unit - 5

UNIT - 5

ENTREPRENEUR

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Ideas drive Economies, no wonder that Innovation & Entrepreneurship are often seen as inseparable.

Science & Technology Students have to be Motivated & Trained to “Think Out Of The Box” so that an Entrepreneurial Culture is Built. The Ones feasible Ways of doing Business are no longer Guarantees for Future Economic Success, hence, the Govt’s around the World have started to realize that Entrepreneurship & Innovation need to be encouraged in order to sustain progress & improve a Country’s Economy.


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Entrepreneurs are responsible for Industrial Development & the fruits of Industrial Development are greater Employment Opportunities to the Unemployed, Increase in Income Levels of People, Improvement in Standard of Living, Increased Revenue to the Government in the form of Direct & Indirect Taxes & Balanced Regional Development.

India needs Entrepreneurs for Two Reasons : 1) To Capitalize on New Opportunities & to

Create Wealth. 2) To Create Wealth & New Jobs.


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1) Peter F. Drucker defines Entrepreneur as One Who Always searches for Change, Responds to it & Exploits it as an Opportunity. Innovation is the Specific Tool of Entrepreneurs, the Means by which, they Exploit Change as an Opportunity for Different Business or Service.

2) Encyclopedia Britannica defines an Entrepreneur as an Individual who bears the Risk of Operating a Business in the Face Of Uncertainty about the Future Conditions.


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3) International Labor Organization (ILO) : This defines “Entrepreneurs as People who have the Ability to See & Evaluate the Business Opportunities ; together with the necessary Resources to take Advantage of them ; & to initiate Appropriate Action to ensure Success.”

4) Dr. Poornima M. Charantimath, Professor, Management Studies, KLS Institute of Management Education & Research (IMER), Belgaum says “ The World Entrepreneur is derived from a Sanskrit Word called “Antaraprerana” ! (Urge from within or Internal Urge).


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5) Francis A. Walker observes that the True Entrepreneur is one who is endowed with more than Average Capacities in the Risk of Organizing & Coordinating the Various other factors of Production. He is a Pioneer & Captain of Industry.

6) E. E. Haggen defines “Entrepreneur is an Economic Man who tries to Maximize his profits by Innovations. Innovations involve Problem Solving & the Entrepreneur gets satisfaction from using his Capabilities in Attacking Problems.


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Conclusions : Definitions of an “Entrepreneur” are divided into 3 Streams :

1) The Ones describing Roles of an Entrepreneur. 2) The Other describing Characteristics & 3) Ones Focusing on Success Factors.

Summarizing, the Entrepreneur can be described as a Person (a) Who carries out a Role in the Economic World by creating Added Value & who bears the Risk & Responsibility. (b) One with a Combination of Specific Personal Characteristics (Creative, Innovative, Dynamic etc.)

Two Conditions seem to be Vital in Order to become an Entrepreneur : The Will to Succeed, Achieve etc., and Opportunities for Creating Value, Innovation etc.


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He is a Person who creates Enterprise. The Process Creation is called as “Entrepreneurship”.

This evolved from the French Word “Entreprende” in the 12th Century. In the early 16th Century, it was applied to those who were engaged in Military Expeditions. In the 17th Century, it was extended to cover Civil Engg Services. In the 18th Century, Richard Centillon described Entrepreneur as “One Who Bears Risk by buying at Certain Prices & selling at Uncertain Prices” which is closer to the Terms as Applied Today.


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In 1848, the famous John Stuart Mill described Entrepreneurship as the founding of a Private Enterprise. This encompassed Risk Takers, the Decision Makers, & the Individuals who desire Wealth by Managing Limited Resources to create New Business Ventures.

Joseph Schumpeter (1934) stated Entrepreneur as one who applies “Innovation” within the Context of the Business to satisfy Unfulfilled Market Demand.

Peter F Drucker perceived Entrepreneurship as the Creation of a New Organization, regardless of its ability to Sustain itself, let alone make a Profit.

Evolution of the Concept of Entrepreneur is considered over nearly Four Centuries Old, the Characteristics of Entrepreneurs being Risk Taking Innovation, Organization Creation, Creating Value, Profit or Non Profit Growth, Uniqueness & the Owner – Manager.


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These Views about Entrepreneur can be classified into 3 Groups viz., Risk Bearer, Organizer & Innovator. These Views have been discussed below :

1) Entrepreneur as a Risk Bearer : Richard Cantillon, French Economist was the first to

introduce the term “Entrepreneur” & his Unique Risk Taking Function in Economics in the early 18th Century. Entrepreneur is One Who Buys Factors of Production at Certain Prices in Order to Combine them into a Product with a View to Sell it at an Uncertain Price. He illustrated a Farmer who pays out Contractual Incomes which are certain to the Landlords & Laborers & sell them (the Produce) at an Uncertain Price.

So also the Merchants who make Certain Payments in expectation of uncertain receipts. Thus, they too are “Risk Bearing” agents of Production.


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Thus, we can say that “Entrepreneurs” are a

Specialized Group of People who bear Uncertainty. Uncertainty is defined as a Risk which cannot be insured against & cannot be Calculated. Thus, “Entrepreneur” is a Economic Functionary who undertakes such a Responsibility of Uncertainty which by its very nature cannot be Insured, nor Capitalized nor Salaried too.


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2) Entrepreneur as an Organizer : Entrepreneur is associated with the functions of

Coordination, Organization & Supervision. He is a Person who combines the Land of One, labor of the Other, & the Capital of Yet Another & thus produces a Product.

By Selling a Product in the Market, he Pays Interest on Capital, Rent on Land, & Wages to Laborers & What Remains is his Profit. According to Jean - Baptist Say, in the Course of Undertaking a Number of Complex Operations like Obstacles to be surmounted, Anxieties to be Suppressed, Misfortunes to be Overcome, & Expedients to be devised, Three more Implicit Factors are deemed to be essential which are as given below :


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1) Moral Qualities for Work Judgement,

Perseverance & a Knowledge about the Business World.

2) Command Over Sufficient Capital. 3) Uncertainty of Profits.

3) Entrepreneur as an Innovator : Innovation can be perceived simply as the

Transformation of Creative Ideas into useful Applications by combining Resources in New or Unusual Ways to provide Value to Society for Improved Products, Technology, or Services.


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By adding “Innovative” features to a Product or Service, & Setting up a Business based on these additional features to compete in the Existing Market, New Entrants may be able to gain a Competitive Edge over the Existing Market Players.

Another Study stated that “Entrepreneur” is One Who Applies “Innovation” within the Context of Business to Satisfy Unfulfilled Market Demand. Entrepreneur is an Innovator who implements changes within Markets thro carrying out of the New Combinations which can take Several Ways as follows :


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1) The finding of a New Market. 2) The finding of a New Source of Materials

Supply. 3) The introduction of a New Product or a New

Standard of Quality. 4) The introduction of a New & Best Method of

Production. 5) The Opening of a New Kind of Business in an

Industry.


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Eg : Jeff Bezos, the Founder of Amazon, the Very Successful Book Store. He was one of the first to Sell Books on a Large Scale using an On Line Store & also patented the One - Click System for Online Buying.

Though Selling Books is not an Innovation in itself, Jeff Bezos was Innovative in the Use of the Internet then as a Viable Marketing & Sales Channel for Selling Books.

To summarize, the Concept of Entrepreneur is closely associated with the 3 Basic Factors – Risk Bearing, Organizing & Innovating. Thus, an Entrepreneur can be defined as a Person who Tries to Create Something New, Organizes Production & in the Process Undertakes Risks & Handles Economic Uncertainty involved in his/her Enterprise.


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An Entrepreneur performs all the Functions necessary, right from generating the Idea for his proposed Enterprise where there is a Need, & Opportunity exists up to establishing his Enterprise & Subsequently Running it Successfully & Earn Profits.

The Functions are listed below in a Sequential Manner :


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1) Generation of Business Ideas & Choosing the Best Suitable Idea after Necessary Scanning. Many Entrepreneurs keep an Eye for Opportunity & start by finding a need & quickly satisfying it. This is the most important function of an Entrepreneur, as subsequent success or failure of his enterprise depends on his decision at this stage. Therefore the Entrepreneur has to exercise great care before deciding to choose a particular Business Idea for his proposed Enterprise.


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2) Determination of Business Objectives i.e., What he wants to achieve in his proposed Business Enterprise.

3) Product Analysis & MR to make sure that there is a Good Market Potential for the proposed Product / Service.

4) Determination of form of Ownership / Organization. i.e., Proprietorship / Partnership / Private Limited Company.

5) Completion of Promotional Formalities , they are :


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Identifying a Location. Looking for a Suitable Land / Building in the

Proposed Location. Obtaining Provisional Registration (PRC) from

District Industries Centre of the District in which the proposed Business is to be established.

Preparation of Plant Layout & Building Plan, if reqd to be constructed.

Taking effective steps for reqd infrastructural facilities like Power, Water, Communication Facilities etc.

Preparing a Detailed Project Report or Business Plan.


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6) Making necessary arrangements for Finance to implement the Project by approaching State Financial Corporation for Long Term Loan & Banks for Working Capital Loan.

In addition, Entrepreneur has to arrange his Own Financial Resources as Equity or Margin Money for the Project. This can be 25 to 30% of the Cost of the Project.

7) Undertaking Building Construction, if Ready Shed is not taken.

8) Plant & Machinery : Ordering, Procuring, & Installation. 9) Getting Electrical Power Connection & Other Utilities. 10) Arranging for Various Raw Materials & Consumables. 11) Arranging Key Managerial / Supervisory Persons. 12) Recruiting reqd Manpower viz., Skilled, Semi - Skilled &

Helpers (Un – Skilled).


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13) Undertaking Trial Productions, Overcoming Initial Teething Problems & Stabilizing the Production Operations.

14) Commencing the Commercial Business Operations.

15) Marketing the Products. 16) Taking Feedback from the Market for Customer

Satisfaction, because “Customer is the King”. Effective Remedial Steps to be taken if there are Customer Complaints on Quality, Performance, Delivery Schedule etc.


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17) After Stabilizing the Commercial Business Operations, Provisional Registration Certificate (PRC) issued by District Industries Centre has got to be converted into Permanent Registration Certificate (PMT) by filing the necessary reqd Application.

18) All other Statutory Licenses / Registrations as per the Govt Regulations have to be obtained during Implementation & after Successful Commencement of Commercial Production.

19) Approaching the District Industries Centre for Grant of Concessions / Incentives as per the Govt Industrial Policy Regulations. For this, the Entrepreneur has to fill up the Necessary Forms & Submit the same to the District Industries Centre with all the reqd Documents.


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20) Entrepreneur has to always keep an Eye on the Market Conditions & be prepared to innovate to face the Competition because Market Conditions are Fast Changing, Customer Needs are Changing. Success today is No Guarantee of Success Tomorrow.

21) Entrepreneur should never be Happy about his Achievement. He must always try for Growth & Expansion of his Business Activities. He should Plan at least 20 to 25% growth over his previous years performance, because stagnation in Business leads to sickness & slow death of his enterprise.


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22) Finally, a Very Important Function of an Entrepreneur is dealing with People because “Business is People.” An Entrepreneur has to maintain a Very Cordial & Healthy Relationship with his Managers, Supervisors, Workmen, Customers, Materials, Suppliers, Vendors, Bankers, Financial Institutions, Govt Officials & all those who are connected Directly or Indirectly with his Business Enterprise.

Now we can summarize that, the Functions of an Entrepreneur have to incorporate Coordination of the Business Management of the Enterprise, Risk Taking, Controlling the Enterprise, Innovation for Change, Motivation & Other Related Activities. In reality, an Entrepreneur has to carry out a Combination of these in keeping with Time & Environment. He has to consider New Ideas, Demands & Exploit the Opportunities & thereby contribute to the Technical & Economic Progress . He is thus the Nucleus of High Growth of the Enterprise. The Entrepreneurial Functions are depicted Schematically as Shown below :


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There are Different Types of Entrepreneurs & so also the Important Classifications of Entrepreneurs. Some of the Important Classifications of Entrepreneurs & Different Types of Entrepreneur in each Classification are enumerated below:

I) Classification of Entrepreneurs based on Functional Characteristics :

a) Innovative Entrepreneur. b) Imitative or Adoptive Entrepreneur. c) Fabian Entrepreneur. d) Drone Entrepreneur.


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II) Classification of Entrepreneurs on the Development Angle :

a) Prime Mover. b) Manager. c) Minor Innovator. d) Satellite. e) Local Trading.

III) Classification of Entrepreneurs based on Types of Business :

a) Manufacturing. b) Wholesaling. c) Retailing. d) Service.


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IV) Classification of Entrepreneurs as per the

Behavioral Scientists :

a) Solo Operators. b) Active Partners. c) Inventors. d) Challengers. e) Buyers. f) Life Timers.


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I) a) Innovative Entrepreneurs : Such an Entrepreneur introduces New Goods / Products / Services or New Methods of Production or discovers New Markets or Reorganizes his Enterprise. Entrepreneurs in this Group are Characterized by an aggressive collection of information for trying out Novel Combination of Factors. Such Entrepreneurs do well when a certain level of development is already achieved; they look forward to improve upon the Past.

b) Imitative or Adoptive Entrepreneurs : Such Entrepreneurs do not Innovate themselves, but

Imitate or Copy Techniques & Technology innovated by other Innovative Entrepreneurs. They are Characterized by their readiness to adopt Successful Innovations by other Entrepreneurs. They are particularly suitable for Under Developed Regions as Adoption saves Costs of Trial & Error.

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c) Fabian Entrepreneur : They display great caution & skepticism in

experimenting with any change in their Enterprise. They adopt changes only when there is an imminent threat to the very Survival of their Enterprise.

d) Drone Entrepreneur : These Entrepreneurs are characterized by a Die –

Hard Conservative Attitude. They do not easily seize opportunities to make changes in their production techniques or the Technology employed, even at the Cost of Low Returns on their Investments compared to other similar enterprises. Such entrepreneurs may even incur Huge Losses but they will not be ready to make Changes in their existing production techniques.


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II) a) Prime Mover : This Entrepreneur sets into Motion a Powerful Sequence of Development, Expansion & Diversification of Business.

b) Manager : Such an Entrepreneur does not initiate Expansion & is content just Staying in Business.

c) Minor Innovator : He contributes to Economic Progress by

finding better use for Existing Resources. d) Satellite : The Entrepreneur assumes a

Supplier’s Role & slowly moves towards a Productive Enterprise.


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e) Local Trading : Such an Entrepreneur limits his enterprise to the Local Market.

III) a) Manufacturing : Entrepreneur is involved in Production of Value Added Goods by using Various Inputs – Raw Materials, Consumables, Labor, Power & Other utilities. Goods can be a Variety of Products like Castings, Forgings, Soaps, Detergents, Various chemicals, Textiles, Plastic Components, Footwear, School Bags, Electronic & Electrical Items, Computer Related Products etc. etc.,


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b) Wholesaling : An Entrepreneur with such a

Business sells Products to the Middle Men or Retailers. c) Retailing : An Entrepreneur with such a

Business sells Products directly to the Consumer’s or End Users.

d) Service : An Entrepreneur in this Business sells Services & not the Products.


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IV) a) Solo Operators : Such Entrepreneurs usually Work Alone & if needed at all, employ a few employees to assist. Most of the Entrepreneurs begin their Entrepreneurial Career in this fashion.

b) Active Partners : These Entrepreneurs start their enterprise in Partnership. All the Partners actively participate in the Operation of the Enterprise. Entrepreneurs who only contribute funds to the enterprise but do not actively involve in Business Activity are called simply “Partners”.


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c) Inventors : Such Entrepreneurs with their Competence & Inventive Nature, Invent New Products. Their Basic Interest lies in Research & Innovative Activities.

d) Challengers : Such Entrepreneurs plunge into Business because of the Challenges it Presents. When One Challenge is satisfied, they will be on the lookout for New Challenges.

e) Buyers : Such Entrepreneurs do not wish to bear much Risk. Hence, in order to reduce Risk involved in establishing a New Enterprise, they wish to buy an Ongoing One.

f) Life Timers :Such Entrepreneurs take Business as an Integral Part of their Life. Usually, the Family Enterprise & Businesses which call for Personal Skills fall in this Category of Entrepreneurs.


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These “New Breed” of Entrepreneurs are emerging from Big Companies.

In this Case the Entrepreneurial Spirit of Small Companies is transferred to Big Companies.

Such Entrepreneurs of Big Companies are called as “Intrapreneurs”, an Emerging Class of Entrepreneurs.

Intrapreneurship is a Method of Stimulating & then Capitalizing on Individuals in an Organization who think that something can be done differently & better.


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There are strong similarities between “Intrapreneurs” & “Entrepreneurs” as strongly contrasted with the Characteristics of traditional Managers.

In Large Organizations, the Senior Level Executives are encouraged to develop New Ideas & then convert their innovative ideas into New Products thro Research & Development Activities within the Frame Work of the Organization.

This Concept of Intrapreneurship is gaining Great Popularity in Developed Countries like the USA. In fact, Increasing Number of Intrapreneurs are leaving their Jobs in Big Organizations & are starting their Own Enterprises.

Many of such Intrapreneurs have become very successful in their newly established enterprises & in fact are competing with their Parent Organizations & are even posing as a Business Threat to them.


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According to Peter F Drucker, “Entrepreneurship” is neither a Science nor an Art, it is a Practice.

It has a Knowledge Basis. Knowledge in Entrepreneurship is a Means to an End, Indeed what constitutes Knowledge in Practice is largely defined by the Ends, that is by Practice.

There are Several Definitions of “Entrepreneurship”, important ones being some of the Following :


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1) It is a Purposeful Activity of an Individual or a Group of Associated Individuals, undertaken to initiate, Maintain or increase Profit by Production or Distribution of Economic Goods & Services.

2) It is an attempt to Create Value thro Recognition of Business Opportunity, the Management of Risk Appropriate to Opportunity & thro the Communicative & Management Skills to mobilize Human, Financial & Material Resources necessary to bring a Project to fruition.


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3) Entrepreneurship is the ability to create & build a Vision from practically nothing. It is a Dynamic Process of Creating Incremental Wealth.

4) According to One Study, the Definition is “Entrepreneurship is based on Purposeful & Systematic Innovation”. It includes not only the independent businessman but also company direction & managers who actually carry out innovative functions.


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Entrepreneurship can exist in Different Kinds of Business, on all levels of Company size & in different functions.

In all above definitions, Entrepreneurship refers to the activities performed by an Entrepreneur in establishing an Enterprise. We can therefore say that Entrepreneurship is the Act of being an Entrepreneur. It is a Process involving various Activities to be undertaken to establish an Enterprise.


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The Two Basic Elements involved in Entrepreneurship are “Innovation” & “Risk Bearing”.

These Two Factors are Given Below :

1) Innovation : This refers to coming out with a New Product or Process or doing something differently. This is a Basic Characteristic of Every Entrepreneur. There are a Few Innovations & New Products developed as given in the Egs below :


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Egs : 1) “Bisleri” introduced Packaged Drinking Water, every one was wondering whether this Business Idea would ever succeed. Now you can see several other Entrepreneurs have copied this idea & have set up Enterprises to manufacture Packaged Drinking Water. In fact, many of them have been successful too. The reason being, People are Health Conscious & are ready to pay Extra Money for sake of their Health. Hence, a Good Market has developed for this Product.


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2) Introduction of “Taj Mahal Tea Bags” (Dip Tea) for use by Travelling Public, by various Big Manufacturers of Tea Powder.

3) Various Ready to Cook Packaged Food Items introduced by “MTR” Ltd., Bangalore to cater to the needs of Working Couples in Bigger Cities & Metros & other Consumers.

4) The Rs 1.00 Lakh “Nano” Car released by Tata Motors recently to meet the needs of 4 Wheelers for the Middle Class people in the Country who cannot afford Expensive Vehicles & who wish to switch to 4 Wheelers from 2 Wheelers.


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From the above Egs, We can infer that the Entrepreneurs need to innovate continuously to come out with Newer products to meet the Changing Demands of the Customers.

2) Risk Bearing : Any Business Proposition has an element of Risk, the

Reason being very obvious that, an Enterprise may Earn Profits or Incur Losses because of Various Factors beyond the Control of the Entrepreneur like Increasing Competition, Labor Unrest. He needs to be Courageous to face the Risk & Challenges involved in running the Enterprise. His ability to Sustain Risk ultimately helps him to be a Successful Entrepreneur, against All Odds.




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Introduction : Down the Years, many Myths have been

created about Entrepreneurship. Some of the Important Myths are :

1) Entrepreneurs are Born, not made. 2) All you need is Money to be an Entrepreneur. 3) All you need is Luck to be an Entrepreneur

etc.


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Such Myths do not hold good any more at present, as Emperical (Experimental Study) have shown that Entrepreneurs are made & can be developed thro a Process of Entrepreneurship Development, Training & Activities.

Development of Entrepreneurship is a Key to achieve overall Economic Development thro an increased level of Industrialization. This is a Process in which Persons are injected with Motivational Drives of Achievement & insight to tackle Uncertain & Risky Situations especially in Business Undertakings.

The Process of Entrepreneurial Development focuses on Training, Education, Re Orientation & Creation of Conducive & healthy Environment for the Growth of the Enterprises.


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This is designed to help a person in strengthening & fulfilling his Entrepreneurial Motive & in acquiring reqd skills & capabilities to become a successful Entrepreneur.

Towards this end, it is necessary to promote his understanding of Motives & Motivational Pattern, their Impact on Behavior & Entrepreneurial Value. A Program which seeks to do that can be called an Entrepreneurial Development Programme (EDP).


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EDP is primarily meant for developing those First Generation Entrepreneurs who on their Own cannot become Successful Entrepreneurs, it covers 3 Major Variables :

i) Location ii) Target Group iii) Enterprise (Entrepreneurial Activities).

In fact, any one of the above three variables

can be used as a Starting Point for initiating & implementing an EDP. The remaining Two then will follow by making the proper synthesis with the first.


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Eg 1 : If the Object is to develop Backward North Karnataka Regions, then the Potential Target Group & feasible Entrepreneurial Ventures must follow.

Eg 2 : If the Objective is to Promote IT based Enterprises, suitable Target Group & Location must Match.

EDP by itself mainly aims at achieving Specific Objectives of the Programmes & therefore cannot create any Magical Result. It is a Continuous Process of Training & Motivating & then to set up Profitable Enterprises in Large Nos.


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The Models suggested for the Development of Entrepreneurship fall into the Following Categories :

1) Psychological Models. 2) Sociological Models. 3) Integrated Models.


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Many Researchers, while Identifying Determinants of Entrepreneurship, have given more importance to Achievement Motives.

Change in Motivation is seen primarily as a Result of Ideological Arousal of the Latent Need for Achievement among Youths.

Hence Achievement Orientation has been identified as the Key Variable in the Development of Entrepreneurship & therefore, Mc Clelland suggests Motivation Training Programme as the Policy Measure, which will make Entrepreneurs really willing & eager to exploit the New Opportunities Provided.


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Another Model suggested by John Kunkel (1965) for Entrepreneurship Development is a Behaviorist Model. According to him, Entrepreneurial Behavior is a Function of the surrounding Social Structure both Past & Present & can really be influenced by manipulating Economic & Social Incentives. Thus, John Kunkel’s Model is based on the Experimental Psychology, which identifies Sociological Variables as the Determinants of Entrepreneurship Development.


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Frank W. Young’s Theory of Entrepreneurship is a Theory of Change based upon Incorporation of Relative Sub Groups in the Society.

The Relativeness of a Sub Group which has a Low Status in a Larger Society will lead to Entrepreneurial Behavior if the Group has better Institutional Resources than others in the Society at the same level.

Young’s Model of Entrepreneurship suggests that the Creation of Supporting Institutions in Society as the Determinant of Entrepreneurship.


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T.V Rao (1975) identifies the following factors as the Determinants of Entrepreneurship :

a) Need for motive is the Dynamic which, for the Prospective Entrepreneur, has the greatest possibility of achieving the Goals if one performs those activities.

b) Long Term involvement is the Goal either at thinking level or at activity level in Entrepreneurial Activity that is viewed as a Target to be fulfilled.

c) Personal, Social, & Material Resources which are related to entry & success in the area of Entrepreneurial Activity.

d) Socio - Political System to be perceived as suitable for establishment & development of his enterprise.


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All the above factors together, with their Optimal Presence lead to the entry point of Entrepreneurship. This in turn leads to acquisition of Material Resources & Commencement of Business.

B.S Venkata Rao (1975) suggested the following Five Stages for the Promotion of Small Entrepreneurs.

1) Stimulation : The Stage includes the Creation of an Industrial Environment, Policy Statement emphasizing the Role of Small Enterprises in Economic Development, giving Wide Publicity to Industrial Development Programmes & Announcing Special Schemes & Promotion of Support Organizations. This Stage is necessary to stimulate interest of the Backward Regions in Industrial Activity & to create awareness.


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2) Identification : This stage is necessary to identify the prospective entrepreneurs such as Rural Artisans, Skilled Factory Workers, Technocrats & Graduates in Business Administration & Management.

3) Development : This Stage would include Organization of Motivation & Managerial Training Workshops along with Identification of Prospective Projects, Locations for settling up these Enterprises & giving Technological Inputs.


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4) Promotion : This Stage includes Govt Policy Initiatives for promoting Small Entrepreneurs.

5) Follow Up : This Stage includes Reviewing the Policies & Programmes of the Govt & Seeking Follow Up with a View to making them more effective.


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Appropriate Design for Entrepreneurial Development Programme :

They can be developed thro appropriately designed Entrepreneurship Development Programmes based on 3 Entrepreneurial Development Models, Viz : Psychological Models, Sociological Models, & Integrated Models.

These Programmes broadly envisage 3 Tiered Approach ; Developing Achievement Motivation & Sharpening of Entrepreneurial Traits & Behavior, Project Planning & Development & Guidance on Industrial Opportunities, Incentives & Facilities & Rules & Regulations & Developing Managerial & Operational Capabilities. Various Techniques have been evolved to achieve these Objectives keeping in View the Target Groups & or the Target Areas.


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Methodology for Selection of the Prospective Entrepreneurs & the support services after the Training have a profound effect on the Success of the Entrepreneurial Development Programme.

Stages in Entrepreneurial Development Process (EDP) :

Entrepreneurial Potential * All of us have Entrepreneurial Potential. Degree

might differ. It is just a matter of Developing that Potential. The 3 Main Stages of EDP are as follows : 1) Pre – Training : Identification, Selection & Initial

Motivation of Potential Entrepreneurs.



2) Training of Potential Entrepreneurs ; & 3) Post – Training : Support & Follow – Up

Services. Any successful EDP Strategy has to be

comprehensive & should avoid any exclusive or lopsided preference for one or the other stage.

Stage – 1 : Pre – Training : Three important aspects of work at the first stage

of an EDP are : 1) Selecting Potential Entrepreneurs.


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2) Target Groups. 3) Validation for Selection.

i) Selecting Potential Entrepreneurs :

The Entrepreneur Identification & Selection Mechanism which precedes training is based on the following Key Assumptions :

a) Not everybody can become an Entrepreneur must have traits.

b) Such traits are identifiable & measurable thro some psychological & behavioral tests supported by social indices.

c) People possessing these traits or showing evidence of these traits (Entrepreneurial Aptitude) can be developed to acquire necessary dimensions of Entrepreneurship.


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This has led to a 3 Step Selection Process which begins with preliminary screening of those responding to the intensive promotional effort undertaken in the location by the Trainer – Motivator.

A specially devised form which screens out those who are only casually interested in the Programme is used for this purpose. It is followed by an assessment of Candidate’s Entrepreneurial Trait level by applying Behavioral Science Techniques. The process ends with individual interviews for over all assessment about candidate’s suitability to undertake Manufacturing Activity or Business, together with an understanding of his specific needs for Training.



The Entrepreneurial Traits assessed in the Course of Behavioral Tests include :

a) The Need to Achieve : This can be seen in an Individual’s desire to compete with some standard of excellence & success in performance.

b) Risk Taking : Entrepreneurs are found to have an inclination to take Calculated, Moderate, Intelligent Risks. They tend to avoid Extremes of both Easy & Risky Situations.

c) Positive Self Concept : Includes Self Confidence as well as Self-Efficacy (Success) & a Positive Image of One’s Abilities & Achievements.


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d) Initiative & Independence : Such people not only show initiative but also

Independence in their Day to Day Behavior. They like to act on their own rather than Follow Directions.

e) Problem – Solving : A tendency to approach problems in order to solve them.

f) Hopeful about Future : Despite Dissatisfaction with Present Working Conditions.

g) An Interest in Environment Scanning : To Seek Answers to present Questions.

h) Urge for Goal Setting & Time – Bound Planning :

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In the Selection Process, Persons Possessing a Minimum (developable) level of Entrepreneurial Traits (Normally decided by a Cut – Off Point in the Scores) are selected.

However, there are No Conditions of Minimum Education & Length of Experience, Occupational Background or Income.

Despite Good Training, Liberal Finance & other supportive assistance, it is found that not everyone or anyone can be successful in Industry. To Avoid Wastage of Scarce Resources & for Optimal utilization of Limited Training & Development Facilities, Inclination on Quality rather than on Quantity (Number) is deemed Critical at the first stage in the Strategy.


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ii) Target Groups : The Large Target Groups are : Technical & Non Technical Employees in

Industry, Trade & Commerce such as, Mechanics, Machine Operators, Supervisors, Salesmen, Store Keepers, Middle Level Management, Small Traders, Fresh Graduates from Technical & Non Technical Colleges, College Dropouts, Artisans & Craftsmen, Govt Employees, Teachers, Ex Servicemen, Women, Tribals & Under Privileged Castes.


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The Profiles of New Entrepreneurs reveal a Diverse Mix of Characteristics in terms of Education (7th Standard to Post Graduation) , age (18 to 45), Occupation & Family Background (From Unemployed to Doctors & Chartered Accounts or from Agricultural Workers to Technicians) & Financial Position (Mostly Income of Rs 500 to Rs 3000 per Month).

This Diversity results from a Key Belief underlying the Programmes foundation : that Latent Entrepreneurial Spirit is lying dormant in a wide variety of men & women & that a desire to be on their own & to improve their Economic lot is humane & well spread. Many, however, lack self confidence & fail to come out of their shells.

Their enterprise is not fully developed or nurtured & the motivation to take Risk is not strong enough, despite frustrations of their current Economic Position, Employment or Occupation. Some need Opportunity Counseling (What Business to take up), while others, the Information or Know how for setting up an Industrial Enterprise. These needs are to be met by a Comprehensive Entrepreneurship Development Programme (EDP) by filling the Gaps in the Information, Motivation & Skill Base. When & Where this Task has been performed effectively, many New Entrepreneurs have been developed with Competence to Set Up & Operate tiny or Small Manufacturing or Industrial Service Enterprises Successfully.


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iii) Validation of Selection Process : Preliminary findings of Studies (Gujarath Experience) on

the Validation of the Selection Process for EDP reveal as under :

i) The proportion of those starting New Ventures from amongst the rejected Applicants are quite low (17%) as compared to the Group of Candidates Selected (44%).

ii) The Number of Persons involved in “Entrepreneurial Movement” (i.e., those starting a Commercial or Industrial Enterprise from a previous occupation as an Employee or Unemployed) was much less (13%) among those rejected by behavioral science tests than those rejected by the alternative aid of Interviews alone (26%).


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Stage II : Training : Training occupies a Central Place in the entire

EDP Strategy, but we have to careful about Identification & Selection of Potential Entrepreneurs so that training efforts are not wasted.

Moreover, we have again to be equally careful to see that there is no further wastage for want of reqd support & guidance after the Main Training if the Objective viz., Setting up of New Ventures is to be realized.


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Let us briefly discuss the same & basically divide them into Three Basic Categories :

i) Achievement Motivation. ii) Business Opportunity Guidance & iii) Business Management.


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i) Achievement Motivation : For the development of selected trainees into “Well

Rounded” Competitive Entrepreneurs, the programme provides training inputs as follows :

An Intensive Training Programme thro a Five Day Programme (40 - 50 Hrs) is given to develop Entrepreneurial Traits such as, need to Achieve, Risk Taking, Initiative etc.

The Motivation Inputs serve to : a) Increase the Person’s need for Achievement. b) Help Participant’s define their Goals realistically & work

towards their achievements & c) Heighten their Self Awareness. The above is called as Achievement Motivation Training

(AMT). It is a Crucial Dose of Behavioral, Psychological Input.


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ii) Business Opportunity and Project Selection :

While Opportunity & Project Selection is initiated & engaged in the initial stage itself, a more intensive treatment is reserved for Phase – II. Guidance sessions are held on selecting an appropriate industrial opportunity for each trainee consistent with his experience, competence & financial resources.

Perceiving a profitable opportunity for commercial exploitation is an essential quality of an Entrepreneur.

By providing information & counseling on various feasible industrial opportunities in the area thro a Team of Experts (Successful Industrialists, Leading Traders, Merchants, & Technical Experts from Industry, Financial Institutions & consultancy organizations) & by Spot Surveys, each Trainee Entrepreneur gets tied up with a Business Opportunity which turns to his goal.

Inadequate Knowledge of an Opportunity or absence of a Clear Project Proposal, therefore, need not be a Handicap in aspiring to be an Owner –Entrepreneur. In fact, the Training Culminates in the Completion of a Project Report prepared by each Trainee. Finally, it also constitutes a way in which the finance for the Project is raised thereby links up completion of training with the support of Financial Institutions for Implementation.


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iii) Business Management :

The Small Scale Entrepreneur has to be a Good Manager also since he cannot afford Specialists to look after Multiple Business Decisions of Sales, Finance, Purchase, Personnel etc.

Though ‘Rounded Managerial Experience’ is essential for better performance, the New (Trainee) Entrepreneur emerging from the Ranks of Employees & Fresh Graduates usually possess familiarity with or experience in only one area, Viz., Production or Sales or Supervision. The Overall Managerial Understanding is therefore developed thro the Business Sessions.

The Syllabus can be evolved in Consultation with Operating Entrepreneurs, practicing trade & industry experts & past trainees, leaving it to the trainer to make modifications to suit the Target Group & Local Conditions. This enables the Participants to look at an Enterprise in its totality & introduces them to the elements of Planning, Budgeting & Control as aids to Good Management.


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Faculty : Normally, no full time faculty is used for the

Training Programme except the Trainer or Project Leader supported by Project Formulation Expert.

Most of the Business Inputs are given thro Management/Professional Practitioners, Business & Industry Executives, Experts of State Industrial Agencies, Bankers, Technical Consultancy Organizations etc.

A Full Time Project Leader In – Charge of the Training Centre is the Back Bone of EDP. He acts as a “Friend, Philosopher, Guide & Personnel Counselor” taking care of the Needs of the Trainees. He Organizes & Administers the Programmes & is responsible for the entire training process.


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Each Group of Entrepreneurs in an Entrepreneurship Programme is looked after by the Entrepreneur Trainer – Motivator. He is responsible for Organizing Post – Training Support also. This involves :

a) Follow up on Loan Application for Finance. b) Facilitating Infrastructure such as Land, Factory Shed, Power etc

& finally, c) Trouble Shooting. His Counseling, Resourcefulness & Liaison Skills come handy

in expediting Project Application. Occasional Visits by the Trainer for Trouble Shooting may well

help. Whenever an Entrepreneur needs help, he needs to be encouraged to approach the Trainer.


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The Importance of Entrepreneurial Resource as a Crucial Input in the Process of Economic development has now been widely recognized by eminent scholars, economists & policy makers.

With Growing Emphasis on the Role of Small Scale & Medium Scale Enterprises in view of their contributions to employment generation, regional development & overall economic growth, a wide range of schemes & programs aimed at accelerating the tempo of new activities in the decentralized sector has been devised in many developing countries.

India is a Developing Economy aiming at Decentralized Industrial Structure to overcome Regional Imbalances in levels of Economic Development. Small Scale Entrepreneurs in such Industrial Structure play a very vital role to achieve Balanced Regional Development. It is a well established fact that Small Scale Enterprises provide immediate Large Scale Employment ensuring a more equitable distribution of National Income, Generate Large Scale Indirect Employment opportunities in support organizations around the Industrial Clusters / Estates, Improve Living Standards of People & also most important, facilitate an effective resource mobilization of capital & skills which might otherwise remain idle.


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Role of Entrepreneurs in Economic Development (A Summary ) : Entrepreneurship promotes effective Capital formation by mobilizing the idle savings

of the Public. It provides Large Scale Direct & Indirect Employment to the Unemployed Youth in

the Country & thereby helps the Govt to overcome Socio – Economic Problems. Improves Standard of Living. Promotes Balanced Regional Development. Helps reduce the Concentration of Wealth & Economic Power in the hands of a few

people. It stimulates equitable distribution of Material Resources, Wealth, Income & even

political power in the interest of the Country. Encourages effective Resource Mobilization of Capital & Skill which might

otherwise remain unutilized & idle. Helps in Harnessing Vast Natural Material Resources of the Country for Economic

Growth. Promotes Backward & Forward linkages which in turn, stimulates the process of

Economic Development in the Country. Contributes substantially in Country’s Export Trade & thereby helps the Country to

earn Vital Foreign Exchange. Helps the Country in Overall Development improving its Status in the World.


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Entrepreneurship is regarded as closely associated with the Economic History of India. This is traced way back to even as early as Rig Veda, when Metal Handicrafts manufacturing cottage & small enterprises existed in the Country.

It has passed thro several Ups & Downs. The important ones include the Decline of Indian Handicrafts Industry towards the end of the 18th Century, entry of the East India Company of the Britisher’s in India’s Business Activities. The Swadeshi Campaign for Indian Manufactured Goods, the First World War, Emergence of the Indian Managing Agency Systems by promoting Joint Stock Companies, the Second World War, Partition of Undivided India & undertaking planned development of Entrepreneurship in the Country by Govt of India after Independence in 1947.

For the purpose of encouraging Entrepreneurship, the Govt of India brought out the First Industrial Policy Resolutions in 1948 which was subsequently revised from Time to Time. The Govt of India in order to promote , assist & develop industries in the National Interest has taken the following Three Important Resolutions in the Industrial Resolutions :


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i) To maintain a proper distribution of economic power between Private & Public Sector.

ii) To encourage Rapid Industrialization by moving the concept of Entrepreneurship from existing centers to other cities, towns & rural areas.

iii) To disseminate the Entrepreneurship acumen concentrated in a few dominant communities to a large number of Industrially Potential People of varied Social Background.


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To achieve these Objectives the Govt accorded emphasis on the Development of Small Scale Industries in the Country. Since the 3rd Five Year Plan, the Govt announced various Incentives & Concessions in the form of Capital, Technical Know How, Reservation of Certain Items for Exclusive Manufacture in Small Scale Sector Tax Concessions, Provision of Infrastructural Facilities like Developed Land, Sheds, Roads, Communication etc for Promotion of Enterprises in the Country etc.

This has helped in Speedy Economic Development in all the States in the Country & to a great extent has minimized regional imbalances.

National Common Minimum Programme (NCMP) describes Small Scale Enterprises as the Most Employment Intensive Segment. At the beginning of the 10th Plan, (2002 – 2003), the Segment provided gainful employment to 24.9 Million People in the Rural & Urban Areas of the Country thro 10.5 Million Units, engaged in Manufacturing & providing a Wide Range of Goods & Services. If the Units in Khadi Village Industries are also taken into account, the Employment would rise to 332 Million. Thus this is rightly called as the segment which provides employment next only to Agriculture. The Contribution of Small Enterprises Segment to the Economic Development of the Country is very significant. Nearly 39% of the Gross Manufacturing Output & 34% of the Exports of India arise from these Enterprises.


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Yet a large number of Entrepreneurs are facing lots of Challenges. In order to assist them to fully harness their potential by availing of the increasing opportunities generated by Trade Liberalization, it is necessary to not only build an enabling Policy Environment but also supplement the former with a specific set of measures to address the continuing challenges.

Therefore Ministry of Micro, Small & Medium Enterprises, Govt of India has announced a package for Promoting such enterprises in Feb 07 to provide full support in the Areas of Credit, Technological Up gradation, Marketing & Infrastructural Up gradation in Major Industrial Infrastructure etc.


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The Slow pace of Growth of Entrepreneurship is mainly due to existence of a tangible set of Barriers prohibiting the Process of Entry into, Continuity in & an eventful exit from a Business Venture of a Would be Entrepreneur if it is a function of forces that one may view as Barriers limiting Full Fledged Business Performance. These may be Entry Barriers, Survival Barriers, & Exit Barriers.

Entry Barriers are those forces limiting access to identified business opportunities & capitalization of these Opportunities. Survival Barriers are constraints on the conditions essential for the Small Business Entity. Exit Barriers are constraints limiting the termination of Small Industrial Ventures that have outlived their Business Viability or the Growth of such ventures to a different size category.


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Following is the Presentation of the Study on “Entry Barriers to Entrepreneurship as perceived by Youth” sponsored by NEDB, Ministry of SSI, Govt of India, Study was conducted in 2002, by Dr. Sunil Shukla, Dr. Dinesh Awasthi , Entrepreneurship Development Institute of India, Ahmedabad.

Following are its findings :


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1) No interest in Business / Distinct Preference for Service :

Reasons : Job Offers secured income & access to Power. Satisfaction with Current Job. Lack of Achievement Motivation.


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2) Desire to wait for some more time : Reasons : To gain experience. To arrange for financial resources. To try for a Good Job First. 3) Lack of Confidence in Business : Reasons : Lack of Knowledge of the Business opportunity. Lack of Ability to take Risk. Lack of Managerial Skill. Lack of Knowledge of Procedure & Formalities to

establish Business.


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4) Disapproval of Family / Friends : Reasons : No Risk bearing Capacity of the Family. No affiliation to Business Community. Family Pressure to earn money thro Job.

Reconsidering Business Career : 58.3% of those 80.8% who had no Business

Plans were ready for Entrepreneurship, if helped for :


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Finance. Project Idea & Training for Business & Management.

Critical Needs of those Planning for Entrepreneurship :

Timely & adequate Finance. Knowledge & Skill Training. Encouragement by Family.


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1. The First requirement is to change the mindset.

2. Entrepreneurship to be introduced in Education (It is heartening to note that VTU, Belgaum, has introduced Management & Entrepreneurship as a Core Subject for V / VI Semester Engg. Students of all branches from the academic year 2008 – 2009.)

3. Need for Resource Material & Handbooks.

4. Entrepreneurship & Business Development Cell (EBDC) to be established on Campuses.

5. Faculty Development Programmes on Entrepreneurship Development.

6. Counseling & Guidance Cells for VRS Employees.

7. Fellowship / leave with Half Pay for Young Employees having feasible business plans.

8. Special Incentives, Hassle free credit to be given to increase female participation in business.

9. Industry – Academic Linkage to be strengthened.


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NEDB to set up EBDC’s on Campuses.

Functions : Organize Entrepreneurship Awareness Camps (EAC’s) , Workshop’s &

Entrepreneurship Development Programmes (EDPs). Sensitize the Environment & develop Network. Conduct Potential Surveys to develop a Basket of Viable Business

Opportunities. Act as a Focal Point for Information Dissemination on Opportunities,

Market, Technologies etc. Conduct need based Research Studies. Organize performance improvement & growth programs for

entrepreneurs to strengthen local entrepreneurial base. Any other activity necessary for inculcating entrepreneurship in

Student’s Community.


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Faculty Development Programs for University & College Teachers.

Teaching Material Development for Students & Handbook for Teachers.

Organize EAC’s & EDP’s. Finally, Introduction of Entrepreneurship in

Regular Curricula. Efforts to be made at Secondary Education Level

as well.


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A Behavioral Pattern that could impair basic managerial practices.

Constraining Practices within the Capital Market. The threatening shadow of changing technology. Increasing Competition from the New Players in the field. Limited Learning. Management of Resources. Failure of Guidance agencies to guide. Scarce Information & limited dissemination of that

information.


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The emotional commitment of the entrepreneur to his venture.

Specialized assets, sunk funds. The increasing demand for Managerial Skills. Fear of Failure.

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unit - 5

Documents

students vtu notes

question papers entrepreneurs

question papers ideas

science technology students

world entrepreneur

business opportunities

true entrepreneur

different business