LOCATION OF AN

ENTERPRISE AND STEPS IN

SETTING SSI
LOCATION OF AN ENTERPRISE
AND STEPS IN SETTING SSI
 “The Choice of the place (location) where an
industrial undertaking (unit) started has a
very great influence on productivity,
efficiency and profitability of the enterprise”.
INTRODUCTION

 Thestudy of industrial locations forms an

important branch of economic geography
which has engaged the attention of both
economists and geographers. Economists
judge from the point of view of profit,
productivity and growth.
 NEED FOR ENTERPRISE LOCATION
1. When a new enterprise is to be established.
2. In the case of established enterprise, the need
for enterprise location arises when expansion,
decentralization and diversification is undertaken
to meet the increased demand for its products.
3. When a new branch or branches are to be
opened for increasing the volume of productions
or distribution or both.
4. When an undesirable location is to be
abandoned.
5. Whenever the existing factory is not in a position
to obtain renewal of lease.
6. When the tendency of shifting the
market , depletion of raw materials,
changes in transportation facilities,
new processes requiring a different
location are observed in a factory.
IMPORTANCE OF ENTERPRISE
LOCATION
• The selection of an enterprise location enables the
enterprise to operate smoothly, efficiently, and with
the minimum cost.
• The location of an enterprise has a great effect on
the success or failure of that plant.
• While selecting a site, the owner must consider
technical, commercial, and financial aspects.
• Location is also an important factor determining the
ultimate success or failure.
STEPS IN ENTERPRISE LOCATION

1. Selection of the region.

2. Selection of the locality or
community.
3. Selection of the exact site.
4. Selection of the optimum
site.
WEBER’S THEORY OF INDUSTRIAL
LOCATION
The Weber’s theory of industrial location is based on the following
basic assumptions:
The materials can be
 Ubiquitous(being or seeming to be everywhere at the same time)
 localized materials
 weight – losing or gross materials
 pure materials
 The situation and size of places of consumption are given ,with the
market comprising a number of separate points.
 Fixed labour locations ,labour is immobile
Weber’s theory divides the factors influencing industrial location
into the following two:

i. Transport and labour cost-affecting industrial location.

ii. Agglomerative(gathering together) or deglomerative

(away from the areas of concentration) forces-
responsible for redistribution for industries.
The limitations of the Weber's theory:
1. The theory is based on the three wrong assumption about labour supply.
2. Transport cost depend on the mode of transport,nature of goods etc.
3. Location and size of markets may vary with change in economy.
4. Non economic factors also exert important influence on industrial
location.

5. The theory ignores the role of capital and entrepreneurship in

industrialization.

6. The classification of materials not proper.

SELECTING GENERAL AREA

The important factors consider in the selection of a site:

• availability of raw materials

• Availability of skilled and unskilled labour
• Nearness to the source of motive power
• Nearness to market
• Availability of transport facilities
• Nuisance problems
• Suitability of climate
The other important features to be considered are:

• Topography –flat ,cheap or marshy land ,sea ,lake or river

location ,vegetation ,sea level

• Soil conditions –corrosion to underground pipes drianage

requirement, quality and cost of fill required.

• Water supply –quality of water is important.

• Waste disposal-treatment of effluents prior to discharge to the main
stream.

• Position of plant to local transport facilities-nearness to railway or

highway.
• Availability of homes for workers
• Local legislations and municipal laws including sanitation air&
steam pollution and others.

• Living conditions for labour and management – climate

,recreational facilities ,quality of schools etc.

• Community directives ,attitude towards manufacturing

activities and outside investors.

• Tax concessions and other incentives applicable to area/site.

Factors taken into consideration in the selection of site:
o Soil test indicating type and load bearing capacity of the soil
at various depths ,water table ,terrain ,etc.
o Extent of site development required;
o Climatic conditions ,namely ,temperature ,rainfall
,humidity ,etc.;
o Presence of mineral deposits;
o Proneness to natural &structural disturbances;
o Leasehold or freehold nature of land ,price/compensation
,mode of acquisition ,etc.
 ECONOMIC SIZE

Each project , there exists a certain minimum

economic size below which the project will not be a
viable .

It may so happen that in the case of some acute

scarcity products ,a project even below the
economic size may appear to be viable in the
immediate future ,
• If a long-term view is taken if may not be so,

• This size various from industry to industry , depending upon

the nature of product to be manufactured , complexity of

the manufacturing process, factory of production ,

particularly capital & labor .

• This concept is also linked with inflationary pressure on the

unit cost of investment and technology adopting .
 PROCESSING UNIT
In a continuous processing unit , minimum
size of of a plants determined by
technology
1. size of the plant

2. Available in a jobbing unit

3. Product mix

4. Project size

5. availability of skilled labor

6. Cost of infrastructural inputs

7. Quantum of bought-out finished

semi-finished components .
• The scale of a project is,
• Examined keeping in view technological efficiency,
• Cost of production ,
• Size of the targeted market &capital cost .

• these factors may, however, be conflicting

and .:. While deciding on the scale of operation,
certain compromises may have to be made .
• When the excepted demand for the
adequate

to justify the size of the project.

• it would be necessary to compromise on

the technology efficient criteria and choose
a lower scale of operation sacrificing
thereby part of technological efficient .
 PROJECT PHASING
Various alternatives are often evaluated for project
phasing in team of either the size of the plant or the
extent of instigation .

When eventually the market develops, the project size

can be increased appropriately by either backward or
forward integration .

Factors witch have an important bearing on the

economic size of the project are:

• the cost structure and availability of infrastructure facilities .

 Cont…

• With this ,it might often be necessary to compromise

with project smaller, with this shorter gestation period

vis-à-vis large capacity plants involving huge

investment and long gestation periods.

• All economic size case’s are analyzed carefully by the

appraising financial institution and its ensured neither

the project is too smaller nor too ambitious .

 Cont. . .

• If a project is found to uneconomic size, the

barrower advised at the initial stage to modify
his scheme and make it economic viable and
acceptable proposition.

• It may be mentioned here that the institutions

also ensure that the licensed capacity of a plant
expressed in terms of physical quantities and
not in terms of the central government .
SELECTION OF MOST ECONOMIC
SITE

According to Kimball and Kimball ,

“most advantageous location is that at which the

cost of gathering material and fabrication it plus
the cost of distributing the finished product to the
customer will be a minimum .”
EX :- SELECTION OF MOST ECONOMIC SITE

 A,B- SOURDE OF
SUPPLT OF
MATERIAL

C-MARKET PLACE
 D-SITE
SELECTION OF ACTUAL SITE
SITE A SITE B SITE C
FACTORS INFLUENCING THE
LOCATION OF PROJECT

 Two types of measures that may be advocated or

adopted to influence the location of project .

 1. The first set of measures refers to the

various inducements extended to the industrialists
to set up their projects in certain specified areas.

 2. The second set measures imposes

restrictions on the location of project in certain
congested areas.
 Cont. . .
• The resources available for industrial projects , for instance ,

were limited .

• If more resource are invested in projects in one region , less

resources will be available for investigation of resource in

projects in some regions of the country .

• If a policy of industrial location with a view to achieving

decentralization and a dispersal is accepted on economic, social,

political& environmental grounds, there is a strong case for

setting up a machinery for the administration of the policy.

• The machinery should exist at central ,regional and local level

to deal with the problem of regional or local industrial

development
 Cont…

• The objective of state incentive to provide

assistance and facilities to allure and motivate

techno-entrepreneurs, intrapreneurs and first

generation entrepreneurs to locate their venture in

their region .

• The nature of assistance ,however, varies from state

to state .
 STATE INCENTIVES
Incentives offered Small-scale industries Medium & large scale
industries

1) Feasibility study Subsidy to a ceiling of 75% Loan of 75% of the cost of

subsidy of the cost of operating preparing feasibility report
the report up to a upto a maximum of
maximum of Rs 5,000 Rs50,000

2) Investment subsidy 10% of value of fixed 10% of the value of fixed

assets, subject to a ceiling assets subject to a ceiling
of Rs5,00,000 of Rs 10,00,000

3) Development loan Overall ceiling of 25% of For zone II,10% of the

the value of fixed assets value fixed assets to a
maximum of Rs50,00,000
& III & IV,15% of the value
of fixed assets, subject to
a maximum of
Rs50,00,000
 Cont…
4) Working capital loan Interest-free loan offered , Interest-free loan ,subject
subject to a ceiling of 25% to a maximum of
of the value of fixed assets Rs50,00,000,
or t he development loan
taken which ever is less

5) Procurement of know- It shall be reimbursed in 50% of fee paid by new

how full, subject to maximum of units for procurement of
Rs 25,000 know-how shall be
subsidized upto a ceiling
ofRs1,00,000

6) Stamp duty exemption Exemption on a stamp duty Same as in the case of

and reduction in for execution agreement small –scale industry
registration fee with KSFC. There is also
reduction fee of Re.1 per
Rs1,00 for registering the
agreement deeds .
 LOCATION POLICY
• Location policy has been significantly amended .

• in location other than cities of more than one

million population, there is no requirement of
obligation industrial licensing .

• In respect of cities with population greater than one

million ,industries other printing , may be located
outside25Kms .

• Of periphery of urban areas, except if they are

located in designated industrial area, prior
to25.7.1991.

• Zoning and land use regulation and environmental

legislation continuous to regulate industrial location.
STEPS FOR STARTING A SSI
INTRODUCTION
• The development of small-scale industries
has been one of the most significant and
characteristics features of industrial
development in India.
• To create broader employment opportunity
• Assist entrepreneur skill and technology
• And ensure to better use of scares financial
resources and appropriate technology.
BASIC OBJECTIVES
The basic objectives underlying the
development of small and medium scale
industries are the increase in the supply of
manufactured goods. The promotion of
capital formation, the development
indigenous entrepreneurial talents and skills
and the creation of broader employment
opportunities.
STEPS TO SET A SSI
1. Analyze yourself and your objectives
2. Date with yourself for newer ideas
3. Consult publication and agencies
4. Discuss with all around you and with SISI &DI office
5. Date with yourself for a decision
6. Choose a line
7. Decide on form of ownership[sole-
property/partnership/company(private/public)/co-
operative].
8. Decide whether to purchase a going concern or to start
a new one
9. Obtain the project report from SISI or elsewhere or
prepare it yourself
10. Decide on location and site
11. Arrange the work shed with facilities(preferably on
rent)
12. Make sure what laws will particularly affect you
13. Obtain clearance from central state & local authorities
and SSI REGN.no .
14. Plan finance
15. Plan source of machinery
16. Place order of machinery(on hire purchase)
17. Apply for materials(if imported or controlled)
18. Plan buying
19. Install machinery
20. Procure materials
21. Recruit personnel
22. Trial run
23. Decide on pricing policy
24. Organize marketing
25. Plan out record –keeping
26. Produce
27. Sell
28. Keep up-to-date
29. Plough back profits
30. Diversification
31. Modernization
32. Compete with others
33. Grow bigger
34. Ancillary development.
FORMALITIES FOR SETTING UP OF
A SMALL BUSINESS ENTERPRISE
1.Selection of a

07/22/10
project
a.Product or service selection
b.Location Selection

38
c.Project feasibility study
d.Business plan preparation
e.Project Profile

K.SE
2.Decide on the NTHI
LKU
constitution MAR

MBA

4. Obtain
3. Obtain SSI
Clearances from
registration
departments as
 07/22/10
6.Arrange for
5.Arrange for 7.Arrange for
plant &
Land Infrastructure
machinery

39
8.Prepare
project Report

9.Apply and
obtain finance

10. a. Proceed to
implement
b. Obtain the final
clearance
SELECTION OF A SMALL SCALE
INDUSTRY
 Various stages for setting up small-scale unit
 (1) Decision to be self-employment

 (2) Identification of opportunities

 (a) Idea generation

 (b) Screening product/service idea

 (c) Concept testing

 (3) Selection of the line of business

PROCESS OF SETTING UP A SMALL-
SCALE INDUSTRY
 For Chart refer Vasant Desai P.No: 665
 Business analysis
 Technical analysis
STARTING A SMALL SCALE INDUSTRY
 Project objectives P.No: 668 (Vasant Desai)
 Process of starting a small enterprise P.No:
668
NOTES:
 Vasant Desai P.No: P.No: (650-682)