CU-MBA-SEM-II-Entrepreneurship-Second Draft (1)

 (q) Provision for avoidance of certain restrictive conditions for the control of anticompetitive practices in contractual licenses. 13.4 COPY RIGHTS The idea of Copyright protection only began to emerge with the invention of printing, which made it for literary works to be duplicated by mechanical processes instead of being copied by hand. This led to the grant of privileges, by authorities and kings, entitling beneficiaries exclusive rights of reproduction and distribution, for limited period, with remedies in the form of fines, seizure, confiscation of infringing copies and possibly damages. However, the criticism of the system of privileges led to the adoption of the Statute of Anne in 1709, the first copyright Statute. In the 18th century there was dispute over the relationship between copyright subsisting in common law and copyright under the Statute of Anne. This was finally settled by House of Lords in 1774 which ruled that at common law the author had the sole right of printing and publishing his book, but that once a book was published the rights in it were exclusively regulated by the Statute. This common law right in unpublished works lasted until the Copyright Act, 1911, which abolished the Statute of Anne. Copyright is a well recognised form of property right which had its roots in the common law system and subsequently came to be governed by the national laws in each country. Copyright as the name suggests arose as an exclusive right of the author to copy the literature produced by him and stop others from doing so. There are well-known instances of legal intervention to punish a person for copying literary or aesthetic output of another even before the concept of copyright took shape. The concept of idea was originally concerned with the field of literature and arts. In view of technological advancements in recent times, copyright protection has been expanded considerably. Today, copyright law has extended protection not only to literary, dramatic, musical and artistic works but also sound recordings, films, broadcasts, cable programmes and typographical arrangements of publications. Computer programs have also been brought within the purview of copyright law. Copyright ensures certain minimum safeguards of the rights of authors over their creations, thereby protecting and rewarding creativity. Creativity being the keystone of progress, no civilized society can afford to ignore the basic requirement of encouraging the same. Economic and social development of a society is dependent on creativity. The protection provided by copyright to the efforts of writers, artists, designers, dramatists, musicians, architects and producers of sound recordings, cinematograph films and computer software, creates an atmosphere conducive to creativity, which induces them to create more and motivates others to create. In India, the law relating to copyright is governed by the Copyright Act, 1957 which has been amended in 1983, 1984, 1985, 1991, 1992, 1994, 1999 201 CU IDOL SELF LEARNING MATERIAL (SLM)

and 2012 to meet with the national and international requirements. The amendment introduced in 1984 included computer program within the definition of literary work and a new definition of computer program was inserted by the 1994 amendment. The philosophical justification for including computer programs under literary work has been that computer programs are also products of intellectual skill like any other literary work. In 1999, the Copyright Act, 1957 was further amended to give effect to the provisions of the TRIPs agreement providing for term of protection to performers rights at least until the end of a period of fifty years computed from the end of the calendar year in which the performance took place. The Amendment Act also inserted new Section 40A empowering the Central Government to extend the provisions of the Copyright Act to broadcasts and performances made in other countries subject to the condition however that such countries extend similar protection to broadcasts and performances made in India. Another new Section 42A empowers the Central Government to restrict rights of foreign broadcasting organisations and performers. The Act is now amended in 2012 with the object of making certain changes for clarity, to remove operational difficulties and also to address certain newer issues that have emerged in the context of digital technologies and the Internet. Moreover, the main object to amendments the Act is that in the knowledge society in which we live today, it is imperative to encourage creativity for promotion of culture of enterprise and innovation so that creative people realize their potential and it is necessary to keep pace with the challenges for a fast-growing knowledge and modern society. Copyright is a right given by the law to creators of literary, dramatic, musical and artistic works and producers of cinematograph films and sound recordings. In fact, it is a bundle of rights including, inter alia, rights of reproduction, communication to the public, adaptation and translation of the work. It means the sole right to produce or reproduce the work or any substantial part thereof in any material form whatsoever (Kartar Singh Giani v. Ladha Singh & Others AIR 1934 Lah 777). Section 14 of the Act defines the term Copyright as to mean the exclusive right to do or authorize the doing of the following acts in respect of a work or any substantial part thereof, namely In the case of literary, dramatic or musical work (except computer programme):  reproducing the work in any material form which includes storing of it in any medium by electronic means;  issuing copies of the work to the public which are not already in circulation;  performing the work in public or communicating it to the public;  Making any cinematograph film or sound recording in respect of the work; making any translation or adaptation of the work.  Further any of the above-mentioned acts in relation to work can be done in the case of translation or adaptation of the work. 202 CU IDOL SELF LEARNING MATERIAL (SLM)

 In the case of a computer programme:  to do any of the acts specified in respect of a literary, dramatic or musical work; and  To sell or give on commercial rental or offer for sale or for commercial rental any copy of the computer programme. However, such commercial rental does not apply in respect of computer programmes where the programme itself is not the essential object of the rental. In the case of an artistic work:  reproducing the work in any material form including depiction in three dimensions of a two-dimensional work or in two dimensions of a three-dimensional work;  communicating the work to the public;  issuing copies of work to the public which are not already in existence;  Including work in any cinematograph film; making adaptation of the work, and to do any of the above acts in relation to an adaptation of the work. In the case of cinematograph film and sound recording:  making a copy of the film including a photograph of any image or making any other sound recording embodying it;  selling or giving on hire or offer for sale or hire any copy of the film/sound recording even if such copy has been sold or given on hire on earlier occasions; and  Communicating the film/sound recording to the public. In the case of a sound recording:  To make any other sound recording embodying it  To sell or give on hire, or offer for sale or hire, any copy of the sound recording  To communicate the sound recording to the public. The main objective of the Act is to give protection to the owner of the copyright from the dishonest manufacturers, who try to confuse public and make them believe that the infringed products are the products of the owner. Further, it wants to discourage the dishonest manufacturers from enchasing the goodwill of the owner of the copyright, who has established itself in the market with its own efforts [Hawkins Cookers Ltd.Magi cook Appliances Co., 00(2002) DLT698]. Unlike the case with patents, copyright protects the expressions and not the ideas. There is no copyright in an idea. In M/s Mishra Bandhu Karyalaya & Others v. Shivaratanlal Koshal AIR 1970 MP 261, it has been held that the laws of copyright do not protect ideas, but they deal with the particular expression of ideas. It is always possible to arrive at the same result from independent sources. The rule appears to be settled that the compiler of a work in which absolute originality is of necessary excluded is entitled, without exposing himself to a charge of piracy, to make use of preceding works upon the subject, where he bestows such mental labour upon what he has taken, and subjects it to such revision and correction as to produce an original result. 203 CU IDOL SELF LEARNING MATERIAL (SLM)

Whether one book is a copy of the other or not, it was held in S K Dutt. V. Law Book Co. & Others AIR 1954 All 57, in deciding the question whether one book is a copy of the other or not the Court has, in one view, to keep in mind the two features of the two books, namely, the external and the internal features. By external features means the get-up and the ‘overall’ scope of the publication. By internal features means the general lay out of the subject-matter, the manner of the treatment of the subject matter and the amount of material contained in the book. 13.5 PROTECTION OF TRADE SECRETS A trade secret is any kind of information that is secret or not generally known in the relevant industry giving the owner an advantage over competitors. Generally, it has been stated that any information that can be used in the operation of a business or other enterprise and that is sufficiently valuable to afford an actual or potential economic advantage over others is a trade secret. Examples of trade secrets include formulas, patterns, methods, programs, techniques, processes or compilations of information that provide one’s business with a competitive advantage. The precise language by which a trade secret is defined varies by jurisdiction (as do the precise types of information that are subject to trade secret protection). However, there are three factors that (though subject to differing interpretations) are common to all such definitions: a trade secret is some sort of information that  is not generally known to the relevant portion of the public,  confers some sort of economic benefit on its holder (which means this benefit must derive specifically from the fact that it is not generally known, not just from the value of the information itself), and  Is the subject of reasonable efforts to maintain its secrecy? Trade secrets are not protected by law in the same manner as trademarks or patents. Probably one of the most significant differences is that a trade secret is protected without disclosure of the secret. A trade secret might be a patentable idea but not always. Unlike patent, a trade secret does not have to pass the test of novelty; nevertheless, the idea should be somewhat new, unfamiliar to many people including many in the same trade. Trade secrets are not registered like other forms of intellectual property and are not creatures of statutes. Instead, the judicial system of each country determines the requirements for obtaining trade secrets protection. In India, trade secrets are not covered under any law. The TRIPS Agreement under Article 39 protects trade secrets in the form of “undisclosed information” and provides a uniform mechanism for the international protection of trade secrets. Such information must be a secret, i.e., not generally known or readily accessible to person within the circles that normally deal with all kinds of information in question. Also, 204 CU IDOL SELF LEARNING MATERIAL (SLM)

the information must have commercial value because it is secret and the information must be subject to reasonable steps by its owners to keep it secret. TRIPS Agreement requires the member countries to provide effective remedies for trade secret misappropriation including: • injunctive relief; • damages; and • provisional relief to prevent infringement and to preserve evidence. Trade secrets are by definition not disclosed to the world at large. So long as trade secret remains a secret, it is valuable for the company. Once the information enters the public domain, it is lost forever. Therefore, companies should take every precaution to keep the information secret. Instead, owners of trade secrets seek to keep their special knowledge out of the hands of competitors through a variety of civil and commercial means, not the least of which is the employment or confidentiality agreements and/or nondisclosure agreements. In exchange for the opportunity to be employed by the holder of secrets, a worker will sign an agreement not to reveal his prospective employer’s proprietary information. Often, he will also sign over rights to the ownership of his own intellectual production during the course (or as a condition) of his employment. Violation of the agreement generally carries stiff financial penalties, agreed to in writing by the worker and designed to operate as a disincentive to going back on his word. Similar agreements are often signed by representatives of other companies with whom the trade secret holder is engaged in licensing talks or other business negotiations. If a trade secret is well protected, there is no term of protection. Trade secret protection can, in principle, extend indefinitely and in this respect offers an advantage over patent protection, which lasts only for a specified period. It is equally possible that a company may decide not to patent as for instance formula for Coca-Cola which is considered to be one of the best well protected trade secrets. Companies often try to discover one another’s trade secrets through lawful methods of reverse engineering on one hand and less lawful methods of industrial espionage on the other. Acts of industrial espionage are generally illegal in their own right under the relevant governing laws, of course. The importance of that illegality to trade secret law is as follows: if a trade secret is acquired by improper means (a somewhat wider concept than “illegal means” but inclusive of such means), the secret is generally deemed to have been misappropriated. Thus, if a trade secret has been acquired via industrial espionage, its acquirer will probably be subject to legal liability for acquiring it improperly. (The holder of the trade secret is nevertheless obliged to protect against such espionage to some degree in order to safeguard the secret. As noted above, under most trade secret regimes, a trade secret is not deemed to exist unless its purported holder takes reasonable steps to maintain its secrecy.) The “quality of confidence” highlights the fact that trade secrets are a legal concept. With sufficient effort or through illegal acts (such as break and enter), competitors can usually obtain trade secrets. However, so long as the owner of the trade secret demonstrates that reasonable efforts have been made to keep the information confidential, the information 205 CU IDOL SELF LEARNING MATERIAL (SLM)

remains a trade secret and is legally protected as such. Conversely, trade secret owners who do not demonstrate reasonable effort at protecting confidential information, risk losing the trade secret even if the information is obtained by competitors illegally. It is for this reason that trade secret owners shred documents and do not simply recycle them. Presumably an industrious competitor could piece together the shredded documents again. Legally the trade secret remains a trade secret because shredding the document is considered to have kept the quality of confidence of the information. In technology transfer a trade secret may be far more valuable than a patent. Sometimes a trade secret is not really a secret and may not be of much value either. In a technology package some part is usually unprotected information, even so the best way of obtaining this unprotected information is to buy from the suppliers. Companies must be assured trade secret protection, which they are enjoying in their respective countries under the international licencing agreements. As mentioned earlier, the value of a trade secret lies in its secrecy. If a company cannot ensure protection of its trade secrets in a foreign country, it will not do business in that country. Every company should therefore, take some important measures to protect its trade secrets. A checklist for the identification of potential trade secrets owned by a manufacturing company has been devised which inter alia includes:  technical information/research and development;  proprietary technology information;  proprietary information concerning research and development;  formulas;  compounds;  prototypes;  processes;  laboratory notebooks;  experiments and experimental data;  analytical data; (xi) calculations;  drawings- all types;  diagrams- all types;  design data and design manuals;  R&D reports-all types;  R&D know-how and negative know-how (i.e., what does not work);  Production/ process information;  Proprietary information concerning production/process etc. Some experts suggest that it may be prudent for the companies to conduct an intellectual property audit to identify the protectable business information. This will help the companies to assess the value of the information useful for their business. The intellectual property audit 206 CU IDOL SELF LEARNING MATERIAL (SLM)

is the starting point for the development of a trade secrets protection programme as company’s portfolio of trade secrets is constantly changing. Some information becomes obsolete, new information is created which is extremely valuable and may be protected. Once the audit is complete, the next step is to determine appropriate level of security necessary to protect different types of trade secret. There are six factors which need to be taken into consideration while determining whether information owned or used by a company is a trade secret in terms of the necessary level of security to ensure adequate protection of those trade secrets. These are:  The extent to which the information is known outside the company.  The extent to which the information is known by employees and others involved in the company.  The extent of measures taken by the company to guard the secrecy of the information.  The value of the information to the company and the competitors.  The expenditures by the company (time, money, effort) in developing the information.  The ease or difficulty with which the information could be properly acquired or duplicated by others. 13.6 LICENSING ISSUES Competition Issues in Intellectual Property Licensing: Typically, intellectual property is one of the components in a production process and derives value from its combination with complementary factors. This integration can lead to more efficient exploitation of the intellectual property, benefiting consumers through reduction of costs and introduction of new products. Such arrangements also increase the value of intellectual property to developers of technology. By potentially increasing the expected returns from intellectual property, licensing increases the incentive for its creation and thus promotes greater investment in research and development. In majority of cases, licensing is pro-competitive because it facilitates the broader use of a valuable intellectual property right by third parties. If an intellectual property owner licenses, transfers or sells the IP to a company or a group of companies that would have been actual or potential competitors without the arrangement, and if this arrangement creates, enhances or maintains market power, the competition authorities may seek to challenge the arrangement under the appropriate provisions of the Competition Law. However, in assessing whether a particular licensing arrangement involves competition issue, the competition authorities the world over examine whether the terms of the arrangement serve to create, enhance or maintain the market power of either the licensor or the licensee and thereby reduce 207 CU IDOL SELF LEARNING MATERIAL (SLM)

competition substantially or unduly relative to that which would have likely existed in the absence of such arrangement. Thus, Licensing arrangements raise concerns under the competition laws if they are likely to affect adversely the prices, quantities, qualities, or varieties of goods and services either currently or potentially available. Licensing agreements which, directly or indirectly, restrict the ability or incentive of any of the parties, to carry out independent R&D, may also have anti-competitive effects, because such agreements can reduce potential competition in the technology and innovation markets, which would have existed in the absence of the agreement. The term restrictive practice signifies non-governmental measures used by companies to strengthen their position in a given market. In the context of IPRs, these practices can hamper or distort competition in given market. Competition and anti-trust laws deal with such business practices and prohibit them when it is established that they have the effect of distorting or preventing competition in a given market. The concept of unfair competition has been also recognised under the Paris Convention for the Protection of Industrial property which comprises not only infringement of industrial property but also all other acts which adversely affect the business relations of a person. The provisions of the Paris Convention contain a broad stipulation that any act of competition contrary to honest practices in industrial and commercial matters constitutes an act of unfair competition. These provisions affirm the foundation of fair competition as being honest practices or good morals and set out three kinds of acts which are deemed typically unlawful in international trade and therefore, must be prohibited. UNCTAD Code of Conduct on Transfer of Technology under Chapter IV has also recognised some practices as restrictive practices. In India, the Monopolies and Restrictive Trade Practices Act, 1969, the Patents Act, 1970 and Competition Act, 2002 prohibit the use of restrictive practices in business agreements. 13.7 FRANCHISING What is franchising? The Indian law does not define franchising. However, simplistically put, franchising is a method of distributing products or services. The Black’s Law Dictionary defines a franchise as a license from the owner of a trademark or trade name permitting another to sell a product or service under that name or mark. In a normal franchise agreement, there are at least two parties involved:  the franchisor, who lends his trademark or trade name (or other intellectual property rights) and the business system; and  The franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor’s name and business system. Characteristic features: 208 CU IDOL SELF LEARNING MATERIAL (SLM)

By drawing from the definitions ascribed to franchising by the British Franchise Association, 8 the International Franchising Association and the Federal Trade Commission of the United States10, the following characteristic traits of franchising emerge.  A franchise arrangement is based upon a contractual relationship.  The franchisor should have developed a business system or format, which is identified with a brand name.  The franchisee makes a substantial initial capital investment and normally owns the business operation.  The franchisor normally trains the franchisee to ensure that it is equipped to effectively comply with the business system.  Once the franchisee’s business commences, the franchisor continually supports the franchisee in certain aspects of the business operation.  The franchisor also regularly supervises the franchisee’s business operations in order to protect the franchisor’s goodwill and brand name.  Some form of consideration is paid by the franchisee to the franchisor for the rights licensed and the services rendered. Types of franchising agreements: The object of a franchise agreement is either to promote a product or a business format. Historically, franchising developed as a means of distributing products. Product franchising involves the franchisee concentrating on one manufacturer’s product, and thereby acquiring the manufacturer’s identity to some extent. Typical examples are automobile dealerships and gas service stations. However, the 1950’s witnessed the dawn of a new form of franchising, Business Format franchising, wherein the franchisee has to follow strict guidelines and operational standards on product development and marketing.13 Examples of business format franchising include restaurants, convenience stores, and personal and business services. (a) Invention Licensing Agreement: This kind of an agreement is common in a situation when a person has created a new invention and seeks to maximize the fruits of his invention, by firstly patenting the invention and thereafter exploiting it on a nationwide or worldwide platform. Such an agreement focuses on the licensing of patent and design rights and the manufacturing and marketing of the invention. (b) Trademark Licensing Agreement: In order to build brand equity, the owner of a trademark can grant a license to another person to use the trademark on goods, which are associated with that particular trademark. This type of an agreement may be for the manufacture, preparation, marketing, presentation, and sale of 209 CU IDOL SELF LEARNING MATERIAL (SLM)

goods and would generally contain provisions to preserve the standard of quality of the goods and the goodwill and reputation of the brand. (c) Character Merchandising Agreement: In such an agreement, the name of a famous entertainment or sports personality or probably a fictional or graphical character is licensed to be used on certain products. This kind of an agreement would necessarily concentrate on provisions to protect the reputation and / or copyright associated with such personalities and / or characters. (d) Dealer / Distributor / Marketing arrangements: These are the most common franchising agreements where usually the dealers or distributors adopt a particular business system or format of the franchisor. Generally, these agreements are entered into in cases of dealerships with automobile companies (such as with Hyundai and Maruti Udyog), food and consumer goods chains (such as McDonalds and barista), petrol pumps and gas stations (such as Hindustan petroleum) et al. Pros and cons of a franchising arrangement: Though franchising can be a very profitable business arrangement for the franchisor and the franchisee, if not entered into properly or looked after well, it could prove quite the contrary this section aims at highlighting some of the benefits and assessing some of the risks that could arise in franchising. The following tables briefly summarize the pros and cons from the franchisor and franchisee’s viewpoints. FRANCHISOR’S VIEWPOINT PROS CONS Financial investment and commitment are Difficulty in finding a suitable person as a limited. franchisee Reasonable (sometimes, high) profits and Loss of goodwill / dilution of brand, if the exponential growth of brand equity, without franchisee acts independently and does not high-capital risks. adhere to certain basic standards Breakdown of a trust-based relationship between Exploitation of a wider territorial area, not the parties or difficulty in receiving co-operation typically within his/its scope. from franchisees Manpower resources looked after by the Franchisee may not disclose complete and Franchisee. Consequently, fewer labour problems accurate income for calculation of franchise fees to cope with. FRANCHISEE’S VIEWPOINT 210 CU IDOL SELF LEARNING MATERIAL (SLM)

PROS CONS Capitalizing and benefiting from the Franchisor’s invention / brand / business Imposition of controls and supervision by the franchisor systems / know-how. Elimination of unnecessary expenses due to Heavy initial capital investment, in addition to franchisor’s experience and pilot operations. consideration for using the franchisor’s invention / brand / business systems / knowhow and receiving the franchisor’s services. Continual assistance from the franchisor while Dependence on the franchisor may hinder the operating the business. franchisee’s personal drive Benefit from the franchisor’s advertising and Franchisor’s policies may affect the franchisee’s promotional campaigns. profitability and business operations. 13.8 SUMMARY  Intellectual property encompasses the properties that are the creations of the human mind, labour, capital and intellect.  Intellectual property is divided into two categories: Industrial property, which includes inventions (patents), trademarks, industrial designs, and geographic indications of source; and Copyright, which includes literary and artistic works such as novels, poems and plays, films, musical works, artistic works such as drawings, paintings, photographs and sculptures, and architectural designs.  The most noticeable difference between intellectual property and other forms of property, however, is that intellectual property is intangible, that is, it cannot be defined or identified by its own physical parameters. It must be expressed in some discernible way to be protectable.  Copyright is a well-recognized form of property right which had its roots in the common law system and subsequently came to be governed by the national laws in each country.  Copyright is a right given by the law to creators of literary, dramatic, musical and artistic works and producers of cinematograph films and sound recordings. In fact, it is a bundle of rights including, inter alia, rights of reproduction, communication to the public, adaptation and translation of the work.  In India, the law relating to copyright is governed by the Copyright Act, 1957 which has been amended in 1983, 1984, 1985, 1991, 1992, 1994, 1999 and 2012 to meet with the national and international requirements 211 CU IDOL SELF LEARNING MATERIAL (SLM)

 Under the Copyright Act, 1957 copyright subsists throughout India in the following classes of works: Original literary; dramatic, Musical and artistic works; Cinematograph films; and Sound recordings.  A trade secret is any kind of information that is secret or not generally known in the relevant industry giving the owner an advantage over competitors.  Unlike patent, a trade secret does not have to pass the test of novelty; nevertheless, the idea should be somewhat new, unfamiliar to many people including many in the same trade  Trade secrets are not protected by law in the same manner as trademarks or patents. In India, trade secrets are not covered under any law. 13.9 KEYWORDS  Trade Related Intellectual Property Rights (TRIPS) Agreement under WTO contains provisions with regard to setting up of standards concerning availability, scope and use of Intellectual Property Rights, Geographical Indications, and Layout- Design of Integrated Circuits etc.  A utility model is an exclusive right granted for an invention, which allows the right holder to prevent others from commercially using the protected invention, without his authorization for a limited period of time.  The World Intellectual Property Organization (WIPO) is a specialized agency of the United Nations.  Intellectual capital is recognized as the most important asset of many of the world’s largest and most powerful companies. 13.10 LEARNING ACTIVITY 1. What are the IPRs used in the business? What is their value (and hence level of risk)? ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- 2. Illustrate the methods for the valuation of intangibles. ---------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------- ----------------------- 13.11 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. What is meant by Intellectual Property? 212 CU IDOL SELF LEARNING MATERIAL (SLM)

2. What are Intellectual Property rights? 3. Why does intellectual property need to be promoted and protected?? 4. Who are responsible for administration of IPRs in the country? 5. How does accounting differ from finance? Long Questions 1. India provides protection to Intellectual Property Rights in accordance with its obligations under the TRIPS Agreement of the WTO. Discuss? 2. List out the subject matter protected by intellectual property rights under the World Intellectual Property Organization (WIPO)? 3. Outline the main differences between utility models and patents. Does India have legislation on Utility models? 4. Briefly explain the term “copyright” and the rights conferred by the copyright. 5. Copyright protects the rights of authors. How an author has been defined under the Copyright Act? B. Multiple Choice Questions 1. Which of the following is a recognized disadvantage of setting up as a start-up as compared with other routes to market entry a.Less satisfaction of the owners. b.Less help from various agencies. c.There are more funds required. d.There is a high failure rate 2. Someone legally appointed to resolve the financial difficulties of an insolvent firm iscalled____________. a. An administrator. b. A predator. c. An auditor. d. A turnaround consultant. 3. Goods or services reach the marketplace through ________. a. Marketing channels. b. Multilevel pyramids. c. Monopolies. d. Multiplication 213 CU IDOL SELF LEARNING MATERIAL (SLM)

4. To provide financial assistance to entrepreneurs the government has set up a numberof___________? a. Financial advisors. b. Financial intermediaries. c. Industrial estates. d. Financial institutions. 5. _____________ can be defined as a specifically evolved work plan densed to achieve a Specific objective within a specific period of time a. Idea generation. b. Opportunity Scanning. c. Project. d. Strategy. Answers 1-d, 2-a, 3-a. 4-d 5-c 13.12 REFERENCES Textbooks  T1 Gupta, R.K. & Lipika, K.L. 2115. Fundamentals of entrepreneurship development & project management, Himalaya Publishing House. ISBN: 978-9351426844.  T2 Ivaturi, V.K., Ganesh, M., Mittal, A., Subramanya, S. 2117. The Manual for Indian Start-ups: Tools to Start and Scale-up Your New Venture, Penguin Random House India. ISBN: 978-0143428527. Reference Books • Richard M.Hodgets, EFFECTIVE SMALL BUSINESS MANAGEMENT, Academic • Press Dan Steinhoff & John F.Burgess, SMALL BUSINESS MANAGEMENT FUNDATMENTALS, McGraw Hill 214 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT – 14 : DESIGNING ORGANIZATION STRUCTURE – LEGAL ISSUES – PART - II STRUCTURE 14.0 Learning Objectives 14.1 Introduction 14.2 Startups 14.3 Differences between Startups and Traditional companies 14.4 Corporate Governance 14.4.1 Elements of Corporate Governance 14.4.2 Corporate governance requirements in India 14.5 Start-ups and Corporate Governance 14.6 Summary 14.7 Keywords 14.8 Learning Activity 14.9 Unit End Questions 14.10 References 14.0 LEARNING OBJECTIVES After studying this unit, you will be able to:  Describe the concept of Startups.  Explain the elements of Corporate Governance.  Explain the startups and traditional companies’ differences.  Describe the corporate governance requirements in india.  Describe the strategies of start-ups and corporate governance. 14.1 INTRODUCTION We, as humans tend to focus on the factors, we assume carry more weightage in the context of a particular outcome we seek for, and when any deviations occur in our expectations; we would try to convince ourselves that maybe we didn't put in enough efforts in respect to those factors. What most of us don't realize is there could be some innate and integral factor we missed altogether which may have led to those deviations. Over the years and especially in the recent ones, the entrepreneurial spirit has grown exponentially throughout the globe not leaving India from its bounds. We are able to confidently state this because of the fact that India is now home to more than 4200 startups with 600 of them opening up in 2015 itself, as 215 CU IDOL SELF LEARNING MATERIAL (SLM)

per NASSCOM. (NASSCOM) However, another fact that comes to our attention is that almost 90% of startups in India fail within the first five years of inception as per studies by IBM and Oxford. (Aggarwal). Most research done on ascertaining the factors responsible for this has been concerned with  Lack of proper execution of operations  Lack of Technology and skilled workforce  Lack of proper Business Models. (D'Cunha) One aspect which gets missed out in the conversation is corporate governance. Corporate Governance continues to be a significance element in successful businesses with recent examples of Tata's and Infosys; what could happen to companies if it is not given the care and attention it requires. Corporate governance describes “the framework of rules, relationships, systems and processes within and by which authority is exercised and controlled within corporations. It encompasses the mechanisms by which companies, and those in control, are held to account. (ASX Corporate Governance Council). With the increasing number of cases of large Multinational Corporations facing problems with the aspect of corporate governance and how to deal with it when a problem arises, it would be interesting to know that whether startups, companies which are in their first five years of operations, take it seriously and consider it as a factor to a healthy organization or see it as a burden that they have to carry for the sake of it. 14.2 STARTUPS Most people understand a startup as some organization which is going through the initial stage of sustaining itself and evaluating its potential for the future at the same time. They are mostly recognised as small companies which are self-funded and operated by 20 to 30-year- olds. In actual scenario, however, Startups are made for larger markets because they have something to offer for the large markets. (Landau) They tend to grow fast, way faster than any small restaurant that open in city, which could be classified as a small business. Another very common misconception is that only tech or online companies can be classified as startups, which is understandable because people only come across those in daily life, but it is not true. The government of India has especially clarified this in their definition of startups. (Kalbi and Ayyar) So, one has to understand that the definition of a startup is ever expanding but if one needs to refer to something, one could frame startups as \" an entrepreneurial venture taken up by an individual or a group looking at potential success in the future owing to innovation which caters to a wide market.\" A more traditional definition would also include that a company remains a 'Startup' only till the first five years of its incorporation which might not fit in with the actual sense of the term completely. Flipkart and Ola are still considered as 'startups' even though they have been incorporated for more than five years now. 216 CU IDOL SELF LEARNING MATERIAL (SLM)

The following chart shows the different features of startups which make it unique and thus define it: Fig 14.1Difference features of Startups 14.3 DIFFERENCES BETWEEN STARTUPS AND TRADITIONAL COMPANIES Now, considering the above elements which define Startups, it is now easier to draw a parallel between them and traditional companies; companies who have crossed the development stage and who focus on maintenance and further growth, steadied their revenues and profits over the years and now look to expand their business. Startups need to take more risk in every aspect than a traditional company would, and with heavier expenses and lower profits, it becomes all the more difficult. (Zhuo). Most surveys and researches show massive difference in mindsets of Startup owners and CEOs of larger companies with regard to the decisions they take, stakeholders they consider while taking these decisions and how they deal with the impact of these decisions. Another way to look at it would be saying that every established company was once a startup, and hence it knows where it went wrong and now it is just trying to rectify that. It is also important to note that there aren't any two separate principles or rules for startups and traditional companies. The major points that differentiate startups from mature corporations with respect to corporate governance are: 1) Sources of funds i.e., the type of investors 2) Hierarchy of board or management 3) Rules and regulations to be followed 4) The entrepreneurial model 14.4 CORPORATE GOVERNANCE Corporate Governance can be defined as the rules, practices and processes by which a company is directed and controlled. The concept itself could be traced back to 1930s but it emerged only in the 1970s. 217 CU IDOL SELF LEARNING MATERIAL (SLM)

It is quite evident that its importance has grown many folds over the years, and it is unlawful today for a company to not follow its guiding principles. The international organisation, Global Network of Director Institutes, Toronto has elaborated these guiding principles. These principles are formed from general experiences and are not prescriptive in any way. They don't force any legal compliance on any organization to follow them but act as starting points or guidelines for these organizations to act upon. 1.Responsibility Every organisation should be headed by an effective board that is collectively responsible for overseeing the long-term success of the organisation and is charged with its direction. 2.Organisational structure The board sets the cultural and ethical tone for the organisation. Governance structures should be designed to encourage an appropriate organisational culture of integrity, ethics and corporate social responsibility and be tailored to the needs of the organisation. 3. Disclosure of practices The governance structures and practices that have been adopted by the board should be disclosed (for example, in a member communication document or on the organization’s website) together with an explanation of why the board considers them to be appropriate for the organisation, with particular focus on any aspects that are unusual or contrary to commonly accepted governance practices directors without members of the executive being present. 4.Independence Taking into consideration the scale and nature of the organisation’s activities, the board should comprise an appropriate number of directors who have a relevant and diverse range of skills, expertise, experience and background and who are able to effectively understand the issues arising in the organisation’s business, provide insight and add value. Directors must be able to allocate sufficient time to their roles, both collectively and individually, to discharge their duties effectively. 218 CU IDOL SELF LEARNING MATERIAL (SLM)

1.14.1 Elements of corporate governance: Corporate governance works like a mesh with many elements working together to trap unethical elements. Many countries have their own framework to deal with corporate governance. Take for instance corporate governance codes in the United Kingdom. The Financial Reporting Council (2012) has laid out four principles to be followed by companies operating in the U.K. which involve  The leadership of those who take key decisions in the company e.g., shareholders, chairman etc. The decisions must be taken in the best interests of the company.  The board should be effective and must possess the relevant skills and expertise to guide the company  The board must be kept accountable for the decisions they make by being transparent about the same.  The board should be remunerated such that they look at the long-term success of the company.  The shareholders must interact with one another to ensure that they collectively contribute Other corporate governance frameworks follow similar lines, though they might differ due to the nuances in each country, for e.g., differing court structures might impact corporate governance legal frameworks in different countries (Hopt). Written in 1999 and revised most recently in 2015, the OECD guidelines were formed about deliberations by both member and non-member nations (Jesover and Kirkpatrick). It is noteworthy that the Securities and Exchange Board of India (SEBI) has also participated and actively tried to adhere to the same principles (SEBI). The principles are simply meant to provide a comprehensive set of guidelines which a nation must look at when developing their corporate governance principles. 1.14.2 Corporate governance requirements in india: Corporate governance in India has had a curious relationship. The three notable committees set up in the 2000 (headed by Kumar Mangalam Birla), 2003 (headed by Narayan Murthy) and most recently in 2017 (headed by Uday Kotak) (Srivats) have all tried to update corporate governance in the country based on the revised needs of the time and age. This has resulted in Clause 49 in the listing agreement, revised after the Narayan Murthy commission. This deals with all the corporate governance requirements which companies need to follow. These includes guidelines regarding the board of directors (with distinction between independent and dependent directors), provisions regarding institutional investors, risk management, redressing the stakeholder concerns, risk management, remuneration of executives among others (Deloitte) While these provisions have tried to equip the businesses in the country with regulations which aid compliance, there has been a dearth to address the corporate governance needs for start-ups in the country. While the number of days to start a 219 CU IDOL SELF LEARNING MATERIAL (SLM)

business in India has gone down from 123 days in 2003 to only close to 26 days in 2016 (The World bank), it is important to note that making it easier to start a business without helping them create effective structures to stay afloat is equivalent to building jails without jailers, there is no system for the companies to regulate themselves effectively. This may put them at odds with the government and one may find a system which dooms start-ups to being branded as criminal enterprises for not being able to decode the cryptic and unrealistic laws which have been set for the same. 14.5 START-UPS AND CORPORATE GOVERNANCE As per the popular business professional Fahim Al Qasimi, startups need corporate governance mainly for three reasons  Managing complex decision making  Saving time  Promoting investor confidence It is quite understandable that startups don't actually look forward towards incorporating corporate governance as an element from the initiation itself as it may seem to be a cumbersome and redundant matter to look into. Its guidelines are not as clear as one would expect and end up acting as hindrances more than they serve to be the framework the business runs upon. A scan of startup boot camps previously completed in Singapore reveals none include it in their agendas (Yen). However, while it may sound difficult to cope with it, it is impossible to run a business ignoring the elements of Corporate Governance. 14.6 SUMMARY  A more traditional definition would also include that a company remains a 'Startup' only till the first five years of its incorporation which might not fit in with the actual sense of the term completely.  Corporate Governance can be defined as the rules, practices and processes by which a company is directed and controlled.  All stakeholders are informed about all company activities, Stakeholders participate in decision making process of the firm, Stakeholders consult one another when firm is making decisions which involve them, and Stakeholders with less power are able to voice their concerns.  The three notable committees set up in the 2000 (headed by Kumar Mangalam Birla), 2003 (headed by Narayan Murthy) and most recently in 2017 (headed by Uday Kotak) (Srivats) have all tried to update corporate governance in the country based on the revised needs of the time and age. 220 CU IDOL SELF LEARNING MATERIAL (SLM)

14.7 KEYWORDS  SSIM:Structural Self-Interaction Matrix  MICMAC is an acronym for Matrice d’Impacts croises-multiplication appliqúe an classment (cross-impact matrix multiplication applied to classification)  Business Ethics - Ghosh (2012) explains ethics as, “ethics is derived from the Greek word, ‘Ethikos’ meaning conduct, custom or habit. 14.8 LEARNING ACTIVITIES 1: Explain the Changing face of Corporate Ethics? ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- 2: Why do we need Business Ethics? ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- 14.9 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Define Startups? 2. Define Corporate Governance? 3. What are the unethical practices in IT industry? 4. What is the extent of unethical behaviour? 5. What are unethical practices in HRM? Long Questions 1. Why do we need Business Ethics? 2. Difference between startups and traditional companies? 3. Describe the elements of corporate governance? 4. Briefly explain the corporate governance requirements in india. 5. Differentiate Startups and corporate governance? B. Multiple Choice Questions 1. PERT stands for __________. a.Programme Evaluation and Research Techniques. b.Project Evaluation and Review Techniques. c.Programme Evaluation and Review Techniques. 221 CU IDOL SELF LEARNING MATERIAL (SLM)

d.Project Evaluation and Research Techniques 2. _____________ is used to accomplish the project economically in the minimum available time with limited resources a. Project Scheduling. b. Network Analysis. c. Budget Analysis. d. Critical Planning. 3. ______________ is a form of financing especially for funding high technology, high risk and perceived high reward projects a. Fixed capital. b. Current capital. c. Seed capital. d. Venture capital 4. In _________, machines and equipment’s are arranged in the order or sequence in which they are to be used for manufacturing the product a. Factory Layout. b. Product Layout. c. Process Layout. d. Combined Layout. 5. The term ___________ denotes bonus or financial aid which is given by a government to an industry to help it compete with other units a. Incentive. b. Subsidy. c. Bounty. d. Concession. Answers 1-a, 2-c, 3-a. 4-b 5-b 14.10 REFERENCES Textbooks 222 CU IDOL SELF LEARNING MATERIAL (SLM)

 T1 Gupta, R.K. & Lipika, K.L. 2115. Fundamentals of entrepreneurship development & project management, Himalaya Publishing House. ISBN: 978-9351426844.  T2 Ivaturi, V.K., Ganesh, M., Mittal, A., Subramanya, S. 2117. The Manual for Indian Start-ups: Tools to Start and Scale-up Your New Venture, Penguin Random House India. ISBN: 978-0143428527. Reference Books  R1 Gordan, E. and Natarajan, K. 2117. Entrepreneurship Development, 6th Edition, Himalaya Publishing House, ISBN: 978-9352125404. CASE STUDIES: Case Study : 1 Gaurav and Gautam are final year students of Science. Both come from business families, and they do not want to work for anybody. They want to set up their own business and make lot of money. They observe that Hotel Industry offers great opportunities to fulfill their dreams even though, the competition is very high, the profit margins are very attractive, as high as 100% or more. Gaurav and Gautam decide to start their five star hotel at Santacruz. Proximity to Airport and corporate offices attract a large number of persons as 223 CU IDOL SELF LEARNING MATERIAL (SLM)

well as corporate houses from Mumbai. Gautam and Gaurav feel that they can join hands and start their hotel. Their respective parents have agreed to give them a loan of rupees 50 crores each to start the business. It doesn’t deter them that they do not have any experience and certainly none in the Hotel industry. They feel that enough expertise is available on hire with which they can start this business. Questions :- 1. Discuss the pros and cons of this business. 2. How does SIICOM help new ventures Case Study : 2 Dr. Verghese (born 1921) ‘Father of India’s white revolution’ is a synonym for cooperative milk sector. Dr. Kurten started Amul India at Anand Gujarat with his cooperative movement. The brain behind operation Flood. Chairman, NDDB Unit 1981, Dr. Kurien was honored with World Food Prize in 1989, Magsaysay award 1963 and Padma Vibhushan from GOI. Kurien started Amul experiment without any capital base. He identified himself with the villagers in Kaira district of Gujarat and started a new experiment in collection of milk from villagers, testing, storage and distribution. He worked on the principle of equitable distribution of the gains of the venture and a process of leaning for all who were involved. He was also responsible for development of the surrounding villages, bringing in new technologies from various sources in dairying, health of animals, animal husbandry and feeds. Kurien also arranged pasteurization, making butter, ghee, other products of milk with better and faster transport facilities for the milk. The experiment got stage by state successes leading to 182 availability of milk and milk products to large parts of Gujarat and Mumbai and in addition, providing gainful employment and all round prosperity to the farmers in Gujarat. The innovative ways of handling this unique project was the brainchild of Kurien. Kurien is known for his frankness and result oriented approach in all his projects as well as in his personal life. Operation Flood—an ambitious nationwide dairy development project which helped an estimated 10 million families. (a) Helped India become the largest producer of milk at the time when children were undernourished because of lack of milk. (b) Milk was scarce in urban areas while in rural areas milk producers could not make a decent living Distribution was a key problem, there were also various vested interests, lack of information and infrastructure. Anand’s Kaira Milk Cooperative showed how problems could be tackled. (c) The While Revolution found a way to provide cheap milk for undernourished children in the Mumbai area and Gujarat, and late all-over India. The technique and technologies used were then copied by others. (d) Professional management, teaching farmers to use quality equipment, innovative processes meant the professionalization of farming. (e) Kurlen’s philosophy was simple—put power in the hands of the people. (f) Empowering the masses and initiating constructive social change in rural areas—from building ‘milk roads’ to participating in elections. Questions 224 CU IDOL SELF LEARNING MATERIAL (SLM)

(1) What are entrepreneurship qualities of Dr. Kurien? (2) Detail achievements of Dr. Kurien. (3) Discuss how Amul could achieve success? Case Study : 3 Mr. Kulkarni is a hardworking computer engineer working in the hardware maintenance and sales department of a reputed Indian Computer Industry for last 10 years. He had developed a lot of understanding of the market needs and was aware that if his company did not use latest innovative techniques of maintenance to keep up with the market needs, they would face difficulties in the future. Mr. Kulkarni tried to convince his seniors about his perception, but no serious action was taken. Mr. Desai, Kulkarni’s friend who was working in the same company’s marketing department also felt the same. They both decided to do a proper feasibility study and 183 prepare a business plan, to start their own enterprise, to serve the market needs but Mr. Kulkarni was hesitant to leave the job. Questions :– 1. Will the new enterprise succeed? Should Mr. Kulkarni leave the job. 2. What are the various area which need to be studied in the new business plan? 3. How should they build the corporate image of the new enterprise in the market. Case Study : 4 A small group of uneducated started a new venture of carrying tiffin boxes in Mumbai to office going people. The ‘tiffinwallas’ as they are commonly called in Mumbai is a household name for good reliable service. It has become a profit making industry and has grown over the years. The Mumbai Tiffinwallas are international figures now thanks to Forbes Global. The Forbes story details the efficiency with which they deliver the tiffins to their customers. Around 5,000 tiffinwallas deliver 1,75,000 lunch Boxes every day and take empty back. They make ONE mistake in 1 month. This means there is one error on every million transactions (or 8 million deliveries of lunches). This is thus a Six Sigma performance (a term used in quality assurance — if the percentage of correctness is 99.999999—6 mines or more). That is within defect rate 3.4 in a million operations the performance which has made companies like Motorola world famous for their quality. Mumbai tiffinwallas have achieved a level of service to which Western Businesses can only aspire. “Efficient Organisation” is not the first thought that comes to mind in India, but when the profit motive is given free reign, anything is possible. To appreciate Indian efficiency at its bet, watch the tiffinwallas at work. These are the men who deliver 1,75,000 lunches (or tiffins) each day to offices and schools throughout Mumbai, the business capital of India. Lunch is in a container consisting of a number of bowls, each containing a separate dish, held together in a frame. The meals are prepared in the homes of the people who commute into Mumbai each morning and delivered in their own tiffin carriers. After lunch the process is reversed. And what a process— in its complexity, the 5,000 tiffinwallas make a mistake only above once every two months, according to Raghunath Medge, President of the Mumbai Tiffin men’s Association. 225 CU IDOL SELF LEARNING MATERIAL (SLM)

That’s one error in every 8 million deliveries or 16 million if you include the return trip. “If we make 10 mistakes a month, no one would use our services, say the craggily handsome Medge. how do they do it? The meals are picked up and delivered home before the commuters return. Each 184 tiffin carrier is, painted on its top, a number of symbols like square, rounds, triangles of different colour which identify where the carrier was picked up, the originating and destination stations and the address to which it is to be delivered. After the tiffin carriers are picked up, they are taken to the nearest railway station, where they are sorted according to the destination station. Between 10.15 a.m. and 10.45 a.m. they are loaded in crates into the baggage cars of trains. At the destination station they are loaded in crates into the baggage cars of trains. At the destination station they are unloaded by other tiffinwallas and re-sorted, this time according to the street address and floor. The 100 kgs crates of carriers, carried on tiffinwallas heads, hand wagons and cycles are delivered on time at 12.30 p.m. picked up at 1.30 p.m. and returned where they came from. The charge for this extraordinary services is just Rs. 150 per month, enough for the tiffinwallas, who are mostly self-employed, to make a good living. After paying Rs. 60 per crate and Rs. 120 per man per month to the Western railway for transport, the average tiffinwalla clears about Rs. 3,250. Of the sum Rs. 10 goes to the tiffinmen’s Association. It is a fruit of hard and demanding work of tiffinwallas. Coordination and minute to minute precious is the hallmark of the work, six days a week and all-round the year. An eye on accuracy of work brings in the quality level. After minimal expenses, the rest of Rs. 50,000 a month that the association collects go to a charitable trust that feed the poor. Superb service and charity too. Can anyone ask for more? Questions 1. Discuss volume of work involved in the job of Mumbai tiffin carrying 2. What are entrepreneurial qualities of 5,000 tiffinwallas? 3. How tiffinwallas got fame as six sigma level service providers? Case Study : 5 Karsanbhai Patel started his business in detergents which he himself use to prepare on Sundays and sell it in the neighborhood. This low priced detergent later turned out to be Nirma, with a present turnover of over Rs. 600 crores p.a. Nirma has the largest number of consumers in India as compared to any other company, rather it is the largest single detergent seller in the world markets. It is a universal house-hold brand name in India. The production process was traditional, involving large manpower working with manual implements in mixing and packing. The investment on plant and machinery per unit was less than Rs. 35 lacs, before the present restructuring and modernization began. 185 Mr. Patel took up production and expansion without organised market studies. He believed that production for common man with low price/profit automatically sells. It requires 226 CU IDOL SELF LEARNING MATERIAL (SLM)

standardisation of quality, cutting down the costs and low profit margin. Nirma is now going for diversification in the fields of linear alkyl benzene and soda ash, to mention a few reported cases. Read the above case and answer the following question : (a) Explain the growth profile of Nirma (b) What growth strategy is followed by Nirma (c) Discuss how Nirma achieved success Case Study : 6 M. Kothari started his career when he was 22 years old. He activity was door to door selling of hair oil and buying and selling of cigarettes. From this modest beginning he started off Pan masala in 1973. Procuring the ingredients from his landlord, using 1150 sq. ft. space and a small capital of Rs. 12,000, the production began. In 1985 the packing underwent changes with introducing of Re. 1 pouches together with Rs. 20 tins. This changes saw an increase in the turnover nearer to Rs. 100 crores p.a. This activity was supported by a strong campaign. The special flavour for the masala is prepared mutually by the Kothari’s family once a week. Kothari has no salesmen, but about 100 workers working in the factory. Read the above case and answer the following question : (a) Explain the growth profile of Kothari (b) Discuss how Pan Masala achieved success Case Study : 7 Satish Kumar an engineering graduate took up to T.V. picture tubes which was formally meant for public sector alone. Mr. Satish used to buy defective picture tubes from abroad and sell them in the Indian market after reconditioning. This was agreed on the ground that it would save foreign exchange. Within six months the suppliers from abroad increased the price. By leaving partnership he ventured into independent production and managed to produce picture tubes at lower price than public sector enterprises. He has to manage without salaries for two years, without dividents for seven years and without holidays for 10 years. Now he has a Rs. 100 crores, business, catering to 62 percent of the Indian market. Read the above case and answer the following question : (a) Explain the growth of Satish Kumar’s business (b) Discuss how Satish Kumar achieved success Case Study : 8 Mrs. A. N. Sujata is the Managing Partner of Rama Machine Tools, an engineering firm established by her father in 1988. She has started a new firm Diamond Engineering Company - dealing with machinery for coir and silk industry. On the personal front Mrs. Sujata has been able to manage her household very successfully. She has received a lot of encouragement from her husband, and he also lends a hand with the housework. They 227 CU IDOL SELF LEARNING MATERIAL (SLM)

have a daughter who goes to school and spends the afternoon at her mother’s office. When asked the reason for her success both at home and at work, she simply says that it is a matter of compromise. Mrs. Sujata is fortunate in getting the assistance of her father. It was natural enough to follow in the footsteps of her father and get into the world of entrepreneurship. Immediately after she completed her schooling, she took up B.E. in Mechanical Engineering at a local college in Mumbai. When she passed out, she joined her father at Rama Machine Tools and was made Managing Partner. This brought a lot of problems because most of the staff at the factory did not like the idea of working for a women who was so young and inexperienced. Some of, the employees had been working there for 20 years ‘But this’ did not faze her at all. She just decided to push harder and dealt with them with a firm hand. After having worked at her father’s firm she was still very keen on the idea of starting her own unit. She wanted to find out for herself if she could establish a separate unit with her academic credentials. Since she was trained as an engineer it was important that she do something with which she was familiar. So in 1982, after submitting her project report and getting a working capital loan. Diamond Engineering Company was established, by Mrs. Sujata as the Sole Proprietor manufacturing of coir and silk machinery. The Engineering degree has proved to be useful to her in effectively managing her entrepreneurial career. But most of her practical experience is credited to her father’s company under his guidance. Initially, the employees did not like the idea of working for a women entrepreneur. They had the traditional idea of women being just housewives. This has been a common problem with several women entrepreneurs. But Mrs. Sandhya overcame this problem 187 very effectively and dealt with them with a firm hand, wherever needed. In 1995 she had firsthand experience of being confronted with a labour problem at her factory. They went on a strike demanding increments. They thought that since she was a women, they could easily gain an upper hand by intimidating her. But she proved them wrong and refused to be cowed down. The ongoing battle went to the courts and took two years. In the end, she managed to work out a successful compromise with them which was mutually satisfying. Today they manufacture equipment and machinery which are used by the coir industry such as the extraction of coir fibers and the processing of these fiber. Fortunately for her, there is not much competition in this field as there are very few people in this business. The company also manufactures silk machinery which included reeling and twisting machines of silk threads. The firm has been regularly supplying the machinery to several government agencies, DGS&D and the Coir Board. The Coir Board had recommended the name of this firm to Fiji and Nigeria for export. The firm supplies the machines to West Indies and Ghana. The firm has received orders from Kenya for the silk machinery. Read the above case and answer the following questions : (a) Explain the entrepreneurial qualities of Mrs. Sujata (b) Discuss how Mrs. Sujata solved the problems of insubordination employees and labour strike. 228 CU IDOL SELF LEARNING MATERIAL (SLM)

Case Study : 9 Mr. Suresh Nadar was working with the Chennai based Air craft maintenance company for quite some time. Sometime before his retirement, he was required to travel a distance of around 130 k.m. from Pune to Ahmednagar to make a visit. Those days the condition of roads was not very good and also due to the traffic on that road, being a state highway, he took more than three hours to reach the factory premises of one of his friends there. The first thing upon reaching there, he was questioned by his friend ‘why do not you do something to reduce the time for such a small travel?’ Mr. Suresh Nadar had never thought on this problem. At the end of the day it was decided that after his retirement, he would stay in Pune, become a director of the Company at Ahmednagar and would be traveling at least once a week on this road. he was now forced to think on this problem, for now it was his problem. To him it was not just onetime problem but a recurring one once he settles in Pune. After his return to his office headquarters in Kolkata and resuming office, he could not drive the problem from 188 his mind out. The traffic problem in Pune city was more serious, and that would be alarming after ten years. He thought if he could find some solution to this problem, it would be welcome by all such cities in the country. He then started writing to surface transport ministry and sought a reply on whether “the ministry has thought over this issue any time”. He however received the standard reply after three months that the matter was under consideration. Mr. Nadar could not stop there was thus wrote to some of his friends at major cities in the country to know the seriousness of the road traffic congestion there. He was surprised when he received the replies. His opinion is that after ten years the problem would be very alarming one was confirmed. Mr. Nadar had a strong vision and therefore the only solution for all these road congestion he thought was the use of ‘Air taxi service’. This was in July 1993. Exactly one year before his official retirement, he came to Pune on a three months leave. As soon as he reached here he started his discussions and meetings with some of his friends. He decided to start the work on formation of company to produce small air crafts which would be used for ‘Air taxi’ service between some of the nearby industrially developing towns, in near future. Some like-minded people also agreed with the seriousness of the problem and the need for such a unique service. This was the first ever effort by an individual to think of manufacturing of air crafts in private sector. But with the liberal economic policy being introduced, the things were possible. Basic formalities like application and preparation of M&A (Memorandum and Articles) etc. was completed and Mr. Nadar left for Kolkata again, only to come back soon. By December 1993, the application was through, and the permission was granted to start the company to undertake the production of small air crafts having a capacity of 10 and 12 seats each, in technical collaboration with a reputed Italian company, who was pioneer in that line. After almost one year the official share issue of this company was floated, and it was subscribed fully. It appeared that public also agreed with the great vision that Mr. Nadar had. Basic study showed that Bangalore as the ideal place to start the manufacture of air crafts. Accordingly purchase of land and other formalities were completed. Technical collaboration and 229 CU IDOL SELF LEARNING MATERIAL (SLM)

maintenance agreements were also through. The company is fast progressing and presently undertakes the maintenance of the existing air crafts in the country. 1. Examine the feasibility and viability of Air-taxi services 2. Analyse the case for its quality of Entrepreneurship. 3. Examine the scope of Air taxi services between (a) small industrially developed towns, and (b) SEZs and city centers 230 CU IDOL SELF LEARNING MATERIAL (SLM)