o meet unexpect ed
expenses.

Ther
eare2waysofcl
assi
fyi
ngthefi
nanci
alneedsofacompany;
1.Onthebasi
sofext
entofperf
ormance:Fi
xedCapi t
alandWorki
ng
Capi
tal
.
2.Onthebasi
sofperiodofuse:Long-t
erm capi
talandShor
t-
ter
m
capi
tal
.

FixedCapi tal:Themoneyi nv estedi nf i

xedasset sordur ableasset s
l
ikel and,buildi
ng,machi nery ,equi pment ,f
urniture.Theseasset sar e
requiredforper manentuse. ,foral ongper i
odoft ime.
Wor kingcapi tal
:Themoneyi nv estedi ncur rentasset swhi char e
requiredforday -
to-dayuse, li
ker awmat eri
al,
finishedgoods, debt or
s,
Long- Term Capi t
al:Thi sismoneywhosepay menti sar r
angedf or
mor et hanf i
vey earsint hef ut ure.Thesour ceofl ong-
termf i
nance
couldbeowner ’
sequity,term- l
oansf r
om f i
nanci ali
nstit
utions,cr edi
t
facil
iti
esfrom commer ci
al bankset c.
Short -
term Capital
:Thi si sbor rowedcapi t
alt hathast ober epaid
within one y ear.The sour ce ofsuch capi t
almaybe t he bank,
borrowi ngfrom wor ki
ngcapi tal,deposi tsorbor rowingfrom f riends
andr elati
ves.

Sour
ceofFi
nance:
(
i) I nternal:Fundsar er aisedf rom withintheent erpri
se
i
t self..Thesour ceofsuchcapi talmaybet hebank,
bor rowingfrom wor kingcapital
,deposi t
sorbor rowing
from f r
iendsandr el
atives.
(
ii
) Ext ernalSour ce:Thi s money coul d be had f r
om
deposi tsorbor r
owi ngsf rom fr
iendsorr elat
ives,fr
om
banksorwor ki
ngpur posecapi tal
,creditfaci
l
iti
esf r
om
commer ci
albanks,Ter m l oans,Per sonalf unds or
equi tycapit
al,Mortgagel oans,Subsidari
es.
Capi talSt ruct ure:
Enter prisesr ai secapi talt hroughi nter nalaswel lasext ernal
resour ces.Theset aket hef orm ofowner shi pandbor r
owedcapi t al
respect i
vel y.Thef or mer ,ie,ownercapi t
al,i sal soknownasequi t y
and t hel at teri sknownasdebt .Thet otalequi tyanddebtofa
companyi sknownasCapi talst ruct ure.Capi talSt r
uct urei st her atio
betweendebtandequi tycapi tal .Itisof tencal leddebt -
equi tyrat io.
Capi talst ructur ei sdi fferentf rom f inanci alst r
uct ure.Capi t al
struct ure means t he l ong t er m orper manentf i
nanci ng oft he
enter pr i
sewhi chconsi st st hedebtand equi ty.Itexcl udesf unds
rai
sedf rom shor tt erm sour ces.Fi nanci alst ruct urecompr isesal l
sour cesoff und, includingshor t-
termf inance.
TheOpt imum capi talst r uctur ei st hef inanci almi xt hati ncur s
thel eastcostbuty ieldst hemaxi mum r eturns.I tisobt ainedwhent he
mar ketv alueperequi tyi st hemaxi mum.Forasuccessf ulbusi ness,
i
nf av ourabl econdi t
ions,debtcapi talcanbemor e,ev ent wi cet he
amountofequi tycapi t
al .Butdur ingunf av our ablesi tuat i
ons,debt
capi talshoul dbeasl owaspossi ble.Thi si sbecauset heent erprise
maynotbeabl et opayi nterestonl oanonaccountofcashcr unch.
Thecr editorsandsuppl iersmayt hinkt hatt heent erpri
sei sunr eliable
andst opext endi ngl oansandcr edit.Thi swi llleadti nsolv ency .
TheOpt imum Capi talSt r uctur ehast hef ollowi ngf eatur es;
1. Thecapi talst r
uct ur eshoul dhav et hemi nimum costand
maxi mum y ields.
2. Theadopt edcapi talshoul dbef lexi bleenought of ulfil
lthe
futur erequi rement sofcapi talasandwhenr equired.
3. Thedebt sshoul dbewi thint her epay ing capaci t
yoft he
ent erprise.
4. Ther eshoul dbeapr opercont rolov ert hef i
nanci alaf fairsof
theent erprise.

FACTORSDETERMI
NINGCAPI
TALSTRUCTURE:

1.Nature ofBusiness:The nat ure ofbusi nessi sone oft he

fact
orsdet er
mininbgt hecapitalstruct
uret obemai ntained.
Business with wide f l
uctuati
ons ofsal es shoul d maintain
smallerproport
ion ofbor rowed funds,i e.,debtcapit
al,i e.,
companiesmanuf acturingtel
evisi
ons,refriger
ators,t
ool
s,et c.
Businesswi t
hinel asti
ct ypeofsel l
inglikeconsumergoods,
 mayhav el argepr opor t
ionofbor rowedf unds.Ther easoni s
thatgener all
ythesecompani eshav est ableear ni
ngs.
2.Sizeoft heEnt erpr i
se:Smal lent erpr i
seshav etor elymor eon
the owner ’
s capi taland l ess on bor r
owed money .Thisi s
becausel edersconsi derl endi ngt osmal lfir
msr i
sky.
3.Tradingonequi ty:Incaset her ateonr etur nedcapi talismor e
thani nthecaseofr at eondebent ureordi videndonpr eference
shares,i tiscal ledt radi ngonequi tyorl ever ageef fect.Inthat
caset herei sgr eaterdependenceonbor rowedcapi t
al.
4.CashFl ow:Theabi lityofacompanyt odi schar geormeeti ts
fi
xedobl i
gat i
onsdependsupont heav ail
abi lityofcash.Orcash
fl
ow.Themor et hecashi nflow,mor ewi llbet hepr oporti
onof
borrowedcapi t
al int hecapi tal struct ure.
5.Purpose off i
nanci ng:I n case cash i sr equired fordi r
ect
product i
onpur pose,t hecompanymayr elyonext er
nalsour ces
ofmoney ,i e.,bor rowed money ,because t he companycan
repayt he bor rowed moneyf rom t he moneyear ned outof
product i
on.I ft he moneyi sf ornon- pr oduct iv
e act i
vit
y,l i
ke
empl oyee’ spay ment ,theownerhast osetasi dethemoney .
6.Provisionf orfuture:Pr ov isi
onf ort hef ut ureshoul dbemadeby
keepingt hebestsecur i
tiest il
lt hel ast.Lessersecur i
ti
escanbe
reeasedi fr equired, att heear li
erst age.

TERM LOANS:
Therear et wot ypesofl oans, shor t
-term andl ong-terml oans;
Term l oans means l ong- t
er m l oans,r angi ng fr
om 5- 15 year s.
Thesear eusual l
yr aiedt opur chasecapi talasset sli
kel andand
si
te,bui lding and ci vilwor ks,pl antand machi nery,install
ation
expensesandmi scellaneousf ixedasset s.Itmayal sobeusedt o
constructr oads, rai
lway s,etc, i
ncaseofbackwar dar eas.
Meansofr aisingsuchl ong-terml oansar ei ssueshar es,issueof
debentur e,l oans f rom Fi nanci ali nst
itutions and Commer cial
Banks, Publ i
cdeposi t
sandRet ent i
onofpr ofits.
Shares:Shar esi stheuni tinwhi cht hetotalcapi t
alofacompany
i
sdiv i
ded.
Prefer
enceShar es: Thesear etheshar eswhi chcarryapr eferential
ri
ghtov erequi t
yshar eswi thr eferencet odi vi
dends.Theyal so
carr
yapr eferenti
alr ighov erequi tyshar esatt het i
meofwi nding
uporpay mentofcapi tal
EquityShar es:Whati snotpr eferenti
alshar ei sequi tyshar e.
 Equi
ty shar
es are ent
it
led to di
vi
dends and capi
talaft
ert he
paymentofpref
erent
ial
shares.
Debent
ures:Adebentureisaninstr
umentwhichisacknowledged
asadebtbyacompanyt oaper sonorper
sons.

Dif
ferencebetweenShar
es&Debentures:
:
Base Share Debent
ure
Represent
ati
on Aport
ionofcapi
tal Aporti
onofdebt
.

St
atus Shar
ehol
dermemberofco.Cr
edi
torofcompany

Ret
urn Pai
ddi
vi
dend Pai
dint
erest

Ri
ghtofcont
rol Ri
ghtov
ert
hewor
kingNor
ightov
ercompany

Repayment Norepay
ment Repai
d af
ter
speci
fi
edper
iod

Pur
chase Cannotpur
chaseownshar
es Can
pur
chaseown
debent
ures

Or
derofr
epayLastt
ogetpay
ment Pr
ior
it
yofpay
ment

VentureCapi t
al:
Venture capitalisaf orm off i
nancing especi
all
y designed f
or
fi
nancinghi ght ech,highr iskandper ceivedhighrewar dproj
ects.
Venture capitalhel ps ent repr
eneurst r
ansl
ate new i deas i
nto
commer ci
al production. It especial
ly helps in financi
ng high
technologyprojectsandr esearchanddev el
opmentprojects.

I
nternati
onal Fi
nance corporat
ion, Washingt
on ( I
PCW) def ines
venture capi
tal as equi
ty or equityfeatur
ed capi t
al seeking
i
nv est
menti n new ideas,new compani es,new pr oduct
s,new
processesornewservicest
hatof f
erthepotent
ialofhi
ghr et
urnson
i
nv est
ment.

TheGov
t.ofI
ndi
aissuedsomegui
del
i
nesi
nNov
ember1988,mai
nly
topromot eabr oadf ramewor kf ortheoper ati
onofv enturecapi tal
compani esi nthecount ry.Themai nfeaturesare;
1.AlI ndiaFi nanci alI nst i
tuti
ons,SBIandot herscheduledbanks
areel i
giblet ofloatsuchaf und.
2.Mi nimum si zeoft hef undshoul dbeRs.10cr ores.
3.I ncaseofpubl i
ci ssues,t hepr omot er’sshareist obemor e
than40%oft hei ssuecapi tal.
4.For ei
gnhol dingwi llbeal l
owedIupt o25% pr ovidedi tcomes
from mul ti
later al i nternati
onal f i
nancial or ganizations,
dev el
opment al i
nst itutionsormut ual f
unds.
5.TheNRI ’
si nvest menti sal l
owedupt o74%i nthecapital.
6.Debtequi tyr ati
oshoul dbel i
mitedt o1:1.5
7.Thi sfundi snotal lowedt ooper ateinmoneymar ketoper ations.
8.The v entur e capi talistwi llpayt ax@ 20% on t he dividend
i
ncomesubj ectt oamaxi mum ofRs.10, 000andwi llhav eto
payt ax@20%oncapi talgains.
.

PERSONNELFEASI
BILI
TY:

“
Ahappywor
keri
samor
epr
oduct
ivewor
ker
.”–Adam Smi
th.

Thiswassaidmanyy ear
sago.Ithol
dsgoodevenfortoday.Witht he
i
ncreasei
ncompet i
ti
on,andeverchangi
ngenvi
ronmentalconditi
ons,
organi
zat
ionshav
ebecomev er
yconsciousofeff
ect
iveutil
izat
ionof
manpower .

I
nf or
mationt
echnologyhasbr
oughtaboutsi
gnif
icantchangesinour
dayt o dayli
ves.Indi
anshavemadegr eatstri
desi ninfor
mation
technol
ogy.Manhast urnedl
ossmakingunitsi
ntopr of
it
ableones.
Manhas, inf
act,mademanystri
desi
nthefi
eldofexcell
ence.

Ever
yor ganizati
onhast osel ectandhirepeopl ewhocani mproveit
s
posi
ti
onandwor keffi
cient
ly.Theor ganizati
onhast oensurethatt
he
peopl
eacqui rerequir
ed
Knowledgeand ski l
l
s. Empl oyeesal so hav eto bemot i
vated t
o
contr
ibutetheirbestformanagi ngtheor ganizat
ionsuccessf
ull
y.

Need/Import
anceofmanagi
ngmen:
Itisthemenwhodot hepl
anni
ng,or
gani
zi
ng,di
rect
ingco-
 ordinatingandcont rolli
ng.
The obj ect i
ves f orwhi ch t he company i s est ablished ar e
attainedeconomi callyandef f
ect i
vely .
Ifmenar emanagedpr oper l
y,t heyt r
yt omai nt ainaposi tive
outlookandwor kf ort hecompanywi thgr eatent husi asm.
Ani ndiv i
dual ’
sknowl edge,ski ll,creat i
v eabi l
iti
es,t alents,et c.,
canbeext ractedandut i
li
zedpr oper l
y .
Thev al
ue, att
itude, cul t
ur eandbel iefsofeachi ndi vidualcanbe
known.
Theobj ect i
vesoft hesoci et ycanbedul yconsi der edandser v ed.
Ithelpsi nt hecr eat i
onanddev elopmentofhumanr elations.
Itl eads t oj ob sat isfact i
on.The pr oduct ivi
ty ,excel lence,
i
nnov at
iv eness,pr ofitability ,etc.,canbei ncreased.TheRi ght
personf ort heRi ghtj obcanbesecur ed.
Theempl oy ees’leani ngs,l ikesanddi sli
kesbecomeknownand
theseat tributescanbeusedt oat taint hecompany ’sgoal s.
Labourt ur novercanber educeddr ast i
cal lyThedr awbacksof
eachandev eryempl oyeecanbeanal y
sed.I thel psi nr el
easi ng
stress,st rainandt ensi on.
Sincei ti st hemenwhomakeuseofal lt heot herr esources
requiredf orproduct i
on,pr operhandl i
ngandmot ivat i
onofmen
canmakewast esori mpr operut i
lizationofr esour ces.gr eat
cont ri
but i
oni nt heachi ev ementofcompanygoal s.I tel iminates
Ithelpst oco- or dinatei ndi vidual andcompanygoal s.
Ithelpsi ni dent i
fyingadequat eandequi t
abl ewages, i
ncent i
ves,
empl oyees benef i
ts and soci alsecur ity and measur es f or
challengi ngwor k,prest ige, recognition, secur i
ty,stat us, et
c.

MOTIVATION:
Ther
earetwoway sbywhichpeoplecanbemot i
vated.
Positi
v emotiv
ati
on:Peoplearesai
dtobemot i
vat
edposi
ti
vely
whent heyareshowedar ewardandt hewayt oat
tai
nt hat
reward.Such a r eward may be fi
nancialornon-fi
nancial
.
Positi
ve mot i
vat
ions cr
eate a posi
ti
ve atmospherei nt he
organizati
on.
 Negativ
eMot i
vati
on:Byi nst
all
i
ngf eari
nthemi ndsofpeople,
one can get the desired work done.Here,t he f
ear of
consequencesofdoingsomet hingkeepsthewor ker
si nthe
desi
red dir
ect
ion.Itis an unfavour
abl
e at
ti
tude and hence,
shouldbeavoi
ded.

For
msofmot i
vati
ons:
Monet ary:
Payinconf ormi t
ywi t
hmar kettr
end.Ski l
l
-basedrewar
dsyst
em.
Meritpay .
Empl oyeewor kopt ion.
Perf
or mancebonus/i ncent
ives.
Non-MonetaryMot i
vations:
Awar ds–t rophies, ci
tati
ons,cert
if
icates.
Token–v acat i
ont ri
ps,gif
tcoupons, watches,et
c.
Clubmember shipSal arybr
eak-upinaccor dancetoempl
oyees’
choice.Medi calbenef it
s.
Groupl i
feinsurance.
Reti
rementbenef its.

WORKI NGCAPI TAL:

Wor kingcapi t
ali sthatamountoff undsrequir
edt ocar ryont he
day-to-dayoper ationsofacompany .I
tmayal sober egardedas
thatpor ti
onofacompany ’stot
alcapit
alwhichisempl oyedini t
s
shortt er
m oper ati
ons.
Wor king capital,somet i
mes call
ed the networ king capitalis
representedbyt heexcessofcur rentasset
sov ercurrentli
abili
ti
es
andi denti
fiesther elat
ivel
yliqui
dporti
onoftotalenterpri
secapital.

Worki
ng capit
alis cal
led cy
cli
ng capi
talbecause t
he money
ci
rcul
ates i
nv ar
ious f
orms ofcurrentasset
si n a cont
inued
manner.

Capi
talf
inancei
sregardedastheli
febl
oodofanyent
erpri
se.
Ther
efor
e, t
hesi
gnif
icanceofworki
ngcapi
tal
inanenter
pri
seli
esi
n
thef
actthati
tsci
rcul
ati
onhastobeproper
lyr
egul
atedi
nthe
busi
ness.Thetot
alworki
ngcapi
tal
iscomposedoftwoki
ndsofpar
ts;
(i
)Regul
arorfi
xed(ii
)Vari
abl
e.

raw
cash mater
ial
s

Cash Semi -
f
inished
Bil
ls goods
Recei
va

Fini
shed
goods

SCHEMESOFFEREDBYTHEVARI
OUSI
NSTI
TUTI
ONS:

Vari
ousfi
nanci
ali
nst
it
utesprovi
defi
nanci
alassi
stancetotheSmall
-
Scal
eIndust
ri
esandentr
epreneur
s.Someofthoseinsti
tut
esare;

1.IFCI-I ndustri
alFinanceCor porati
onofIndi
a
2.ICICI-Industri
alCreditCorporationofI
ndia
3.IDBI-I ndustri
alDev el
opmentBankofI ndia
4.LIC -Li feInsuranceCor porati
on
5.UTI -Uni tTrustofI ndia
6.SIDBI-Smal lI
ndustri
esDev el
opmentBankofI ndi
a
7.NSI C-Nat i
onalSmal lIndustr
iesCorpor
ation

I
FCI-
Thi
swasest abl
ishedi
ntheyear1948toprovi
deassistancet
othe
medium andlar
geindust
ri
alOrgani
sat
ions.I
tsfunct
ionsare;
 1.Topr ov i
deassi stancef ori ndust ri
al i
nfrast ructure.
2.Topr ocessMer chantbanki ngoper ati
on
3.Helpst oimpr ov ev ariousf act orsf orthesoci o-
economi c
objectivesoft hecompany .
4.Prov i
desneededgui dancei npr ojectev aluat ion,i
dentif
ication,
formul ati
on, i
mpl ement ation, etc.
5.Givesahel pinghandi nr espectt ot echnical andadmi nistrati
ve
objectives.
6.Under takesr esear chandsur v eyfort hesakeofi ndustri
al
development .
7.Adv ancesl oansf orv ar i
ouspur posessuchasunder writ
ingof
sharesguar ant eeingofdef er r
edpay ment sf ormachi nery.
I
CI CI
:-
Thiswasest ablishedi nthey ear1955asapr i
v atei nsti
tuti
onf orthe
purposeofassi sti
ngl ongt ermf undsf orcapi tal assetsandpr oject
promot i
onal serv i
ces.I tsv ariousf unctionsar e;
1.Di rectsubscr ipti
ont osecur i
ti
es.
2.Pr ov i
del ongt erml oansi nr upees.
3.Pr ov i
del oansi nfor eigncur rencies
4.Guar anteeingpay mentf orcr edits
5.Pr ov i
dingcr editfaci l
iti
est oindigenousmanuf acturers.
6.Leasi ngofequi pment
7.Conduct i
ngt echno- economi csur veyf orbackwar dar eas.

LIC:
Thiscorporati
onwasest abli
shedin1956.Itprov i
desfinancial
assist
ancet oindust
ries.
1.Itworksincloseliaisonwit
ht heotherAllIndi
af i
nancial
i
nstit
utionsinprovidingfi
nancet otheindustri
es.
2.Helpsindustri
alconcernsbyi tsunderwri
ti
ngsuppor t.

UTI
Thiswasest ablishedi
ntheyear1964.I tprovi
desthefol
l
owi ng
assist
ance;
1.I tsubscribestoi
ndustr
ialsecuri
ti
esandal sotopurchase
outstandingsecur
it
iesi
nt hesecondar ymarket.
2.I tisgov ernedbyconsi
der ati
onsofy iel
dandsecur i
tyasithas
anobl i
gat i
ontoearnar easonablerateofretur
nforitsholder
s
i
ni tsv ari
ousschemeswi thoutexposingcustomerst oundue
 r
isks.

IDBI
IDBIwasest abl i
shedi nt hey ear1964asanapexf inancialinst itution
andsubsequent l
yr econst r
uct edast hepr inciplef inancial;inst i
tution.
I
DBIpr ovideassi st ancef ort hedev elopmentofi ndust ri
es;
1.Di rectassi st ance t oi ndust rialconcer ns i nt he f orm of
under wr i
tingofshar esanddebent ures.
2.Sof tloansf ormoder nization, renov ationandr eplacementod
existingi ndust ries.
3.Redi scountbi llsar isingoutofsal esofi ndi genousmachi ner y
ondef erredpay ment .
4.Fi nanceexpor tor i
ent edi ndust r i
es.
SIDBI :
This was setup i n 1989 t of unction as t he pr incipalf i
nanci al
i
nst i
tutionf ort hepr omot ion, dev el opmentandf inanci ngofi ndust ries
i
n t he smal l-
scal e sect or. The assi stance pr ovided by t his
organisat i
onar e;
1.Ref inanci ngofl oansandadv ancesext endedbypr imar yl endi ng
i
nst i
tutions.
2.Di scount i
ngandr edi scount ingofbi ll
s.
3.Ext ensi onofr i
skcapi tal orsof tloanassi stancet oindust ries.
4.Ext endi ngf inanci al suppor tt oSSI DCandNSI C
5.Technol ogicalup gr adat i
on and moder ni zation ser v i
ces t o
i
ndust r
ies.
6.Pr omot esempl oy mentor i
ent edi ndust r
ies,especi all
yi nsemi
urbanar eas.
NSI C
NSI Cwassetupi n1955asapubl i
cunder taking.I twasest ablished
mai nlytodev elopsmal lscal eindust ri
esi nt hecount ry.Thef unct i
ons
fol
lowedar e;
1.Pr ocur ingGov t.or der sf orsmal l
scal euni ts.
2.Dev elopingsmal lscal ei ndust ri
esasanci l
lar i
est olar gescal e
i
ndust r
ies.
3.Dev elopingandupgr adingt echnol ogyf orpr ojectbasedwast es
4.I mpor ting and di stri
but ing scar cer aw mat erial,component s
andpar tsamonguser sint hesmal l
scal ei ndust ri
es.
Quest
ions:
1.Whatdoy ouunder st
andbyPr ojectManagement ?Whatar eits
objecti
vesandhowar et heyselect ed?
2.Howar efundsr equirementest imat edandf rom wherearethey
procuredbysmal lscaleindust r
ies?
3.Whati sthef actorsandsi gnifi
canceofWor ki
ngCapi t
al?How
willyoudi
f f
erentiateitfrom FixedCapi tal?
4.Whati sVentureCapi tal?
5.Whatar ethef undingschemesof f
eredt oSmallScal
eIndustr
ies
byv ari
ousBanksandFi nancialInst i
tut
ions?
6.Whatdoy ouunder standbyLongTer m andShortTerm Loans?