INDIAN INSTITUTE OF TECHNOLOGY,

KHARAGPUR
Mid-Autumn Semester 2022-23

Date of Examination: 21 February 2023, Session (FN/AN): AN. Duration 2 hrs,

Subject No.: EP61201, Subject Name: Entrepreneurship Essentials,
Department/Center/School: Rajendra Mishra School of Engineering
Entrepreneurship, IIT Kharagpur, Specific charts, graph paper, log book etc.,
required: NIL, Special Instructions (if any): NIL

Answer all questions Full Marks: 100

DO NOT WASTE TIME REPRODUCING QUESTIONS IN THE ANSWER SCRIPT.
Please answer precisely without missing key elements.

Answer all questions.

1. (i) State three important reasons for learning entrepreneurship by engineering

students (Answer in three bulleted points). (ii) How do entrepreneurs improve the
quality of life of citizens of a country? Illustrate with an example. (answer in
bulleted points)? [5+5=10]

i. Reasons for learning entrepreneurship

a) To remain competitive amidst challenges thrown by emerging innovative
entrepreneurial ventures, contemporary businesses demand
entrepreneurial qualities in executives.
b) Given the increasing propensity of people taking up entrepreneurship,
acquiring early knowledge is likely to be of help.
c) Students may excel in corporate entrepreneurship with the knowledge
gained by entrepreneurship studies.

ii. How do entrepreneurs improve the quality of life of citizens of a country? Illustrate
with an example. (answer in bulleted points)?

Page 1 of 9
a. Ample evidence shows that the GDP of a country is proportional to its
entrepreneurial intensity. Jio has added more than 5% to India’s GDP.

b. Entrepreneurs make new products and services available to consumers thereby

increasing satisfaction, consumption, and government income, which the
government uses to build infrastructure and utilities for its citizens. Paytm has
introduced digital wallet and many more.

c. Entrepreneurs create new jobs reducing unemployment leading to higher

consumption and investment. Swiggy employs hundreds of thousands of delivery
persons.

2. (i) State three pieces of evidence to prove that India has the wherewithal to
compete in global markets (Answer in three bulleted points). (ii) State three key
attributes that characterize an entrepreneurial venture and differentiate it from a
small business. Answer in three bulleted points. [5+5=10]

i. Evidence that India has the wherewithal to compete in global market

a) India has gained the title of the ‘global pharmacy’.
b) Indian IT industries are comparable to any global tech companies.
c) The automobile companies in India, especially two-wheeler brands, have
been asserting dominance in various global markets despite facing
competition from China and Japan.
d) India is at par in space technology and offers far cheaper services compared
to any other countries in the world.
e) Indian healthcare industry has been improving very fast and is catching up
with those in the developed world.

[Comment: Many of you have written about demographic advantages, huge

population, number of unicorns, etc. which are not relevant for global
competitiveness. ]

ii. State three key attributes that characterize an entrepreneurial venture and
differentiate it from a small business. Answer in three bulleted points.

Page 2 of 9
Entrepreneurial ventures are

a. Innovation-driven
b. Characterized by high growth
c. Set-up around a pain-point and a vision
None of the above attributes is usually associated with a small business.

3. a. (i) Explain (writing only the items is not good enough) the five core
constituents of Lean Startups stated by Eric Ries. Restrict your answer within
five sentences. (ii) How does Ola Cabs define a superior value proposition
compared to traditional taxi services and make a good product-market fit?
[5+5=10]
i. Five core constituents of Lean Startups
a) Lean thinking: shrinking batch sizes, just-in-time inventory & production
management, and acceleration of cycle times.
b) Progress measure: measure progress through validated learning.
c) Productivity: Create products that people enjoy, are willing to pay a
profitable price for, and do so efficiently and swiftly.
d) Build-measure-learn feedback loop: Rather than building based on
numerous assumptions, continuously adjust using the steering wheel known
as "build-measure-learn." Through this iterative process, we can learn when
and if a sharp turn, known as a pivot, is necessary.
e) Charge early – A paying customer serves as genuine validation of the
hypothesis, providing crucial support for the most critical element: cash flow.

(ii) How does Ola Cabs define a superior value proposition compared to
traditional taxi services and make a good product-market fit?
a) Online booking from the comfort of your home.
b) No queue or waiting (instant booking)
c) Cashless payment
d) Driver and car are identifiable for security
e) Visual direction
f) Loyalty points
g) Less expensive

Page 3 of 9
 h) Book a future trip.
i) Book a taxi in an unfamiliar city even before reaching there.

4. (i) Explain entrepreneurial essence with examples. (ii) How does google
maintain unfair advantages? [5+5=10]

(i) Explain entrepreneurial essence with examples.

The primary attribute of entrepreneurial essence is maintaining a steadfast

focus on customers and continuously innovating to address evolving
customer needs, preferences, and aspirations, staying ahead of competitors.
Success doesn't breed complacency for entrepreneurs with this essence;
instead, it keeps them actively engaged in understanding and creating what both
existing and potential new customers would appreciate.
IBM lost its entrepreneurial essence, allowing new companies to dominate the
personal computer market. Nokia and BlackBerry, after achieving early
success, assumed that they were the best and that customers would always buy
their products. Unfortunately, they were unaware that new products like the
iPhone and Android phones, offering far more features, had redefined the
purposes and uses of cell phones, making their offerings irrelevant.

ii. Unfair advantage by Google

Google has established an asymmetric business model by offering

complimentary products (known as economics of complements) and services
free of charge, while collecting data to track user behavior and preferences. It
utilizes this knowledge for targeted advertisements and guidance in making
purchases, thereby increasing its revenue and profit.
Google offers various free services, including the Android OS, Chrome
browser, online storage in Google Drive, YouTube, Google Maps, free listing
of research articles in Google Scholar, and more. The Google Play Store
comes preloaded with Android, compelling users of Android phones to
involuntarily keep and use several Google apps. Additionally, the predominant
Page 4 of 9
 search engine, which typically employs algorithms to display content relevant to
its business, enables Google to deliver a seamless experience to its customers,
providing it with substantial unfair advantages.

5. How does a startup build competitive advantage and pricing power? Answer in
not more than five sentences. No line limit for bulleted points. [10]
i. Competitive advantage and pricing power
Pricing power is gained by becoming more competitive with superior value
proposition and acquiring loyal repeat customers. The following can help
achieve this:
a) Technology-edge: Building innovative technologies and protecting IP.
b) Product differentiation to target niche customer segments.
c) Core competency that is difficult to emulate.
d) Providing unique experience to delight the customers so they become loyal to
the brand.
e) Building brands with loyal followers

6. Presented below are the balance sheet of a company as of 31.03.2021 (Table

1), some operational data for the financial year 2021-22, and some balance sheet
data as of 31.03.2022 (Table 2). Estimate (i) detailed Profit & Loss account for
the year 2021-22 including the margin of Gross Profit, Operating Profit, and Net
Profit, (ii) Balance Sheet as of 31.03.2022, and (iii) Cash Flow statement for the
year 2021-22. All calculations must be shown and merely writing the answers will
not qualify for any marks.
[You may use the additional column provided in the table below to populate the
balance sheet data as of 31.03.2022, and cash flow statement for the year 2021-
22, and attach it with the answer script.]
[Marks: (i) 20, (ii) 20, (iii) 10 = 50]

Table I: Balance sheet as of 31.03.2021 and 31.03.2022

All amounts are in ₹

Balance Sheet as of 31.3.2021 31.03.2022

Assets
Current Assets

Page 5 of 9
 Cash in hand and Bank 480 4,109
Closing stock 410 700
Trade Receivables/Sundry Debtors 350 350

Non-current assets/ Fixed assets

Land 1000 1000
Building 1200 1425
Plant & Machinery 4300 5,058
Capitalized expenses 500 450
Total assets 8240 13,092

Equity and Liabilities

Short term liabilities
Trade Payables/ Sundry Creditors 500 400
Short term loan from bank 2100 450
Long term liabilities
Long term loan 3100 3600

Owners' Equity
Fully paid up equity share capital 2000 2500
Other equity (Reserves and
Surplus) 540
6,142

Total Equity & liabilities 8240 13092

Table II: Operational data for the year 2021-22 and some balance sheet data as of
31.3.2022

Operational data for the year 2021-22 and some

balance sheet data as of 31.3.2022
Sale of goods 20,000
Dividend payment during the year 200
Purchase of equipment 2,000
Salary 600
Closing stock 700
Transportation expense 60
Legal expense 40
Purchase of goods 11,000
Construction of factory shed 500
Amortization of capitalized expenses 50
Repayment of bank loan 200
Trade Receivables 350
Telephone bill payment 10

Page 6 of 9
 Purchase of telephone 20
Electricity bill payment 130
Sale of old machine (book value: 700) 700
Interest on bank loan 140
Advertisement expense 40
Insurance 75
Audit fees 30
Fresh long term loan raised 700
Trade Payables 400
Traveling expenses 60
Stationeries 15
Maintenance 150
Founders contribute to new equity capital 500
Company pays income tax @ 20%
Outstanding in short term loan 450
Depreciation rate for building @ 5%
Depreciation rate for machinery @ 10%
Sale of building (book value: 200) 200

Profit & Loss Account

Sales 20,000
Opening stock 410
Purchase of goods 11,000
Closing stock 700
CoGS 10,710
Gross Profit 9,290

Depreciation
Building
Previous ac 1200
Purchase 500
Sell 200
Sub total 1500
Depreciation 75
Book value 1425

Machinery
Existing 4300

Page 7 of 9
Purchase 2,020
Sell 700
Subtotal 5,620
Depreciation 562
Book value 5,058

Total depreciation 637

Operating expenses 1897

Operating profit 7,393

EBITDA 8,080
PBT 7,253
Income Tax 1450.6
Net Profit 5,802
Dividend 200
Retained profit 5,602

Cash flow statement

Financial year
Cash flow from operating activities
Net profit 5,802
Depreciation & amortization 637
Change in inventory/ stock 50
Change in accounts receivable -290
Change in account payable 0
Sub total -100
6,099
Cash flow from investment
activities
Change building 0
Sale of building -300
Machinery
Sold machine -2,020
Sub total 700
-1620
Cash flow from financing activities

Page 8 of 9
Change in long-term loan 500
Change in short-term loan -1650
Change in equity
Dividend -200
700
Total cash flow -200
-850
Balance of cash in last year
balance sheet 3,629
Net balance 4,109

Page 9 of 9