CHAPTER: 1 INTRODUCTION TO SSI

The SSI (Small Scale Industries) today is immense for the growth of the country. Small scale industries are the industries which are run with the help of hired labour and which also use some simple machine & power. The investment scale in this industry varies from 5 lakhs to 1 crore for the fixed assets. Irrespective to no. of workers engaged is called small scale unit. The small scale industries (SSI) constitute one of the vibrant sectors of the Indian economy in terms of employment generation, the strong entrepreneurial base it helps to create and its share in industrial production and exports. The Government created the Ministry of Small Scale Industries and Agro and Rural Industries (SSI&ARI) in October, 1999 as the nodal Ministry for

formulation of policy and co-ordination of Central assistance relating to promotion and development of the small scale industries in India. The Ministry of Small Scale Industries and Agro and Rural Industries (SSI&ARI) was bifurcated into two separate Ministries, namely, Ministry of Small Scale Industries and Ministry of Agro and Rural Industries in September, 2001. Taking into account the high potential for growth in the SSI sector in terms of output, employment and exports, the role of the Ministry of Small Scale Industries is to strengthen the SSI sector, to enable it to remain competitive in market-led economy and generate additional employment opportunities. For achieving these objectives, the endeavor of the Ministry is to provide the SSI sector proper and timely inputs like: 1. Adequate credit from financial institutions/banks. 2. Funds for technology up gradation and modernization. 3. Adequate infrastructural facilities. 4. Modern testing facilities and quality certification laboratories; modern management practices and skill up gradation through advanced training facilities.

Page |4

5. Marketing assistance. 6. Level playing field at par with the large industries sector. In India these type of industries are permoted to meet with the problems of excess population & unemployment so the govt. of India permotes entrepreneur to step up small scale industries by aiding him by giving loans, subsidiaries, land, guidance etc. The strategy adopted by the govt. is: 1. Public entrepreneurship should remain confirmed only to those industries and sectors where private enterprise, individual or corporate, is generally not attracted. Existing public entrepreneurship be improved through better management and by putting relatively greater emphasis on research and development. There is need to streamline the R & D wing of public sector enterprises. 2. All possible efforts are made very seriously (not casually) for the development of an industrial culture. It should be realized that the central core of entrepreneurship is the motive force since by its very nature, entrepreneurship implies positive action and initiative, motivated individuals with the right kind of combination of abilities and attributes can pursue their goal with unremitting courage and enthusiasm. 3. There is need to develop management education and industrial training. 4. The development of backward regions/areas constitutes a new challenge. Programmes for their development be drawn up and should be effectively implemented. 5. Adequate measures are a must for mobilizing and fostering the entrepreneurial talent in the country. In this context, it should be realized that entrepreneurs are not the gift of a particular class. 6. Economic administration by the sate should be improved and made more effective so that economic policies may fully achieve their objectives in the overall interest of the economy.

Page |5

7. Financial institutions should provide adequate and timely credit and technical assistance, especially to the small and medium sized enterprises. They may also impart knowledge about the needs of the economy and they should file their massive data in terms of growth of new entrants or entrepreneurs in the field of industry.

1.1 Role of Small Sector

The contribution of this sector is c\considerably to Indian economy. About 204 million units are provided employment to over 14 million people. This sector is also contributing about one third of the countrys export, today central and state governments are providing all type of help to interested persons to solve their problems regarding small scale sector. Small scale industries plays dynamic role in acerbating the rate of industrial growth and attaining economic prosperity of nation. Therefore in a developing country like India small-scale industries are much importance for building up of national economy.

1.2 Advantages of Small Scale Industries

1. These create immediate and permanent employment in large scale at relatively small capital cost. 2. These can immediately meet a substantial part of the increased demand for consumer goods. 3. These offer a good method of ensuring more equitable distribution of national income. 4. These provide more chances of work and income.

1.3 Objectives of Small Scale Industries

Page |6 Employment generation Equitable distribution of national income To meet increased demand Decentralization

Better utilization of services Balanced economic development Self employment Labor intensive and capital saving With small investment production can be easily started Check on monopoly

Highly prcised machines and modern techniques are no

Page |7

CHAPTER: 2 ENTREPRENEUR
2.1 Introduction
Entrepreneur is the owner of the business who contributes the capital and bears the risk of uncertainties in business life. He organizes, manages, assumes the risks and takes the decision about the enterprise. He takes all the steps to establish undertaking, coordinates the various factors of production, and gives it a start. He should be able to evaluate, business, opportunities, together all the necessary resources and ensures the success of the enterprise. Entrepreneur views are broadly classified into three groups: 1. Risk bearer 2. Organizer

2.1.1 Entrepreneur as a Risk Bearer:

According to Richard Cotillion, a rich man living in France, was the first who introduced the term entrepreneur as an agent who buys the factory production at certain price in order to combine them into product with a view to selling it at certain price. He illustrated the framer who pays out contractual income, which are certain to landlord, labour and sells at price that are uncertain. Thus they too are risk bearer agent of production. Uncertainty is defined as the risk which cannot be insure against and incalculable.

2.1.2 Entrepreneur as an Organizer:

According to Jean-Baptize, Entrepreneur is a function of co-ordination, organization and supervision. According to him, an Entrepreneur is one who combines the land of one, the labor of another, capital of one another and thus produces product. By selling the product in the market he pays interest in capital, rent on land, wages to labor and what remains in his profit. Page |8

Entrepreneur as an Innovator: According to Joseph who has introduced new combination of factors of production. He said, it may occur in any one of the following five forms: 1. The introductions of new product in market. 2. The instituting of new production technique, which is not yet tested by experience in the branch of manufacture concern. 3. The opening of new market into which the specific product has not previously entered. 4. The discovery of new source of supply of raw material. 5. The carry input of new form of organization of any industry by creating of monopoly position or breaking up of it.

2.2 Characteristics of an Entrepreneur:

1. Hardworking, willingness 2. Desire of high achievement 3. Highly optimistic 4. Independence 5. Foresight 6. Good organizer 7. Innovative 8. Energetic 9. Flexible 10. Knowledgeable Page |9

11. Resourceful and should be able to take initiative.

2.3 Functions of Entrepreneur

1. Idea generation 2. Determination of business objectives 3. Product analysis and market research 4. Determination of form of ownership of organization 5. Completion of promotion facilities 6. Raising the necessary funds 7. Proper use of machine and material 8. Recruitment of men 9. Undertaking business funds 10. To manage business and take decision, whenever required. 11. To study the market and to take advantage from opportunities.

2.4 Entrepreneur Development

The myth that entrepreneurs are born not made no longer holds good. Entrepreneur characteristic can be developed through entrepreneur development program. The duration of training under this program ranges from 7 days to 3 months. The basic objectives of entrepreneur development program can be started as: To develop and strengthen their entrepreneurship quality. To analyze the environment relating to small-scale industry. To select project and product.

P a g e | 10

To formulate the project. To know the influence support needed for launching enterprise. To ensure providing self-employment to a number of young men and women. To acquire the basic managerial skills.

P a g e | 11

CHAPTER: 3 HOW TO SETUP A PROJECT?

Project Selection
"... Our best business missions are based on those ideas that often emerge out of our deepest personal motivations and interests." Warren Avis in "Take a Chance to Be First" -

3.1 It all begins with an Idea

The overriding reason for anyone to think of establishing a SSI unit can be summarized in one word - opportunity. An opportunity to provide a product or service, which can generate sufficient surplus. This is all the more true if one is a believer in the maxim, "Small is Beautiful". However, ideas need to be filtered through a multi-layer sieve. This model is shown in the following flow: Does the idea fire up your motivation? - Is it a viable business proposition in your area? - Does it match the needs of your clientele? - Check it out with basic market research - Test it out at market place - Consult with the experts - Look out for competition in the field - Is it a sunrise industry? - Your business opportunity Project conceptualization Once the ideas are screened and a viable business opportunity emerges the project has to be conceptualized in all its dimensions. The 4 Ps of Project Conception is: PRODUCT (Shape, Size and Nature) PROCESS (Technology to produce the product)

- PLACE (Location of Plant) P a g e | 12

PARTNER (Technological of Financial Collaborator)

3.2 Making a Product Choice

In a project conceptualization stage while making a product choice following factors are related to product need to be considered:- Product Line - Depth, Width - Packaging Branding - Warranties - After Sales Service Some other factors that one should consider while finalizing the product choice are: Ease of availability of raw-material - Process Technology - Accessibility to the market - Incentive and support from Government Market information is also important for product selection. Products, which are likely to have a number of players in the market, are best avoided. Some such products in the recent past have been plastic footwear, audiocassettes, disposable gloves and bulk drugs. In case the entrepreneur is looking for a product, which has export potential, the following additional questions need to be asked: What should be the contents of export-product portfolio? - What are the special requirements for packaging if one has to export the products? - What product adaptations are needed to be made for exporting a product to a specific country? Are any WTO conditionalities involved e.g. "child lab our free", ISO 9000 certified, GMP followed etc. The development of export-product portfolio can be done by considering 4 parameters viz. - External demand conditions - Internal supply capability - Complexity of marketing tasks - Amount of investment required to penetrate the market Analysis can be conducted using this four dimensional model. The obvious choice is a product which scores a high rating on first two parameters and low rating on last two parameters. P a g e | 13

EXIM (Export Import Bank of India) Bank has also developed an excellent model to conduct the export-product portfolio analysis based on three parameters viz. - Supply Capability in Product Group - Domestic Environment - Export Market Attractiveness

3.3 Technology and Machinery

Process Selection Choices of process technology emerge once the product is finalized. For some complex products, process know how has to be imported. In such cases agreements for technology transfer should be made with due care to safeguard interest. A lot of appropriate technology is being developed at CSIR and Defense Research Labs and some of this technology can now be bought. Indigenously developed process know-how has intrinsic benefits such as appropriateness and relative inexpensiveness. While checking out on a process technology, the following things need to be considered with utmost care: Whether process requires very high level of skilled workers or complex machines? Whether process requires large quantities of water and/or power? Whether any process or product patent needs to be honoured while utilizing the selected process technology. Any special pollution or environmental regulations. Finally, the appropriateness to the Indian environment and conditions. Machinery and equipment One of the major deficiencies in the small industry scenario is the prevalence of outdated production and management methods hindering the efficient operation of small-scale units.

P a g e | 14

3.4 Arranging Finance

No SSI unit can take off without monetary support. This need for finance can be classified into following types: - Long and medium term loans - Short term or working capital requirements - Risk Capital - Seed Capital/Marginal Money - Bridge loans Financial assistance in India for SSI units is available from a variety of institutions. The important ones are -SIDBI: Small Industries Development Bank of India (refinances and directs lending) -SFCs: State level Financial Corporation e.g. Delhi Financial Corporation. -NSIC: National Small Industry Corporation. -Small Industry Development Corporations of various states. -Commercial/Co-operative Banks. -DIC: District Industry Centre. State Financial Corporations, SIDBI and State Industrial Development Corporations provide long and medium term loans. Banks also finance term loans. This type of financing is needed to fund purchase of land, construction of factory building/shed and for purchase of machinery and equipment. Term loans are secured against mortgage of assets such as land, building, machines, equipment and other stocks. The short-term loans are required for working capital requirements, which fund the purchase of raw material and consumable, payment of wages and other immediate manufacturing and administrative expenses. Such loans are generally available from commercial banks.

3.5 Unit Development

After deciding the issues of product and process, the next important question is where to set the unit up? P a g e | 15

For many tiny units and service-based units, the home is perhaps the best starting point. Setting up an establishment is much more than putting a signboard up and waiting for customers to walk in. It requires negotiating a favorable plot or shed purchase, organizing for proper construction of building, design of interiors and finding good deals for equipment and machinery.

3.5.1 Construction of Building

Once an industrial plot for the unit is secured, then the next job is that of finding a suitable architect. Design of factory building has to be in consonance with the type of industry and have an appropriate plant layout. An architect's estimate of building construction is essential for loan applications. Further, architect's certificate for money spent on building is needed for disbursement of loan Materials procurement and planning are critical to success, of a start-up with a SSI unit. Inventory management can lead to manageable cash flow situations; otherwise if too much is ordered too soon considerable amount of working capital gets locked up. On the other hand, non-availability may result in production hold-ups, and idle machine and manpower. For essential imported raw material whose lead-time is large proper planning is all the more essential. 3.5.2 Getting 3M's Right Men Projections for manpower and staffing are made in the project report. However it is necessary to time the induction of manpower in a planned manner. The engineers and operatives must be available before the installation of the machinery. Machinery Choosing and ordering of right machinery is also of paramount importance. In many cases technology or process provides us with specifications, which is not provided, then an P a g e | 16

extensive techno-economic survey of machinery and equipment available must be carried out. International trade fairs and engineering fairs are good places to look at available options. The entrepreneur must also consult experts, dealers / suppliers as well as users, prior to making a selection of equipment and machinery. The advice of DIC, SISI and NSIC can also be sought. Materials Materials procurement and planning are critical to success, of a start-up with a SSI unit. Inventory management can lead to manageable cash flow situations; otherwise if too much is ordered too soon considerable amount of working capital gets locked up. On the other hand, non-availability may result in production hold-ups, and idle machine and manpower. For essential imported raw material whose lead-time is large proper planning is all the more essential.

3.6 Registration of SSI Units

Small Scale and ancillary units (i.e. undertaking with investment in plant and machinery of less than Rs. 10 million) should seek registration with the Director of Industries of the concerned State Government. The Scheme of voluntary registration of Small Scale, Village and Cottage Industries with the State Directorate of Industries was introduced in 1960 and such registered industrial units were made eligible for different types of assistances by the Governmental Agencies. Initially a uniform norm for registration were not laid down with the result that some of the States had granted different registration numbers to different lines of manufacturing processes to the same unit thereby resulting in multiple registration. Therefore to avoid such anomalies a uniform set of Application Forms for both Provisional as well as Permanent Registration were evolved out at the time of introduction of the revised procedure of registration of these sectors of industrial undertakings in 1975. With the passage of time, the Government of India, Ministry of Commerce and Industries further simplified the procedures by simplification of the forms for registration and also P a g e | 17

introduced the coded system to indicate the State, Districts and the unit's serial number so as to facilitate computerisation of the whole system of SSI registration, in 1989. Registration of Small Scale, Village and Cottage industries are done under two stages, viz1. Provisional Registration 2. Permanent Registration Provisional Registration: Provisional registration is granted to a unit at its pre- investment period to enable it to take necessary steps to apply for financial credit, land or an industrial set, water, power or telephone connections, etc. Permanent / Final Registration: A provisionally registered industrial unit when it is about to go into production is to apply for grant of Permanent / Final Registration. An existing and functioning industrial unit is eligible to apply for Permanent / Final Registration without going into provisional registration processes.

3.6.1 Registering your SSI Unit

The main purpose of Registration is to maintain statistics and maintain a roll of such units for the purposes of providing incentives and support services. States have generally adopted the uniform registration procedures as per the guidelines. However, there may be some modifications done by States. It must be noted that small industries is basically a state subject. States use the same registration scheme for implementing their own policies. It is possible that some states may have a 'SIDO registration scheme' and a 'State registration scheme'.

P a g e | 18

3.6.2 Objectives of the Registration Scheme

o To enumerate and maintain a roll of small industries to which the package of incentives and support are targeted. o To provide a certificate enabling the units to avail statutory benefits mainly in terms of protection. o To serve the purpose of collection of statistics. o To create nodal centers at the Center, State and District levels to promote SSI.

3.7 Approvals
Every SSI unit has to comply with various regulations in force. These include regulatory, taxation, environmental and certain product specific clearances. This section looks into the methodology of obtaining these approvals and clearances.

3.8 Export Promotion

Rationale behind Export Promotion The capability of Indian SSI products to compete in international markets is reflected in its share of about 34% in national exports. In case of items like readymade garments, leather goods, processed foods, engineering items, the performance has been commendable both in terms of value and their share within the SSI sector while in some cases like sports goods they account for 100% share to the total exports of the sector. In view of this, export promotion from the small scale sector has been accorded high priority in Indias export promotion strategy which includes simplification of procedures, incentives for higher production of exports, preferential treatments to SSIs in the market development fund, simplification of duty drawback rules, etc. Products of SSI exporters are displayed in international exhibitions free of cost under SIDO Umbrella abroad.

P a g e | 19

CHAPTER: 4 FINANCIAL REQUIREMENT

Since Independence Government of India has been giving all possible encouragement of SSI. A number of organizations have been set up by the Government of India to provide assistance and incentive to small scale industries. These packages of assistance are provided to SSI by a large number of organizations operating at national and State level. Development Programmes are being carried out at two levels National level State level

Agencies which work at National level are:1. Small Scale Industrial Board (SSIB) 2. Small Scale Industries Development Organization 3. National Small Scale Industries Corporation.

Agencies which work at State level are:1. State Directorate of Industries 2. District Industrial Centre (DIC) 3. State Small Industrial Corporation (SSIC) 4. State Financial Corporations 5. Commercial Banks P a g e | 20

6. Small Industries Development Bank of India (SIDBI)

4.1 National Level SSIB

It is all advisory body and comprises State Government Ministers Offices and representatives of several Institutions and associations. Its functioning is to plan, advice and coordinate the activities of Central and State Government. As such it does not render direct help to entrepreneurs. However, it helps the Government in involving new policy and programme for small scale sector.

4.2 Small Industries Development Organization (SIDO)

Its Headquarter Nirman Bhavan, New Delhi headed by the Development Commissioner (SSI) has a network of Small Industries Service Institutes (SISIs) one in each State which helps in economical, technical, industrial information service, management consultancy services, training and marketing etc. The Office of the Development Commissioner (Small Scale Industries) is also known as the Small Industry Development Organization (SIDO). It is an apex body for assisting the Ministry in formulating, coordinating, implementing and monitoring policies and Programmes for the promotion and development of small scale industries in the country and is headed by the Development Commissioner (SSI). In addition, the SIDO provides a comprehensive range of common facilities, technology support services, marketing assistance, etc., through its network of 30 Small Industries Service Institutes (SISIs), 28 Branch SISIs, 7 Field Testing Stations (FTS), 4 Regional Testing Centres, 2 Small Entrepreneur Promotion and Training Institutes (SEPTI) and 1 Hand Tool Design Development and Training Centre. The SIDO also has a network of Tool Rooms, Process-cum-Product Development Centres (PPDCs) and technology and training support institutes which are run as autonomous bodies registered as societies under the Societies Act. Its headquarters at New Delhi and Regional Offices at Kolkata, Mumbai, Chennai, Guwahati etc.

P a g e | 21

4.3 NSIC
Its headquarter is at New Delhi and Regional Offices at Kolkata, Mumbai, Chennai, Guwahati etc. Facilities provided: Supply of machines and equipment on hire purchase Distribution of scare raw material imported components. Marketing assistance. Assistance to SSI in securing orders for railway and defense. Operating a credit guarantee scheme for those units which are registered within.

4.4 State Financial Corporations

Almost every state has its own financial corporation to provide machines and long term loans to small and medium scale industries. Amount of loan varies from Rs. 5000 to Rs. 6.00 lakhs and these loans are repayable in equal installments spread over a period of 1012 years. Important schemes of financing SFC are 1. A loan scheme for financing of village and cottage industries. Under this scheme they are financed to the extent of Rs. 25,000 and the interest rate is very low. 2. Assistance to tiny units these grant assistance up to Rs. 2.00 lakhs. 3. Scheme for technical entrepreneur in order to encourage self employment these corporations provide financial assistance up to Rs. 2.00 lakhs at very low interest rate to such technical entrepreneurs who have acquired a diploma or degree in any discipline of engineering 4. Loans to hotel industry P a g e | 22

5. Scheme for SC/ST Grant financial assistance to SC/ST entrepreneurs at a nominal margin such rates are charged at the rate of 10%. 6. Scheme for physically handicapped these provide financial assistance up to Rs. 3.00 lakhs at a rate of 10%.

4.5 Commercial Banks

SBI and its subsidiary banks and other nationalized banks provide liberal term loans and working capital to small scale entrepreneurs and these loans are advanced for purchase of machine and material and to the technical entrepreneurs to encourage self employment. Specialized institutes like Central Institute of Tool Design, Hyderabad, Central Tool Room, Ludhiana and Kolkata, Central Institute of Hand Tools Jalandhar, Institute for Design of Electrical Measuring Instruments (IDEMI) Mumbai, Integrated Trading centre, Nilokheri, National Institute of Small Industry Extension, Hyderabad and National Institute for Entrepreneurship and Small Business Development. They conduct special courses, Programmes, workshops, training Programmes for the benefit of small scale industries. Credit Support Credit is the prime input for sustained growth of small scale sector and its availability continued to be a matter of concern. To provide credit support to the various SSI units various policies have been formulated by the GOI. Various institutes like SFC, SIDC, NISC, and SIDBI are providing financial support to various SSI units. Overview of the steps taken by the GOI 1. Composite loans limit raised from Rs. 10 lakhs to Rs. 25 lakhs. 2. In the National equity fund scheme (NEF) the project cost limit has been raised from Rs. 25 lakhs to Rs. 50 lakhs. 3. Soft loan limit restrained to 25% of the project cost. P a g e | 23

4. Task Force is appointed by the Department of Economic Affairs to suggest revitalization/ restructuring of the State financial Corporation.

4.6 RBI and its support to SSI

1. Investment limit raised from Rs. 60 lakhs to Rs. 300 lakhs 2. Working capital limit raised to Rs. 4 crore. 3. Lower rate of interest and the interest is 20% of their projected annual turnover. 4. Public sector banks have been advised to operationalise more specialized SSI branches at Centres where there is a potential for financing many SSI borrowers.

P a g e | 24

CHAPTER: 5 CONCEPT OF MARKETING

5.1 Concept of marketing

Studies reveal that different organizations have different perceptions of marketing and these different perceptions have led to the promotion of different concepts of marketing. It is found that at least 5 distinct concepts of marketing have guided and are still guiding business terms. They are: 1. Exchange Concept 2. Production Concept 3. Product Concept 4. Sales Concept 5. Marketing Concept

5.1.1. Exchange Concept: The exchange concept of marketing as the very name indicates holds the exchange of a product between the sellers a buyer is a central idea of marketing. But a proper scrutiny of the marketing is very much broader then exchange. The other important aspect of marketing such as concern for customer, the generation of the avenue satisfaction, the creative selling and integrated action for serving the customer get the completely over shadowed in this concept of marketing. 5.1.2. Production Concept: According to the production concept marketing can be managed by managing production. The concept holds that consumers good as a rule support these products that are produced in grade volume and allow unit cost organization voting for this concept are influenced by a drive to produce all that they can. They do P a g e | 25

achieve high production efficiency and substantial reduction in the unit cost of production. Yet they often do not get customer as they expected. Customers after all are motivated by a variety of consideration in their purchases. Easy availability and low cost are not the only parameters governing the customer buying action and the production concept thus fails to derive as the right marketing policy for the enterprise. 5.1.3. Product Concept: The product concept is somewhat stiff from the production concept whereas the production concept seeks to win the markets and profits via high volume of production and low unit of cost. The product concept seeks to achieve the same result via product excellence, improve product, new product and ideally design and engineered products. It also places emphasis on quality assurance. Organizations that subscribe to the product concept of marketing believe that consumer goods automatically vote for products of high quality they spend considerable energy. Time and money on research and development brings in the variety of new products. They do not bother to study the market and the consumer in depth. They get totally embarrassed with the product and almost forget the consumer for whom the product is actually meant. They fail to find what consumer actually need and what they would gladly accept. 5.1.4. Sales Concept: The sales concept maintains that a company cannot expect its products to get picked up automatically by the costumer. The company has to consciously promote and push its products heavy advertising, high power personnel selling, large scale sale promotion, high price discounts and strong publicity and public relation are the normal tools used by the organization that rely on this concept. Evidently the scale concept too generates marketing myopia just as a exchange concept, production concept and product concept. It leads to a wrong or an inadequate understanding of market and consequently a total failure in the market place. 5.1.5. Marketing concept: A market in its common usage used to refer the place value actual buying and selling takes place whereas marketing is concerned with handling and transportation of goods from the point of production to the point of consumption. Marketing is the performance of the business activity that direct the follow of goods, services from the producer to the consumer on marketing is the economic priority by P a g e | 26

means of which good services are exchanged between the maker and the user and there values determine in terms of money prices. Importance of marketing to the society: 1. Marketing has to archive, maintain and raise the standards of the living marketing brings new variety of useful and quality goods to the consumer and better rigorous marketing gives soon for mass production. And under mass production the cost of production so that people can buy more goods for there money, which results in high standards of living. 2. Marketing increase employment opportunity. 3. Marketing helps to increases national income. 4. Marketing is a connecting link between the consumer and the producer. 5. Marketing helps to maintain economic stability - economic stability is the sign of any efficient and dynamic economy and economic stability is maintained only when there is a balance in supply in demand. If production is more then demand the excess goods cannot be sold at acceptable prices then the stock of goods would be picked up and there would be glut all market resulting in falling price. Similarly if production is less, then demand prices will shoot up resulting in higher prices. In situation marketing maintains the economic stability by balancing production and consumption.

5.2 Marketing Management in SSI

What is marketing is? Why it is needed? Are such questions that are to be answered for up liftment of SSIs. According to P.Felton marketing can be described as -

P a g e | 27

A cooperate state of mind that insists on the integration and coordination of all marketing functions which in turn answered with all other cooperate functions, for the basic objective of producing maximum long range corporate profits. 5.2.1 Studs in marketing management 1. Product Planning 2. Sales Forecasting 3. Pricing Policy 4. Distribution Policy 5. Role of advertising (personnel selling) 5.2.1.1 Product planning Product planning may be defined as the act of marketing out and supervising the search, screening, development and commercialization of new products, modification of existing lines. Product planning involves three important considerations 1. The development and introduction of new ideas 2. Modification of existing lines as may be required in terms of changing consumers need and preferences. 3. The discontinuance of elimination of marginal or profitable products. Products can be classified as: Consumer Products Industrial Products Defense Products

P a g e | 28

5.2.1.2. Sales forecasting A sales forecast is an estimate for the amount or unit sale for a specified further period under a proposed marketing plan or programme. As defined by the American Marketing Association It is an estimate of sales in dollars or physical units for a specified further period under a proposed marketing or programme under an assumed set of economic and other forces outside the unit for which the forecast is made. Marketing of proper sales forecast requires an assessment of 1. The outside uncontrollable likely influence the company sales. 2. The internal proposed changes in the marketing strategies and tactics of the company, which are likely to affect the sales. Sales forecast can be for a specified product line or it can be for a market as a whole or for any portion of it. According to the time period, the sale forecast can be divided in three types1. Short range forecast - Which generally extended from a few weeks to about six month or at most one year in future. This is mostly done by companies day-to-day forecasts for their production control needs and to plan for long time financial needs. 2. Medium range forecast- Which extends from one year to about four years into future. This type of forecasting is important for Estimating profits, budgeting expenses etc. Determining dividend policy. Decide range of maintenance expenditure. Determining schedule of operation.

It is useful for the following purposeP a g e | 29

1. Estimating inventory requirement 2. Providing adequate shipping facilities 3. Assessing production worker requirements 4. Estimating working capital needs 5. Setting production runs for each products 3. Long range forecast- Extending to at least five years into future and in case of really large organization extended over a longer period up to ten years or even more. It is useful in following ways1. Anticipating the magnitude and timing of capital expenditures required new facilities in the future. 2. Determining probable trends and range of cash inflows from sales. 3. Estimating companies long-range personnel needs. 4. Highlighting future problems. 5.2.1.3. Pricing policy Pricing is a very critical decision pricing decisions are not easy to make. Hence soundpricing policy must be adopted to ensure that the organization secures satisfactory profits. For pricing decision a marketing manager has to be familiar with economic concept useful in pricing decision. He has to consider various pricing factors which influence pricing apart from cost such as the customer characteristics, the economic product characteristics, competitive environment and governmental control wherever applicable the price of the product materially effect the demand for it as well as the organization competitive ability for expenditure if the quality of product is to be improved the may be possible only if the customer are willing to pay a higher price for it. Besides, if the product is not properly priced there might be reluctance from the channels of distribution. P a g e | 30

5.2.1.4. Distribution strategy: Distribution may be defined as an operation or a series of operations, which physically bring goods manufactured or produced by only particular manufacturers into the hands of the final consumers to the users. A distribution strategy consists of distributing or sub-dividing the total products of a manufacturer to various specific markets. There may be state market, a national market or even a world market. 5.2.1.5. Advertising: To counter the markets at national and international level the government of India set up various institutes like: 1. Export credit guarantee corporation ltd. (ECGC) 2. State trading corporation (STC) 3. Trade development authority 4. National small industries corporation (NSIC)

P a g e | 31

CHAPTER: 6 PROCEDURE TO START A SMALL SCALE INDUSTRY

Starting of a small-scale industry is not a very easy task. At the same time it is not difficult so, if different factors are considered before taking a decision to start it. For starting, the first and most important work is to select a suitable site and then to make a proper scheme and yet approved. Procedure to start small scale industry consist of following important steps-

6.1 Getting Familiar

An entrepreneur desiring to set up an industry must first formulate comprehensive setting the industry for its success. For this, he should be confident, enthusiastic and realizing. He should therefore make himself familiar with the permanent policies and procedures, assistants and facilities he can get from whom and how.

6.2 Selection of Industry

Selection of a suitable place for an industry is the key to success. Different factors for the selection of the site are availability of the land, lab our, raw material, power and transport facilities and nearness to the market. Type and size of industry should be decided by the market study, quality and price of other product with which proposed item be in competition. Demand and supply of position of the product should be before selecting the type of industry. Owner should make himself conversant with all acts, rules of central and state governments etc.

6.3 Preparation of Scheme

After deciding the product to be manufactured and the place of industry, a detailed scheme is prepared. This scheme include number of machines, their approximate cost, requirements of land and building, number of workers and other staff, their salaries and estimated production cost, expected profit, proposed factory layout and plant layout. P a g e | 32

CHAPTER: 7 NAME OF PRODUCT AUTOMOBILE SILENCER

1. 2. 3. 4. 5. 6.

Name of product Name of Director Address Size Details about the project Marketing aspects

AUTOMOBILE SILENCER Nishant Dalal Autosils, Sec-34 Gurgaon, Haryana Small Scale Industry. About 15,000 automobile silencers per annum. Market for silencer has a very good potential as it can be sold to original equipment manufacturer and also in the replacement market. With increase in transport means on road like buses, cars, scooters, motorcycles, auto rickshaws, etc., the demand of auto silencer is growing.

7.

Manufacturing process in Manufacturing process consists of cutting, shaping, edge brief. folding, bending, gas welding. 13 Sound pollution is involved in the manufacturing process.

8. 9.

Employment Pollution

P a g e | 33

7.1 MANUFACTURING PROCESS

The manufacturing process of automobile silencer involves a simple fabrication process & press working process of sheet metal. The sheets are cut into the required size and shape. These sheets are then given the desired shape with the help of power presses, edge folding machines and bending rollers. The mufflers are also made out of sheet with the help of presses. These mufflers are then gas welded in one half of the silencer and in other half, MS tubes are gas welded according to the size and design of the silencer. Finally, these two halves are assembled, gas welded and painted. The silencers are then cleaned and packed for dispatched. 1. Cutting Firstly the metal sheets are cut into desired shape and sizes. 2. Shaping These sheets are then given the desired shape with the help of power presses. 3. Edge folding Edges are folded with the help of edge folding machines. 4. Bending Sheets are bended with the help of rollers. 5. Gas welding Mufflers and assemblies are gas welded. 6. Painting After assembly silencers are painted.

P a g e | 34

SPECIFICATION
Name of product : Automobile silencer

AREA FROM WHERE RAW MATERIAL IS PURCHASED

Generally the raw material is purchased from the Delhi/NCR.

AREA WHERE PRODUCT IS SOLD

Automobile silencers are sold in Delhi and NCR depending upon demand.

7.2 COST OF PROJECT

S.No.

PARTICULARS

AMOUNT(LACS)

1. 2. 4. 5. Total

Land and building(Rent) Machinery and Equipment Working capital required Pre-operated expense

0.25 10 8.5 0.33 19.08

P a g e | 35

7.2.1 Means of Financing

S.No.

Particulars

Amount(in lacs)

1.

Proprietor/Partners Contribution

15.3

2.

Term loan against building & machinery from SIDBI

10.00

3.

Loans from relatives/friends

3.00

4.

Working capital loan from Bank of Baroda

4.73

5.

Loan against fixed assets (IDBI) Total

2.7 35.73

7.2.2 Cost of Elements

1. Land and Building On rent 1000 Sq. Mtr. Covered area @ Rs. 25/- Sq. Mtr. P a g e | 36 25,000.00 PM

2. Machinery and Equipment

S.No. i.

Description

HP/KW

Ind/Imp. Ind. 01

Qty.

Value(Rs) 1,30,000.00

Shearing Machine 05HP Blade Cap. 4 Ft x16 SWG

ii.

Power Press Cap. 03HP 30 Ton

Ind.

01

95,000.00

iii.

Power Press Cap. 01HP 05 Ton

Ind.

02

70,000.00

iv. v.

Fly Press Nos. 18 Sheet Roll

Ind. Ind.

02 01

35,000.00 60,000.00

Bending 02HP

vi.

Double

Ended 0.5HP

Ind.

01

8,000.00

Bench Grinder 8 wheel dia. vii. Edge Machine 16SWGx1200mm viii. Welding Set (Gas) complete ix. Spot Machine Welding Ind. 02 50,000.00 Ind. 02 30,000.00 Folding Ind. 01 25,000.00

- Electrification and installation charges - Testing and measuring equipments

30,000.00 20,000.00 5,53,000.00

P a g e | 37

- Other tools and fixtures - Office equipments

40,000.00 20,000.00 6,13,000.00

3. Pre-Operative Expenses

(Project cost, non-refundable deposits etc.)

20,000.00

4. Fixed Capital

i. ii. iii.

Land and Building Machinery and Equipments Pre-Operative Expenses

Rented 6,13,000.00 20,000.00 6,33,000.00

5. Staff and Labour (per month)

S.No. i. ii. iii. iv. v. vi.

Description Supervisor / Foreman Clerk cum cashier Skilled workers Semi-skilled workers Helpers Peon / Watchman

No. 01 01 03 04 02 02

Salary 6,000/5,000/4,500/3,500/3,000/3,000/-

Value(Rs) 6,000.00 5,000.00 13,500.00 14,000.00 6,000.00 6,000.00 50,000.00

Perquisites @ 15% of salary

7,500.00

58,000.00

P a g e | 38

6. Raw Material (per month)

CRCA Sheets (4MT @ Rs. 42000/per MT ) MS Tube (500 Mtrs. @ Rs. 38/-per Mtr. )

1,68,000.00 19,000.00 1,87,000.00

7. Utilities

Electricity (L.S.) Water (L.S.)

12,000.00 500.00 12,500.00

8. Other Contingent Expenses (per month)

i. ii. iii. iv. v. vi. vii. viii. ix.

Rent Postage and Stationary Advertisement Repair and Maintenance Telephone Transportation Consumables Insurance Misc. Expenses

25,000.00 500.00 1,000.00 2,000.00 1,500.00 3,000.00 3,000.00 4,000.00 1,000.00 38,000.00

P a g e | 39

9. Working Capital (per month)

i. ii. iii. iv.

Staff and Labour Raw Material Utilities Other Contingent Expenses

58,000.00 1,87,000.00 12,500.00 38,000.00 2,95,500.00

10. Total Capital Investment

i. ii.

Fixed Capital Working Capital for 3 months

6,33,000.00 8,50,500.00 14,83,500.00

7.3 MACHINERY UTILIZATION

It is expected that during first year machine utilization will be 70% and during second year 75% and 80% in subsequent years. The suggested Plant & Machinery are sufficient to achieve the target, if utilized as per the recommendations made.

7.4 FINANCIAL ANALYSIS

1. Cost of Production (Per annum)

i. ii. iii. iv. v.

Total Recurring Cost per annum Depreciation on Machinery & Equipments @ 10% Depreciation on Tools, Fixtures etc. @ 25% Depreciation on Office Equipments @ 25% Interest on Total Capital Investment @ 16%

35,46,000.00 55,500.00 10,000.00 5,000.00 2,37,500.00 38,54,000.00

P a g e | 40

2. Turn Over (per annum)

By sales of 10,000 Nos. large silencers @ Rs. 310/- each By sales of 5,000 Nos. small silencers @ Rs. 235- each

31,00,000.00 11,75,000.00 42,75,000.00

3. Net Profit (per annum before Income Tax) =Turn Over (per annum) Cost Of Production (per annum) =42,75,000.00 38,54,000.00 =4,21,000.00

4. Net Profit Ratio

Net profit x 100 Turn over

4,21,000 X 100 42,75,000 = 9.85%

5. Rate of Return

Net profit x 100 Total investment

4,21,000 x 100 14,83,500 = 28.38%

P a g e | 41

7.5 BREAK EVEN ANALYSIS

1. Fixed Cost (per annum)

i. ii. iii. iv. v. vi.

Total Depreciation Rent Interest on Total Capital Investment Insurance 40% of Staff and Labour 40% of Other Contingent Expenses (Excluding rent & insurance)

70,500.00 3,00,000.00 2,37,500.00 48,000.00 2,78,500.00 58,000.00

9,92,500.00

2. Break Even Point

Fixed Cost x 100 Fixed cost + profit

9,92,500 x 100 9,92,500 + 4,21,000 = 70.22%

7.6 LIST OF MACHINERY SUPPLIERS

1. M/s, Sant Machine Tools, G.T. Road, Near Dholewal Chowk, Ludhiana. 2. M/s, Kalsi Machine Tools, Gill Road, Ludhiana. 3. M/s, Leading Engineering Corpn., Anand Prabhat Industrial Estate, New Delhi. 4. M/s, Ess Kay Engineering Corpn., 21/6 A, Freeganj Chowk, Agra. 5. M/s, Jeet Machine Tools Corpn., G. B. Road, Delhi. 6. M/s, Batliboi and Co., Parliament Street, New Delhi.

P a g e | 42

7.7 SELECTION OF SITE:I choose this location because both raw material suppliers and consumers of automobile Silencer are near by. Raw material supplers are from Delhi/NCR. And more consumers are in metropolitan cities which are near by this location and also automobile manufacturers are there.

7.8 COMPETITORS:1. Onyx Auto India, Shalimar Bagh, Delhi Selling price ( per large silencer ) Rs. 335 Selling price ( per small silencer ) Rs. 250 2. Royal Group, Faridabad, Haryana Selling price ( per large silencer ) Rs. 325 Selling price ( per small silencer ) Rs. 240 3. Trikuta Metals, Faridabad, Haryana Selling price ( per large silencer ) Rs. 320 Selling price ( per small silencer ) Rs. 230

7.9 FUTURE SCOPE:Growth in automobile industry during last 5 years was 17.42% and it is still rising. Therefore, with the growth of automobile industry, automobile silencers demand would increase.

7.10 LOAN INTEREST RATE:1. SIDBI - Interest rate is 12.75% - 13.25% (floating) for more than 3 years time period. 2. IDBI - Interest rate is 13.50% against fixed asset. 3. Bank of Baroda - Interest rate is 15.25% for Working capital.

P a g e | 43