Professional Documents
Culture Documents
Enterprenuership Class Xii
Enterprenuership Class Xii
2. Enterprise Planning 19
3. Enterprise Marketing 36
5. Business Arithmetic 58
6. Resource Mobilization 73
Rationale
Development of school curriculum is a dynamic process responsive to the society and reflecting
the needs and aspiration of its learners. Fast changing society deserves changes in educational
curriculum particularly to establish relevance to emerging socio-economic environment; to
ensure equity of opportunity and participation and finally promoting concern for excellence. In
this context the course on entrepreneurship aims at instilling and stimulating human urge for
excellence by realizing individual potential for generating and putting to use the inputs,
relevant to social prosperity and thereby ensure decent means of living for every individual.
Objectives:
Acquiring Entrepreneurial spirit and resourcefulness
Familiarization with various uses of human resource for earning dignified means of
living
Understanding the concept and process of entrepreneurship - its contribution in and role
in the growth and development of individual and the nation
Acquiring entrepreneurial quality, competency and motivation
Learning the process and skills of creation and management of entrepreneurial venture
Number Of Questions in 5 5 7 4 3 24
2.
Theory Paper Questions
Total Marks allocated for Written Paper 5*1=5 5*2=10 7*3=21 4*4=16 3*6=18 70 Marks
Total Marks allocated for Unit Tests 3*1=3 3*2=6 4*3=12 2*4=8 1*6=6 35 Marks
Methodology
Topics will be discussed in class.
A handout to cover topics not given adequately in the text will be given wherever required.
Flow charts to facilitate quick recap will be used for revision.
Assignments to cover previous year Board questions will be given for writing practice.
Extra question covering HOTS questions for the chapter will be discussed in class.
A monthly class test will be given to assess learning of students.
Any other method used for a topic in addition to what is mentioned above will be given in the details
given below.
Assessment
All questions in the Smart Skills will be discussed in class and attempted by students in their
note books.
Worksheets containing application based questions will be given at the end of every chapter.
Question Paper Design
Total %
VSA SA LA I LA II ESSAY
S. No Typology of questions TYPE Marks weigh
Peter F.Drucker defined entrepreneur as one who has always searches for an opportunity. The
basic test of a successful entrepreneur is the identification of business opportunity in the
environment and initiating steps to produce and sell goods and services to make use of the
opportunity.
Before selecting an opportunity, the entrepreneur has to ensure two things in order to be
successful -
There is a good market for the product he is going to produce
The rate of return on the investment is attractive to be accepted by him
Opportunity should be suitable for him in terms of customers to be served and profits
expected. An opportunity may be derived from the needs and problems of the society.
E ENVIRONMENT E
N N
V Problems V
I I
R Opportunity Creativity & Innovation & Project R
O Need Spotting Ideas Product Business O
N ENVIRONMENT N
M M
E E
N N
Enterprise Process Diagram
T T
The entrepreneurs perceive opportunities, synthesize the available information and analyse
emerging patterns that escape the attention of other people. They are people with vision, capable
of persuading others such as customers, partners, employees and suppliers to see the opportunity,
share and support it.
Business environment may be defined as all those conditions and forces external to a business
unit under which it operates.
Entrepreneurship does not emerge and grow spontaneously. Rather it is dependent upon
several economic, social, political, legal and other factors.
Why do we need to scan our environment?In rapidly changing environments, the right
information, combined with the right adaptations, can determine an organization's future
viability. If an entrepreneur is not aware of what the environment surrounding his business
he is sure to fail. Eg., HMT watches lost its market to Titan;
iii. Tapping useful resources: It can tap raw materials, technology and even
financial resources from the market at economical prices at the right time.
iv. Better performance:Proper take timely action to deal with the threats and avail
opportunities for the purpose of improvement in the performance of the firm.
vi. Image building: It will come out with new products and services to meet the
requirements of the customers. This would build the image or reputation of the
firm in the eyes of the general public.
Information for environmental scanning can be collected from several sources. These
include
a. verbal information from customers, wholesalers, retailers, distributors, consultants., etc
b. records of companies
c. government publications
d. publications by various financial institutions
e. formal studies conducted by strategic planners
The data so obtained is processed and analysed with the help of quantitative and qualitative
techniques.
Opportunity – Project Interface
Interface
Business
Environment
Micro
Macro Environment
Environment
A. Political
A. Suppliers B. Economic
B. Customers C. Social
C. Intermediaries D.
D. Competitors Technological
E. General Public E. Ecological
F. Legal
(Pestel)
Idea Fields
Idea Fields can be described as: ‗convenient frames of reference for streamlining the
process of generation of ideas.‘
Idea
Fields
Market or Demand driven Trading Related
a) Natural Resources:
Ideas can be generated based on natural resources.
A product or service may be derived from
o forest resources, agriculture, horticulture,
o mineral,
o animal husbandry,
o wind, sun, and
o human resource
A business opportunity or idea often comes from everyday problems that someone solves.
Successful businesses find a need and fill it by providing a service or product.
Entrepreneurs who look at ways to make an existing product or service better can be as
successful as those who create or invent products.
While it may seem like only good can come from improving, adding to, or changing
different products around, this is not always the case. It must be done skilfully, or else
other problems can arise.There are a number of pros to changing or improving your
existing product line.
There is a constant and consistent effort on the part of all entrepreneurs to improve the
products and services already existing in the markets.
Oftentimes, a company will improve or change their existing products. There are many
reasons for doing this. It can make a substantial difference in the success of your company
and even take it in a whole new direction. However, it can also spell disaster if not done
correctly.
Change or improvement in an existing product can come about in many ways. Perhaps
you sell a skincare line and would like to change the ingredients around a little. Or maybe
you run a math tutoring business and would like to expand into other subjects, like science
or reading.
Market research can be defined as ‗any organized effort to gather information about target
markets or customers. It includes social and opinion research is the systematic gathering
and interpretation of information about individuals or organizations using statistical and
analytical methods and techniques of the applied social sciences to gain insight or support
decision making.
Market research develops from knowledge of the consumer, the market, the technology
and the general environment,
o It creates newness in product, production and marketing.
o It systematically develops product ideas to satisfy the aim of the project and
therefore the business strategy.
f) Creative Efforts:
We have seen elsewhere that creativity is an important and key component of the talents
and abilities needed for an entrepreneur.
Skills Knowledge
Opportunity
Idea Processing
Knowledge, skills, competencies and creative thinking needed to develop an idea are
backed by factors critical for market success. When knowledge, skills, competencies and
creativity are strategically applied or market orientation, a viable venture is born.
Once the entrepreneur has assessed the opportunities on these bases he should go ahead and
assess the market also.
Market Assessment
Selection of a product or service will depend upon many factors. While assessing the
market, an entrepreneur has to prepare details on the following lines:
1. Demand:
The demand assessment will be based on the size of market being targeted, ie., local
markets, market at state level or national/international market. It will also involve a study
of the target groups of consumers, their preferences, tastes and other related variables.
Trend Spotting
It means identification of new trends. This will help the entrepreneur to understand the
market and produce goods or provide services in sync with the market trends.
One of the keys to business success is to anticipate what the market will want or need before
the entrepreneurs are aware of it themselves. Since it‘s unlikely for an entrepreneur to see into
the future, the best way to do this is to become a trend-spotter.
Professional trend-spotters charge big money for reports and industry trend updates. But
there are some entrepreneurs who spot these trends themselves.There are so many ways to
spot trends.
4. Think trends.
o As an entrepreneur begins regularly gathering all this information, they‘ll start to
develop a ―trend-spotter mind.‖
o As they absorb and mull about what they‘ve read, heard and observed, they‘ll start to
make connections and observations that will lead to business-boosting insights.
o The news about rising shrimp prices, the lines out the door at the Asian-fusion
restaurant downtown, and something one of the customers said last week will all come
together and they‘ll have a great idea for a new menu item, a new product line or even
a whole new business.
Activity is thus, a symbol of human life and may broadly be categorized into:
(a) Economic Activities:
(b) Non-Economic activities:
All Entrepreneurial activities can be divided into three major categories: Manufacturing,
Trading and Service.
1) Manufacturing
Production of merchandise for use or sale using labour and machines, tools, chemical and
biological processing, or formulation. most commonly applied to industrial production,
The term is used in all economic systems:
o In a free market economy, directed toward the mass production of products for sale to
consumers at a profit.
o In a collectivist economy, directed by the state to supply a centrally planned economy.
o In mixed market economies, manufacturing occurs under some degree of government
regulation.
2) Service
A service is intangible, is not stored and does not result in ownership.
3) Trading:
Refers to the activity or process of buying, selling, or exchanging goods or services, the
amount of things or services that are bought and sold the money made by buying and
selling things or services , the act of exchanging one thing for another
Business is a continuous human economic activity with objective to earn profit by producing,
and buying and selling of goods and services.
An enterprise is a separate and distinct unit, institutionally arranged to conduct any type
of business activity.
Every business entity needs to select an appropriate legal structure or framework to work
in.
From the point of view of ownership and management, business enterprises may be
broadly classified under three categories.
O Private Sector Enterprises
O Public Sector Enterprises
O Joint Sector
(1) Private Sector Enterprises: owned, controlled, and managed by private individuals, with
the main objective of earning profit comes under this category.
Private individuals thus could start a venture as:
(a) Sole-proprietorship (c) Joint Hindu Family (d) Co-operative Society
(b) Partnership Business (e) Company
(2) Public Sector Enterprises: owned, controlled and operated by public authorities, with
welfare as primary and profit as secondary goals, are called public sector enterprises.
Either the whole or most of the investment in these undertakings is done by the
Government(s). These enterprises have the following form of organization:
(a) Departmental (b) Public (c) Government
undertaking Corporations Companies
Statutory Corporation
Joint Stock Company
Co-operative Society
I. SOLE PROPRIETORSHIP:
Definition :The most commonly used forms of business organization which is owned
financed, controlled and managed by only one person is called as sole proprietorship,
II. PARTNERSHIP:
Partnership form of organization has developed due to the inherent limitations of sole
proprietorship.
Characteristics of partnership:
1. Two or more persons 6. Mutual agency
2. Agreement 7. Utmost good faith
3. Profit sharing 8. Restriction on transfer of shares
4. Unlimited liability 9. Continuity
5. Implied authority
Suitability of Partnership:
Partnership form of a business is an ideal choice for starting a new venture, if the entrepreneur's.
(1) Capital and Managerial requirements are higher as compared to that of sole
proprietorship.
(2) Enterprise falls in the category of either being a small or a medium scale enterprise.
(3) Direct contact with the customers is essential.
Registration procedure
o Step: 1 :
Application for partnership registration
o Step: 2
Every partner needs to verify and sign the application. Ensure that the
necessary documents and prescribed fees are enclosed with the registration
application.
o Once the Registrar of Firms is satisfied that the application procedure has been duly
complied with, he shall record an entry of the statement in the Registrar of Firms and
issue a Certificate of Registration.
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III. JOINT STOCK COMPANY:
A company means an voluntary association of a person‘s formed for some common object
with capital divisible into units of equal value called 'shares' and with limited liability.
Thus, a company is an association of persons who contribute money in the shape of shares and
the company gets a legal entity and enjoys a permanent existence.
Characteristics of a Company
I. Voluntary association. VI. Transferability of shares.
II. Artificial person. VII. Diffusion of ownership and
III. Separate legal entity. management.
IV. Common seal. VIII. Number of members
V. Limited liability. IX. Limitation of action
X. Winding up.
Choice to Be Made: An entrepreneur, under the 'Company' form of organisation has a further
choice to incorporate enterprise either as a:
(a) Private Company or (b) Public Company
Why Private Company Is More Desirable : In spite of certain restrictions imposed on a private
company, it enjoys certain privileges under the Companies Act. Because of the following
important privileges being granted, a substantial number of entrepreneurs prefer to form a private
company.
The privilegesgranted to a private company are:
(1) Only two members are required to form a private company.
(2) Only two directors are required to constitute the quorum to validate the proceedings of the
meetings.
(3) Such company is not required to file prospectus or a statement in lieu of prospectus with
the Registrar of Companies.
(4) It can commence its business immediately after incorporation.
(5) Holding of statutory neither meeting nor filing of a statutory report is required by a
private company.
(6) A non-member cannot inspect the copies of the Profit and Loss A/c filed with the
Registrar.
(7) Limit on payment of maximum managerial remuneration does not apply to a private
company.
The company form of organisation has shown phenomenal increase in almost all countries of the
world in the twentieth century.
V. CO-OPERATIVES ORGANISATIONS:
The Indian Co-operative Societies Act, 1912 defines co-operative in Section 4 as, "Society
which has its objectives the promotion of economic interests of its members in accordance
with co-operative principle."
Entrepreneur does not find this form as a very desirable structure to start a new venture
because of his / her:
1) Quest for excellence 5) Creative and innovative nature
2) Drive for independence 6) "Must be own boss", attitude.
3) Tendency to be project champion 7) Love for being a 'Leader' in the field.
4) Strong desire to succeed and earn profit 8) Zeal to capture major market share.
2. Owners‘ Risk and liability Company, Coop Society Sole Prop, Partnership
involved
11. Economy in formation Sole Prop, Partnership, HUF Co-Op Soc, Company
13. Transfer of ownership or share Company, Sole Proprietorship Partnership, HUF, Coop Society
in firm
14. Initial costs, Sole proprietorship company
BUSINESS PLAN
Planning can be defined as "thinking in advance what is to be done when it is to be done, how
it is to be done and by whom it should be done."
The entrepreneur must make some important decisions and gather information about the
external and internal factors so as to address the integration and co-ordination of effective
business objectives and strategies related to his proposed venture.
Thus, the content and the format of the business plan is such which is able to represent all
these aspects of business planning process.
Hence, a business plan gives adequate clarity to the entrepreneur, Investor(s) and the
government of:
o What an entrepreneur is doing,
o Why he/she is doing it, and
o How he/she will do that?
Organizational plan describes the proposed venture's form of ownership. Each type of
business differs significantly in terms of:
a) Commencement procedures d) Accounting methods
b) Legal constraints e) Marketing and promotional strategies
c) Financial requirement f) Risk and liability
The entrepreneur have access to following forms to choose from to start his/her venture:
a) Sole proprietorship b) Partnership c) Joint Hindu family d) Cooperative, or e)
Corporation
Each of these forms has important implications on (i) Taxes (ii) Liability (iii) Continuity
(iv) Financing (v) Ownership. No form is the best form. Entrepreneur in light of multiple
factors (as already discussed) decides the legal structure, best suited to attain his dream.
To conclude, both the entrepreneur and the potential investors stands to gain from the
organizational plan as the design of the organization so opted helps even in:
o Specifying the types of skills needed and the roles that must be filled by the
member
o Chalking out informal organization or culture.
Hence, a production plan helps to plan the work in such a manner that one can clearly
form an idea about:
Production schedule and/or budget
Machinery, equipment requirement
Manufacturing method and process involved
Plant layout
There may be three situations before the venture viz complete manufacturing, partial
manufacturing and no manufacturing.
iv. Regulating the orderly movement of goods through the entire manufacturing cycle
i.e. right from procurement of all materials to the shipping of finished goods.
Nature of venture Scale of operation, and
Type of product/service Technology involved
Thus, to obtain the above mentioned objectives, entrepreneur specifically pays attention to
the following elements of the plan:
a) Routing d) Follow-Up
b) Scheduling. e) Inspection
c) Dispatching f) Shipping
Procurement of "right man, at right job, at right time" is the objective of human
resource plan.
Normally, each year the entrepreneur should prepare an annual marketing plan so as to
gel well with the changing business environment and its forces
Steps in preparing the marketing plan - procedure for preparing the marketing plan
involves following steps:
a) Business situation analysis
b) Identify the target market
c) Conduct SWOT analysis
d) Establish goals
e) Define marketing strategy
f) Implementation and monitoring of the plan
The financial plan is so designed that the entrepreneur and the investors could have a clear
picture of:
a) How much funds are required?
b) Where will funds come from?
c) How are they disbursed?
d) The amount of cash available
e) General financial well-being of the new venture i.e. probable revenue forecast for
the first year at least.
As the financial plan must explain to any potential investor how the entrepreneur plans to
meet all financial obligations and maintain its liquidity in order to either pay off debt or
provide good return on investment, several financial projection techniques and tools are
made use of by the entrepreneur. In general, the financial plan will need three years of
projected financial data to satisfy any outside investors.
Components of financial plan Major financial items that should be included in the
financial plan are:
a) Proforma Investment Decisions d) Proforma Cash Flow
b) Proforma Financing Decisions e) Proforma Balance Sheet
c) Proforma Income Statements f) Break-Even Analysis
g) Economic And Social Variables
X. APPENDIX
a. contains any backup material that is not necessary in the text of the document as:
Letters from customers, distributors etc. , Any primary or secondary
research data , Copies of contracts, agreements or any price lists if received.
1. When is a sole proprietor required to file for registration for service tax?
Service tax = is a tax levied on the transaction of certain services.
These are specified by the Central Government under the Finance Act, 1994.
It is an indirect tax, which means that normally, the service provider pays the tax
and recovers the amount from the person or organisation who receives such
taxable service.
Service tax registration: Form ST 1 is to be filled if the taxable services are more
than 10 lakh for a financial year.
4. Name the documents and licenses required for starting a sole proprietorship:
a. Service tax registration or VAT/CST registration
b. PAN Card no. of the sole proprietor,
c. Bank account no. in the name of sole proprietorship business,
d. Shops & Establishment License,
e. Employee Provident Fund Registration or Importer Exporter Code (if in export-
import business) as and where applicable, have to be complied with.
1. What is PAN?
a. Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued by
the Income Tax Department.
b. PAN, acts as an identifier for the person with the tax department.
c. It is mandatory to quote PAN in all documents pertaining to financial transactions.
d. PAN enables the department to link all transactions of the person with the
department. These transactions include tax payments, TDS/TCS credits, returns of
income/wealth/ gift/FBT, specified transactions, correspondence, and so on.
6. What is TIN?
For identification/registration of dealers under VAT, the Tax Payer's
Identification Number (TIN) is used. TIN consists of 11 digit numerals
throughout the country. Its first two characters represent the State Code and the
set-up of the next nine characters can vary in different States.
13. What are the Permissions that are required to be obtained from the Government by a
company at the construction stage?
a. These are some permissions which are required to be obtained from the
government:
Pre-construction clearances
o Application for plot/shed, offer letter, payment of earnest money deposit
o Allotment of plot/shed, payment of balance occupancy price, taking over
possession thereof
o Application for issuance of NOC/SSI registration
o Execution of lease agreement
o Application for grant of connection for construction water
o Application for grant of connection for construction power
Post construction clearances
o Building completion/drainage completion/tree plantation certificate
o Permission for mortgage
o NOC from Pollution Control Board
o Final fire clearance
o NOC from environment department
o Industrial safety permit
o Sanction of permanent power
o Sanction of permanent water and sewerage connection
14. When does a firm require registration for Employee's Provident Fund (EPF) account?
Applicable for establishments employing 20 or more persons and engaged in industry.
– Fundamental goal of business is to make profit; this always need not be in terms of money but
improved customer relations, goodwill etc.,
– What is goal setting?
"Establishing short or long term objectives, usually incorporating deadlines and
quantifiable measures."
– Why is goal setting important?
For ensuring the appropriate performance.
Ensures clarity of vision, alignment to the organizational goals, clarity of purpose
and higher probability of achieving the goals.
Allows us to be proactive, instead of just being reactive.
– Goals need action
Goal setting strategy.
Provides us with direction and motivation.
Set the right goals, that is, goals that will keep our business on track rather than
derail it.
Rules for goal setting:
i. Business goals need to be relevant.
ii. Business goals need to be actionable.
iii. Business goals need to be achievable stretches.
Marketing Strategy
– Marketing strategy is defined by David Aaker as "a process that can allow an organization to
concentrate its resources on the optimal opportunities with the goals of increasing sales and
achieving a sustainable competitive advantage."
– What does the Marketing strategy of a company include?
All basic and long-term activities in the field of marketing.
Analysis of the strategic initial situation of a company.
Formulation, evaluation and selection of market-oriented strategies that contributes
to the goals of the company and its marketing objectives.
Strategies for growth as well as interrelated components called the marketing mix.
– Product:
– Refers to the item actually being sold. The product must deliver a minimum level
of performances; otherwise even the best work on the other elements of the
marketing mix won't do any good.
– Branding:
– A product is
o It includes physical objects, services, personalities, places, organizations and ideas.
o As a product is any tangible and/or intangible offering that is required to satisfy the
needs or aspirations of a consumer,
– It is important to understand:
o the "underlying motives" behind "buying" of the product,
o To ascertain whether the buyer is really satisfied by having the same product.
– Every product satisfies a 'generic' requirement, = the core benefit, a product offers to the
customer.
– If products were sold by generic names, it would be very difficult for the marketers to
distinguish their products from that of competitors.
– Branding as a Concept - A brand is "a name, term, sign, symbol, or design or a combination of
them which is intended to identify the goods or services of one seller or group of sellers and to
differentiate them from those of the competitors."
Purpose
1. Anchors Company‘s brand.
2. Are the "Identity" of an enterprise
3. Provide essential information about a company that allows customers to
relate with the enterprise's core brand.
4. Short path for advertising and other marketing materials.
5. Act as the key visual component of an enterprise's overall brand identity.
– Packaging
Packaging is often the key element in assisting, mainly consumer goods companies,
to achieve a comparative advantage.
The critical decisions that must be made on the package are concerned with :
i. The functions the product pack will perform and
ii. The mix of packaging components best able to perform in different degrees,
the particular functions of the packaging.
– Labeling
It is the display of information about a product on its container, packaging, or the
product itself.
Intellectual property (IP) rights are the legally recognized exclusive rights to creations of
the mind. Under this law, owners are granted certain exclusive rights to a variety of
intangible assets.
Common types of intellectual property rights include
o Copyrights o Industrial Design Rights
o Trademark o Trade Secrets.
o Patents
Price Mix
– Price
o = the value that is put for a product.
o It depends on
Cost of production, Segment targeted, Ability of the market to pay, Supply -
demand and a host of other direct and indirect factors.
o There can be several types of pricing strategies, each tied in with an overall business plan.
o Pricing can also be used as a demarcation, to differentiate and enhance the image of a
product.
o Price is the only revenue generating element amongst the four P's, the rest being cost
centers.
o Some Methods Of Pricing which are used in pricing decisions are as follows: Cost Plus
Pricing, Penetration Pricing, Price Skimming and Variable Pricing
b. Penetration Pricing
o Price is initially set at a price lower than the eventual market price, to attract new
customers.
o The expectation is that customers will switch to the new brand because of the lower price.
o Penetration pricing is most commonly associated with a marketing objective of increasing
market share or sales volume.
o The advantages of penetration pricing to the firm are:
1. Result in fast diffusion and adoption. This can achieve high market rates quickly.
2. It can create goodwill among the early adopters segment.
3. It creates cost control and cost reduction pressures from the start.
4. It discourages the entry of competitors. Low prices act as a barrier to entry
5. It can create high stock turnover throughout the distribution channel
6. This can create critically important enthusiasm and support in the channel.
o Disadvantages or penetrating price method:
1. The main disadvantage with penetration pricing is that it establishes long–term
price expectations for the product and image preconceptions for the brand and
company.
2. Another potential disadvantage is that the low profit margins may not be
sustainable long enough for the strategy to be effective.
c. Creaming or Skimming
o Goods are sold at higher prices. Usually employed to reimburse the cost of
investment of the original research into the product.
o This strategy is often used to target "early adopters" of a product or service who
generally have a relatively lower price-sensitivity.
o This strategy is employed only for a limited duration.
o Advantages of skimming price
i. Helps the company recovering the research and development costs.
ii. If the company caters to consumers who are quality conscious rather
than price conscious.
– Place: Refers to the point of sale. In every industry, catching the eye of the consumer and
making I it easy for her to buy is the main aim of a good distribution or 'place' strategy.
– A channel of distribution or trade channel is defined as the path or route along which goods
move from producers or manufacturers to ultimate consumers or industrial users.
This channel consists of:
i. Producers, consumers or users and the various middlemen like wholesalers,
selling agents and retailers (dealers) who intervene between the producers
and consumers.
Therefore, the channel serves to bridge the gap between the point of production
and the point of consumption thereby creating time, place and possession utilities.
– An entrepreneur has to choose a suitable channel of distribution for his product such that
the channel chosen is
Flexible, Effective and Consistent with the declared marketing policies and
programmes of the firm.
– Promotion Mix
– This refers to all the activities undertaken to make the product or service known to the user
and trade.
– This can include advertising, word of mouth, press reports, incentives, commissions and
awards to the trade. It can also include consumer schemes, direct marketing, contests and
prizes.
C. SALES STRATEGY
– Types - Businesses employ one of two basic types of sales strategies to their overall plan:
direct or indirect.
With the direct sales strategy, sales people attack the competition head on.
Indirect sales approaches apply more subtle techniques by demonstrating features
and benefits not available with the competition‘s products or services without ever
mentioning them by name.
– Considerations
Requires market knowledge, awareness of competitor activities, awareness of
current trends and detailed business analysis.
Small business owners wishing to create and implement a sales strategy for the first
time may want to hire a professional business consultant to help guide the process.
D. PROMOTION STRATEGY
– Promotion is the method to spread the word about the product or service to customers,
stakeholders and the broader public.
– There are various approaches a company can use to promote its products. They are:
Above-the-line
Below-the-line
Through-the-line
– Above-the-line
Uses mass media methods. Focuses on advertising to a large audience. It includes
conventional media like print, online, television and cinema advertising.
Include advertisements in the press.
It is difficult to tailor a promotion to a specific group of consumers because it is
viewed by a mass audience with different tastes and needs.
Very expensive.
– Below-the-line
Very specific, memorable activities focused on targeted groups of consumers.
They are under the control of the organization.
The purpose of these activities has been to develop the brand by creating
awareness and building a brand profile.
– Below-the-line methods include Sponsorship, Sales Promotions , Public Relations ,
Personal Selling , Direct Marketing.
– Through-the-line
Refers to an advertising strategy involving both above and below the line
communications in which one form of advertising points the target to another form
of advertising thereby crossing the "line".
Difference between above the line (ATL) and below the line (BTL) Bases: Target ,
Promotions - help in, Measurability , Examples
– A mix of the following can be used to promote their products or services.
i. Advertising
ii. Personal Selling
iii. Sales Promotion
iv. Public Relations
– Developing effective advertising (AIDA) Good advertising generally elicits the following
four responses:
Attention, Interest, Desire and Action.
– Negotiation is a process where two or more parties with different needs and goals discuss an
issue to find a mutually acceptable solution.
– In business, negotiation skills are important in both informal day-to-day interactions and
formal transactions such as negotiating conditions of sale, lease, service delivery, and other
legal contracts.
Negotiation can be categorized in different ways. Below are just a few ways that we can look
at negotiation:
Integrative negotiations, Distributive negotiations , Inductive , Deductive , Mixed
F. CUSTOMER RELATIONS
G. EMPLOYEE MANAGEMENT
– A process that companies use to effectively manage all interactions with employees, ultimately
to achieve the goals of the organization.
– The human resources department can play a critical role in this process.
– Factors which lead to effective employee relationship
i. Identifying objectives
ii. Determining employee needs
iii. Balancing work and life needs
iv. Open and honest communication
v. Measuring and monitoring results
vi. Relationships are interpersonal
H. BUSINESS FAILURE
– Business failure refers to a company ceasing operations following its inability to make a profit
or to bring in enough revenue to cover its expenses. A profitable business can fail if it does not
generate adequate cash flow to meet expenses.
– The 12 broad causes that lead to a business failure are summarized below.
I. VENDOR MANAGEMENT
– Vendors are individuals or businesses that supply goods or services to other individuals or
businesses.
– Vendor management is a term used to describe the process of finding, qualifying and doing
business with vendors.
– Common activities include researching vendors, negotiating contracts, obtaining quotes,
evaluating performance, creating and updating vendor files, and ensuring that payments are
made properly.
a. Internal expansion
Internal expansion results from the gradual increase in the activities or production
capacity of the concern.
It may be done by
i. Adding more machines or byreplacing old machines.
ii. Taking up other units to increase the production capacity
iii. Entering new fields on the production and marketing sides.
Internal expansion may befinanced by the issue of more share capital, generating funds
from old profits or byissuing long–term securities.
The net result of internal expansion is the increase inbusiness activities and broadening
the present capital structure.
Franchising
Types of franchising
a. Product franchise business opportunity
b. Manufacturing franchise opportunity
c. Business franchise opportunity ventures
d. Business format franchise opportunity
Types of Mergers
1. Conglomerate 4. Product extension mergers
2. Horizontal merger 5. Vertical merger
3. Market extension mergers
Acquisitions
Acquisition refers to a corporate action in which a company buys most, if not all, of the
target company's ownership stakes in order to assume control of the target firm.
. Acquisitions are often paid in cash, the acquiring company's stock or a combination of
both. An acquisition, also known as a takeover, is the buying of one company (the target) by
another.
Reasons For Mergers And Acquisitions Reasons for Failure of Merger and
1. Synergy- can take the following forms: Acquisitions
Operating synergy 1. Unrealistic price paid for target
Financial synergy 2. Difficulties in cultural integration
2. Acquiring new technology 3. Overstated synergies
3. Improved profitability 4. Integration difficulties
4. Acquiring a competency 5. Poor business fit
5. Entry into new markets 6. Inadequate due diligence
6. Access to funds 7. High leverage
7. Tax benefits 8. Boardroom split
9. Regulatory issues
10. Human resources issues
B. VALUE ADDITION
Business adds values to goods and services by modifying them in a particular way to
create a new product of greater value to customers.
Added value,
o From a financial point of view= difference between the value of inputs to a
production process and the value of the outputs of that process.
o From a marketing perspective, = means adding value that turns a commodity into
a branded product.
Adding Value is a Business Strategy for Growth (Kevinzhengli) - Types of added value
There are several types of added values that a business can employ to improve its
products and services.
1. Quality
2. Environmental
3. Cause-related
4. Cultural
The different types of added value are not mutually exclusive and can be employed at
any phase of the production or service cycle.
Adding value can be used as a marketing strategy to differentiate a product from
competing products. Such strategies should be fully researched and included in a
business plan to show the potential benefits to a business.
A value chain is the whole series of activities that create and build value at every step.
The total value delivered by the company is the sum total of the value built up all
throughout the company.
Michael Porter developed this concept. In simple words 'Value Chain' is a high level
model of how business receive raw-materials, add value to the raw-materials through
various processes and sell as finished products to customers. 'It looks at every step of
business, from raw-materials to the eventual end users, with one goal to deliver
maximum value.
If they are run efficiently, the value obtained should exceed the costs of running them.
Some formulas:
1. Unit Price per customer = Total Billed Amount .
Number of Customers
Thus, Break even quantity is the quantity where Total Revenue = Total Expenses, where
o Total Revenue = Total Quantity x Price Per Unit = Qty x Unit Price
o Total Expenses = (Total Quantity x Cost Per Unit) + Fixed Costs
= (Qty x Unit Cost) + Fixed Exp
that is, at Break even quantity, (Qty x Unit Price) = (Qty x Unit Cost) + Fixed Exp
(Qty x Unit Price) - (Qty x Unit Cost) = Fixed Exp
Qty x (Unit Price – Unit Cost) = Fixed Exp
Qty x Gross Margin (or Profit) per Unit = Fixed Exp
Please note: Gross margin and gross profit are one and the same.
Cash (or money, which means both currency and checks) is the lifeblood of every business. It
is the most important asset for the operations of a business.
Cash Flow refers to the movement of money in and out of a business during a specific period
of time. It is a record of a company's inflows and outflows.
a. Cash inflow is defined as the movement of money into a business and
b. Cash Outflow is defined as the movement of money out of a business.
Cash Flow Projection shows how cash is expected to flow in and out of your business.
a. It is an important tool for cash management, as it helps one estimate if outflows are
too high or when you might want to arrange short term investment to deal with a cash
surplus.
Cash Flow Projections is not a static document. It must be used as a dynamic tool.
o Calculations of cash Flow Projections are based on certain assumptions. Actual
performance will be different.
o An important question that arises is about the frequency and period (unit of time) of
preparing Cash flow projections.
Decide the frequency and develop a format that suits your business.
As you would be preparing this projection on periodic basis, please make sure that when one
‗period‘ is over, it is dropped and a new period is added, keeping the length of the horizon
intact.
How accurate a Cash Flow Projection is depends on the period and horizon involved.
Sources Of Inflow:
A Total Inflows
Forthcoming Expenditure
B Total Expenditures
Surplus Or (Deficit)
(A – B)
Opening Balance
Closing balance
Budgeting
a. Sales budget – an estimate of future sales, in units and currency. Helps create sales goals.
b. Production budget – an estimate of the number of units that must be manufactured. It also
estimates the various costs involved with manufacturing those units, including labour and
material.
c. Capital budget - used to determine whether an organization's long term investments are
worth pursuing.
d. Cash flow/cash budget – a prediction of future cash receipts and expenditures for the
short term future. Helps the business determine whether the company will need to seek
outside financing.
e. Marketing budget – an estimate of the funds needed for promotion, advertising, and
public relations.
f. Project budget – a prediction of the costs associated with a particular company project.
These costs include labour, materials, and other related expenses.
Budgets and budgeting
o budget = the final product, budgeting = the process of arriving at a budget.
o A budget is an allocation of money for some purpose.
o Modern formal budgets limit expenditures; predict income, profits, and returns on
investment a year ahead.
o They have evolved into tools of control and are also used as a means of
determining such rewards as profit-sharing and bonuses.
Budgeting as a process
o In large corporations, budgeting is a collective process in which operating units
prepare their plans in conformity with corporate goals published by top
management.
o Each Unit managers calculates and presents to a reviewing upper management
panel
Projections of sales, operating costs, overhead costs, and capital
requirements.
Operating profits and returns on the investment they intend to use.
o The reviewing upper management panel and May, thereafter, make whatever
changes result from instructions from or negotiations with the higher level.
o Approved budgets then become the road-map for operations in the coming year.
o Ideally monthly or quarterly budget reviews track performance against the budget.
As part of such reviews, changes to the budget may be approved. At yearend
managers are judged by their performance against the budget.
Benefits of budgeting
o For a new business, it is a roadmap that can help them set goals and assess the
validity of their business concept.
o For established small businesses, it determining how the business is performing
through the years, and helping identify possible future investments.
o By regularly consulting a budget, business leaders can compare actual figures and
catch potential business shortfalls or other problems early.
o Budgets can also be instrumental in winning over investors,.
o It ensures that responsible managers take time to think about their operation by
looking at all of its aspects.
Cost of budgeting
o The chief cost of the budget processis time.
o Much of the negative attitude that has developed concerning this activity has its
roots in unnecessary bureaucratic bottlenecks on the one hand and unreliability
because of rapid change a few months out.
Working capital
Need for capital
For procuring or investing in longer term assets – land, building, machinery,
equipment etc. These are typically known as Fixed Assets. Once pressed in to
service, they last over a reasonably longer period. These are placed in service for
carrying out the main activity of the business – production and sales or service etc –
and are not traded or sold to receive money (except when they have outlived their
life). In other words, money invested on these items does not result in direct cash
inflow for the business.
For buying raw materials, packing materials, paying rent, insurance premium,
utility bills, wages and salaries and for many other services and/or materials used
in the production or service. In other words this is the money needed for the day-
to-day operations of the business.
Money needed to fund the normal, day to day operations of a business is known as the
Working Capital. It ensures you have enough cash to pay your debts and expenses as they
fall due.
OPERATING CYCLE
Control
An inventory control system is expected to help achieve ‗desirable behaviour‘ of the
inventory items. Higher the conformance with the ‗desirable behavior‘ using a system, that
system can be labeled as a better system.
Desirable behaviour of any inventory item =
o Moment the need (demand) arises we should be able to supply the item – without
losing any time.
o The above should be at the lowest possible cost.
A well conceived and thought through system can help in achieving the two different
aspects of control – physical and fiscal (or monetary).
These are the various characteristics of SKUs that have to be kept in mind while designing
inventory control systems.
o In ABC analysis, a company reviews its inventory and sorts all SKUs into three categories.
Once a company has conducted its ABC analysis, it can devise an inventory-control strategy
that focuses effort where it will have the greatest effect.
Strategy Used Tightly controlled, Watched closely, but Least expensive, the
meaning the company the company reviews company can order
keeps close tabs on its ordering strategy them in bulk and
how much it has in less often. exercise minimal
stock; pays close controls; all that
attention to current really matters is that
demand and forecasts the company doesn't
for future demand; run out.
and carefully plans its
ordering so that it
neither runs out nor
winds up with too
much excess inventory
that can become
obsolete.
Differences between
(A) items (High (B) items (Moderate (C) item (Low
Consumption Value) Consumption Consumption
Value) Value)
Degree of control Very strict consumption Moderate control Loose control
control
Safety stock No/very low safety stock Low safety stock High safety stock
Delivery Phased delivery (Weekly) Once in three Once in 6 months
months
Control report Weekly Monthly Quarterly report
Follow up Maximum follow up Periodic follow up Exceptional
Sources of supply As many sources as Two or more reliable Two reliable
possible
Accuracy of forecasts Accurate forecasts Estimates on past Rough estimate
data
Centralized purchasing Central purchasing Combination Decentralised
/storage purchasing
Max. efforts to control LT Moderate Min. clerical efforts
Level of management To be handled by Sr. Middle level Can be delegated
officers
When to place an order =Reorder Point and how much to order = Economic Order
Quantity.
Reorder point takes due note of the lead time and demand during lead time.
o Reorder formula = Average daily usage rate × Lead time in days
Under ideal situation, the new quantity will arrive, just as the stock reaches zero. Real life
is not that simple or straightforward.
o There is variability in the rate of demand (or consumption) as well as in the supply.
To cater to such variability, the concept of safety stock is used.
o Thus, Reorder formula = Average daily usage rate × Lead time in days + Safety
Stock
Costs
There are two costs involved:
One for Ordering (which includes paperwork for placing order, receiving, inspection,
warehouse handling etc) and another for holding the inventory or
Inventory Carrying Cost (which includes cost of money tied up i.e. interest, space cost,
insurance etc).
Measure of profitability
Return on Investment (ROI) and Return on Equity (ROE) are two such critical profitability
ratios.
Return on investment
ROI = Net Profit x 100
Total Capital Invested
Return on equity
ROE = Net Income x 100
Equity
o Price for a business is often quoted in terms of a multiple of its EBITDA – say (M) x
(EBITDA). M has numerical value that varies from industry to industry.
Thus, 'Finance' refers to funds or monetary resources needed by individuals, business houses and
the government.
Finance assists in the formation of new businesses, and allows businesses to take advantage of
opportunities to grow and expand. Right from the very beginning i.e. conceiving an idea;
finance is required to:
a) Promote or establish the business
b) Acquire fixed assets
c) Make market investigations
d) Develop product
e) Keep men and machines at work
f) Encourage management to make progress and create value.
g) Expand, diversify, improve and grow.
h) Be enough to meet unexpected/unplanned business expenses.
Before doing anything, an entrepreneur should clearly answer the following three
questions:
a. How much money is required?
b. Where will money come from?
c. When does the money need to be available?
The money needed can be estimated by developing a statement of various assets required
by the enterprise. Integral to total amount needed is to decide about its arrangement or
sources. The various sources from which an enterprise can raise the required funds could
broadly be classified into 2 major categories.
1) Internal sources
2) External sources
Not all of them are equally appropriate to all enterprises at all times as these different
sources carry very different:
1) Obligations
2) Responsibilities
3) Opportunities
I. CAPITAL MARKETS
The role of transferring financial resources from the surplus units to the deficit units is
what is referred to as "Financial Intermediation".
A capital market may be defined as an organized mechanism meant for effective and
smooth transfer of money capital or financial resources from the investors to the
entrepreneurs.
The capital market satisfies the tastes of savers and the needs of investors through its
various financial instruments and institutions.
Primary market is basically to facilitate transfer of resources from the savers to the
entrepreneurs seeking funds for:
a) Setting new enterprises
b) Expanding
c) Diversifying
The 'new issues' may be issued by:
1) New companies – also called initial issues.
2) Old companies – also called further issues.
Initial Issues
When for the first time, entrepreneur for the purpose of obtaining capital funds decides to
issue securities to the public in the primary market for the first time; such issues of
securities are referred as "new money issues".
Methods Of Flotation Of New Issues - One of the most difficult problems in the new
venture creation process is obtaining finance. An entrepreneur can raise the required
capital in the primary market by the following methods:
1. Public issue
2. Rights issue
3. Private placement
4. Offer to the employees
Overall, going public is a complex decision that requires careful consideration and
planning. Entrepreneurs should examine their current and future capital needs, and be
aware of how an IPO will affect the availability of future financing.
2. Rights Issue
Rights issue is a method of raising additional finance from existing shareholders by
offering securities to them on pro-rata basis.
In case they are not willing to subscribe, they can renounce the same in favour of another
person.
3. Private Placement
Private placement means the direct sale by a company of its securities to a limited number
of sophisticated investors.
Entrepreneurs, herein, raise funds by selling the issues mainly to the institutional investors
like:
a. Unit Trust of India
b. Life Insurance Corporation of India
c. General Insurance Corporation of India
Entrepreneurs both from public limited and private limited sector, bank heavily upon
raising funds through the issue of varied financial instruments under this segment as at
times they do not wish to disclose information to the open market.
4. Offer to Employees
Stock options or offering shares to the employees has gained much popularity in many
countries of the world. This method enables employees to become shareholders and share
the profits of the company leading to:
a. Higher efficiency
b. Low labour turnover
c. Better industrial locations
d. Low floatation cost
e. Wider/higher generation of funds.
1. History –
SEBI was officially established by The Government of India in the year 1988 and given
statutory powers in 1992 with SEBI Act 1992 being passed by the Indian Parliament.
SEBI has its Headquarter in Mumbai, and has Northern, Eastern, Southern and
Western Regional Offices in New Delhi, Kolkata, Chennai and Ahmedabad
respectively
Initially SEBI was a non–statutory body without any statutory power. However in
1995, SEBI was given additional statutory powers by the Government of India
2. SEBI's establishment
SEBI was established as a supervising and regulatory body to curb certain
malpractices and to promote the securities markets in India.
SEBI is managed by its members, which consists of following:
i. Chairman who is nominated by Union Government of India.
ii. Two members, i.e. Officers from Union Finance Ministry.
iii. One member from The Reserve Bank of India.
iv. The remaining 5 members are nominated by Union Government of
India, out of them at least 3 shall be whole-time members.
3. SEBI has three functions rolled into one body: quasi-legislative, quasi-judicial and quasi
executive.
It drafts regulations in its legislative capacity,
It conducts investigation and can enforce action in its executive function and
It passes rulings and orders in its judicial capacity.
Though this makes it very powerful, there is an appeal process to create accountability. There
is a Securities Appellate Tribunal which is three-member tribunal. A second appeal lies
directly to the Supreme Court.
4. Powers of SEBI - For the discharge of its functions efficiently, SEBI has been vested with the
following powers:
i. To approve by-laws of stock exchanges, SEBI
ii. To enquire the stock exchange to amend their by-laws.
iii. Inspect the books of accounts and call for periodical returns from recognized stock
exchanges.
iv. Inspect the books of accounts of financial intermediaries.
v. Compel certain companies to list their shares in one or more stocks exchanges.
vi. Levy fees and other charges on the intermediaries for performing its functions.
vii. Grant license to any person for the purpose of dealing in certain areas.
viii. Delegate powers exercisable by it.
ix. Prosecute and judge directly the violation of certain provisions of the Companies Act.
x. Power to impose monetary penalties.
Venture capital is a type of private equity capital provided as seed funding to early-stage,
high potential, high risk, growth up companies/entrepreneurs who lack the necessary
experience and funds to give shape to their ideas.
Funding –
o Obtaining venture capital is substantially different from raising debt or a loan from
a lender as a venture capital is invested in exchange for an equity stake in the
business.
Thus, entrepreneurs are expected to carry out detailed due diligence prior to seeking
venture capital as a source of financing. As venture capitalists investments are liquid,
requiring extended time frame to harvest, an entrepreneur should carefully evaluate and
analyse, the stage which he/she would require venture capitalist to assist in.
Certain sections of the industry face greater difficulties than others in procuring long-term
finance. These include
a. Small and medium sized concerns,
b. New concerns set up by new entrepreneurial group,
c. Specific industries, which required funds for modernization,
d. Enterprises involved in innovation and new technological developments,
e. Enterprises requiring extra-ordinarily large amounts of finance with a long
gestation period,
f. Ventures in backward regions.
NABARD was established "for providing credit for the promotion of:
vi. Agriculture,
vii. Small-scale Industries
viii. Cottage and Village Industries
ix. Handicrafts and other rural crafts, and
x. Other economic activities in rural areas with a view to promoting IRDP and
securing prosperity of rural areas...."
Objectives
3. The bank will serve as a financing institution for institutional credit such as long-
term, short-term, and for the promotion of activities in rural areas.
4. To provide direct lending to any institution as may be approved by the Central
Government.
Functions - The primary functions of NABARD can be classified under three heads –
o Credit Functions, Developmental Functions & Regulatory Functions
5. Regulatory Functions
I. NABARD is empowered to undertake inspection of RRBs and Cooperative
Banks, other than the Primary Cooperative Banks.
II. A recommendation of NABARD is imperative by RRBs or Cooperative
Banks before seeking permission from RBI to open a new branch,
III. RRBs and Cooperative Banks, along with RBI, are required to file returns
anddocuments with NABARD.
Objectives - The ICICI has been established to achieve the following objectives:
d) To assist in the formation, expansion and modernization of industrial units in the
private sector;
e) To stimulate and promote the participation of private capital (both Indian and
foreign) in such industrial units;
f) To furnish technical and managerial aid so as to increase production and expand
employment opportunities.
Functions
ix. It provides medium and long-term loans in Indian and foreign currency for
importing capital equipment and technical services. Loans sanctioned generally go
towards purchase of fixed assets like land, building and machinery;
x. It subscribes to new issues of shares, generally by underwriting them or directly
subscribing the same;
xi. It guarantees loans raised from private sources including deferred payment;
xii. It provides technical and managerial assistance to industrial units, along with
consultancy services for new projects;
xiii. It provides assets on lease to industrial concerns. In other words, assets are owned
by ICICI but allowed to be used by industrial concerns for a consideration called
lease rent.
xiv. It provides merchant banking services.
xv. Rs. 5 lakhs is the minimum amount sanctioned by it to a single concern and
normally it does not go beyond the maximum limit of Rupees one crore.
To meet the financial needs of small and medium enterprises, SFCs have been established
by State governments to meet the financial requirements of medium and small sized
enterprises.
There are 18 SFCs at present.
Functions
1. Grant of loans and advances to or subscribe to debentures of, industrial concerns
repayable within a period not exceeding 20 years, with option of conversion into
shares or stock of the industrial concern.
2. Guaranteeing loans raised by industrial concerns which are repayable within a
period not exceeding 20 years.
3. Guaranteeing deferred payments due from an industrial concern for purchase of
capital goods in India.
4. Underwriting of the issue of stock, bonds or debentures by industrial concerns.
5. Providing technical and administrative assistance to any industrial concern or any
person for the promotion, management or expansion of any industry.
6. Planning and assisting in the promotion and development of industries.
VIII. Tourism Finance Corporation of India (TFCI)
The Tourism Finance Corporation of India (TFCI) is a specialized all-India development
financial institution to cater to the needs to the needs of the tourism industry.
Functions
a) TFCI provides financial assistance to enterprises for setting up or the development
of tourism-related projects, facilities and services.
b) It also provides advisory and merchant banking services in this field.
c) The projects with a capital cost of ` 1 crore or above are generally eligible for
assistance from TFCI. Smaller projects would also be considered.
d) TFCI has sanctioned assistance to 2003 projects aggregating to ` 5.2 billion during
the last five years, resulting in more than 12,217 hotel rooms and direct
employment to 22,938people.
6. Environment Scanning:
a. Definition
b. Need for environment Scanning
c. Importance of environment
i. Identification of opportunities to get first mover advantage
ii. Formulation of strategies and policies
iii. Tapping useful resources
iv. Better performance
v. Sensitization of entrepreneurs to cope up with rapid changes
vi. Image building
7. Analysis of environment
a. Verbal information from customers, wholesalers, retailers distribution, consultants, etc.
b. Record of companies
c. Government publications
d. Publications by various financial institutions
e. Formal studies conducted by strategic planners
c. PESTEL Model
I. Political, IV. Technological,
II. Economic, V. Ecological &
III. Social, VI. Legal
a. The process of creating, developing and communicating ideas which are abstract, concrete or
visual
c. Ideas fields
i. Natural resources
ii. Existing products/services
iii. Market driven ideas/demand driven ideas
iv. Trading related ideas
v. Service sector ideas
vi. Creative effort of the entrepreneur
The process of basic idea becoming an opportunity is shown in the diagram below:
Skills Knowledge
Processing
Idea Opportunity
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1. Activity is thus, a symbol of human life and may broadly be categorized into:
a. Economic Activities:
b. Non-Economic activities:
2. Types Of Economic Activities- which are inspired mainly by economic consideration can
be classified in three broad categories:
a. Profession
b. Employment
c. Business
7. Factors defined by the decision that an entrepreneur selecting the form of ownership
8. Factors that will be taken into account while making a choice of Form of ownership
9. From the entrepreneur's point of view the most commonly opted out forms for starting a
new venture are:
4) Sole Proprietorship
5) Partnership
6) Company
11. Partnership:
(1) Meaning
(2) Characteristics of partnership
(3) Suitability of Partnership
(4) Consequences for non–registration of a partnership firm
(5) Drafting of partnership deed
(6) Registration procedure
(j) Appendix
i. Definition
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2) Marketing Strategy
Marketing strategy – Definition
What does the Marketing strategy of a company include?
i. Components of Marketing Mix:
(a) Definition
(b) The 4Ps that make up a typical marketing mix.
v. Promotion Mix
i. Define promotion mix
v. Public Relations
i. What are Public Relations?
ii. Who is a stakeholder?
iii. What are the main public relations tools?
iv. Typical public relations tools include:
E. NEGOTIATION
i. Define negotiations.
ii. How do good negotiations contribute significantly to business success,
iii. Categorization of Negotiation: Integrative negotiations, Distributive
negotiations , Inductive , Deductive , Mixed
F. CUSTOMER RELATIONS
i. CRM = customer relationship management.
ii. It entails all aspects of interaction that a company has with its customer,
whether it is sales or service-related.
iii. It is the process of carefully managing detailed information about
individual customers in order to manage loyalty.
iv. What does CRM enable businesses to?
v. How CRM is used today?
vi. The impact of technology on CRM.
vii. The benefits of CRM.
G. EMPLOYEE MANAGEMENT
i. Definition.
ii. Factors which lead to effective employee relationship
I. BUSINESS FAILURE
i. Definition
ii. The 12 broad causes that lead to a business failure are summarized
below.
i. Definition
ii. Common activities included in vendor management.
iii. How is vendor management done?
iv. Quality, timeliness and customer satisfaction
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3. Franchising:
a. Definitions of franchising, franchisor, franchisee and franchise agreement.
b. Main ingredients or components of a franchise agreement
c. Names of companies that have opted for franchising
d. Types of franchising with examples
e. How franchising helps start-ups
f. Advantages and disadvantages of franchising for:
i. Franchisee and
ii. Franchisor
Value Addition
1. Definition
2. Values added – financial and marketing point of view.
3. Examples of value that can be added.
4. Adding Value is a Business Strategy for Growth (Kevinzhengli) - Types of added value
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1. Unit of Sale, Unit Price and Unit Cost (Multiple Products or Services)
f. Some formulae:
Unit Price per customer = Total Billed Amount .
Number of Customers
i. Single Product
Calculate gross margin/contribution = Selling price per unit – variable cost per
unit
The formulae to calculate the figures given in the above steps can be been given as:
i. Gross Contribution per Unit = Selling price per unit – variable cost per unit
ii. Find Weighted contribution for each productby multiplying the Gross
Contribution Per Unit with the proportion or the units sold for each product, that
is,
Weighted contribution for Product = Gross Contribution per Unit x units sold
iii. Find Total Weighted contribution by adding all the Weighted contribution for
Products, that is
5. Working Capital
a. Need for capital
b. Fixed and Working Capital – Definitions
c. Need for working capital
i. Operating Cycle or Cash Conversion Cycle
In manufacturing activity and trading concern
Different products have different CCCs
6. Inventory Control
a. Define inventory
b. Define inventory control systems
c. Desirable behavior of any inventory item
d. Items that make up inventory
i. Stock keeping unit (SKU) code ii. Motley crowd iii. Space
iv. Standard vs. made to order v. Lead time vi. Safety aspects
vii. Seasonality of supply viii. Value ix. Shelf life
x. Demand not uniform/particular xi. Obsolescence xii.
c. Return on equity
ROE = Net Income x 100
Equity
d. The acronym EBITDA stands for earnings before interest, taxes, depreciation and
amortization.
e. Why calculate EBITDA and what its utility is.
f. The extraneous factors must be normalized to measure or compare true
effectiveness of one operation and the managerial decisions with another
one(interest, taxes, depreciation and amortization)
g. Price for a business is often quoted in terms of a multiple of its EBITDA – say (M) x
(EBITDA). M has numerical value that varies from industry to industry.
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Unit 6 – Resource Mobilization
1. Define finance
2. Reasons why finance is needed right from the beginning.
3. 3 questions related to finance to be answered before an entrepreneur does anything.
4. Sources from which an entrepreneur can raise funds.
5. All of them have different Obligations, Responsibilities and Opportunities.
6. Sources of funds
External Sources
Angel Venture
SFIs Capital Markets
Investors Capital
Secondary Primary
Market Market
Offer Private
to Placement
Employees
7. Capital Markets:
a. Definition
b. Why is it considered to be the most important source of capital for an entrepreneur?
c. Primary (new Issues) Market
i. Used by entrepreneurs for:
ii. May be issued by
iii. Methods of floatation of new issues:
5. Public issue
a. Definition
b. Advantages of public issue
i. Access to capital( uses of such funds)
ii. Other advantages
c. Drawbacks of going public
6. Rights issue
7. Private placement
8. Offer to the employees (leads to)
9. Venture Capital
a. Definition
b. Venture capital helps in creation of:
c. Features of venture capital
d. Funding
e. When to seek venture capital - Entrepreneurs can typically seek venture capital to
assist at any of the following four stages in the company's development.
1) Early stage financing - This stage includes:
(a) Seed capital
(b) Pre-start up and start up
(c) Second-round financing.
2) Last stage financing /bridge /pre-public stage
f. Entrepreneurs to watch out for
2 mark questions
1. State what has to be ensured by an entrepreneur before selecting an opportunity?
2. Enlist any two factors involved in sensing opportunities.
3. Why do we need to scan our environment?
4. Enlist any four micro factors in business environment.
5. Differentiate between ‗marketing‘ and ‗market research‘.
6. In transformation of ideas into opportunities different processes are followed. Name and
state the process.
7. Give two examples for ‗service sector ideas‘.
8. What is the basic test of a successful entrepreneur?
3 mark questions
1. Enlist any three elements of a business opportunity.
2. Explain vision and creativity as a factor in the process of sensing opportunities.
3. Enlist any three sources from where information for environment scanning can be
obtained.
4. What is meant by perceiving and sensing opportunities?
5. Enlist the objectives of problem identification.
6. With the help of an example explain the meaning of ‗Watch trends‘.
7. Why is creativity important for an entrepreneur?
8. ‗This is the subconscious assimilation of information‘. Identify and explain the stage in
creative process.
9. What is meant by analysis of environment and what does it include?
4 mark questions
1. Draw and explain the ‗Enterprise Process Diagram‘.
2. Draw and explain the opportunity project interface.
3. What is ―Problem Identification‖? State how it helps an entrepreneur.
6 mark questions
1. Explain with the help of an example any three sources which lead to the emergence of
basic ideas.
2. Explain the various factors an entrepreneur has to keep in mind while assessing the
market?
3. Explain any four benefits of understanding business environment.
4. What are the various steps involved in in assessing the potentiality of an opportunity?
5. Explain PESTEL model with the help of an example.
6. Explain with the help of an example the ways in which creative ideas can be generated.
7. Isha was travelling around the country, when she realised that people tend to eat chips in
all the parts of the country. She was wondering if she could introduce new variety of chips
such as carrot chips, Bitter gourd chips etc., and also use a new technology which can air
fry the chips without using any oil. Explain the various steps involved in assessing the
potentiality of an opportunity keeping in mind the product identified.
8. The process of creativity involves various steps. Explain the steps.
9. Yash, a budding entrepreneur is planning to introduce an innovative bag which can
charge cellphones using solar power which will be useful for travellers. The market
assessment of this product depends on many factors. Explain the factors.
4 marks
1. Enlist any 4 ways in which a private individual can start a business venture.
2. Name the factors an entrepreneur has to keep in mind whilst choosing a business
enterprise.
3. Differentiate between a private company and a public company.
4. State the situations when a company form of business is more suitable?
5. What categories of persons are required to obtain registration with the Central Excise
Department?
6. State the various permissions required in the construction stage?
7. Explain any four features of co-operative organisations.
8. Who should write the business plan?
9. Explain the various formats of business plans.
10. Meenu was involved in partial manufacturing of wardrobes. Explain the elements which
should be included in her production plan.
11. How does a production plan help an entrepreneur?
12. State the various elements involved in an organizational plan?
6 marks
1. What are the characteristics of sole proprietorship?
2. Define sole proprietorship state when this type is more suitable?
3. Explain in detail the registration procedure to be followed in sole proprietorship.
4. Elaborate on the essential features of partnership.
5. What is a partnership deed? Enlist the various contents of the deed.
6. Explain the registration procedure of a partnership concern
7. ‗Members may come, members may go ; neither the company stops nor is slow‘.In the
light of the given statement explain the characteristics of a company.
8. Why is a private company more desirable?
9. Explain the main features of HUF.
10. What are the legal formalities involved in formation of HUF.
11. Explain the importance of a business plan.
12. Elaborate on the various elements of operational plan.
13. Explain any four major components of financial plan.
14. What elements should be included in manpower planning?
15. Explain the various steps involved in preparing a marketing plan.
Mark 2
1. Define marketing strategy.
2. Explain the term ‗Brand‘.
3. Define branding.
4. Differentiate between trademark and brand mark.
5. What is an alpha numeric name in an industrial product?
6. Differentiate between individual brand name and family brand name.
7. Explain tagline with the help of an example.
8. What is a sales strategy?
9. Enumerate the significance of sales strategy.
10. Name any four major sales promotional activities?
11. What is meant by Public Relations?
12. Explain the term ‗Negotiation‘.
13. Identify the type of negotiation in the following situations:
a. It starts with an agreed upon strategy
b. They are most common form of negotiation.
14. How is CRM used today?
15. What is meant by vendor management?
Mark 3
1. Why is goal setting important?
2. State the rules for goal setting?
3. What does the marketing strategy of a company include?
4. Explain the components of Product mix.
5. Explain the three components of brand.
6. What is the importance of intellectual property for an entrepreneur?
7. Differentiate between patent, copyright and industrial design.
8. Explain Place mix as an element of marketing mix.
9. What considerations related to manufacturer affect the choice of channel of distribution?
10. Explain the different types of sales strategies.
11. What are the components of sales strategies?
4 mark
1. Explain the following terms:
a. Internal expansion b. External expansion
2. Explain the main features of franchise agreement.
3. Rekha is planning to start a food business. How franchising help her?
4. Enlist the disadvantages of franchising to the franchisor and franchisee.
5. Explain the two forms in which mergers can take place?
6. Explain the different types of acquisitions.
7. What are the different types of value addition that a company can employ to improve its
products?
2 mark
1. In case of multi product or services industries how unit cost is calculated?
2. Identify expenses which are not a part of gross margin?
3. Why ROI decreases if rate of tax increases?
4. Why is depreciation and amortization added back to profit?
5. Why will debit be added while calculating capital employed?
6. What is meant by financial management?
7. What is the chief cost of budgeting process?
8. State the need for working capital.
9. Give some examples of gross working capital.
10. What is meant by ‗lead time‘?
11. Give the formulae for calculating ROI and ROE.
3 mark
1. Give the meaning of ‗ EBITDA‘? Why is it calculated?
2. State any three objectives of return on equity.
3. How can ROI of a company define its earning capacity of business?
4. If the cost of product is 75% of selling price. Calculate the gross margin per unit.
5. Net profit after interest but before tax 65,000; Shareholders funds 3,00,000 15% debt on
1,00,000. Calculate ROI.
6. What is contribution approach method?
7. State the objectives of financial management.
8. Differentiate between budget and budgeting.
9. What is Economic Order Quantity?
4 marks
1. What is meant by cash flow projection?
2. State the essentials of a budget.
3. Give the benefits of budgeting.
4. Explain the two forms of budgeting process.
5. Explain the ‗Pareto Principle‘ of ABC analysis
6. How EOQ is calculated
Reserve 1,54,000
6 Mark
1. A grocery store sold in one day the following items at the prices indicated.
40/Kg 35 Kgs
Dal
40/Kg 4 Kgs
Chilli powder
5/Kg 5 Kgs
Salt
15/Packet 10 packets
Chips
10/Pack 5 packs
Juice pack
The shopkeeper also found out, based on the number of bills issued by him,
that there were 50customers. If customer is the unit of sale, what is the
―Unit Price‖ in this case? If the cost of each grocery item is 75% of its selling
price, calculate the ―Unit Cost‖ and the ―Gross Marginperunit of sale.
2 mark
1. Explain Initial Public Offer.
2. Differentiate between ‗rights issue‘ and ‗ private placement‘ as methods of raising finance.
3. What is crowd funding
4. Who are angel investors?
5. What is the bridge stage?
6. List any two specialised financial institutions at national level
7. State any two objectives of IDBI.
8. Explain the role of IIBI.
9. What is SIDC?
3 mark
1. What is meant by Money Markets? State its features.
2. Who are the major participants in Money Markets ?
3. Explain the different instruments of Money Market.
4. Differentiate between commercial paper and Commercial bill.
5. Why is the capital market the most important source of finance.
6. What do these stand for.
a) NAV
b) SEBI
c) ROC
7. Give the meaning of private placement.
8. Explain the features of angel investors.
9. State any three points which highlights the need for specialised financial institutions?
10. Explain the functions of SIDBI.
4 mark
1. Explain the limitations of Public Issue.
2. Company A goes for public issue of 10,000 shares @Rs.10 each. Applications were received
for only 5,000 shares. Can the company proceed with the process of issuing shares? Give
reason in support of your answer.
Unit of Sale, Unit Price and Unit Cost (Multiple Products or Services)
Question 1: A stationery store sold in one day the following items at the prices indicated. The
shopkeeper also found out, based on the number of bills issued by him, that there were 50
customers. If customer is the unit of sale, what is the Unit Price in this case? If the cost of each
stationery item is 75% of its selling price, calculate the Unit Cost and the Gross Margin per unit of
sale.
Unit Price per Unit of Sale or, Unit Price per Customer =
_________
Total Billed Amount ( ) = ( )
Total No. of Customers 50
Gross Margin per unit of sale = Unit Price Per Customer – Unit Cost Per Customer
o Gross Margin per unit of sale = 93 – 69.75
o Gross Margin per unit of sale = 23.25 per customer
10
1
17
2
13
3
22
4
18
5
80
total
Total Billed Amount ( )
Unit Price per Unit of Sale or, Unit Price per Customer =
___________________
Total Billed Amount ( ) = 11,600 ( )
Total No. of Customers 80
Gross Margin per unit of sale = Unit Price Per Customer – Unit Cost Per Customer
o Gross Margin per unit of sale = 145 – 87
o Gross Margin per unit of sale = 58 per customer
Illustration 2: Restaurant
Number of people who took their meals and the total billing for each of the 5 weeks is in the
following table. What are the Unit of sale and the Unit Price in this case? If the variable cost is 50%
of the sale price, calculate the Unit Cost and the Gross Margin per Unit of Sale.
Week No. Of Customers Total Amount Billed (`) Average Amount Billed
Taking Meals
(`) Per Customer
120 18,000 150
1
60 12,300 205
2
70 10,220 146
3
80 17,680 221
4
90 21,600 240
5
420 79,800
total
Solution:
Week No. of customers Total amount billed (`) Avg amt billedper customer
120 18,000 150
1
60 12,300 205
2
70 10,220 146
3
80 17,680 221
4
90 21,600 240
5
420 79,800
total
Total Billed Amount ( ) 79,800
Unit Price per Unit of Sale or, Unit Price per Customer =
190
Total Billed Amount ( ) = 79,800 ( )
Total No. of Customers 420
Gross Margin per unit of sale = Unit Price Per Customer – Unit Cost Per Customer
o Gross Margin per unit of sale = 190 – 95
o Gross Margin per unit of sale = 95 per customer
Solution:
B.E. Point =𝐹𝑖𝑥𝑒𝑑𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠 .
(Selling price per unit – variable cost per unit)
Questions:
A. Suppose the company currently sells 140,000 alligators per year and 60,000 dolphins per
year (Sales Mix Percentage 14:6). Assuming the sales mix stays constant how many
alligators and Dolphins must the company sell to break even?
B. Suppose the company currently sells 60,000 alligators per year and 140,000 dolphins per
year (Sales mix percentage 6:14). Assuming the sales mix stays constant, how many
alligators and dolphins must the company sell to break even per year?
C. Explain why the total number of toys needed to break even in (a) is the same as or
different from the number in (b).
Solution: 1A
9,00,000
Contribution Margin = 16,80,000
= Contribution Margin per unit x Number of Units Sold
= 30,000 units
Solution: 1B
Contribution Margin =
= Contribution Margin per unit x Number of Units Sold
= Net Income
= _______per unit
The total number of toys needed to break even in (A) is different from the number in (B) and
lower also. This is due to the reason as weighted contribution per unit has increased; fixed cost
spreads over greater number of rupees letting the breakeven to be achieved early. Perhaps (b)
sales mix is more efficient and gives the firm a hint to produce toy dolphins more as contribution
per unit of a toy dolphin is also higher.
Question II:
Let us look at a manufacturing plant that produces four different types of machine tools and their
cost, price and BE Qty. The fixed costs are allocated – taking in to consideration the utilization of
common resources for different products. Here is the basic data:
Products: A, B, C and D
Selling Price: 100,000; 50,000; 70,000 and 2,00,000 respectively
Variable Cost: 30,000; 25,000; 30,000 and 100,000 respectively
Allocated Fixed Expenses per month: 350,000; 250,000; 1,000,000 and 1,500,000
respectively
Product A B C D
50,000 70,000 2,00,000
Sales price per unit 1,00,000
25,000 30,000 1,00,000
Variable cost per unit 30,000
If a particular product consistently fails to move beyond the BE level, then it is a candidate
for some management discussion
o How to increase sales or
o Reduce costs (variable as well as fixed) etc.
o If all else fails, then dropping the product is the preferred management action.
BE analysis helps in such decision making. Please note that such decisions are product
related and not business related.
Question III:
Textile shop - please calculate breakeven point. Garments sold are silk saris, cotton saris, suit
materials, kids wear.
=𝐸 √
OR
Example 1:
Annual qty of jeans sold by a shop is 1,200 at the rate of 100/- per month. Cost of placing an
order and receiving goods is 500/- per order. Inventory holding cost is 30/- per annum. What
is the economic order Qty for the shop keeper?
Here, D = 1,200; P = 500 and C = 30.
So 2 x P x D = 12, 00,000
This divided by 30 = 40,000.
Square root of which is = 200. So the EOQ is 200 jeans.
Example 2:
A book shop sells pens – 30,000 qty per year. Demand is uniform. Purchase cost is 6/- per pen.
Holding cost per annum is 20% of purchase cost. Ordering cost is 500/- per order. What should
be the EOQ for the shop keeper?
Here, D = 30,000; P = 500 and C = 1.2 (20% of 6)
So 2 x P x D = 3, 00,00,000
This divided by 1.2 = 2, 50,00,000
Square root of which is = 5,000
So the EOQ is 5,000 pens.
𝐸 √
𝐸 √
Return on investment
If, for example, you spend 100,000/- to open a grocery shop and make a net profit of 20,000/- in
one year, your annual ROI equals (20,000/100,000) x 100 = 20 percent. When calculating ROI, the
investment will include not only what the investor spent out of his/her pocket, but also all
borrowed funds. In the example, the owner might have invested 40, 000/- of his own money
(equity) and secured a loan for ` 60, 000/-.
Return on equity
You can calculate ROE by dividing the net income by the equity of the investor and multiplying
the result by 100. In the example, the grocery owner has an equity stake of 40,000/- in the
business. He has borrowed 60,000/-. This will attract an interest of 6,000/- @ of 10% per
annum. The net profit, then would be 14,000/- (= 20,000 – 6,000). So, ROE is (14,000 / 40,000) x
100 = 35 percent. This means that for every Rupee of own money the owner put into the business,
he made 35 paisa. The ROI of 20 percent, on the other hand, means that for every Rupee of
combined assets and loans invested, the business yielded a 20 paisa average profit per Rupee
invested (equity plus loan).
Some Ratios
ROI =(F/X)
ROE = (F/Y)
Calculation of EBITDA
Profit Before Tax (PBT)
+ Interest
+ Depreciation
+ Amortization
EBITDA/Investment
EBITDA/Equity
EBITDA – Stands For Earnings Before Interest, Tax, Depreciation And Amortization. This Is Arrived At By
Adding Interest, Depreciation And Amortization To PBT.
Breakeven Analysis
Question 1 A factory manufacturing shirts gives you the following information:
Sales 2,00,000
Direct labour costs(for 1000 units) 20,000
Direct material costs(for 1000 units) 50,000
Direct expenses(for 1000 units) 10,000
Fixed Costs 60,000
Find out
a. Variable cost per unit
b. Total cost
c. Quantity to be sold at breakeven point
Solution 1 a. Variable cost per unit = Direct labour costs + Direct material costs + Direct expenses
Number of Units
B.E. Point = .
(____________ per unit – _________ per unit)
B.E. Point = .
(____________ per unit – _________ per unit)
Question 3 Find Breakeven point if Fixed costs = 40,000; Variable Cost = 2 per unit and sales price =
4 per unit.
Solution 3
B.E. Point =𝐹𝑖𝑥𝑒𝑑𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠 .
(Selling price per unit – variable cost per unit)
B.E. Point = .
(____________ per unit – _________ per unit)
B.E. Point = .
(____________ per unit – _________ per unit)
B.E. Point = .
(____________ per unit – _________ per unit)
Solution 5 a. Variable cost per unit = Direct labour costs + Direct material costs + Direct expenses
Number of Units
Question 6 A company has invested 20,000 on land; 10,000 on building and 10,000 on furniture. The
selling price of its product is 10 per unit and the variable cost of the same is 2 per unit.
Calculate the breakeven point.
i. Calculate BEP.
ii. What should the selling price per unit be if the breakeven point is 12,000 units?
Solution 8
(i) B.E. Point =𝐹𝑖𝑥𝑒𝑑𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠 .
(Selling price per unit – variable cost per unit)
B.E. Point = .
(____________ per unit – _________ per unit)
(ii)
B.E. Point =𝐹𝑖𝑥𝑒𝑑𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠 .
(Selling price per unit – variable cost per unit)
12,000 = 1, 08,000 .
Selling price per unit – 15
𝐸 √
𝐸 √
Question 3 The annual usage of an item is 20,000 units, ordering costs are 100 per order and carrying
costs are 20 per unit per year. Calculate EOQ.
Question 4 A company purchased 9,000 parts of a component for its annual requirement. Ordering cost of
one component is 20, carrying cot is 15% of the cost of one component per year. Advise the
management for procurement policy (calculate EOQ).
Question 5 Calculate EOQ if the company has to pay a carrying cost of 60 per unit, the monthly usage
rate is 80 units and the cost to place an order is 10.
Current Assets:
Stock
Debtors
Cash
Short Term Investments
Total Current Assets
Current Liabilities:
Trade Creditors
Dividend Payable
Tax
Short Term Loan
Total Current Liabilities
Ramu is buying and selling ice-cream. Explain his working capital requirement.
Question 2
Current Assets:
Stock
Cash
Current Liabilities:
Trade Creditors
Question 3 An entrepreneur proposes to produce 100 leather bags per week for which he needs 5,500 for
purchasing raw material and 2,500 for payment of labor charges. Calculate the working
capital requirements.
Working capital requirement = Total Expenses For The Month
Working capital requirement = _____________ + _____________
Working capital requirement = ___________________________________
Question 4 If the operating cycle of a product is 2 months, calculate the working capital requirements if
miscellaneous expenses incurred monthly is 8,000; depreciation charged is 5% on the fixed
assets worth 16,00,000 and raw material required for the month is expected to be 16,000.
Misc expenses
Deprecation
Raw material
Total Expenses For The Month =
Working capital requirement = Total Expenses For The Month x operating cycle
Working capital requirement = _____________ x _____
Working capital requirement = ___________________________________
Salaries
Rent
Misc expenses
Deprecation
Raw material
Total Expenses For The Month =
Working capital requirement = Total Expenses For The Month x operating cycle
Working capital requirement = _____________ x _____
Working capital requirement = ___________________________________
Question 6 Calculate working capital when raw material is 15,000 for 3 months; salaries = 10,000
(including outstanding salaries of 2,000) for 1 month; monthly rent to be paid 5,000.
Bimonthly telephone bills 1,500; electricity charges for 1 month 7,500 and operating cycle of
a product is 2 months.
Question I:
A company produces 2 products, A and B. Fixed costs are 18, 00,000 per year. Sales revenue and
variable costs per unit are as follow:
Product A B
650
Sales price per unit 800
600
Variable cost per unit 700
Suppose the company currently sells 500 units of A per year and 2,000 units of B per year.
Assuming the sales mix stays constant how many A and B must the company sell to break even?
Question II:
A company produces 2 products, A and B. Fixed costs are 11, 20,000 per year. Sales revenue and
variable costs per unit are as follow:
Product A B
380
Sales price per unit 265
340
Variable cost per unit 245
Suppose the company currently sells 6,000 units of A per year and 4,000 units of B per year.
Assuming the sales mix stays constant how many A and B must the company sell to break even?
Question III:
A company produces 2 products, A and B. Fixed costs are 45, 00,000 per year. Sales revenue and
variable costs per unit are as follow:
Product A B
385
Sales price per unit 275
335
Variable cost per unit 225
Suppose the company currently sells 10,000 units of A per year and 8,000 units of B per year.
Assuming the sales mix stays constant how many A and B must the company sell to break even?
Viva 5 marks.
The student will have to prepare 2 projects and prepare 2 project files. They will also have a
written paper worth 5 marks that they will have to appear for on the day of the CBSE Practical
Examination
Written paper:
The students will get a 5 mark question from any one or a combination of the given
topics:
Calculation of EOQ.
Calculation of Working capital Requirements
Calculation of Break Even point.
Identification and calculation of start up costs/fixed costs/variable costs.
Year:2016-17
Analysis of questions:
Tally-Bars
Data Analysis and Blank Questionnaire
Analysis
Interpretation
Decisions
Pie-Chart S &
Bar Diagrams
2. Certificate of Authenticity
Print the Certificate
3. Acknowledgements
I , ______________________, do hereby declare that this project is my original work and I
would like to thank Ms _______________________, my Entrepreneurship teacher, for her
wholehearted support and guidance for making it possible to complete this project on time. I
would also like to thank CBSE for giving us an opportunity to widen our knowledge base by
introducing this topic of study and my school for giving us this subject option.
I would also like to thank my friends and family members for their kind support and
guidance without which this project could not have been completed.
4. Executive Summary
For my Market Survey, I choose to find out the feasibility of producing a
______________ and the innovation I introduced was----------------------------------.
OR
For my Market Survey, I choose to find out the feasibility of providing a
______________ service and the innovation I introduced was---------------------------.
To see whether my business would be successful or not, I prepared and administered
a questionnaire containing ______ questions to 25 respondents.
Once my respondents filled in these questionnaires, I analysed them. For every
question, I prepared tally bars that summarised their responses, and I identified the
least and the most favourable responses.
On the basis of these responses, i took decisions that helped me to plan out the 4 P‘s
for my product namely:
i. The features that my product/service should have
ii. The price that they will be willing to pay for my services
iii. The distribution network they would prefer
iv. The ,promotion techniques that I should use for my product.
What is marketing?
The definition that many marketers learn as they start out in the industry is:
Putting the right product in the right place, at the right price, at the right time.
It's simple! You just need to create a product that a particular group of people want, put it on sale some
place that those same people visit regularly, and price it at a level which matches the value they feel they
get out of it; and do all that at a time they want to buy. Then you've got it made!
The marketing mix and the 4 Ps of marketing are often used as synonyms for each other. In fact, they are
not necessarily the same thing.
Marketing Mix
There are a large number of factors that affect marketing decisions. They can be classified as:
Non-controllable factors and Controllable factors:
To be successful, a firm needs to take sound decisions wrt controllable factors while keeping the
environmental factors in mind.
To develop marketing tools, marketing managers use the abovementioned controllable factors and the set of
marketing tools that a firm uses to pursue its marketing objectives in the target market is described as
Marketing Mix.
Success of a market offer will depend upon how well these ingredients are mixed to create
superior value for customers and simultaneously achieve their sales and profit objective. Thus, an
ideal marketing mix would need:
Producing satisfying products
Offered to buyers at a reasonable price
Conveniently available
About which communication is offered.
Marketing mix" is a general phrase used to describe the different kinds of choices organizations have to
make in the whole process of bringing a product or service to market. The 4Ps is one way – probably the
best-known way – of defining the marketing mix, and was first expressed in 1960 by E J McCarthy. The
4Ps are:
Product (or Service), Place, Price and Promotion.
A good way to understand the 4Ps is by the questions that you need to ask to define your marketing mix.
Here are some questions that will help you understand and define each of the four elements:
Place Mix:
Set of decisions that need to be taken in order to make the product available for purchase and
consumption of the target market at the right place, in the right time and at the right price.
It includes all the activities involved in transferring ownership and physical possessions of the
product o the consumer.
It involves decisions wrt:
o Channels of distribution- selection of intermediaries/dealer to reach the customers, providing
support to the intermediaries etc.
o Physical distribution-managing inventory, storage, warehousing and transportation of goods
from the place where they are produced to the place where it is required by the buyer.
Price Mix:
It is a value that a buyer passes on to the seller in lieu of the product or services provided.
It is a source of revenue for the seller.
Decision also includes pricing methods, pricing strategies, pricing policies, price changes, discounts
to be offered, credit terms etc.
Price is the cost the customers has to bear for the product and so must be set so that the customers
perceive the price to be in lieu with the value of the product.
Promotion Mix:
These are activities undertaken to persuade and motivate people to buy their products.
It involves communicating the features, attributes, availability, merits etc of the product to both the
customers and the participants in the channels of distribution in order to achieve sales goals.
Tools used include advertising, sales promotion, personal selling etc.
The 4Ps model is just one of many marketing mix lists that have been developed over the years. And,
whilst the questions we have listed above are key, they are just a subset of the detailed probing that may be
required to optimize your marketing mix.
To identify our target market and find out their key needs.
To find out the possibility of marketing a ______________________
To conduct a market survey that will give an indication about whether the product that I
have designed meets the needs of my target market.
To help me get an idea about the :
i. Price range at which I should offer my product.
ii. What channel of distribution I should use to distribute my product.
iii. The similarities and differences between my products and customers and my
competitors' products and customers.
iv. To understand when do customers buy and the factors that influence their buying
decisions- Convenience, price, quality, reputation, location, selection, brands,
impulse, etc.
v. To find out how do customers buy - Cash, credit, etc.
vi. To find what price they will be willing to pay for my product.
vii. To identify the promotion schemes that will have a positive impact on their buying
behaviour.
1.Brand names
2.Delivery
3.Installation
4.Warranty service
5.Variety of selection
6.Credit terms
7.Return policy
8.Convenient location
9.Parking
10.Appropriate atmosphere
12.Experienced personnel
Tally Bars:
Options Tally bars Total
Price IIII 5
Total 20
Analysis:
On the basis of survey conducted maximum number of consumers are motivated to
buy a washing detergent by looking at the quality of detergent, as 12 respondents
look at quality whereas 5 and 3 respondents focuses on price and brand image of
detergent respectively.
11.Photographs(if any)
12.Bibliography
Names of books used and website addresses.
13.Appendix
Any specific terms used are to be defined here.
All filled in questionnaires are to be attached here.
Any printed research material to be attached here.
14.Teacher’s Observations
Take a print of the market survey Evaluation form.
Business Plan:
Year:2016-17
Competitive advantage
and USP of your Marketing Plan Cost Decisions
product/service/firm
Tiffin service
Chocolates Stationary
Crèche
Soap Flower shop
Pet care center
Detergent powder/
liquid soap
Sandwiches
1. Cover page
Design an attractive cover
2. Certificate of Authenticity
Print the Certificate
3. Acknowledgement
4. Index:
(Print the index given and then copy the theory given below)
BUSINESS PLAN
Planning can be defined as "thinking in advance what is to be done when it is to be done, how it is to be
done and by whom it should be done."
The entrepreneur must make some important decisions and gather information about the external and
internal factors so as to address the integration and co-ordination of effective business objectives and
strategies related to his proposed venture.
Thus, the content and the format of the business plan is such which is able to represent all these
aspects of business planning process.
Hence, a business plan gives adequate clarity to the entrepreneur, Investor(s) and the government
of:
o What an entrepreneur is doing,
o Why he/she is doing it, and
o How he/she will do that?
The depth and detail in the business plan depends on the size and scope of the proposed new
venture. There is no fixed content for a business plan as it varies according to the entrepreneur's
goals and audience (i.e. who are being targeted).
Thus, it is common for especially start-ups to have three or four formats as follows for the same
business plan.
i. Elevator pitch:
a. It is a three minute summary.
ii. A pitch deck with oral narrative:
a. slide show and oral narrative that includes the executive summary and a
few key graphs showing financial trends and key decision making benchmark.
iii. A written presentation for external stakeholders:
a. A detailed, well written, and pleasingly formatted plan targeted at external
stakeholders.
iv. An internal operational plan:
a. A detailed plan describing planning details that are needed by management but may
not be of interest to external stakeholders.
Depending upon the entrepreneur's experience, knowledge and purpose, generally a business plan
outlines sequentially following components or parts:
1. Introductory cover 4. Production plan 7. Marketing plan
page/general introduction 5. Operational plan 8. Financial plan
2. Business venture 6. Manpower Planning 9. Assessment of risk
3. Organisational plan 10. Miscellaneous/appendix
Organizational plan describes the proposed venture's form of ownership. Each type of business
differs significantly in terms of:
1. Commencement procedures 4. Accounting methods
2. Legal constraints 5. Marketing and promotional strategies
3. Financial requirement 6. Risk and liability
Each of these forms has important implications on (i) Taxes (ii) Liability (iii) Continuity (iv)
Financing (v) Ownership. No form is the best form. Entrepreneur in light of multiple factors (as
already discussed) decides the legal structure, best suited to attain his dream.
To conclude, both the entrepreneur and the potential investors stands to gain from the
organizational plan as the design of the organization so opted helps even in:
o Specifying the types of skills needed and the roles that must be filled by the member
o Chalking out informal organization or culture.
Hence, a production plan helps to plan the work in such a manner that one can clearly form an idea
about:
Production schedule and/or budget
Machinery, equipment requirement
Manufacturing method and process involved
Plant layout
There may be three situations before the venture viz complete manufacturing, partial
manufacturing and no manufacturing.
V. OPERATIONAL PLAN
Operations plan ensures "work your plan".
It is actually a blue print prepared right in advance of actual operations —
ii. Ensuing orderly flow of materials in the manufacturing process
iii. Facilitating continuous production, lesser work-in-progress and minimization of
wastage.
iv. Co–ordinating the work of engineering, purchasing, production, selling and
inventory management.
v. Describing the flow of goods / services from production point to the consumers.
vi. Introducing a proper system of quality control
vii. Undertaking the best and most economic production policies and methods.
Normally, each year the entrepreneur should prepare an annual marketing plan so as to gel well
with the changing business environment and its forces
Steps in preparing the marketing plan - procedure for preparing the marketing plan involves
following steps:
i. Business situation analysis
ii. Identify the target market
iii. Conduct SWOT analysis
iv. Establish goals
v. Define marketing strategy
vi. Implementation and monitoring of the plan.
The financial plan is so designed that the entrepreneur and the investors could have a clear picture
of:
a) How much funds are required?
b) Where will funds come from?
c) How are they disbursed?
d) The amount of cash available
e) General financial well-being of the new venture i.e. probable revenue forecast for the first year at
least.
As the financial plan must explain to any potential investor how the entrepreneur plans to meet all
financial obligations and maintain its liquidity in order to either pay off debt or provide good return
on investment, several financial projection techniques and tools are made use of by the
entrepreneur. In general, the financial plan will need three years of projected financial data to
satisfy any outside investors.
Components of financial plan Major financial items that should be included in the financial plan
are:
1. Proforma Investment Decisions 4. Proforma Cash Flow
2. Proforma Financing Decisions 5. Proforma Balance Sheet
3. Proforma Income Statements 6. Break-Even Analysis
7. Economic And Social Variables
IX. ASSESSMENT OF RISK
a. There are some hazards, risks, or/and obstacles always present in the competitive
environment. In a business plan, entrepreneur should:
i. Identify potential hazards
ii. Develop alternative strategies to either prevent minimize or respond to the risk.
X. APPENDIX
a. contains any backup material that is not necessary in the text of the document as:
i. Letters from customers, distributors etc. , Any primary or secondary research data ,
Copies of contracts, agreements or any price lists if received.
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5. Objectives:
To find out the feasibility of starting a business to sell ______________
OR
To find out the feasibility of starting a business to provide ______________________ services
OR
To find out the feasibility of starting a business to trade in _________________.
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A logo is a graphic mark or emblem commonly used by commercial enterprises, organizations and even
individuals to aid and promote instant public recognition. Logos are either purely graphic (symbols/icons)
or are composed of the name of the organization (a logotype or word mark).
In the days of hot metal typesetting, a logotype was a uniquely set and arranged typeface or colophon. At
the level of mass communication and in common usage a company's logo is today often synonymous with
its trademark or brand.[2] The current era of logo design began in the 1870s with the first abstract logo,
the Bass red triangle. Today there are many corporations, products, brands, services, agencies and other
entities using an ideogram (sign, icon) or an emblem (symbol) or a combination of sign and emblem as a
logo. As a result, only a few of the thousands of ideograms people see are recognized without a name. An
effective logo may consist of both an ideogram and the company name (logotype) to emphasize the name
over the graphic, and employ a unique design via the use of letters, colors, and additional graphic
elements.
Tagline In entertainment, a tagline (or tag line) is a small amount of text which serves to clarify a
thought for, or designed with a form of, dramatic effect. Many tagline
slogans are reiterated phrases associated with an individual, social group, or product. As a variant of
a branding slogan, taglines can be used in marketing materials and advertising.
The idea behind the concept is to create a memorable phrase that will sum up the tone and premise of
a audio/visual product,[note 1] or to reinforce and strengthen the audience's memory of a literary product.
Some taglines are successful enough to warrant inclusion in popular culture. Consulting companies
which specialize in creating taglines may be hired to create a tagline for a brand or product.
d. My tagline is _________________________________________________
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Competitor analysis in marketing and strategic management is an assessment of the strengths and
weaknesses of current and potential competitors. This analysis provides both an offensive and defensive
strategic context to identify opportunities and threats. Profiling coalesces all of the relevant sources of
competitor analysis into one framework in the support of efficient and effective strategy formulation,
implementation, monitoring and adjustment.
Competitor analysis is an essential component of corporate strategy. [2] It is argued that most firms do
not conduct this type of analysis systematically enough. Instead, many enterprises operate on what is
called ―informal impressions, conjectures, and intuition gained through the tidbits of information about
competitors every manager continually receives.‖ As a result, traditional environmental scanning
places many firms at risk of dangerous competitive blind spots due to a lack of robust competitor
analysis.
Competitive advantage occurs when an organization acquires or develops an attribute or
combination of attributes that allows it to outperform its competitors. These attributes can include
access to natural resources, such as high grade ores or inexpensive power, or access to highly trained
and skilled personnel human resources. New technologies such as robotics and information
technology can provide competitive advantage, whether as a part of the product itself, as an advantage
to the making of the product, or as a competitive aid in the business process (for example, better
identification and understanding of customers).
The unique selling proposition (USP), or unique selling point, or "'unique selling product"' or "'
unique selling price"' is a marketing concept first proposed as a theory to explain a pattern in successful
advertising campaigns of the early 1940s. The USP states that such campaigns made unique
propositions to the customer that convinced them to switch brands. The term was developed
by advertising pioneer Rosser Reeves of Ted Bates & Company. Theodore Levitt, a professor at Harvard
Business School, suggested that, "Differentiation is one of the most important strategic and tactical
activities in which companies must constantly engage." The term has been used to describe one's
"personal brand" in the marketplace. Today, the term is used in other fields or just casually to refer to
any aspect of an object that differentiates it from similar objects.
Unique propositions that were pioneers when introduced include:
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8. Marketing Plan
A target market is a group of customers towards which a business has decided to aim its marketing efforts
and ultimately its merchandise. A well-defined target market is the first element to a marketing strategy.
The marketing mix variables ofproduct, place (distribution), promotion and price are the four elements of
a marketing mix strategy that determine the success of a product in the marketplace.
Target markets are groups of individuals that are separated by distinguishable and noticeable aspects.
Target markets can be separated by the following aspects:
Geographic segmentations - addresses (their location climate region)
demographic/socioeconomic segmentation - (gender, age, income, occupation, education, household size,
and stage in the family life cycle)
psychographic segmentation - (similar attitudes, values, and lifestyles)
behavioural segmentation - (occasions, degree of loyalty)
product-related segmentation - (relationship to a product)
In addition to these segmentations, market researchers have advocated a needs-based market segmentation
approach to identify smaller and better defined target groups. Some approaches to these smaller groups
are:
Select the target audience – the customers are grouped based on similar needs and benefits sought by
them on purchase of a product.
Price Mix:
It is a value that a buyer passes on to the seller in lieu of the product or services provided.
It is a source of revenue for the seller.
Decision also includes pricing methods, pricing strategies, pricing policies, price changes,
discounts to be offered, credit terms etc.
Price is the cost the customers has to bear for the product and so must be set so that the
customers perceive the price to be in lieu with the value of the product.
Promotion Mix:
These are activities undertaken to persuade and motivate people to buy their products.
It involves communicating the features, attributes, availability, merits etc of the product to both
the customers and the participants in the channels of distribution in order to achieve sales goals.
Tools used include advertising, sales promotion, personal selling etc.
The 4Ps model is just one of many marketing mix lists that have been developed over the years.
And, whilst the questions we have listed above are key, they are just a subset of the detailed
probing that may be required to optimize your marketing mix.
i.
ii.
iii.
iv.
v.
vi.
iv. Age,
v. Gender,
vii. Education,
viii. Occupation,
x. Number of members
in the household
xi.
xii.
Options Tools of promotion I would use (please tick) Reasons for my choice
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9. Cost Decisions
Costing is a managerial accounting method that describes when all fixed and variable costs, including
manufacturing costs, are used to compute the total cost per unit. Full costing includes these costs
when computing the amount of money it takes to produce and distribute one unit of output.
In the early industrial age, most of the costs incurred by a business were what modern accountants call
"variable costs" because they varied directly with the amount of production. Money was spent on
labor, raw materials, power to run a factory, etc. in direct proportion to production. Managers could
simply total the variable costs for a product and use this as a rough guide for decision-making
processes.
Some costs tend to remain the same even during busy periods, unlike variable costs, which rise and fall
with volume of work. Over time, these "fixed costs" have become more important to managers.
Examples of fixed costs include the depreciation of plant and equipment, and the cost of departments
such as maintenance, tooling, production control, purchasing, quality control, storage and handling,
plant supervision and engineering.[2] In the early nineteenth century, these costs were of little
importance to most businesses. However, with the growth of railroads, steel and large scale
manufacturing, by the late nineteenth century these costs were often more important than the variable
cost of a product, and allocating them to a broad range of products lead to bad decision making.
Managers must understand fixed costs in order to make decisions about products and pricing.
Particulars Costs
i. Consultation Charges
ii. Rent
iii. Insurance
iv. Salaries
vi. Transport
vii. Miscellaneous
_______________ * * 1 =
100 12
x.
xi.
_______________ * 10 * 1 =
i. Compute the Variable Costs per Unit - Any of the following details can be added:
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10.Selling Price
a. Cost-Plus Pricing
b. Penetration Pricing
o Price is initially set at a price lower than the eventual market price, to attract new customers.
o The expectation is that customers will switch to the new brand because of the lower price.
o Penetration pricing is most commonly associated with a marketing objective of increasing market
share or sales volume.
o The advantages of penetration pricing to the firm are:
1. Result in fast diffusion and adoption. This can achieve high market rates quickly.
2. It can create goodwill among the early adopters segment.
3. It creates cost control and cost reduction pressures from the start.
4. It discourages the entry of competitors. Low prices act as a barrier to entry
5. It can create high stock turnover throughout the distribution channel
6. This can create critically important enthusiasm and support in the channel.
o Disadvantages or penetrating price method:
1. The main disadvantage with penetration pricing is that it establishes long–term price
expectations for the product and image preconceptions for the brand and company.
2. Another potential disadvantage is that the low profit margins may not be sustainable long
enough for the strategy to be effective.
c. Creaming or Skimming
o Goods are sold at higher prices. Usually employed to reimburse the cost of investment of the
original research into the product.
o This strategy is often used to target "early adopters" of a product or service who generally
have a relatively lower price-sensitivity.
o This strategy is employed only for a limited duration.
o Advantages of skimming price
i. Helps the company recovering the research and development costs.
ii. If the company caters to consumers who are quality conscious rather than
price conscious.
o Disadvantages of skimming price
i. This strategy can backfire if there are close competitors.
ii. Not viable when there are strict legal and government regulations.
11.Start Up Costs
Start-up costs are non-recurring costs associated with setting up a business, such as accountant’s
fees, legal fees, registration charges, as well as advertising, promotional activities, and employee
training. Also called start-up expenses, preliminary expenses, or pre-opening expenses
(End here)
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12.Risk Analysis
The term business risk refers to the possibility of inadequate profits or even losses due to
uncertainties e.g., changes in tastes, preferences of consumers, strikes, increased competition,
change in government policy, obsolesce etc .Every business organization contains various risk
elements while doing the business.
Business risks implies uncertainty in profits or danger of loss and the events that could pose a risk
due to some unforeseen events in future, which causes business to fail.
For example, an owner of a business may face different risks like in production,risks due to irregular
supply of raw materials, machinery breakdown, labor unrest, etc. In marketing, risks may arise due
to different market price fluctuations, changing trends and fashions, error in sales forecasting, etc.
In addition, there may be loss of assets of the firm due to fire, flood, earthquakes, riots or war and
political unrest which may cause unwanted interruptions in the business operations. Thus business
risks may take place in different forms depending upon the nature and size of the business.
Business enterprises constantly face two types of risk:
o Speculative risks: involve both the possibility of gain as well as the possibility of loss.
o Pure risks: involve only the possibility of loss or no loss.
Business risks can be classified by the influence by two major risks: internal risks (risks arising
from the events taking place within the organization) and external risks (risks arising from the
events taking place outside the organization).
o Internal risks arise from factors (endogenous variables, which can be controlled) such as
human factors (talent management, strikes), technological factors (emerging technologies),
physical factors (failure of machines, fire or theft), operational factors (access to credit, cost
cutting, advertisement).
o External risks arise from factors (exogenous variables, which cannot be controlled) such as
economic factors (market risks, pricing pressure), natural factors (floods, earthquakes),
political factors (compliance and regulations of government).
Causes Of Business Risks
a) Natural causes: eg earthquake, flood, drought etc.
b) Human causes: eg losses due to carelessness or dishonesty of employees.
c) Economic causes: eg price fluctuation, changes in the market conditions etc
d) Other causes: e.g. accidents, equipments becoming outdated or damaged.
Speculative risks
Pure risks
Internal risk
external risks
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A financial statement that summarizes the revenues, costs and expenses incurred during a specific
period of time - usually a fiscal quarter or year. These records provide information that shows the
ability of a company to generate profit by increasing revenue and reducing costs. The P&L
statement is also known as a "statement of profit and loss", an "income statement" or an "income
and expense statement‖.
It is referred to as an income statement, or profit and loss account, revenue
statement, statement of financial performance, earnings statement, operating statement,
or statement of operations.
The statement of profit and loss follows a general form as seen in this example. It begins with an
entry for revenue and subtracts from revenue the costs of running the business, including cost of
goods sold, operating expenses, tax expense and interest expense. The bottom line (literally and
figuratively) is net income (profit). Many templates can be found online for free, that can be used in
creating your profit and loss, or income statement.
It is one of the financial statements of a company and shows the company’s
revenues and expenses during a particular period.
o It indicates how the revenues (money received from the sale of products and services before
expenses are taken out) are transformed into the net income (the result after all revenues
and expenses have been accounted for, also known as ―net profit‖).
o It displays the revenues recognized for a specific period, and the cost and expenses charged
against these revenues. The purpose of the income statement is to
show managers and investors whether the company made or lost money during the period
being reported.
It‘s now a year since I started my Business. I am presenting one month‘s Profit and Loss
Statement for the first month of the second year to cover the following main items:
Sales
A
Cost Of Sales
B
Gross Profit = a - b
C
Fixed Expenses:
i. Consultation Charges
ii. Salary
iii. Rent
iv. Insurance
v. Salaries
vi. Rent
viii. Transport
ix. Miscellaneous
x. Monthly Interest
_______________ * * 1 =
100 12
xi. Depreciation
_______________ * 10 * 1 =
100 12
xiii. Salary
xv.
E xiv. Depreciation
_______________ * 10 * 1 =
100 12
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Breakeven point is the level of sales (or revenue generated) that equals all the expenses required for
generating that revenue.
It is not more than the expenses (i.e. no profit) nor is it less than the expenses (i.e. no loss). In other
words there is neither loss nor profit.
Thus, Break even quantity is the quantity where Total Revenue = Total Expenses, where
o Total Revenue = Total Quantity x Price Per Unit = Qty x Unit Price
o Total Expenses = (Total Quantity x Cost Per Unit) + Fixed Costs
= (Qty x Unit Cost) + Fixed Exp
That is, at Break even quantity, (Qty x Unit Price) = (Qty x Unit Cost) + Fixed Exp
(Qty x Unit Price) - (Qty x Unit Cost) = Fixed Exp
Qty x (Unit Price – Unit Cost) = Fixed Exp
Qty x Gross Margin (or Profit) per Unit = Fixed Exp
For my firm,
B.E. Point in value = 𝐹𝑖𝑥𝑒𝑑 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠 .
(Selling price per unit – variable cost per unit)
Fixed costs
Solution:
B.E. Point = 𝐹𝑖𝑥𝑒𝑑 Expenses .
(Selling price per unit – variable cost per unit)
2. Logo And
3. Tagline
5. Marketing Plan
My main competitors ,
My target market ,
Advertising and promotion idea,
Packaging (if applicable),
Distribution,
Quality
6. Cost Decisions
Fixed costs
Variable costs
7. Selling Price
Selling price per unit
Pricing strategy followed
8. Start Up Costs
Total startup costs
How will I meet them
9. Risk Analysis
Causes of risk
10. Statement Of Profit And Loss
Projected Profits/losses
11. Break Even Analysis
Breakeven point in rupees
Breakeven point in units