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Management Consulting/ms -03 economic and social environment

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Question
QUESTION: sir please give me guideline for question

a)   Distinguish between basic restructuring and financial restructuring.
  b)   Discuss the various organizational measures which promote privatization.

ANSWER: Corporate restructuring is the process of redesigning one or more aspects of a company. The process of reorganizing a company may be implemented due to a number of different factors, such as positioning the company to be more competitive, survive a currently adverse economic climate, or poise the corporation to move in an entirely new direction. Here are some examples of why corporate restructuring may take place and what it can mean for the company.
Restructuring a corporate entity is often a necessity when the company has grown to the point that the original structure can no longer efficiently manage the output and general interests of the company. For example, a corporate restructuring may call for spinning off some departments into subsidiaries as a means of creating a more effective management model as well as taking advantage of tax breaks that would allow the corporation to divert more revenue to the production process. In this scenario, the restructuring is seen as a positive sign of growth of the company and is often welcome by those who wish to see the corporation gain a larger market share.
However, financial restructuring may take place in response to a drop in sales, due to a sluggish economy or temporary concerns about the economy in general. When this happens, the corporation may need to reorder finances as a means of keeping the company operational through this rough time. Costs may be cut by combining divisions or departments, reassigning responsibilities and eliminating personnel, or scaling back production at various facilities owned by the company. With this type of corporate restructuring, the focus is on survival in a difficult market rather than on expanding the company to meet growing consumer demand.
Corporate restructuring may take place as a result of the acquisition of the company by new owners. The acquisition may be in the form of a leveraged buyout, a hostile takeover, or a merger of some type that keeps the company intact as a subsidiary of the controlling corporation. When the restructuring is due to a hostile takeover, corporate raiders often implement a dismantling of the company, selling off properties and other assets in order to make a profit from the buyout. What remains after this restructuring may be a smaller entity that can continue to function, albeit not at the level possible before the takeover took place.
In general, the idea of corporate restructuring is to allow the company to continue functioning in some manner. Even when corporate raiders break up the company and leave behind a shell of the original structure, there is still usually the hope that what remains can function well enough for a new buyer to purchase the diminished corporation and return it to profitability.
Corporate restructuring :

Restructuring is the corporate management term for the act of partially dismantling and reorganizing a company for the purpose of making it more efficient and therefore more profitable. It generally involves selling off portions of the company and making severe staff reductions.

Restructuring is often done as part of a bankruptcy or of a takeover by another firm, particularly a leveraged buyout by a private equity firm. It may also be done by a new CEO hired specifically to make the difficult and controversial decisions required to save or reposition the company.
Characteristics

The selling of portions of the company, such as a division that is no longer profitable or which has distracted management from its core business, can greatly improve the company's balance sheet. Staff reductions are often accomplished partly through the selling or closing of unprofitable portions of the company and partly by consolidating or outsourcing parts of the company that perform redundant functions (such as payroll, human resources, and training) left over from old acquisitions that were never fully integrated into the parent organization.
Other characteristics of restructuring can include:

• Changes in corporate management (usually with golden parachutes)

• Retention of corporate management sometimes "stay bonus" payments or equity grants

• Sale of underutilized assets, such as patents or brands

• Outsourcing of operations such as payroll and technical support to a more efficient third party

• Moving of operations such as manufacturing to lower-cost locations

• Reorganization of functions such as sales, marketing, and distribution

• Renegotiation of labor contracts to reduce overhead

• Refinancing of corporate debt to reduce interest payments

• A major public relations campaign to reposition the company with consumers

• Forfeiture of all or part of the ownership share by pre restructuring stock holders
The term corporate restructuring encompasses three distinct, but related, groups of activities; expansions – including mergers and consolidations, tender offers, joint ventures, and acquisitions; contraction – including sell offs, spin offs, equity carve outs, abandonment of assets, and liquidation; and ownership and control – including the market for corporate control, stock repurchases program, exchange offers and going private (whether by leveraged buyout or other means). Mergers and acquisitions (M&A) and corporate restructuring are a big part of the corporate finance world. One plus one makes three: this equation is the special alchemy of a merger or an acquisition. The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies. Two companies together are more valuable than two separate companies - at least, that's the reasoning behind M&A.
This rationale is particularly alluring to companies when times are tough. Strong companies will act to buy other companies to create a more competitive, cost-efficient company. The companies will come together hoping to gain a greater market share or to achieve greater efficiency. Because of these potential benefits, target companies will often agree to be purchased when they know they cannot survive alone.

We will briefly look at each of the three major categories of restructuring in the section which follow as:

* Expansions:
Expansions include mergers, consolidations, acquisitions and various other activities which result in an enlargement of a firm or its scope of operations. There is a lot of ambiquity in the usage of the terms associated with corporate expansions.
A Merger involves a combination of two firms such that only one firm survuves. Mergers tend top occur when one firm is significantly larger than the other and the survivor is usally the larger of the two.A Merger can take the form of :

* Horizontal merger involves two firms in similar businesses. The combination of two oil companies or two solid waste disposal companies, for example would represent horizontal mergers.

* Vertical mergers involves two firms involve in different stages of production of the same end product or related end product.

* Conglomerate mergers involves two firms in unrelated business activities.
A consolidations involves the creation of an altogether new firm owning the assets of both of the first two firms and neither of the first two survive. This form of combination is most common when the two firms are of approximately equal size.
The joint ventures, in which two separate firms pool some of their resources, is another such form that does not ordinarily lead to the dissolution of either firm. Such ventures typically involve only a small portion of the cooperating firms overall businesses and usually have limited lives.
The term acquisitions is another ambiguous term. At the most general, it means an attempts by one firm, called the acquiring firm to gain a majority interest in another firm called the target firm. The effort to gain control may be a prelude to a subsequent merger to establish a parent subsidiary relationship, to break up the target firm and dispose of its assets or to take the target firm private by a small gropu of investots. There are a number of strategies that can be employed in corporate acuisitions like friendly takkeovers, hostile takeovers etc.The specialist have engineered a number of strategies which often have bizarre nicknames such as shark repellents and poison pills terms which accurately convey the genuine hostility involved. In the same vain, the acquiring firm itself is often described as a raider. One such strtegy is to emply a target block repurchase with an accompaying stanstill agreement. This combination sometimes describes as greenmail.
* Contractions:
Contraction, as the term implies, results in a maller firm rather than a larger one. If we ignoe the abondanment of assets, occasionally alogical course of action, coporate contraction occurs as the result of disposition of assets. The disposition of assets, sometimes called sell-offs, can take either of three board form:
* Spin-offs
* Divestitures
* Carve outs.
Spin-offs and carve outs create new legal entities while divestitres do not.
* Ownership and Control
The third mahor area encompassed vy the term corpoate restructuring is that of ownership and control. It has been wrested from the current board, the new managemt willl often embark on a full or partial liquidatin strategy involving the sale of assets. The leveraged buyout preserves the integrity of the firm as legal entity but consolidates ownership in the hands of a small groups. In the 1980s, many large publicly tradedd firms went private and employes a similar strategy called a leveraged buyout or LBO.

Whether a purchase is considered a merger or an acquisition really depends on whether the purchase is friendly or hostile and how it is announced. In other words, the real difference lies in how the purchase is communicated to and received by the target company's board of directors, employees and shareholders.
Synergy

Synergy is the magic force that allows for enhanced cost efficiencies of the new business. Synergy takes the form of revenue enhancement and cost savings. By merging, the companies hope to benefit from the following:
Staff reductions - As every employee knows, mergers tend to mean job losses. Consider all the money saved from reducing the number of staff members from accounting, marketing and other departments. Job cuts will also include the former CEO, who typically leaves with a compensation package.
Economies of scale - Yes, size matters. Whether it's purchasing stationery or a new corporate IT system, a bigger company placing the orders can save more on costs. Mergers also translate into improved purchasing power to buy equipment or office supplies - when placing larger orders, companies have a greater ability to negotiate prices with their suppliers.
Acquiring new technology - To stay competitive, companies need to stay on top of technological developments and their business applications. By buying a smaller company with unique technologies, a large company can maintain or develop a competitive edge.
Improved market reach and industry visibility - Companies buy companies to reach new markets and grow revenues and earnings. A merge may expand two companies' marketing and distribution, giving them new sales opportunities. A merger can also improve a company's standing in the investment community: bigger firms often have an easier time raising capital than smaller ones.
That said, achieving synergy is easier said than done - it is not automatically realized once two companies merge. Sure, there ought to be economies of scale when two businesses are combined, but sometimes a merger does just the opposite.

Mergers and Acquisitions : Valuation matters
Investors in a company that is aiming to take over another one must determine whether the purchase will be beneficial to them. In order to do so, they must ask themselves how much the company being acquired is really worth.
Naturally, both sides of an M&A deal will have different ideas about the worth of a target company: its seller will tend to value the company at as high of a price as possible, while the buyer will try to get the lowest price that he can.

There are, however, many legitimate ways to value companies. The most common method is to look at comparable companies in an industry, but deal makers employ a variety of other methods and tools when assessing a target company . Here are just a few of them:
Comparative Ratios - The following are two examples of the many comparative metrics on which acquiring companies may base their offers:
Price-Earnings Ratio (P/E Ratio) - With the use of this ratio, an acquiring company makes an offer that is a multiple of the earnings of the target company. Looking at the P/E for all the stocks within the same industry group will give the acquiring company good guidance for what the target's P/E multiple should be.
Enterprise-Value-to-Sales Ratio (EV/Sales) - With this ratio, the acquiring company makes an offer as a multiple of the revenues, again, while being aware of the price-to-sales ratio of other companies in the industry.
Replacement Cost - In a few cases, acquisitions are based on the cost of replacing the target company. For simplicity's sake, suppose the value of a company is simply the sum of all its equipment and staffing costs. The acquiring company can literally order the target to sell at that price, or it will create a competitor for the same cost. Naturally, it takes a long time to assemble good management, acquire property and get the right equipment. This method of establishing a price certainly wouldn't make much sense in a service industry where the key assets - people and ideas - are hard to value and develop.
Discounted Cash Flow (DCF) - A key valuation tool in M&A, discounted cash flow analysis determines a company's current value according to its estimated future cash flows. Forecasted free cash flows (operating profit + depreciation + amortization of goodwill – capital expenditures – cash taxes - change in working capital) are discounted to a present value using the company's weighted average costs of capital (WACC). Admittedly, DCF is tricky to get right, but few tools can rival this valuation method.
Mergers and Acquisitions : Break Ups
As mergers capture the imagination of many investors and companies, the idea of getting smaller might seem counterintuitive. But corporate break-ups, or de-mergers, can be very attractive options for companies and their shareholders.

Advantages

The rationale behind a spinoff, tracking stock or carve-out is that "the parts are greater than the whole." These corporate restructuring techniques, which involve the separation of a business unit or subsidiary from the parent, can help a company raise additional equity funds. A break-up can also boost a company's valuation by providing powerful incentives to the people who work in the separating unit, and help the parent's management to focus on core operations. Most importantly, shareholders get better information about the business unit because it issues separate financial statements. This is particularly useful when a company's traditional line of business differs from the separated business unit. With separate financial disclosure, investors are better equipped to gauge the value of the parent corporation. The parent company might attract more investors and, ultimately, more capital. Also, separating a subsidiary from its parent can reduce internal competition for corporate funds. For investors, that's great news: it curbs the kind of negative internal wrangling that can compromise the unity and productivity of a company. For employees of the new separate entity, there is a publicly traded stock to motivate and reward them. Stock options in the parent often provide little incentive to subsidiary managers, especially because their efforts are buried in the firm's overall performance.

Disadvantages

That said, de-merged firms are likely to be substantially smaller than their parents, possibly making it harder to tap credit markets and costlier finance that may be affordable only for larger companies. And the smaller size of the firm may mean it has less representation on major indexes, making it more difficult to attract interest from institutional investors. Meanwhile, there are the extra costs that the parts of the business face if separated. When a firm divides itself into smaller units, it may be losing the synergy that it had as a larger entity. For instance, the division of expenses such as marketing, administration and research and development (R&D) into different business units may cause redundant costs without increasing overall revenues.
Restructuring Methods
There are several restructuring methods: doing an outright sell-off, doing an equity carve-out, spinning off a unit to existing shareholders or issuing tracking stock. Each has advantages and disadvantages for companies and investors. All of these deals are quite complex.

Sell-Offs

A sell-off, also known as a divestiture, is the outright sale of a company subsidiary. Normally, sell-offs are done because the subsidiary doesn't fit into the parent company's core strategy. The market may be undervaluing the combined businesses due to a lack of synergy between the parent and subsidiary. As a result, management and the board decide that the subsidiary is better off under different ownership.
Besides getting rid of an unwanted subsidiary, sell-offs also raise cash, which can be used to pay off debt. In the late 1980s and early 1990s, corporate raiders would use debt to finance acquisitions. Then, after making a purchase they would sell-off its subsidiaries to raise cash to service the debt. The raiders' method certainly makes sense if the sum of the parts is greater than the whole. When it isn't, deals are unsuccessful.

Equity Carve-outs
More and more companies are using equity carve-outs to boost shareholder value. A parent firm makes a subsidiary public through an initial public offering (IPO) of shares, amounting to a partial sell-off. A new publicly-listed company is created, but the parent keeps a controlling stake in the newly traded subsidiary.
A carve-out is a strategic avenue a parent firm may take when one of its subsidiaries is growing faster and carrying higher valuations than other businesses owned by the parent. A carve-out generates cash because shares in the subsidiary are sold to the public, but the issue also unlocks the value of the subsidiary unit and enhances the parent's shareholder value.

The new legal entity of a carve-out has a separate board, but in most carve-outs, the parent retains some control. In these cases, some portion of the parent firm's board of directors may be shared. Since the parent has a controlling stake, meaning both firms have common shareholders, the connection between the two will likely be strong.

That said, sometimes companies carve-out a subsidiary not because it's doing well, but because it is a burden. Such an intention won't lead to a successful result, especially if a carved-out subsidiary is too loaded with debt, or had trouble even when it was a part of the parent and is lacking an established track record for growing revenues and profits.

Carve-outs can also create unexpected friction between the parent and subsidiary. Problems can arise as managers of the carved-out company must be accountable to their public shareholders as well as the owners of the parent company. This can create divided loyalties.

Spinoffs

A spinoff occurs when a subsidiary becomes an independent entity. The parent firm distributes shares of the subsidiary to its shareholders through a stock dividend. Since this transaction is a dividend distribution, no cash is generated. Thus, spinoffs are unlikely to be used when a firm needs to finance growth or deals. Like the carve-out, the subsidiary becomes a separate legal entity with a distinct management and board.
Like carve-outs, spinoffs are usually about separating a healthy operation. In most cases, spinoffs unlock hidden shareholder value. For the parent company, it sharpens management focus. For the spinoff company, management doesn't have to compete for the parent's attention and capital. Once they are set free, managers can explore new opportunities.

Investors, however, should beware of throw-away subsidiaries the parent created to separate legal liability or to off-load debt. Once spinoff shares are issued to parent company shareholders, some shareholders may be tempted to quickly dump these shares on the market, depressing the share valuation.
Tracking Stock
A tracking stock is a special type of stock issued by a publicly held company to track the value of one segment of that company. The stock allows the different segments of the company to be valued differently by investors. Let's say a slow-growth company trading at a low price-earnings ratio (P/E ratio) happens to have a fast growing business unit. The company might issue a tracking stock so the market can value the new business separately from the old one and at a significantly higher P/E rating. Why would a firm issue a tracking stock rather than spinning-off or carving-out its fast growth business for shareholders? The company retains control over the subsidiary; the two businesses can continue to enjoy synergies and share marketing, administrative support functions, a headquarters and so on. Finally, and most importantly, if the tracking stock climbs in value, the parent company can use the tracking stock it owns to make acquisitions.

Still, shareholders need to remember that tracking stocks are class B , meaning they don't grant shareholders the same voting rights as those of the main stock. Each share of tracking stock may have only a half or a quarter of a vote. In rare cases, holders of tracking stock have no vote at all.
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b)   Discuss the various organizational measures which promote privatization
Organizational Measures which Promote Privatization: Privatization is the process involving the private sector in the ownership or operation of a state-owned undertaking.
Organizational Measures:
1. A holding company may be designed to take top level decisions with sufficient degree of autonomy for the operating companies in its hold in their day-to-day operations. In this way decentralization promotes privatization.
2. The government agrees to transfer the use of assets of a public enterprise to a private bidder. While entering into a lease, the bidder is required to give an assurance of the quantum of profits that would be made available to the state. This is a kind of tenure ownership. In this measure the governments reserves the right to reviews the lease.
3. To promote privatization these two types of restructuring measures may be taken:
A. Financial Restructuring: Financial restructuring implies the writing off of accumulated losses and rationalization of capital composition of an enterprise in respect of debit equity ratio.
B. Basic restructuring implies the shedding by public enterprises of some of its activities which are taken up by ancillaries or small scale units.
Thus it can be concluded that organizational measures are important efforts of organization towards transferring ownership to private sector.


(i) Ownership measures: By the extent of ownership transferred the degree of privatisation is judged form the public enterprises to the private sector. Ownership almost transferred to a separate, co-operative or corporate sector. This can have three forms:
(a) Entire Denationalisation implies 100% transfer of ownership of a public enterprise to private sector.
(b) Joint venture implies partial transfer of a public enterprise to the private sector. It can have various variants – 25% transfer to private sector in a joint venture implies that majority ownership and control remains with the public sector. 51% transfer of ownership to the private sector shifts the balance in optimum to the private sector, through the public sector retains a substantial stake in the undertaking. 74% transfer of Ownership to the private sector implies a dominant share being transferred to private sector. In such a situation, the private sector is in a better position to change the character of the enterprise.
(c) Liquidation implies sale of assets to a person who may use them for the same purpose or some other purpose. This solely depends on the preference of the buyer.
(d) Workers’ co-operative is a special form of denationalisation. In this form, ownership of the enterprises is transferred to workers who may form a co-operative to run the enterprise. In such a situation, relevant provision of bank loans is build to enable workers to buy the shares of the enterprise. The burden of running the enterprises rests on the workers in workers co-operative. The workers become entitled to ownership dividend besides achieving wages for their services.
Organisational measures involve a variety of measures to limited state control. They added:
(a) In their day-to-day commands a structure of holding company almost designed in that the government limits its control to top-level big decisions and leaves a sufficient degree of autonomy for the operating companies. A big company like the Somnath enterprises of India limited (SEIL) or Raghvan Heavy Electrical Limited (RHEL) may acquire a holding company status, thereby transferring a number of functions to its smaller units. In this way, a decentralised pattern of management emerges.
(b) Leasing: In this arrangement, the government agrees to transfer the use of assets of a public enterprise to a private bidder for a specified period, say of 5 years. While entering into a lease, the bidder is required to give an assurance of the quantum of profits that would be built available to the state. This is a kind of tenure ownership. The government reserves the right to review the lease to the same person or to grant the lease to another bidder depending upon the circumstances of the cases.
(c) Restructuring there are two categories of restructuring: financial restructuring and basic restructuring.
(1) Financial Restructuring implies the writing off of accumulated losses and rationalisation of capital composition in respect of debt-equity ratio. The main purpose of this restructuring is to improve the financial health of the enterprise.
Basic Restructuring is said to occur when the public enterprise decides to shed some of its activities to be taken up by ancillaries or small-scale units.
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---------- FOLLOW-UP ----------

QUESTION: sir please help me for following questions

1. how do these economic and non economies environments impacts the business


2.     The small scale industry has found a place of prominence in the successive industrial policies of India'. Keeping this statement in mind, elaborate upon the industrial policy for small scale industries (SSI).

3.   Explain the institutional infrastructure at the central level institutions for SSIs.

4. Experts often argue that industrial licensing policy has impeded competition in India. Evaluate this statement in the light of objectives of industrial licensing policy in India.

Answer
1. how do these economic and non economies environments impacts the business
A  business  unit  is a  macro/micro  economic  unit. The  business  environment
furnishes the  macro-economic  context  within   which  the  firm  operates.
-external  factors or  forces  which  affect  the  operation  of the  business  unit.
-business  firms  must  demonstrate  adaptability  as  well  as  adoptability to  environment.

TYPES  OF  BUSINESS  ENVIRONMENT.
-ECONOMIC
-NON-ECONOMIC
============================
The  economic  environment of  business is  a  complex one.
The  business  unit  has economic  relation  with
-GOVERNMENT  [ CENTRAL /LOCAL]
-CAPITAL  MARKET
-HOUSEHOLD  SECTOR
-FOREIGN  SECTOR
These different  sectors together influence  trends and the
structure  of  the  economy.
The design and structure of  the economic  system is conditioned
by the  socio-political arrangement which  affect  the macro-micro
economic   decisions.
=======================================
THE  NON-ECONOMIC  MACRO  ENVIRONMENT OF  BUSINESS
These  non-economic  environment  is  complex  and dynamic.
Political (incl. Legal)   [ [Poltical] EST[Environment][Legal] ]

-Environmental regulations and protection
[what  are  the  government regualtions/ protection laws  that  must be  observed ]

-Tax policies
what tax  hinder the business and what  taxes  incentives  are available]

-International trade regulations and restrictions
[ does  the  government    encourage  exports / with  high tariffs  on  imports]

-Contract enforcement law/Consumer protection
[does  the  government  enforce  on  consumer  protection ]

-Employment laws]
[ is the  government    encouraging  skilled  immigrants  with  temp. permits]

-Government organization / attitude
[ does  the  government  have  a   very  positive  attitude  towards  this   industry]

-Competition regulation
[ are  there   regulation  for  limiting  competition]

-Political Stability
[ politically ,  does the   government    have   a  very   stable  government ]

-Safety regulations
[ has  the  government      adopted  some  of  the  modern  safety regulations]
=================================================================
Economic     [P[Economics][Social]TEL ]

-Economic growth
[  what  is  the economic growth rate  /  what  are  the  reasons ]

-Interest rates & monetary policies
[ are  the  interest  rates    under control /  is there   a  sound  monetary  policies]

-Government spending
[is  government  spending  is  significant   and  is it   under control ]

-Unemployment policy
[what  is  the  employment / unemployment  policies  of the government ]

-Taxation
[  has  the  taxation    encouraged  the  industry ]

-Exchange rates
[ is   there  well  managed   exchange  controls  and  is it  helping  the  industry]

-Inflation rates
[ is  the  inflation  well   under  control ]

-Stage of the business cycle
[ is  your    industry  is  on  the   growth  pattern]

-Consumer confidence
[ is  the  consumer  confidence   is   high/ strong and  if  not, why ]

==================================================
Social  [ PE[Social]TEL ]

-Income distribution
[is there   balanced   income  distribution   policy ]

-Demographics, Population growth rates, Age distribution
[ what  is   population   growth  and  why ]

-Labor / social mobility
[ what   are the  labor  policies  and  is  there  labor  mobility]

-Lifestyle changes
[ are  there  significant  lifestyle   changes     taking  place--more  modernization/ why  ]

-Work/career and leisure attitudes
[ are  the  population      career  minded  and  are  seeking  better  lifestyle]

-Education
[ what  are  the  education  policies /  is  it  successful ]

-Fashion, hypes
[are  the   people    becoming  fashion  conscious ]

-Health consciousness & welfare, feelings on safety
[ are  the  people     becoming  health  consciousness]

-Living conditions
[ is the  living  conditions   improving  fast  and  spreading  rapidly]

=========================================================
Technological  [  PES [Technology] EL]

Government research spending
[is  the  government    spending  on research  and  development]

Industry focus on technological effort
[are  the   industries    focused  on  using  improved  technology]

New inventions and development
[ are  new  inventions     being   encouraged  for  developments]

Rate of technology transfer
[ is  the  rate  of  technology  transfer  is  speeding  up ]

(Changes in) Information Technology
[ is  the   information  technology    rapidly  moving  and  is  there  government  support]

(Changes in) Internet
[ is the   internet  usage    rapidly  increasing   and  why]

(Changes in) Mobile Technology
[is  the   Mobile   technology    rapidly developing  and  is there  government  support]

=======================================
The economic  environment of  business   unit  exercises
a  strong  influence on  the  non-economic environment
of  the  business just as  the  non-economic  environment
can  influence  the  economic  environment.  
THE  ECONOMIC  ENVIRONMENT   IS  BOTH
-exogenous.
-endogenous.
IT  IS  DETERMINED  AS   WELL  AS  DETERMINING.

-social  factors  affect  the  economic  environement
and  vice  versa.
-legal  factors  affect  the  econominc environment
and  vice  versa.
-educational  factors   affect  the  economic  environment
and  vice  versa.
-political   factors   affect  the  economic  environment
and  vice  versa.
-technological   factors   affect  the  economic  environment
and  vice  versa.
===================================
THE  NON-ECONOMIC   ENVIRONMENT
CAN  BE   SPLIT  INTO  MICRO   AND  MACRO.

THE  MICRO  ENVIRONEMENT.

* Markets [ what  is  the market  situation, which is forcing the change requirements
*Customers [ how can service the customer -internal / external -better .          
* Industry  [ is  the  industry  trend ]
* Competition [ is  it the  competitive situation      
*Factors of  business [ causing  the change]
* Technology [ is  it  technology  change ]
*Suppliers
*Marketing  agents
*PUBLIC/  community
=============================================
INTERNAL  TO  THE  BUSINESS   UNIT.

Internal Assessment

Areas  for strengths, weaknesses, and barriers to success

ORGANIZATION DIMENSIONS
*Culture  [ is the  working  culture  change ]
* Organization [  is the  organization  demanding  change ]
* Systems  [ is it  the  systems change ]
* Management practices  [ change in  managemement process]


OTHER KEY DIMENSIONS

*Cost efficiency[  is it for  cost efficiency ]
* Financial  performance  [ is  it for  financial  performance improvement ]
* Quality [ is  it for  quality  performance improvement
*Service [ is  it for  service   performance improvement
*Technology[ is  it for  technology   performance improvement
* Market segments [ is  it for  sales  performance improvement
* Innovation[ is  it for    performance improvement
*new products[ is  it for new product   performance improvement
*Asset condition[ is  it for  financial  performance improvement
*productivity[ is  it for  financial  performance improvement

3. Source  Strategic  objectives  and  programs

The critical issues that must be addressed if the organization
Is  to  succeed
Strengths
Weaknesses
 Opportunities
 Threat

PRIORITY   ISSUES

FROM  THE  ABOVE , DETERMINE   THE  CORE  ISSUES
WHICH  NEEDS  TO  SOLVED  WITH  YOUR  INVESTMENT.

STRATEGIC  PROGRAMS

FROM  THE  ABOVE  CORE  ISSUES , DETERMINE  YOUR
STRATEGIC  PROGRAMS.

Mission  STATEMENT

VISION    STATEMENT

 Your CORE  PURPOSE  

  Your   CORE   OBJECTIVES
  Your   Core markets;
 Your  CORE  strategic thrusts.

BUSINESS DEFINITION:

The arena of products, services, customers, technologies, distribution methods, and geography in which you'll compete to get results.

 VALUES:
 Desired attitudes and behavior toward internal and external stakeholders that
will yield the culture and business results you want and that you will execute and turn into
action through

-policy,
-programs,
-processes,
-procedures,
-personnel selection.

levels and tiers of strategies

OVERALL FINANCIAL POSTURE
Grow; hold; milk; get out

PRIORITIES AND POSTURES
(Grow; hold; milk)
Market; business unit; product/services


Internal development
Divest
Restructure

COMPETITIVE ADVANTAGE
Cost /Value/ differentiation


EXTERNAL STRATEGIES

Product      Convenience
Service      Image
Target customer      Geography
Distribution      Product design
Delivery      Quality
Value      Reliability
Pricing      Advertising/promotion

INTERNAL STRATEGIES

People/skills / Facilities
Organizational /   Product
structure    /         development
Management style   /Incentives/rewards
Training      Spending
Equipment      Sourcing/
         manufacturing
technology          /    Systems
R&D          /   Service
FINANCING        /  Quality
 

Strategy Statement Content

v Priorities and Posture
 Business unit
 Market
 Product
 Strategic thrust/competitive advantage
 External strategies
 Internal strategic thrust
 Internal strategies
 Strategic fixes
--------------------------------------------------
8. Strategic  Program Content

LEADERSHIP: who

OBJECTIVES

KEY STEPS: who, what, when

FINANCIAL AND STRATEGIC
GAIN AND COST

PEOPLE: numbers and skills

COORDINATION REQUIREMENTS:

People and organizational units outside your control who must contribute

LEVERAGE: the high leverage individuals and units who must contribute at lower levels

Strategic
Accountability~/Reviews

QUARTERLY: Programs and strategic numbers' progress

INDIVIDUAL OBJECTIVES:
Performance appraisal

REWARDS AND CONSEQUENCES: Based on strategic performance of teams and individuals

INFORMAL VIGILANCE

####################

2. The small scale industry has found a place of prominence in the successive industrial policies of India'. Keeping this statement in mind, elaborate upon the industrial policy for small scale industries (SSI).
Government has recognized the important role of entrepreneurs in the industrial
development of the country, especially through the small scale industries (SSIs).
SSIs are essential for Indian economy in terms of employment generation, foreign
exchange earnings, its share in industrial output, and contribution to national
income. The government of India and state governments provides a number of
special facilities and incentives.
The incentives not only motivate entrepreneurs to set up industries in the small scale sector, but also strengthen the entrepreneurial base in the economy. The new  entrepreneurs face a number of problems on account of inadequate infrastructure facilities and other support services.
The government offers a package of services through its specialized institutions
and motivates entrepreneurs to take advantage of the various facilities and establish enterprises and flourish. This package includes assistance in obtaining finance, help in marketing, technical guidance, training, and technology upgradation etc. It is hoped that institutional incentives would play a key role in the promotion of small enterprises and ensure their self-sustained growth.


ALL INDIA INSTITUTIONS
In order to facilitate the growth of small scale sector, the central and state
governments have created an elaborate institutional framework in the country.
The institutions providing assistance to small scale industries are broadly
classified as “ All India Institutions “, “ State Level Institutions” and “Fund-Based
Institutions”.

SMALL SCALE INDUSTRIES BOARD
SSI Board is the apex non-statutory advisory body constituted by the Government of India to render advice on all issues pertaining to the SSI sector. It provides a forum to its members for interaction to facilitate co-operation and inter institutional
linkages and to render advice to the Government on various policy matters, for the development of the sector.

MINISTRY OF SMALL SCALE INDUSTRIES
The process of liberalisation and market reforms has created wide-ranging
opportunities of the development of small scale industries. At the same time, changing world scenario has thrown up new challenges to the very existence of this sector. The need of the hour is to suitably strengthen the sector so that it could
adapt itself to the changed environment and face the challenges boldly and effectively.
The implementation of policies and various programmes/schemes for providing
infrastructure and support services to small enterprises is undertaken through its
attached office, namely the Small Industries Development Organisation (SIDO),
statutory bodies/other organizations like Khadi and Village Industries
Commission (KVIC) & Coir Board, National Small Industries Corporation
(NSIC) and three training institutes- National Institute of Small Industry
Extension Training (NISIET), Hyderabad, Indian Institute for Entrepreneurship
(IIE), National Institute for Entrepreneurship and Small Business Development
(NIESBUD)

SMALL INDUSTRY DEVELOPMENT
ORGANIZATION (SIDO)
The Office of the Development Commissioner (Small Scale Industries) is also
known as the Small Industry Development Organization (SIDO). It is an apex
body, established in 1954, for assisting the Ministry in formulating, coordinating,
implementing and monitoring policies and programmes for the promotion and
development of small scale industries. It has over 60 offices and 21 autonomous
bodies under its management, including Tool Rooms, Training Institutions and
Project-cum-Process Development Centres etc. Functions of such main bodies
are as follows:
a) Small Industries Service Institutes (SISIs) are operational one in each state. They provide technical support and consultancy services, conduct entrepreneurship development programmes, and export promotion and
liaison activities Emphasizes is also placed on implementation of programmes on modernization, energy conservation, quality control /
upgradation and pollution control for the benefit of entrepreneurs.

b) Regional Testing Center (RTC) provides Testing facilities for product quality upgradation.

c) Tool Rooms/Tool Design Institutes (TRs/TDI) assist SSIs in technical upgradation, and provide good quality tooling by designing and producing
tools, moulds, jigs & fixtures, components, etc.

d) Product-cum-Process Development Centres (PPDCs) look into their
specific problems and render technical service.

e) Central Footwear Training Institutes (CFTIs) develop footwear designing
to promote exports.

f) Sub-Contract Exchanges for Ancillary Development (SCXs) register and
create database of the spare manufacturing/service capacity of SSI; create
database of requirements of large/medium units and match the requirements with the spare capacity available with small units; and arrange Buyer-Seller Meets, organise vendor exhibitions, seminar, workshops for large-small units coordination, quality upgradation, export promotion, etc and facilitate flow of data on vendor development.
Thus, the main services rendered by DC SSI office are:
a) Advising the Government in policy formulation for the promotion and
development of small scale industries.
b) Providing techno-economic and managerial consultancy, common
facilities to small scale units.
c) Providing facilities for technology upgradation, modernisation, quality
improvement and infrastructure.
d) Developing Human Resources through training and skill upgradation.
e) Providing economic information services.
f) Maintaining a close liaison with the Central Ministries, Planning
Commission, State Governments, Financial Institutions and other
Organisations concerned with development of Small Scale Industries.
g) Evolving and coordinating policies and programmes for development of

Small Scale Industries as ancillaries to large and medium scale industries.
h) Monitoring of Prime Minister Rozgar Yojna (PMRY) Scheme

NATIONAL SMALL INDUSTRIES CORPORATION (NSIC)
The National Small Industries Corporation Ltd. was set up in 1955 with a view to
promoting, aiding and fostering the growth of small scale industries in the country
with focus on commercial aspects of these functions. NSIC continues to
implement its various programmes and projects throughout the country to assist
the SSI units. The Corporation has been assisting the sector through the following
schemes and activities:
a) Composite Term Loan Scheme
To promote small-scale sector, NSIC has launched a Composite Term
Loan Scheme for the benefit of existing and prospective entrepreneurs to
acquire land and building, machinery and equipment and working capital
under one roof to the tiny units.
b) Hire Purchase Scheme
Supply of indigenous and imported machinery and equipment on easy
financial terms with special focus on women entrepreneurs, weaker
sections, handicapped and ex-servicemen and SC/ST entrepreneurs.
c) Equipment leasing
It is done mainly to facilitate SMEs to expand their capacities or diversify
and/or upgrade their technology according to the needs of the market.
d) Working Capital Finance
This Scheme aims at augmenting working capital of viable and well
managed units, on selective basis in case of emergent requirements to
enable them to pay-off their purchase of consumable stores, spares and
production related overheads particularly electricity bills, statutory dues.
e) Raw Material Assistance
It facilitates availability of scarce raw material either through the domestic
market or by importing.
f) Marketing Support Programme
NSIC has been trying to act as a major agency to bring SMEs closer to
various Governmental purchasing agencies, with the intention of creating
confidence in the purchasing agencies about SMEs, and their capabilities
to supply goods and services of requisite quality, economic prices and
adherence to agreed delivery schedules.
g) Tender Marketing
It participates in bulk local/global tender on behalf of Small Scale
Industries/Enterprises. It is aimed at assisting SSIs with the ability to
manufacture quality products but which lack brand equity & credibility or
have limited financial capabilities.
h) Integrated Marketing Support
NSIC has been operating an Integrated Marketing Support Programme in
which bills pertaining to supplies made by small scale units to eligible
purchasers are discounted by NSIC up to a certain specified limit.
i) Government Stores Purchase Programme
The units registered with the Corporation for participation in government
purchase programme are considered at or with individual purchase
organisations and derive all the benefits like free supply of tender forms,
exemption from payment of earnest money, security deposits, etc.
j) Technology Upgradation
Excellent technical support is provided to SSIs/SMEs through five NSICTechnical
Service Centres. These centres have been recognised by Council
of Scientific and Industrial Research for in-house R&D. NSIC has set up a
Technology Transfer Centre. The latest information is provided to on-line
connections and networks of computers on matching technology seekers
and technology providers are arranged through the Technology Transfer
Centre.
k) Software Technology Parks
NSIC has set up a NSIC-STP Complex under Software Technology Parks
of India (STPI). Software Technology Parks facilitates small scale units to
establish their units for the 100% export of software and also act as the
major point to activate software exports directly through NSIC.
NSIC-STP Complex at Okhla, New Delhi is one of such Parks set up by
the National Small Industries Corporation under the Software Technology
Parks of India to promote small entrepreneurs in software development.
NSIC-STP provides high speed better communication facilities through
VSNL/SATCOM networks, built-up office space, and uninterrupted
power supply, back-up power through DG sets, a modern business centre
and other administrative support.
l) Exports
NSIC is providing a complete package of export assistance, testing
facilities, pre-shipment credit facility, export incentives etc. apart from
exposure to the products of SSEs in trade fairs, buyer and seller meets etc.
The Corporation has been endeavoring to increase share of Indian
industries in purchases to United Nations Organization, it being the largest
single buyer in the world.
The Khadi and Village Industries Commission (KVIC) is a statutory body created
by an Act of Parliament in April 1957. The KVIC is supposed to do the planning,
promotion, organisation and implementation of programmes for the development
of khadi and other village industries in the rural areas in coordination with other
agencies engaged in rural development wherever necessary.
COIR BOARD
Coir Board is a statutory body established by the Government of India under a
legislation enacted by the Parliament namely Coir Industry Act 1953 for the
promotion and development of Coir Industry in India as a whole.

TRAINING INSTITUTES
There are three National Level Training Institutes. These are:
National Institute of Small Industry Extension Training (NISIET), Hyderabad,
which undertakes operations ranging from training, consultancy, research and
education, to extension and information services.
National Institute for Entrepreneurship and Small Business Development
(NIESBUD), New Delhi, which conducts national and international level training
programmes in different fields and disciplines.
Indian Institute of Entrepreneurship (IIE), Guwahati was established to act as a
channel for entrepreneurship development with its focus on the North East.



Seed Capital refers to capital provided to entrepreneur to meet equity gap and to
meet cost over-runs.
Discounting of bill implies that when entrepreneur, if is in need of money
immediately, may get the bill discounted with NSIC. NSIC gives cash equal to the
amount of the bill less some amount (popularly known as discount).
Incentive is a general term and includes concessions, subsidies and bounties.
Subsidy denotes a single lump sum, which is given by a government to an
industry.

STATE LEVEL INSTITUTIONS
State Level Institutions execute different promotional and developmental
projects/schemes and provide a number of supporting incentives for development
and promotion of small scale sector in their respective States. These are executed
through State Directorate of Industries, who has District Industries Centres (DICs)
under them to implement Central/State Level schemes. The State Industrial
Development Corporations also look after the needs of the small-scale sector.

STATE INDUSTRIAL DEVELOPMENT
CORPORATIONS (SIDCS)
Incorporated under the companies Act 1956 SIDC’s were set up in different states
as wholly owned companies for promoting industrial development in their
respective states. The main functions of SIDC’s are as follows:

a) Providing term finance to all small, medium and large industrial
enterprises set up in state.
b) Underwriting and directly subscribing to shares, and debentures of
debentures of industrial enterprises being set up in the state.
c) Preparing feasibility studies, conducting market surveys and motivating
private entrepreneurs to set up their industrial ventures in the state.
d) Collaborating with private entrepreneurs to set up industrial ventures in
joint and assisted sector.
e) Implementing scheme of ‘Industrial Development Bank of India’ of seed
capital in the state.

STATE DIRECTORATE OF INDUSTRIES (SDIS)
Under the constitution of India promotion and development of small scale
industries is a State subject. Therefore, the primary responsibility for
implementation of policies and programmes of assistance rests with the
Directorate of Industries in each State. It acts under the overall guidance of SIDO
and concerned Central institutions. It performs both regulatory and developmental
functions. It functions through a network of District Industries offices, industries offices and extension offices at district sub-division and block level respectively.

The main functions of Directorate of Industries are as follows:
a) Registration of small scale units
b) Providing financial assistance
c) Distributing scare and indigenous raw materials to industrial units
d) Granting essentiality certificates for import of raw material
e) Establishing industrial estates and industrial co-operatives
f) Developing industrial infrastructure
g) Undertaking industrial surveys and collecting information
h) Arranging concessions and incentives for industries.
i) Overall administration of village and small scale industries.
j) Maintaining liaison with other agencies for industrial development.

DISTRICT INDUSTRIES CENTRES (DICS)
The District Industries Centers programme was launched in 1978 for effective
promotion of cottage and small scale industries widely dispersed in rural areas
and small towns. These centers are the focal points providing all the services and
support required by small scale and village entrepreneurs under one roof. These
serves as an integrated administrative framework at the district level for industrial
development.
The main functions of DIC’s are as follows:
a)   It conducts surveys to know industrial potential of a district kee
b)   ping in
view the availability of raw material, human skills, infrastructure, demand,
etc.
b) It prepares an action plan for industrial development.
c) It appraises the various investment proposals received from entrepreneurs.
d) It guides and assists entrepreneurs in buying appropriate machinery and
equipment and raw material.
e) It suggests appropriate marketing strategies to entrepreneurs.
f) It maintains links with research and development institutions for
upgradation of technology, quality improvement, industrial training
g) It conducts artisans training programmes.
h) It has been assigned operation responsibility for special schemes to
provide self-employment to educated unemployed youths.

FUND-BASED INSTITUTIONS
Of all the elements that go into a business, credit is perhaps the most crucial. The
best of plans can come to naught if adequate finance is not available at the right
time. SSIs need credit support not only for running the enterprise & operational
requirements but also for diversification, modernisation/ upgradation of facilities,
capacity expansion etc. In respect of SSIs, the problem of credit becomes all the
more critical when ever any episodic event occurs such as a large order, rejection
of consignment, inordinate delay in payment etc. In general, SSIs operate on tight
budgets, often financed through owner's own contribution, loans from friends and
relatives and some bank credit.
Government of India recognised the need for a focused credit policy for SSIs in
the early days of promotion of SSIs and RBI has been instrumental in devising a
multi-stage approach/financial system for credit dispensation to different sectors
of the economy, for example, agriculture, industry, exports, SSIs etc.

SMALL INDUSTRIES DEVELOPMENT BANK OF
INDIA (SIDBI)
The SIDBI was established in 1990 as the apex refinance bank. The SIDBI is
operating different programmes and schemes through 5 Regional Offices and 33
Branch Offices. The financial assistance of SIDBI to the small scale sector is
channelised through the two routes – direct and indirect.
1. Indirect assistance
a) SIDBI’s financial assistance to small sector is primarily channelized through the existing credit delivery system, which consists of state level
institutions, rural and commercial banks.

b) SIDBI provides refinance to and discounts bills of Primarily Lending Institutions (PLI).
c) The assistance is available for
i. Marketing of SSI product
ii. Setting up of new ventures
iii. Availability of working capital
iv. Expansion
v. Modernisation
vi. Human resource development
vii. Diversification of existing units for all activities
2. Direct assistance
a) The loans are available for new ventures, diversification technology upgradation, modernization and expansion of well run small scale enterprises. Assistance is also available for private sector.
b) Small scale sector is eligible for maximum debt-equity ratio of 3:1
c) Foreign currency loan for import of equipment are also available to export
oriented small scale enterprises.
d) SIDBI also provide venture capital assistance to the entrepreneurs for their
innovative ventures if they have a sound management team, long term
competitive advantage and a potential for above average profitability
leading to attractive return on investment.
New Initiatives of SIDBI
a)   Two Subsidiaries viz. SIDBI Venture Capital Limited and  SIDBI Trustee
Company Limited formed to oversee Venture Capital.
b) Technology Bureau for Small Enterprise formed to oversee Technology
Transfer, Match making Services, Finance Syndication and facilitating
Joint Ventures.
c) SIDBI Foundation for Micro Credit has been launched to provide financial
assistance to the poor and to meet emerging needs of the micro finance
sector especially in rural areas.


COMMERCIAL BANKS
Credit requirement of SSIs is basically of two types – long term loans and
working capital. Commercial banks with their extensive network of branches
operating nation wide are primary channel for working capital requirement.
Banks are required to compulsory ensure that defined percentage (currently 40%)
of their overall lending is made to priority sectors as classified by RBI. These
sectors include agriculture, small industries, export etc. The inclusion of small
industries in this list makes them eligible for this earmarked credit. With the
liberalisation of the Indian economy, greater emphasis was placed on meeting the
credit needs of SSIs. This was manifest through the following initiatives taken by RBI.

a) Credit for tiny sector has been earmarked within overall lending to small
industries. In order to ensure that credit is available to all segments of SSI
sector, RBI has issued instructions that out of the funds normally available
to SSI sector, 40% be given to units with investment in plant and
machinery up to Rs.5 lakhs, 20% for units with investment between Rs.5
lakhs to Rs.25 lakhs and remaining 40% for other units.
b) Public sector banks have been advised to operationalise more specialised
SSI branches at centres where there is a potential for financing many SSI borrowers.
c) 'Single Window Scheme' was extended to all districts to meet the financial
requirements (both term loan & working capital) of SSIs.
d) Laghu Udyami Credit Card (LUCC) Scheme was launched by Public
Sector Banks for providing simplified & borrower friendly Credit facilities
to SSI, tiny enterprises retail traders & artisans.
e) Composite loan limit was enhanced to Rs.50 lakhs from Rs.25 lakhs.
f) Limit on collateral free loans was increased to Rs.25 lakhs in deserving cases.

It shows that the banking system over the years has played a major role in the
development of SSIs in the country. Analysis of the data reveals that while the
overall flow of credit from banking sector to SSIs continuously increased from
15% in 1999 to 17% in 1999. After that declining trend in bank credit to SSIs is
observed. It came down to 11% in 2003. This may be attributed to increase in
non-performing assets of SSIs.

STATE FINANCIAL CORPORATIONS (SFCS)
State Financial Corporation Act 1951 was brought into force to enable all the state
governments (except Jammu and Kashmir) to set up State Financial Corporations
as regional development banks. Presently following assistance is provided to
small scale and medium scale entrepreneurs or units:
a) Providing long term finance to industrial enterprises having sole
proprietary, partnership, company and co-operative society form of
business organization.
b) Subscribing equity and debentures of industrial enterprises.
c) Providing financial assistance to small and medium enterprises engaged in
service sector.
d) Provide working capital loans and meeting various short-term needs of
their clients.
Working Capital is the amount obtained by subtracting current liabilities from
current assets.
Micro Credit scheme has emerged as a powerful tool for empowering the poor to
alleviate their poverty. Micro credit programme envisage extending small loans to
poor entrepreneurs for undertaking income generating enterprises, which have the
potential to make a dent on poverty.
Primary lending institutes includes State Financial Corporations, State Industrial
Development Corporation, Commercial Banks, State cooperative Banks, and
Regional Banks etc.
Venture Capital refers to the risk capital supplied to growing entrepreneurs for
long term purpose
###########################
3. Explain the institutional infrastructure at the central level institutions for SSIs.
ALL INDIA INSTITUTIONS
In order to facilitate the growth of small scale sector, the central and state
governments have created an elaborate institutional framework in the country.
The institutions providing assistance to small scale industries are broadly
classified as “ All India Institutions “, “ State Level Institutions” and “Fund-Based
Institutions”.

SMALL SCALE INDUSTRIES BOARD
SSI Board is the apex non-statutory advisory body constituted by the Government of India to render advice on all issues pertaining to the SSI sector. It provides a forum to its members for interaction to facilitate co-operation and inter institutional
linkages and to render advice to the Government on various policy matters, for the development of the sector.

MINISTRY OF SMALL SCALE INDUSTRIES
The process of liberalisation and market reforms has created wide-ranging
opportunities of the development of small scale industries. At the same time, changing world scenario has thrown up new challenges to the very existence of this sector. The need of the hour is to suitably strengthen the sector so that it could
adapt itself to the changed environment and face the challenges boldly and effectively.
The implementation of policies and various programmes/schemes for providing
infrastructure and support services to small enterprises is undertaken through its
attached office, namely the Small Industries Development Organisation (SIDO),
statutory bodies/other organizations like Khadi and Village Industries
Commission (KVIC) & Coir Board, National Small Industries Corporation
(NSIC) and three training institutes- National Institute of Small Industry
Extension Training (NISIET), Hyderabad, Indian Institute for Entrepreneurship
(IIE), National Institute for Entrepreneurship and Small Business Development
(NIESBUD)

SMALL INDUSTRY DEVELOPMENT
ORGANIZATION (SIDO)
The Office of the Development Commissioner (Small Scale Industries) is also
known as the Small Industry Development Organization (SIDO). It is an apex
body, established in 1954, for assisting the Ministry in formulating, coordinating,
implementing and monitoring policies and programmes for the promotion and
development of small scale industries. It has over 60 offices and 21 autonomous
bodies under its management, including Tool Rooms, Training Institutions and
Project-cum-Process Development Centres etc. Functions of such main bodies
are as follows:
a) Small Industries Service Institutes (SISIs) are operational one in each state. They provide technical support and consultancy services, conduct entrepreneurship development programmes, and export promotion and
liaison activities Emphasizes is also placed on implementation of programmes on modernization, energy conservation, quality control /
upgradation and pollution control for the benefit of entrepreneurs.

b) Regional Testing Center (RTC) provides Testing facilities for product quality upgradation.

c) Tool Rooms/Tool Design Institutes (TRs/TDI) assist SSIs in technical upgradation, and provide good quality tooling by designing and producing
tools, moulds, jigs & fixtures, components, etc.

d) Product-cum-Process Development Centres (PPDCs) look into their
specific problems and render technical service.

e) Central Footwear Training Institutes (CFTIs) develop footwear designing
to promote exports.

f) Sub-Contract Exchanges for Ancillary Development (SCXs) register and
create database of the spare manufacturing/service capacity of SSI; create
database of requirements of large/medium units and match the requirements with the spare capacity available with small units; and arrange Buyer-Seller Meets, organise vendor exhibitions, seminar, workshops for large-small units coordination, quality upgradation, export promotion, etc and facilitate flow of data on vendor development.
Thus, the main services rendered by DC SSI office are:
a) Advising the Government in policy formulation for the promotion and
development of small scale industries.
b) Providing techno-economic and managerial consultancy, common
facilities to small scale units.
c) Providing facilities for technology upgradation, modernisation, quality
improvement and infrastructure.
d) Developing Human Resources through training and skill upgradation.
e) Providing economic information services.
f) Maintaining a close liaison with the Central Ministries, Planning
Commission, State Governments, Financial Institutions and other
Organisations concerned with development of Small Scale Industries.
g) Evolving and coordinating policies and programmes for development of

Small Scale Industries as ancillaries to large and medium scale industries.
h) Monitoring of Prime Minister Rozgar Yojna (PMRY) Scheme

NATIONAL SMALL INDUSTRIES CORPORATION (NSIC)
The National Small Industries Corporation Ltd. was set up in 1955 with a view to
promoting, aiding and fostering the growth of small scale industries in the country
with focus on commercial aspects of these functions. NSIC continues to
implement its various programmes and projects throughout the country to assist
the SSI units. The Corporation has been assisting the sector through the following
schemes and activities:
a) Composite Term Loan Scheme
To promote small-scale sector, NSIC has launched a Composite Term
Loan Scheme for the benefit of existing and prospective entrepreneurs to
acquire land and building, machinery and equipment and working capital
under one roof to the tiny units.
b) Hire Purchase Scheme
Supply of indigenous and imported machinery and equipment on easy
financial terms with special focus on women entrepreneurs, weaker
sections, handicapped and ex-servicemen and SC/ST entrepreneurs.
c) Equipment leasing
It is done mainly to facilitate SMEs to expand their capacities or diversify
and/or upgrade their technology according to the needs of the market.
d) Working Capital Finance
This Scheme aims at augmenting working capital of viable and well
managed units, on selective basis in case of emergent requirements to
enable them to pay-off their purchase of consumable stores, spares and
production related overheads particularly electricity bills, statutory dues.
e) Raw Material Assistance
It facilitates availability of scarce raw material either through the domestic
market or by importing.
f) Marketing Support Programme
NSIC has been trying to act as a major agency to bring SMEs closer to
various Governmental purchasing agencies, with the intention of creating
confidence in the purchasing agencies about SMEs, and their capabilities
to supply goods and services of requisite quality, economic prices and
adherence to agreed delivery schedules.
g) Tender Marketing
It participates in bulk local/global tender on behalf of Small Scale
Industries/Enterprises. It is aimed at assisting SSIs with the ability to
manufacture quality products but which lack brand equity & credibility or
have limited financial capabilities.
h) Integrated Marketing Support
NSIC has been operating an Integrated Marketing Support Programme in
which bills pertaining to supplies made by small scale units to eligible
purchasers are discounted by NSIC up to a certain specified limit.
i) Government Stores Purchase Programme
The units registered with the Corporation for participation in government
purchase programme are considered at or with individual purchase
organisations and derive all the benefits like free supply of tender forms,
exemption from payment of earnest money, security deposits, etc.
j) Technology Upgradation
Excellent technical support is provided to SSIs/SMEs through five NSICTechnical
Service Centres. These centres have been recognised by Council
of Scientific and Industrial Research for in-house R&D. NSIC has set up a
Technology Transfer Centre. The latest information is provided to on-line
connections and networks of computers on matching technology seekers
and technology providers are arranged through the Technology Transfer
Centre.
k) Software Technology Parks
NSIC has set up a NSIC-STP Complex under Software Technology Parks
of India (STPI). Software Technology Parks facilitates small scale units to
establish their units for the 100% export of software and also act as the
major point to activate software exports directly through NSIC.
NSIC-STP Complex at Okhla, New Delhi is one of such Parks set up by
the National Small Industries Corporation under the Software Technology
Parks of India to promote small entrepreneurs in software development.
NSIC-STP provides high speed better communication facilities through
VSNL/SATCOM networks, built-up office space, and uninterrupted
power supply, back-up power through DG sets, a modern business centre
and other administrative support.
l) Exports
NSIC is providing a complete package of export assistance, testing
facilities, pre-shipment credit facility, export incentives etc. apart from
exposure to the products of SSEs in trade fairs, buyer and seller meets etc.
The Corporation has been endeavoring to increase share of Indian
industries in purchases to United Nations Organization, it being the largest
single buyer in the world.
The Khadi and Village Industries Commission (KVIC) is a statutory body created
by an Act of Parliament in April 1957. The KVIC is supposed to do the planning,
promotion, organisation and implementation of programmes for the development
of khadi and other village industries in the rural areas in coordination with other
agencies engaged in rural development wherever necessary.
COIR BOARD
Coir Board is a statutory body established by the Government of India under a
legislation enacted by the Parliament namely Coir Industry Act 1953 for the
promotion and development of Coir Industry in India as a whole.

TRAINING INSTITUTES
There are three National Level Training Institutes. These are:
National Institute of Small Industry Extension Training (NISIET), Hyderabad,
which undertakes operations ranging from training, consultancy, research and
education, to extension and information services.
National Institute for Entrepreneurship and Small Business Development
(NIESBUD), New Delhi, which conducts national and international level training
programmes in different fields and disciplines.
Indian Institute of Entrepreneurship (IIE), Guwahati was established to act as a
channel for entrepreneurship development with its focus on the North East.



Seed Capital refers to capital provided to entrepreneur to meet equity gap and to
meet cost over-runs.
Discounting of bill implies that when entrepreneur, if is in need of money
immediately, may get the bill discounted with NSIC. NSIC gives cash equal to the
amount of the bill less some amount (popularly known as discount).
Incentive is a general term and includes concessions, subsidies and bounties.
Subsidy denotes a single lump sum, which is given by a government to an
industry.
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4. Experts often argue that industrial licensing policy has impeded competition in India. Evaluate this statement in the light of objectives of industrial licensing policy in India.
The  policy  itself  has not  impeded  the  competition. But  it is  due
-poor  implemention.
-poor  procedure
-poor  practices
-poor  management  of  the  policies  by   the  government.



Industrial Licensing Policy
1.   Industries licensing policy are regulated under the Industries Development Regulation Act 1951
2.   At present Industrial Licensing for manufacturing is required in case of :-
o   Industries under compulsory licensing
o   Manufacture of item reserved for SSI sector by non SSI units
o   Project location attracts locational restrictions
Compulsory Licensing
Following industries require compulsory industrial licence under the provisions of I(D&R) Act, 1951.
1.   Distillation and brewing of alcoholic drinks.
2.   Cigars and cigarettes of tobacco and manufactured tobacco substitutes;
3.   Electronic Aerospace and defence equipment: all types;
4.   Industrial explosives, including detonating fuses, safety fuses, gun powder, nitrocellulose and matches;
5.   Hazardous chemicals;
o   Hydrocyanic acid and its derivatives
o   Phosgene and its derivatives
o   Isocyanates and di-isocyanates of hydrocarbon, not elsewhere specified (example: Methyl Isocyanate).
Large or medium industries undertaking manufacture of items reserved for SSI units
The Government has reserved certain items for exclusive manufacture in the small scale sector. Non-small scale units can undertake the manufacture of items reserved for small scale sector, only after obtaining an industrial licence. In such cases, the non-small scale unit is required to undertake an obligation to export 50% of the production of SSI reserved items.
Locational Restrictions
Industrial undertakings are free to select the location of their projects. Industrial licence is however required if the proposed location is within 25 km of standard urban area limits of 23 cities having a population of one million as per 1991 Census. In Gujarat, this provision is applicable in the case of 3 cities namely Ahmedabad, Vadodara and Surat.
The Locational restriction however does not apply:
1.   If the unit were to be located in an area designated as an “industrial area” before the 25th July, 1991.
2.   In the case of Electronics, Computer software and Printing and any other industry, which may be notified in future as “non polluting industry”.
The location of industrial units is subject to applicable local zoning and land use regulations and environmental regulations.
Procedure for obtaining Industrial Licence
Industrial licence is granted by the Secretarial of Industrial Assistance (SIA) on the recommendation of the Licensing Committee. For the purpose, application in the prescribed form (Form FC-IL) accompanied by a crossed demand draft of Rs.2,500/- may be submitted to PR&C Section in SIA.
Delicensed Industries
Industries exempted from the provisions of Industrial Licence are required to file Industrial Entrepreneur’s Memorandum (IEM)
Procedure for filing IEM
•   Industrial undertakings exempt from industrial license are only required to file an Industrial Entrepreneur’s Memoranda (IEM) in Part ‘A’, in the prescribed format (Form IEM) with Secretariat for Industrial Assistance (SIA), Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce & Industry, Government of India, New Delhi.
•   The IEM should be submitted along with a crossed DD of Rs.1000/- for upto 10 items proposed to be manufactured. For more than 10 items an additional fee of Rs.250/- for up to 10 additional items needs to be paid.
•   On filing the IEM, an acknowledgement containing the SIA registration No. for future reference is issued. This acknowledgement is sent by post and no further approval is required.
Upon commencement of commercial production, industrial undertakings need to file information in Part-B of the IEM to SIA. No fee is to be paid for filing Part-B.
All the fees payable to SIA are paid through a crossed demand draft drawn in favor of Pay & Accounts Officer, Dept of Industrial Policy and Promotion, Ministry of Commerce & Industry, payable at New Delhi.
Environment Clearance
•   Entrepreneurs are required to obtain statutory clearances relating to Pollution Control and Environment as may be necessary, for setting up an industrial project for 31 categories of industries in terms of Notification S.O. 60(E) dated 27.1.94 as amended from time to time, issued by the Ministry of Environment & Forests, Government of India under The Environment (Protection) Act, 1986. This list includes petrochemical complexes, petroleum refineries, cement, thermal power plants, bulk drugs, fertilizers, dyes, paper, etc.
•   However, if investment in the project is less than Rs. 100 crore, such Environmental Clearance is not necessary, except in cases of pesticides, bulk drugs and pharmaceuticals, asbestos and asbestos products, integrated paint complexes, mining projects, tourism projects of certain parameters, tarred roads in Himalayan areas, distilleries, dyes, foundries and electroplating industries.
•   Setting up industries in certain locations considered ecologically fragile (e.g. Aravalli Range, coastal areas, Doon valley, Dahanu, etc.) are guided by separate guidelines issued by the Ministry of Environment and Forests.
Details can be obtained at the website of Ministry of Environment and Forests ().
Foreign Technology Agreement
•   Foreign technology collaboration agreement for acquisition of foreign technology requires approval of Government of India. It normally includes technical know-how, design and training, engineering services and lump sum or royalty payments.
•   Payment for foreign technology collaboration under automatic route is allowed subject to:
The lump sum payment not exceeding US $ 2.0 million.
Royalty payable limited to 5% for domestic sales and 8% for exports, without any restriction on the duration of the royalty payments. The royalty limits are net of taxes. The royalty will be calculated on the basis of the net ex-factory sale price of the product, exclusive of excise duties, minus the cost of the standard bought out components and the landed cost of imported components, irrespective of the source of procurement, including ocean freight, insurance, custom duties etc.
Use of Trademarks and Brand Name
•   Payment of royalty up to 2% for exports and 1% for domestic sales is allowed under automatic route for use of trademarks and brand name of the foreign collaborator without technology transfer. Royalty on brand name/trade mark shall be paid as a percentage of net sales, viz., gross sales less agents’/dealers’ commission, transport cost, including ocean freight, insurance, duties, taxes and other charges, and cost of raw materials, parts and components imported from the foreign licensor or its subsidiary/affiliated company.
•   In case of technology transfer, payment of royalty includes the payment of royalty for use of trade mark and brand name of the foreign collaborator.
Procedure for Automatic Route
•   Authorized Dealers (ADs) appointed by the RBI allow remittances for royalty, payment of lump-sum fee and remittance for use of Trade mark/Franchise in India within the limits prescribed under the automatic route.
•   RBI’s prior approval is required for remittance towards purchase of trade mark/franchise.
Government Approval – Project Approval Board
Royalty payment in the following cases requires prior Government approval (through Project Approval Board – PAB when only technical collaboration is proposed and Foreign Investment Promotion Board – FIPB where both financial & technical collaboration are proposed):
•   Sectors/activities which are not on the automatic route for FDI, or
•   Proposals not meeting any of the parameters for automatic approval
Procedure for Government Approval
•   Proposals for foreign technology collaboration not covered under the automatic route are considered by the Project Approval Board (PAB) in the Department of Industrial Policy and Promotion. Application in such cases should be submitted in Form FC-IL to the Secretariat for Industrial Assistance.
•   Proposals where both financial & technical collaboration are proposed, application is to be submitted to FIPB. No fee is payable.
Foreign Direct Investment
•   Foreign direct investment is allowed up to 100% in all activities/sectors except the following which require prior approval of the Government.
1.   Manufacture of Cigars & Cigarettes of tobacco and manufactured tobacco substitutes ;
2.   Manufacture of Electronic aerospace and de fence equipments : all types
3.   Manufacture of items exclusively reserved for Small Scale Sector with more than 24% FDI;
4.   Proposals in which the foreign collaborator has an existing financial / technical collaboration in India in the ‘same’ field [Refer Press Note No.1 (2005 series)];
5.   All proposals falling outside notified sect oral policy/caps (Refer Annexure II).
FDI policy is reviewed on continued basis and changes in sect oral policy/sect oral equity cap are notified through Press Notes by the Secretariat for Industrial Assistance (SIA), Department of Industrial Policy & Promotion (DIPP). All Press Notes are available at DIPP web site (www.dipp.gov.in). FDI Policy is also notified by Reserve Bank of India (RBI) under Foreign Exchange Management Act (FEMA) 1999.
Procedure under Automatic Route
FDI in sectors/activities to the extent permitted under automatic route does not require any prior approval either by the Government or RBI. The investors are only required to notify the Regional office concerned of RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issue of shares to foreign investors.
Procedure under Government Approval
•   FDI in activities not covered under the automatic route, requires prior Government approval. Such proposals are considered by the Foreign Investment Promotion Board (FIPB).
•   Application for all FDI cases, except Non-Resident Indian (NRI) investments, Export Oriented Units (EOU’s) and for FDI in retail trading (single branded product) should be submitted to the FIPB Unit, Department of Economic Affairs (DEA), Ministry of Finance.
•   Application for NRI investment, EOU and for FDI in retail trading (single branded product) cases should be submitted to SIA in DIPP.
•   Applications can also be submitted with Indian Missions abroad who forward them to the DEA for further processing.
Application can be made in Form FC-IL, which can be downloaded from http://www. dipp.gov.in. Plain paper applications carrying all relevant details are also accepted. No fee is payable.
100% Export Oriented Units/Units set up in SEZ
•   The Development Commissioner of Special Economic Zones accord automatic approval if certain conditions are met.
•   The application for setting up an EOU in Gujarat may be made to Development Commissioner, Kendal Special Economic Zone, Ministry of Commerce & Industry, Government of India, Gandhi (Cutch), Gujarat 370 230, India in 3 copies along with a crossed Demand Draft of R’s. 5,000/- drawn in favor of the Pay & Accounts Officer, Ministry of Commerce & Industry, Department of Commerce, payable at the Central Bank of India, Udyog Bhavan, New Delhi
•   The application for setting up an EPZ unit in Gujarat has to be made in the prescribed format and submitted to Development Commissioner, Kandla Special Economic Zone, Ministry of Commerce & Industry, Government of India, Gandhidham (Kutch), Gujarat 370 230, India. in 5 copies along with a crossed Demand Draft of Rs. 5,000/- drawn in favor of The Pay & Accounts Officer, Kandla Special Economic Zone together with a project report giving details of activities proposed.
•   Proposals for setting up units in SEZ other than those requiring industrial licence may be granted approval by the Development Commissioner within 15 days.
•   Proposals for setting up units in SEZ requiring Industrial Licence may be granted approval by the Development Commissioner after clearance of the proposal by the SEZ Board of Approval and Department of Industrial Policy and Promotion, within 45 days.
•   Letter of permission (LOP)/Letter of Intent(LOI) issued to SEZ units by the Development Commissioner would be construed as a licence for all purposes, including for procurement of raw materials and consumables either directly or through canalizing agency.
•   The LOP/LOI shall specify the items of manufacture/service activity, annual capacity, projected annual export for the first years in dollar terms, Net Foreign Exchange Earnings (NFE), limitations, if any, regarding sale of finished goods, by products and rejects in the DTA and such other matter as may be necessary and also impose such conditions as may be required.
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