Page 98 - DMGT310_ENTREPRENEURSHIP_AND_SMALL_BUSINESS_MANAGEMENT

Unit 7: Building the Business Plan

Technological Appraisal: It assesses the various technological know-how available to convert Notes
the idea into a product. It can also be done to assess the various modern technologies expected
in the near future and their receptiveness by the industry.

Example: An entrepreneur has an idea of manufacturing tobacco-free herbal cigarettes
which would not harm the health of smokers; technological appraisal can assess whether
manufacturing of this kind of product is possible or not.
Economic Appraisal: It assesses the status of economy in a given society in terms of inflation,
per capita income and consumption pattern, balance of payments, consumer price index etc. A
healthy economy offers greater opportunities for growth and development of the industry and
therefore provides greater confidence to the entrepreneur about the success of his business
venture.
Demographic Appraisal: It assesses the overall population pattern of a given geographical
region. It includes variables like age profile, distribution, sex, education profile, income
distribution etc. The demographic appraisal can help in identifying the size of target customers.
Governmental Appraisal: It assesses the various legislations, policies, incentives, subsidies,
grants, procedures etc. formulated by government for a particular industry. The softer the
government norms for the industry, the easier it is for the entrepreneur to establish and run the
business. Take for example, the government policies of subsidized electricity in Uttaranchal. A
manufacturing unit highly dependent on power has an added advantage for setting up industry
there. On the other hand, take Uttar Pradesh. Here, the electricity is not just expensive, but there
is acute shortage of it as well and entrepreneurs in UP are dependent on personal generators for
electric supply, which automatically increases the cost of product. Hence it would be a wise
decision on the part of an entrepreneur to set up/shift his manufacturing unit to Uttaranchal.

The outcome of government policies in other sectors too should be taken into reckoning while
conducting an appraisal of its policies. One such example is the government’s intentions to
allow only partial FDI in the retail segment. Because of this particular clause, multinational
retail outlets like Wal-Mart are not able to enter the Indian market, though the market potential
and financial feasibility is in abundance.
Internal Environment

Following are the components of internal environment of a business:
Raw Material: It assesses the availability of raw material now and in the near future. If the
availability of raw material is less now or would be less in future then the entrepreneur should
give a serious thought to establishing a venture as the entire system can come to a standstill due
to shortage of raw material.
Production/Operation: It assesses the availability of various machineries, equipments, tools
and techniques that would be required for production/operation.
Finance: It assesses the total requirements of finance in terms start-up expenses, fixed expenses
and running expenses. It also indicates the sources of finance that can be approached for funding.
Human Resource: It assesses the kind of human resources required and its demand and supply in
the market. This further helps in estimating the cost and level of competition in hiring and
retaining the human resources.
As stated above, the objective of environmental scanning should be to gather information from
as many sources as possible and to maximize this information for enhanced probability of
success in the business.

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