Preparing The Business Plan Short Answer Type Questions

Question 1.
Discuss the need or importance for business plan.
Answer:
The importance of business plan is as follows:

  • It helps to define the business plan.
  • It helps in establishing goals.
  • It helps to manage risk and uncertainty.
  • It ensures effective planning.
  • It helps in developing organization structure.
  • It helps in establish strategy.
  • It helps in allocating resources.
  • It helps in decision making.
  • To establish the right steps to starting a new business.
  • It helps in developing new business alliance.
  • To determine the potential to make a profit.
  • It creates competitive advantage.

Question 2.
What are the financial aspects of the business plan?
Answer:
Before preparing the business plan, the entrepreneur must have a complete evaluation of the profitability of the venture. The assessment will primarily tell potential investors if the business will be profitable, how much money will be needed to launch the business and meet short term financial needs, and how this money will be obtained (Example: Stock or debt).
There are traditionally three areas of financial information that will be needed to ascertain the feasibility of the new venture:
(1) Expected sales and expense figures for atleast the first three years: Determination of the expected sales and expense figures for each of the first twelve months and each subsequent year is based on the market information. Each item of expense should be clearly identified.

(2) Cashflow figures for the first three years: Estimates of cashflow consider the ability of the new venture to meet expenses at designated time of the year. The forecasted cashflow should identify cash at the beginning, expected accounts receivable and other receipts, and all payments on a monthly basis for the entire year.

(3) Current balance sheet figures and proforma balance sheets for the first three years: Current balance sheet figures reflect the financial conditions of the business at any particular time. They identify th? assets of the business, the liabilities (what is owed), and the investment made by the owner or other partners.

Question 3.
Explain marketing aspect of a business plan.
Answer:
The marketing aspect of a business plan includes the following:
(i) Well defined market: A market that is well-defined will make it easier to target it at the right people, project market size and determine subsequent market goals for the new venture.

(ii) Channel Strategy: It is also necessary to take into account the channel strategy i.e. how the product/service will reach the consumers. The choice of the channel will depend on the nature of product/service to be sold and the industry in which it is operating.

(iii) A positioning statement then needs to be prepared. A positioning statement will put forth the attributes/benefits of the product/service and create a favourable image in the minds of customers. It will also describe, in what way the product has been designed and tailored to meet the needs of the target customer.

(iv) The pricing strategy needs to be explained i.e. on what basis is the price determined and why it will be effective with target customers. Also, the discounts offered at each level of the channel need to be considered.

(v) Communication strategy communicates the benefit of using the product/service to the consumer via media advertising, outdoor advertising, p- o-p, public relations, e-commerce and the like. Brand name, logo, tagline, colour scheme, packaging etc. will all go in creating a brand image.

(vi) sales strategy: Last but not the least, the sales strategy will describe the manner in which the product/service will be sold i.e. through salesforce, telemarketing, direct mail, etc. The procedure of generating leads, recruiting, training and compensating the salesforce also need to be established.

Question 4.
Explain the marketing problems of Small Scale Industries.
Answer:
Small scale industries are not in a position to play their role effectively due to various constraints. The various constraints, the various problems faced by small scale industries are as under:
(1) Finance: Finance is one of the most important problem confronting small scale industries Finance is the life blood of an organisation and no organisation can function proper 6 in the absence of adequate funds. The scarcity of capital and inadequate availability of credit facilities are the major causes of this problem.

Firstly, adequate funds are not available and secondly, entrepreneurs due to weak economic base, have lower credit worthiness. Neither they are having their own resources nov are others prepared to lend them. Entrepreneurs are forced to borrow money from money lenders at exorbitant rate of interest and this upsets all their calculations.

After nationalisation, banks have started financing this sector. These enterprises are still struggling with the problem of inadequate availability of high cost funds. These enterprises are promoting various social objectives and in order to facilitate then working adequate credit on easier terms and conditions must be provided to them.

(2) Raw Material: Small scale industries normally tap local sources for meeting raw material requirements. These units have to face numerous problems like availability of inadequate quantity, poor quality and even supply of raw material is not on regular basis. All these factors adversely affect t e functioning of these units.

Large scale units, because of more resources, normally corner whatever raw material that is available in the open market. Small scale units are thus forced to purchase the same raw material from the open market at very high prices. It will lead to increase in the cost of production thereby making their functioning unviable.

(3) Idle Capacity: There is under utilisation of installed capacity to the extent of 40 to 50 percent in case of small scale industries. Various causes of this under-utilisation are shortage of raw material problem associated with funds and even availability of power. Small scale units are not fully equipped to overcome all these problems as is the case with the rivals in the large scale sector.

(4) Technology: Small scale entrepreneurs are not fully exposed to the latest technology. Moreover, they lack requisite resources to update or modernise their plant and machinery Due to obsolete methods of production, they are confronted with the problems of less production in inferior quality and that too at higher cost. They are in no position to compete with their better equipped rivals operating modem large scale units.

(5) Marketing: These small scale units are also exposed to marketing problems. They are not in a position to get firsthand information about the market i.e. about the competition, taste, liking, disliking of the consumers and prevalent fashion.

With the result they are not in a position to upgrade their products keeping in mind market requirements. They are producing less of inferior quality and that too at higher costs. Therefore, in competition with better equipped large scale units they are placed in a relatively disadvantageous position.

In order to safeguard the interests of small scale enterprises the Government of India has reserved certain items for exclusive production in the small scale sector. Various government agencies like Trade Fair Authority of India, State Trading Corporation and the National Small Industries Corporation are extending helping hand to small scale sector in selling its products both in the domestic and export markets.

(6) Infrastructure: Infrastructure aspects adversely affect the functioning of small scale units. There is inadequate availability of transportation, communication, power and other facilities in the backward areas. Entrepreneurs are faced with the problem of getting power connections and even when they are lucky enough to get these they are exposed to unscheduled long power cuts.

Inadequate and inappropriate transportation and communication network will make the working of various units all the more difficult. All these factors are going to adversely affect the quantity, quality and production schedule of the enterprises operating in these areas. Thus their operations will become uneconomical and unviable.

(7) Under Utilisation of Capacity: Most of the small-scale units are working below full potentials or there is gross underutilization of capacities. Large scale units are working for 24 hours a day i.e. in three shifts of 8 hours each and are thus making best possible use of their machinery and equipments. On the other hand small scale units are making only 40 to 50 percent use of their installed capacities. Various reasons attributed to this gross under utilisation of capacities are problems of finance, raw material, power and underdeveloped markets for their products.

(8) Project Planning: Another important problem faced by small scale entrepreneurs is poor project planning. These entrepreneurs do not attach much significance to viability studies i.e. both technical and economical and plunge into entrepreneurial activity out of mere enthusiasm and excitement.

Question 5.
Explain the HRM’aspect of business plan.
Answer:
An efficient and competent team of people is a prerequisite to the success of any organisation. The talents and experience that the team brings to the business is very valuable. A description of the organisational structure along with organisational chart is needed.

The HRM aspect of business plan are as follows:
(i) Top Management: The structure of the top management should be listed down. It is the apex body which makes policies, sets goals, pool the resources etc.

(ii) Middle Management: Middle management is responsible for putting the plans into action.

(iii) Operations Management: Operations management has people who are working at the operational level, be it the shop floor in case of manufacturing, on the field in case of sales and service personnel, and in different branches in case of service providers. These are the people who interact with the customers and vendors directly.

(iv) Supporting staff: The support staff plays an important role in the organisation. Hence its duties need to be clearly laid down.

(v) Advisors: Advisory services in case of matters such as legal, quality, finance, and auditing are required. These services are needed because an entrepreneur requires expert opinion from time to time.

The following information about human resources in the business plan will add clarity:

  • Number and type of employees.
  • Pay structure.
  • Training methods.
  • Job descriptions.

Question 6.
Explain technical aspect of business plan.
Answer:
When outlining the plan of technology, it should be borne in mind how the company might grow or change. Also the technology chosen should be simple and flexible. Technology can be used in:

  • Accounting, taxes, finance.
  • Order taking and tracking.
  • Inventory management.
  • Database management.
  • Presentations.
  • Human Resource Management,
  • Internet marketing etc.

Following factors should be borne in mind while choosing technology:

  • Functions.
  • Ease of use.
  • Security.
  • Flexibility.
  • Maintainability.
  • Financial consideration.

Question 7.
Explain the social aspects of the business plan.
Answer:
A business has certain social responsibilities in addition to the objective of maximising profits. An ideal business firm should:

  • Take the welfare of society into consideration.
  • Focus on values of society.
  • Optimise the use of resources.
  • Protect the environment, ecology by undertaking anti-pollution measures.
  • Participate in social welfare programmes, make charitable contributions, undertake social forestry, adopt villages for their all round development and the like.
  • Share the gains arising out of improved production technique with all those who have interests in the business.
  • Assist in the establishment of an egalitarian social order.