LAUNCHING OF SMALL BUSINESS

Issues in launching of small business :

* Resource Mobilisation * Operations Planning
*Market Selection * Channel Selection
*Product Launch
RESOURCE MOBILISATION:
Resource mobilisation includes – Financial mobilisation, Human Resource
mobilisation & Material Resources mobilisation.
Financial Mobilisation: how to find and manage money?
•Estimating the cost of launching business – cost of premises, equipment,
inventory, insurance,etc.
•Obtaining funds for launching – own & borrowed funds.
•Income Statement – this P&L a/c summarizes financial results, i.e., cash
generating ability.
•Cash flow statement – gives idea on liquid cash in business.
•Balance sheet – statement of assets & liabilities.
HR Mobilisation: by hiring or outsourcing of employees
 Material Resource mobilisation: Materials required for production &
those for administration.
 OPERATIONS PLANNING:
• It’s the process of converting input into output through conversion
process.
• Dimensions of Operations planning - Plant location, plant layout,
capacity planning & Inventory management.
 Plant Location – decision based on – availability of raw material,
proximity to market, integration with others parts of the co,
availability of labor, amenities, transport, services, site cost, safety,
regional regulations, climate suitability, expansion provision, grants &
subsidies possibility.
 Plant Layout – integrate production centres, reduce material
handling, effective space utilisation, convenience, flexibility, speedy
work, avoid accidents.
• Types of layout – Product layout, Process layout, Fixed position
layout, Combination layout, Flexible layout, Group Technology /
Cellular manufacturing layout.
 Capacity planning : It is the process of determining how much labor
& m/c resource is required to accomplish the production task.
 Inventory management: inventory types – raw material, work-in-
process, consumables, finished goods, stores & spares.
 MARKET SELECTION:
 Market segmentation basis:
– Geographic variable
– Demographic variable - age, gender, etc.
– Education variable
– Income variable
 Marketing Mix
Marketing mix classified the four factor under 4 P’s viz Product,
Price, Promotion, Place.
“Marketing mix is the tailoring the product, its price, its promotion
and distribution to reach the target customers”.
 Target Market Strategies: Alternative segments targeting strategies are-
A. Limited Coverage Market Targeting (LCMT) : only one or few
segments are selected as market targets; suits small & new
companies wanting to compete with giants. Forms of LCM1 are -
1. Single segment concentration – gains strong knowledge of the
segments needs, through concentrated marketing, thus gaining
segment leadership.
2. Selective Specialization – selects many segments (one
product for each of the segment) which are attractive &
appropriate, with or without synergy, resulting in risk
diversification.
3. Product specialization – specializes in producing one
product with different specifications to suit different
segment or customer groups. Eg. Produces only pumps
(compressor / jet / submersible) - for industrial use (big /
small ), agriculture, domestic use.
4. Market Specialization – many needs of a particular customer
group are served. Eg. Producing all requirements for the
hotel industry (grinder, mixie, scrapper, chopper, juicer, kneader,
 A restaurant complex with all four basic
layout types
Line layout cafeteria

Cell layout buffet

Fixed-position layout
service restaurant

Desert

Starter
buffet

buffet
Main course
buffet Service line
Preparation

Oven
Process layout kitchen
Cool room
Freezer Vegetable prep Grill
 Single Segment Selective
Specialisation
M1 M2 M3 M1 M2 M3

P1 P1

P2 P2
P3 P3

Product Specialisation Market

Specialisation
M1 M2 M3 M1 M2
M3
P1 P1

P2 P2
P3 P3
 B. Full Market Coverage : serving all customer groups with all the products they
might need; suits very large firms. Eg. General Motors (vehicle market), IBM
(computer market)
1. Undifferentiated marketing – ignores differences in market segment & offers
the same to whole market; focusing on basic buyer needs.
2. Differentiated marketing – operates in several market segments with
different product design for each segment.
3. Concentrated marketing– goes after large share of one/few
submarkets.
C. Additional Considerations : for evaluating and selecting segments:
1. Ethical choice of market targets – socially responsible marketing , not
harming the targeter.
2. Segment Interrelationships and super segments- Emphasizes segment
interrelations on cost, performance & technology. A company carrying fixed cost
(sales force, store outlets) can add products to absorb & share cost.
3. Segment by Segment Invasion Plans– wiser to enter one segment at one time,
hiding from competitor which is next segment.
4. Mega Marketing – Strategic coordination of economic, psychological, political
& public relation skills to make cooperate many parties in a market.
5. Inter Segment Cooperation – Segment managers should be given free hand for
their segment promotion & also should cooperate with other segment mgrs in
 PRICING METHODS / POLICIES:
o Cost plus method:
Total cost + profit = selling price. Total cost includes fixed cost + variable cost. Profit
refers to margin.
o Skimming Pricing:
Its suitable for a new product introduced and it is used mainly by sophisticated group of
customers. High price is usually promoted by heavy promotion. Recover the cost with in
a shorter period of time.
o Penetration Pricing:
It is contrary to skimming, to attract more customers who are very particular about price
and when the product is an item of mass consumption. Under this policy, the price of
the product is set at lower level to penetrate into the market.
o Market rate policy:
This policy adopts the prevailing market rates for determining the price of the product.
Unusually this policy used for unbranded products like oils, couriers, tailoring, repairing.
o Variable price policy:
The price of the same product varies from customers to customers depending upon the
situation prevailing in the market.
o Resale price Maintenance:
The manufacturer of the product fixes prices of the whole seller and retailer. The retailer
price of the product like drugs and detergents are printed on the package. Retail price is
fixed somewhat higher to meet of the cost of inefficiency retailers not selling the goods
timely.
 CHANNEL SELECTION:
 Distribution channels:
• A channel of distribution or marketing channels is the
structure of intra-company organisation units and extra-
company agents and dealers, wholesale and retails through
which a commodity, product or service is marketed.
• In view of number of intermediaries of the product channels it
can be classified into three:
• Zero level Channel: Producer → consumer (Amway,
Tupperware)
• One level Channel: Producer → retailer →consumer (Motor
industry)
• Two level Channel: Producer →whole seller → retailer →
consumer.
 Types of Channel members in channel selection:
1. Sole selling agent/Marketer- Mfr stays out of distribution & entrusts it
to this Marketer, who has large resources & has own network
(wholesaler/retailer) for distribution.
2. C&F Agents- Mfr employs such Carrying & Forwarding Agents (CFA’s),
who supply stock to wholesale/retail mkt, but don’t resell. (commission
agents)
3. Wholesaler/Stockist/Distributor- Big, but comparatively small operators
than Marketer & work under Marketer. (pharmaceutical stockists)
4. Semi Wholesalers – They specialize by region, buy goods from mfr /
wholesaler, break bulk to resell goods to retailers. (rice)
5. Retailer/Dealer- at bottom of distribution hierarchy, reaching the
ultimate consumers; also act as authorised reps.
6. Value added resellers- buy basic product from producers and add value
to it or modify it and resell it to final customers. (T-shirts designing,
plates & mugs carrying paintings)
7. Merchants- assume ownership of goods they sell to customers or any
intermediaries.
 WORKING CAPITAL MANAGMENT:
– Cash Management
– Receivables Management
– Inventory Management - ABC, JIT, FSN, VED, EOQ
 PRODUCT LAUNCH: Issues in product launch-
1. When (timing)- market entry timing are –
a. First entry- gets merits in getting key distributors, customers,
reputation and leadership. Johnsons baby products, Sakthi
Masala.
b. Parallel entry- coincides with competitors entry.
c. Late entry- merits are- competitors pay cost of educating
market, competitors products can reveal faults, understanding
of market potential. Canon copier machine.
2. Where (Geographic)- launch in single locality / region / several
regions / national / international mkt.
3. To whom (target market)- to group with best prospects.
4. How (introductory market strategy)- develop action to introduce
new product.
 MANAGING GROWTH IN SMALL BUSINESS:
 Types of Growth:
1. Financial Growth: It relates to the development of the venture as a
commercial entity, based on financial performance.
2. Strategic Growth: Firm should adapt , plan & change its strategy & set
growth targets at different stages in its life cycle. Strategic objectives change,
as an organisation moves through the stages of its life cycle – at ‘starting
stage’ aiming at survival & ‘later’ focusing on developing customers,
maintaining profits and obtaining resources.
3. Structural Growth: It refers to the changes in the way a venture organises
its internal systems, managerial roles and responsibilities, reporting relations,
communication links & resource control systems, to meet growth changes.
Aspects of structural growth includes :
Size - organisational structure changes with size of the organisation;
Operational Technology – the way in which the business operates with
growth;
Strategy – the way organisation goes about competing for its customers
attention;
Environment – challenges posed by the environment needs to be faced.
4. Organisational Growth: It refers to the changes in process, culture &
attitude when a business grows and develops; & changes in
entrepreneur’s role and leadership style as the organisation moves
from small to big firm.
 Stages in the life cycle of a company:
A. Start up stage
B. Expansion stage
C. Maturity stage
D. Decline stage
 Start-up stage:
It refers to the birth of a business enterprise in the economy. The
production takes place in limited scale. The enterprise does not face
any competition during this stage. Profits may not be earned during
the start up stage.
• Types of growth:-
1. Internal growth Strategies
2. External growth Strategies
• Internal growth:-These imply that enterprise grow on their own
without joining hands with other enterprises.
• Expansion strategies – Market penetration, market development,
product development
• Diversification strategies
• External growth:-Enterprises grow by joining hands with other
enterprises.
• Joint ventures,
• Mergers & Amalgamation
• Sub-contracting.
• Acquisition / Take over
• Strategic Alliance / Collaboration
• Leveraged Buy out
• Franchising
 VENTURE CAPITAL
 Entrepreneurial Venture - “a risky or daring undertaking that has
no guarantee of success”.
 Venture capital is a source of finance for risky and daring
undertakings, provided by outside investors to new, growth
businesses. Generally made as cash in exchange for shares in the
investee company
 Venture Capitalist (VC) is a person who makes such investments.
 Venture capital as a concept was born to fund the promising but
unproven and therefore risky business ideas.
Stages of venture capital financing:
1. The seed stage: A setup stage where a person or a venture
approaches an angel investor or an investor in a VC firm for funding
for their idea/product. During this stage, the person or venture has
to convince the investor why the idea/product is worthwhile.
2. The Start-up Stage: It ensues when the idea is qualified for further
investigation by presenting the business plan. If the company has a
board of directors, a person from the VC firms will take seats at the
board of directors (VC’s management team)
3. The Second Stage: At this stage, the idea has been transformed into
a product and is being produced and sold. This is the first encounter
with the rest of the market (competitors). The venture is trying to
squeeze between the rest and it tries to get some market share
from the competitors. The venture is trying to minimize their losses
in order to reach the break even.
4. The Third stage: This stage is seen as the expansion/maturity phase
of the previous stage. The venture tries to expand the market share
they gained in the previous stage.
5. The Bridge / Pre-public stage: last stage of the venture capital
financing process. The main goal of this stage is to achieve an exit
vehicle for the investors and for the venture to go public. At this
stage the venture achieves a certain amount of the market share.
 Angel Capitalist / Angel Investor
• An investor who provides financial backing for small startups or
entrepreneurs. Angel investors are usually found among an
entrepreneur’s family and friends. The capital they provide can be a
one-time injection of seed money or ongoing support to carry the
company through difficult times.
• Angel investments bear extremely high risk and are usually subject
to dilution from future investment rounds. As such, they require a
very high return on investment. Because a large percentage of
angel investments are lost completely when early stage companies
fail, professional angel investors seek investments that have the
potential to return at least 10 or more times their original
investment within 5 years, through a defined exit strategy, such as
plans for an IPO or an acquisition.
 BUSINESS INCUBATION
"
Business incubation is a unique and highly flexible combination of business development pr
ocesses, infrastructure and people designed to nurture new and small businesses by helpin
g them to survive and grow through the difficult and vulnerable early stages of developmen
t
."

Business incubation provide SMEs and start-ups with the nurturing environment needed to
develop and grow their businesses, offering everything from virtual support, rent-a-desk
through state of the art laboratories and everything in between. They provide direct access
to hands on intensive business support, access to finance and experts and to other
entrepreneurs and suppliers to really make businesses and entrepreneurs to grow.

Business incubation programs are often sponsored by private companies or municipal

entities and public institutions, such as colleges and universities. Their goal is to help create
and grow young businesses by providing them with necessary support and financial and
technical services. There are approximately 900 business incubators nationwide, according
to the National Business Incubation Association.

Incubators carefully screen potential businesses because their space, equipment, and
finances are limited, and they want to be sure they're choosing to nurture businesses with
the best possible chance for success.
Types of incubators:
1. Government sponsored
2. Non-profit sponsored
3. University or academic institutions
4. Private sponsored
Services offered by incubators:
5. Flexible space & leases- below market rate
6. Administrative services – shared copiers, fax m/c, phone systems,
computers, high speed internet access, admin / clerical staff.
7. Management help – consultation, biz plans marketing assistance,
accounting and financial mgt services.
8. Expert advice
9. Specialisation
10. Increased credibility
11. Easy networking
12. Funding
 “Top Incubation Centers”
1. Centre for Innovation, Incubation& Entrepreneurship (CIIE) – IIM
Ahmedabad
• Set up in 2001
• Since inception CIIE has 15-odd innovations grow out of the incubation centre
in varied technologies
2. Society for Innovation and Entrepreneurship (SINE)- IIT Bombay
• Set up in 2004
• It currently has 16 companies under its incubation programme
3. Cell for Tech Innovation, Development & entrepreneurship support- IIT,
• Chennai
• Set up in 2000
• Organises national level competitions, Breakthrough (general business plan
• competition) and Genesis (social entrepreneurship plan competition)
4. Society for Innovation and Development (SID) – IISc, Bangalore
• Set up in 2006
• The investigator is given a seed capital for Rs 20 lakh a year for two years as
soft loan for the approved plan
5. The SP Jain Centre for Entrepreneurship Development- SPJIMR
• 16-week ‘Start Your Own Business’ programme-a public programme
held every six months.
6. Technology Business Incubator (TBI) – BITS Pilani
• In association with DST, BITS has established Technology Business
Incubator in the area of embedded systems and VLSI design back in
2004
• So far, TBI has helped spawn ten companies.
7. Technology Incubation and Entrepreneurial Training Society (TIETS)
– IIT, Kharagpur
• Set up in 2005, So far, the institute has been able to incubate two
companies through “Concipio” over the last three years. Besides, an
in house panel has helped 11 -12 ventures take wing.
8. Nirma Labs, Nirma University, Ahmedabad
• Established in 2004, Nirma Labs used to pride itself in a three-step
model for students who were interested to start their own
businesses-training, incubation and funding.
 IT STARTUPS
 The start up of a successful IT coy requires finding an underserved
market or creating a new technology product, with strong biz plan,
& sufficient funding to withstand a highly competitive market.
 IT Startups may take form of – service or product company
Steps in starting a new IT coy:
1. Determine areas of expertise – domain based (web dseigning,
overall IT solutions, IT training, hardware pdn / trading, s/w
developers, etc.)
2. Research & analyse market
3. Enhance required services and skills
4. Draft a biz plan
5. Obtain funding
6. Setting up legal framework
7. Market service