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Entrepreneurship-Meaning,Definition and Characteristics

The word “entrepreneur” is derived from the French verb “entreprendre”, which means ‘to
undertake’. This refers to those who “undertake” the risk of new enterprises. An enterprise is
created by an entrepreneur. The process of creation is called “entrepreneurship”.

MeaningEntrepreneurship is a process of actions of an entrepreneur who is a person always in

search of something new and exploits such ideas into gainful opportunities by accepting the risk
and uncertainty with the enterprise. It is the process of starting a business, a startup
company or other organization. The entrepreneur develops a business plan, acquires the human
and other required resources, and is fully responsible for its success or failure.Entrepreneurship
operates within an entrepreneurship ecosystem.

Definitions According to A.H.ColeEntrepreneurship is the purposeful activity of an individual or a

group of associated individual,undertaken to initiate,maintain or aggrandize profit by production
or distribution of economic goods and services.

According to J.A. Timmons Entrepreneurship is the ability to create and build something from
practically nothing.

According to Musselman and Jackson

“Entrepreneurship is the investing and risking of time, money and effort to start a business and
make it successful.

Characteristics of Entrepreneurship Entrepreneurship is characterized by the following features:

1. Economic and dynamic activity:-Entrepreneurship is an economic activity because it involves the

creation and operation of an enterprise with a view to creating value or wealth by ensuring
optimum utilization of scarce resources. Since this value creation activity is performed
continuously in the midst of uncertain business environment, therefore, entrepreneurship is
regarded as a dynamic force.

2. Related to innovation:-Entrepreneurship involves a continuous search for new ideas.

Entrepreneurship compels an individual to continuously evaluate the existing modes of business
operations so that more efficient and effective systems can be evolved and adopted. In other
words, entrepreneurship is a continuous effort for synergy (optimization of performance) in

3. Profit potential:-“Profit potential is the likely level of return or compensation to the entrepreneur
for taking on the risk of developing an idea into an actual business venture.” Without profit
potential, the efforts of entrepreneurs would remain only an abstract and a theoretical leisure

4. Risk bearing:-The essence of entrepreneurship is the ‘willingness to assume risk’ arising out of
the creation and implementation of new ideas. New ideas are always tentative and their results
may not be instantaneous and positive.An entrepreneur has to have patience to see his efforts
bear fruit. In the intervening period (time gap between the conception and implementation of an
idea and its results), an entrepreneur has to assume risk. If an entrepreneur does not have the
willingness to assume risk, entrepreneurship would never succeed.

5. Skillful management:-Entrepreneurship involves skillful management.The basic managerial skill is

the most important characteristic feature of entrepreneurship. Foreffective management of an
enterprise,the role of an entrepreneur is to initiate and supervise design of organization
improvement projects in relation to upcoming opportunities is very much important.

6. Accepting challenges:-Entrepreneurship means accepting challenges amidst risk and

uncertainty.While accepting entrepreneurship as a career the entrepreneur accepts the
challenges of all odds and puts his efforts to convert the odds into viable business opportunities
by pooling together the resources of building and running the enterprise.

7. Goal-oriented Activity:-The entrepreneur who creates and operates enterprises seeks to earn
profits through satisfaction of needs of consumers; hence, entrepreneurship is a goal-oriented
activity. Entrepreneurship emphasizes results, achievements and targets achieved. It is work
done not imaginary plans or paper decisions. Hence entrepreneurship is a goal-oriented activity.

8. Value Creation:-Next, we find that the process of creating value is a characteristic in describing
entrepreneurship. Through entrepreneurship, new products, services, transactions, approaches,
resources, technologies, and markets are created that contribute some value to a community or
marketplace. We can also see value created when, through entrepreneurship; resources are
transformed into outputs such as products or services. During this transformation process, value
is created because the entrepreneur is fashioning something worthwhile and useful. Drucker
says, “Until entrepreneurial act, every plant is a seed and every mineral just another rock.

9. Dynamic Process:-Entrepreneurship is a dynamic function. Entrepreneur thrives on changes in

the environment, which bring useful opportunities for business. An entrepreneur deals
proactively with changing markets and environment. He looks at the changes as the source of
market advantages, not as a problem. Uncertainties are market opportunities for him. He
capitalizes on fleeting market anomalies.

10. Uniqueness:-Other characteristic found in entrepreneurship is that of uniqueness.

Entrepreneurship involves new combinations and new approaches with which entrepreneurs are
willing to experiment. Through Entrepreneurship unique products are created and unique
approaches are tried. Entrepreneurship isn’t merely imitating what others have done. It’s doing
something new, something untested and untried – something unique.

11. Interest and Vision:-The first factor for entrepreneurial success is interest. Since
entrepreneurship pays off according to performance rather than time spent on a particular effort,
an entrepreneur must work in an area that interests her. Otherwise, she will not be able to
maintain a high level of work ethic, and she will most likely fail. This interest must also translate
into a vision for the company’s growth. Even if the day-to-day activities of a business are
interesting to an entrepreneur, this is not enough for success unless she can turn this interest
into a vision of growth and expansion. This vision must be strong enough that she can
communicate it to investors and employees.

12. Risk and Rewards :-Entrepreneurship requires risk. The measurement of this risk equates to the
amount of time and money you invest into your business. However, this risk also tends to relate
directly to the rewards involved. An entrepreneur who invests in a franchise pays for someone
else’s business plan and receives a respectable income, while an entrepreneur who undertakes
ground breaking innovations risks everything on an assumption that something revolutionary will
work in the market. If such a revolutionary is wrong, she can lose everything. However, if she is
right, she can suddenly become extremely wealthy.

Difference between Entrepreneur and Intrapreneur

Difference between Entrepreneur and Intrapreneur

Entrepreneur Intrapreneur

An entrepreneur is independent in his operations An intraprenuer is dependent on the entrepreneur

i.e. the owner.

An entrepreneur himself raises funds required The Intrapreneur does not raise funds.
for the enterprise.

Entrepreneur bears the risk involved in the An intrapreneur does not fully bear the risk
business. involved in the enterprise.

An entrepreneur operates from outside. On the contrary,an intrapreneur operates from

within the organization itself.

An entrepreneur begins his business with a An intrapreneur sets up his enterprise after
newly set up enterprise. working someone else’s organization.

As an entrepreneur establishes new business, so An intrapreneur establishes his business after

he does not posses any experience over the gathering experiences through working in the
business. other organization.

Entrepreneurs may find it difficult to get Intrapreneurs have their resources readily
resources available to them.

Entrepreneurs are found anywhere their vision Intrapraneurs work within the confines of an
takes them. organization.

Entrepreneurs know the business on a macro Intrapreneurs are highly skilled and specialized.

Difference between an Entrepreneur and a Manager

Difference between an Entrepreneur and a Manager

Basis of Difference Entrepreneur Manager

1. Motive The main motive of an entrepre- But, the main motive of a manager is to
neur is to start a venture by render his services in an enterprise already
setting up an enterprise. set up by someone else i.e., entrepreneur.

2. Status An entrepreneur is the owner of A manager is the servant in the enterprise

the enterprise. owned by the entrepreneur.

3. Risk Bearing An entrepreneur being the owner A manager as a servant does not bear any
of the enterprise assumes all risk involved in the enterprise.
risks and uncertainty involved in
running the enterprise.

4. Rewards The reward an entrepreneur gets A manager gets salary as reward for the
for bearing risks involved in the services rendered by him in the enterprise.
enterprise is profit which is Salary of a manager is certain and fixed.
highly uncertain.

5. Innovation Entrepreneur himself thinks over A manager simply execute the plans
what and how to produce goods prepared by the entrepreneur. Thus, a
to meet the changing demands of manager simply translates the
the customers. Hence, he acts as entrepreneur’s ideas into practice
an innovator also called a
‘change agent’

6. Qualifications An entrepreneur needs to possess On the contrary, a manager needs to

qualities and qualifications like possess distinct qualifications in terms of
high achievement motive, origi- sound knowledge in management theory
nality in thinking, foresight, risk and practice.
-bearing ability and so on.

7. Focus An entrepreneur is someone who A manager is typically concerned with

is concerned primarily with the sustainability, and has to focus on what
necessary components to start up can be done within the framework of what
he has been given to work with in an
a business existing enterprise.

8. Growth An entrepreneur begins with the A business manager is focused on

idea of the business from its engendering growth based on available
inception and its potential for resources. A manager must get employees
growth in the long run. An to perform at optimal levels, and must
analysis of the market and make use of non-human resources to create
available resources in relation to additional growth beyond basic
the original idea plays a primary sustainability
role in his business decisions.

9.Objective Entrepreneur’s objective is to Manager’s objective is to supervise and

innovate and create and he acts create routines. He implements the
as a change agent. Entrepreneur’s plans and ideas.

Entrepreneur Vs. Entrepreneurship

Entrepreneur Vs. Entrepreneurship

Entrepreneur Entrepreneurship

Entrepreneur is a person. Entrepreneurship is a process.

Entrepreneur is an organizer. Entrepreneurship is an organization.

Entrepreneur is an innovator. Entrepreneurship is an innovation.

Entrepreneur is a risk bearer. Entrepreneurship is risk bearing.

Entrepreneur is a motivator. Entrepreneurship is motivation.

Entrepreneur is a creator. Entrepreneurship is a creation.

Entrepreneur is a visualizer. Entrepreneurship is a vision.

Entrepreneur is a leader. Entrepreneurship is leadership.

Entrepreneur is an imitator. Entrepreneurship is an imitation.

Importance of Entrepreneurship
Importance of Entrepreneurship

Entrepreneurship offers the following benefits:

1. Development of managerial capabilities :-The

:-:- biggest significance of
entrepreneurship lies in the fact that it helps in identifying and developing managerial
capabilities of entrepreneurs. An entrepreneur studies a problem, identifies its
alternatives, compares the alternatives in terms of cost and benefits implications, and
finally chooses the best alternative.This exercise helps in sharpening the decision-
making skills of an entrepreneur. Besides, these managerial capabilities are used by
entrepreneurs in creating new technologies and products in place of older technologies
and products resulting in higher performance.

2. Creation of organizationsEntrepreneurship results into creation of organizations

when entrepreneurs assemble and coordinate physical, human and financial resources
and direct them towards achievement of objectives through managerial skills.

3. Improving standards of living:-By creating productive organizations,

entrepreneurship helps in making a wide variety of goods and services available to the
society, which results into higher standards of living for the people.Possession of luxury
cars, computers, mobile phones, rapid growth of shopping malls, etc. are pointers to the
rising living standards of people, and all this is due to the efforts of entrepreneurs.

4. Means of economic development:-Entrepreneurship involves creation and use of

innovative ideas, maximization of output from given resources, development of
managerial skills, etc., and all these factors are so essential for the economic
development of a country.

5. Job Creation:-We know that job creation is vital to the overall long-term economic
health of communities, regions, ad nations. Entrepreneurial ventures play very
important role in it. Small business create more jobs than large business do. During
economic recession, when large companies are on their way to retrenchment of their
work force, individuals whose jobs are eliminated find employment with small business.
The creation of jobs by small businesses is expected to continue into the future as new
firms start small and grow.

6. Innovation;-Innovating is a process of creating, changing, experimenting, transforming

and revolutionizing. Innovation is one of the key distinguishing characteristics of
entrepreneurial activity. The passionate drive and intense hunger of entrepreneurs to
forge new directions products and processes and to take risks set in motion a series of
decisions that lead to the innovations that are important for economic vitality. Without
these new ideas, economic, technological, and social progress would be slow indeed. The
“creative destruction” process of innovating leads to technological changes and
employment growth. Entrepreneurial firms act as these “agents of change” by providing
an essential source of new and unique ideas that might otherwise go.
7. Other Contribution
Entrepreneurship in small businesses helps in distribution of products of large business. They, thus,
support the large business houses.

It offers business avenues to women and minorities. Women and minorities are allowed the benefit of
financial independence and a chance to exhibit the ability to manage business enterprises.

Dispersal of economic activities to different sectors of economy and identifying new avenues of

Improvement of the standard of living of different weaker sections in the society.

Bring socio political change in the society.

Develop technological know-how.

Improve culture of business and expand commercial activities.

Entrepreneurship acts as a change agent to meet the requirements of the changing markets and
customer preferences.

Develop a culture of achievement orientation.

It helps in bringing about change and development of the civilization through change in trade,
comment be and industrialization.

It arouses the need for achievement in individuals, which brings about a change in the economic
scenario through economic development and growth.

It results in exploitation of economy’s resources, such as labour, capital and technology to the fullest

Factors affecting Entrepreneurship

Entrepreneurship is a complex phenomenon influenced by the interplay of a wide

variety of factors. The entrepreneurial activity at any time is dependent upon a complex
and varying combination of economic, social, political, psychological and other factors.
These factors may have been both positive and negative effluences on the emergence of
entrepreneurship. Positive influences constitute facilitative and conductive conclusive for
the emergence of entrepreneurship whereas negative influences create inhibiting milieu
to the emergence of entrepreneurship. Following factors contribute to the success of


1.Personality Factors:-Personality traits such as inner desire for control of their

activities, tolerance for risk, high level of tolerance to function in adverse situations and
background experiences such as the family environment, level of education, age and
work history tolerance for ambiguity are important personal characteristics that affect
entrepreneurship. Individuals who are desirous of working independently; willing to work
for long hours and assume risk; are self-confident and hard-working are likely to be
more successful as entrepreneurs than those who do not posses these qualities

Personal factors, becoming core competencies of entrepreneurs, include:

(a) Initiative (does things before being asked for) (b) Proactive (identification and
utilization of opportunities) (c) Perseverance (working against all odds to overcome
obstacles and never complacent with success) (d) Problem-solver (conceives new ideas
and achieves innovative solutions) (e) Persuasion (to customers and financiers for
patronization of his business and develops & maintains relationships) (f) Self-confidence
(takes and sticks to his decisions) (g) Self-critical (learning from his mistakes and
experiences of others) (h) A Planner (collects information, prepares a plan, and monitors
performance) (i) Risk-taker (the basic quality).

2. Environmental factors:-These factors relate to the conditions in which an

entrepreneur has to work. If the environment that a individual is working in is
unsatisfactory, that is, not conducive to his growth needs, it is likely that the individual
will quit his job and start his own business as an entrepreneur. Unsatisfied personal
needs for growth and achievement in employment conditions results in successful

3. Political:- Some researchers felt that the growth of entrepreneurship cannot be

explained fully unless the political set-up of a country is taken into consideration.
Political stability in a country is absolutely essential for smooth economic activity.
Frequent political protests, strikes, etc. hinder economic activity and entrepreneurship.
Unfair trade practices, irrational monetary and fiscal policies, etc. are a roadblock to the
growth of entrepreneurship

4. Socio-Economic Factors:-The entrepreneurial activity at any time and place is

governed by varying combination of socio-economic factors. The empirical studies have
identified the following socioeconomic factors:

Cast/religion, Family background, Level of Education, Level of perception, Legitimacy of

Entrepreneurship, Migratory character, Social Mobility, Social Security, Investment

5. Economic Factor:-Factors such as availability of finance, labor, land,

accessibility of customers, suppliers are the factors that stimulate
entrepreneurship. Capital is one of the most important prerequisites to
establish an enterprise. Availability of sufficient capital affects the
introduction, survival and growth of a business enterprise. Capital is
regarded as lubricant to the process of production. If we increase in capital
investment, capital output ratio also tends to increases. This results in
increase in profit, which ultimately goes to capital formation. Due to this
capital supply increase, entrepreneurship also increases.
6. Other Factors

Entrepreneurial Education:-More and more people with high academic attainments started
joining the ranks of industrialists, especially the professionals holding qualifications in
engineering, law, medicine, cost and chartered accounting. The newer entrepreneurs
have a larger proportion of their floatation in the traditional sector, but these
professionals have by and large preferred to make their investments in modern sector.
The technicians in particular among both old and new entrepreneurs have entered
industries in the modern sector having a bearing of their academic qualifications. Many
universities and institutes are nowadays offering entrepreneurship education. A number
of institutes have set up successful entrepreneurship centers, which provide help to
budding entrepreneurs by conducting formal training and structured mentoring

Impact of Services Sector:- Increase in per capita income leads to a greater share of the
services sector in the national economy. The average size of firms’ m many sections of
the services sector are relatively small. This in turn promotes entrepreneurial activity
across a number of service sector industries. Even for some developing countries such
as India, services account for over half of the total GDP. Growing importance of services
in the overall economy has paved the way for entrepreneurial activity. New industries
such as software and business process outsourcing have emerged and these have a
large number of entrepreneurial firms.

Increasing Demand for Variety:- Increased wealth has led to increase in the demand for
variety (Jackson 1984). The increasing demand for new products is of advantage to
smaller firms. A number of studies have shown the comparative advantage of smaller
firms in being innovative and coming up with new products . If the products has unmet
demand, it will create a market for itself. The success of entrepreneurship is, therefore,
dependent upon the extent to which the product is in demand. Changes in consumer
tastes are a major reason for growth of entrepreneurship. People are, inclined to
products that are specifically designed to meet their special needs. Mass produced
homogenous goods do not enjoy as wide an appeal anymore.

Impact of Ethical Value System:-Max Weber was first to point out that the entrepreneurial
growth was governed by the ethical value system of the society concerned. He said that
the spirit of rapid industrial growth depends upon a rationalized technology, acquisition
of money and its rational use for productivity and multiplication of money. These
elements depend upon a specific value orientation of individuals. Entrepreneurship
develops rapidly in those societies where ethical values provided independent capacity of
decision-making. No doubt, this view has some truth but it is not accepted universally.

Internal Control System:-Entrepreneurship largely depends upon the control system

designed for controlling the business activities. If the control system is effective they will
result in optimal inventory, good quality products and high profit margins. This will have
a positive effect on the success of entrepreneurship.
Factors impacting emergence of Entrepreneurship

Various researchers world over have identified the factors that contribute to the
development of entrepreneurship. Economists agree that the lack of entrepreneurs is not
caused by economic conditions alone. It is also due to the whole set of socio-cultural and
institutional environment prevailing in the less developed countries. Various
environmental factors influencing the entrepreneurship are as follows:

I. Economic Factors:-Economic environment exercises the most direct and immediate

influence on entrepreneurship. The economic factors that affect the growth of
entrepreneurship are the following:

1.Capital:-Capital is one of the most important perquisites to establish an enterprise.

Availability of capital facilitates is required to purchase the land, machine and raw
material for producing goods. Capital is therefore, regarded as lubricant to the process
of production. Our accumulated experience suggests that with an increase in capital
investment, capital-output ratio also tends to increase. This results in increase in profit,
which ultimately goes to capital formation. This suggests that as capital supply
increases, entrepreneurship also increases.

2. Labor:-The quality rather quantity of labor is another factor, which influences the
emergence of entrepreneurship. Most less developed countries are labor rich nations
owing to a dense and even increasing population. But entrepreneurship is encouraged if
there is a mobile and flexible labor force. And, the potential advantages of low-cost labor
are regulated by the deleterious effects of labour immobility. methods like Japan. In
contrast, the disadvantage of high-cost labor can be modified by introduction of labor-
saving innovations as was done in US.

3. Raw Materials:-The availability of raw materials is very important for establishing any
industrial activity. In the absence of raw materials, neither any enterprise can be
established nor can an entrepreneur be emerged.

4. Market:-The fact remains that the potential of the market constitutes the major
determinant of probable rewards from entrepreneurial function.. The size and
composition of market both influence entrepreneurship in their own ways. Practically,
monopoly in a particular product in a market becomes more influential for
entrepreneurship than a competitive market..


Expansion of entrepreneurship depends upon properly developed communication and

transportation facilities. It not only helps to enlarge the market, but expand the horizons
of business too. Take for instance, the establishment of post and telegraph system and
construction of roads and highways in India. It helped considerable entrepreneurial
activities, which took place in the 1850s. Apart from the above factors, institutions like
trade/ business associations, business schools, libraries, etc. also make valuable
contribution towards promoting and sustaining entrepreneurship’ in the economy

II. Social Factors:-Social factors can go a long way in encouraging entrepreneurship. In

fact it was the highly helpful society that made the industrial revolution a glorious
success in Europe. The main components of social environment are as follows:

Caste Factor:;-There are certain cultural practices and values in every society which
influence the actions of individuals. These practices and value have evolved over
hundred of years. For instance, consider the caste system (the varna system) among
the Hindus in India. It has divided the population on the basis of caste into four
divisions. The Brahmana (priest), the Kshatriya (warrior), the Vaishya (trade) and the
Shudra (artisan): It has also defined limits to the social mobility of individuals. By social
mobility we mean the freedom to move from one caste to another.

2. Family background:-This factor includes size of family, type of family and economic
status of family. Zamindar family helped to gain access to political power and exhibit
higher level of entrepreneurship. Background of a family in manufacturing provided a
source of industrial entrepreneurship. Occupational and social status of the family
influenced mobility

3. Education:-Education enables one to understand the outside world and equips him with
the basic knowledge and skills to deal with day-to-day problems. In any society, the
system of education has a significant role to play in inculcating entrepreneurial values.

4. Attitude of the Society:-A related aspect to these is the attitude of the society towards
entrepreneurship. Certain societies encourage innovations and novelties, and thus
approve entrepreneurs’ actions and rewards like profits. Certain others do not tolerate
changes and in such circumstances, entrepreneurship cannot take root and grow.
Similarly, some societies have an inherent dislike for any money-making activity. It is
said, that in Russia, in the nineteenth century, the upper classes did not like
entrepreneurs. For them, cultivating the land meant a good life. They believed that land
belongs to God and the produce of the land was nothing but god’s blessing.

5.Cultural Value

Motives impel men to action. Entrepreneurial growth requires proper motives like profit-
making, acquisition of prestige and attainment of social status. Ambitious and talented
men would take risks and innovate if these motives are strong. The strength of these
motives depends upon the culture of the society. If the culture is economically or
monetarily oriented, entrepreneurship would be applauded and praised; wealth
accumulation as a way of life would be appreciated.

III. Psychological Factors;-Many entrepreneurial theorists have propounded theories of

entrepreneurship that concentrate especially upon psychological factors. These are as
1.Need Achievement:-The most important psychological theories of entrepreneurship was
put forward in the early1960s by David McClelland. According to McClelland ‘need
achievement’ is social motive to excel that tends to characterize successful
entrepreneurs, especially when reinforced by cultural factors. He found that certain kinds
of people, especially those who became entrepreneurs, had this characteristic.

2. Withdrawal of Status Respect

There are several other researchers who have tried to understand the psychological
roots of entrepreneurship. One such individual is Everett Hagen who stresses the-
psychological consequences of social change. Hagen says, at some point many social
groups experience a radical loss of status. Hagebelieves that the initial condition leading
to eventual entrepreneurial behavior is the loss of status by a group. He postulates that
four types of events can produce status withdrawal:

(a) The group may be displaced by force;

(b) It may have its valued symbols denigrated;

(c) It may drift into a situation of status inconsistency; and

(d) It may not be accepted the expected status on migration in a new society.

He further postulates that withdrawal of status respect would give rise to four possible
reactions and create four difference personality types:

(a) Retreatist: He who continues to work in a society but remains different to his work
and position;

(b) Ritualist: He who adopts a kind of defensive behavior and acts in the way accepted
and approved in his society but no hopes of improving his position;

(c) Reformist: He is a person who foments a rebellion and attempts to establish a new
society; and

(d)Innovator: He is a creative individual and is likely to be an entrepreneur.

Hagen maintains that once status withdrawal has occurred, the sequence of change in
personality formation is set in motion. He refers that status withdrawal takes a long
period of time – as much as five or more generations – to result in the emergence of

3. Motives:-Other psychological theories of entrepreneurship stress the motives or goals

of the entrepreneur. Cole is of the opinion that besides wealth, entrepreneurs seek
power, prestige, security and service to society. Stepanek points particularly to non-
monetary aspects such as independence, persons’ self-esteem, power and regard of the
On the same subject, Evans distinguishes motive by three kinds of entrepreneurs:

(a) Managing entrepreneurs whose chief motive is security.

(b) Innovating entrepreneurs, who are interested only in excitement.

(c) Controlling entrepreneurs, who above all other motives- want power and authority.

Finally, Rostow has examined intergradational changes in the families of entrepreneurs.

He believes that the first generation seeks wealth, the second prestige and the third art
and beauty.

IV. Political Factors

An entrepreneur, however creative he/she may be, cannot function without the
supportive actions of the Government. It is for the government/society to ensure the
availability of required resources for the entrepreneurs and also the accessibility to
them. This is because the successful entrepreneur contributes to the well being of the
society. Policies relating to various-economic aspects like prices, availability of capital,
labour and other inputs, demand structure, taxation, income distribution, etc..


The difference between the entrepreneurial style and the managerial style
(administrative domain) involves five business dimensions.

A.Strategic Orientation

1. The entrepreneur’s strategic orientation depends on his or her perception of the

opportunity.2. When the use of planning systems is the strategic orientation, the
administrative domain is operant.

B. Commitment to Opportunity

1. The entrepreneurial domain is pressured by the need for action and has a short time
span in terms of opportunity commitment.2.The administrative domain is not only slow
to act on an opportunity, but the commitment is usually for a longer time span.

C.Commitment of Resources

1. An entrepreneur is used to having resources committed at periodic intervals, often

based on certain tasks or objectives being reached. 2.In acquiring these resources the
entrepreneur is forced to maximize resource use. 3. In the administrative domain, the
commitment of resources is for the total amount needed. 4. Administrative-oriented
individuals receive personal rewards by effectively administering the resources under
their control.

D. Control of Resources
1. The administrator is rewarded by effective resource administration and has a drive to
own or accumulate as many resources as possible. 2. The entrepreneur, under pressure
of limited resources, strives to rent resources on an as-needed basis.

E.Managerial Structure 1. In the administrative domain, the organizational structure is

formalized and hierarchical in nature.2. The entrepreneur employs a flat organizational
structure with informal networks

Traits/Qualities of Successful Entrepreneurs

1. Full of determinationTo be a successful entrepreneur it is important to set clear goals
along the way. Growing business, increasing sales and hiring new employees require
several micro-goals within them to be executed successfully.This type of workload and
challenge is enough to stop many people from pursuing the entrepreneurial career path.
One has to be determined from the beginning to be successful. If one isn’t fully
determined there is a good chance to crumble under the pressure.

2. Risk TakingSome of the most successful entrepreneurs took major risks, and they paid
off in a big way. Entrepreneurs are risk takers ready to dive deep into a future of
uncertainty. But not all risk takers are successful entrepreneurs. Successful
entrepreneurs have will to risk time and money on unknowns, but they also keep
resources, plans and bandwidth for dealing with “unknown” in reserve. When evaluating
risk, a successful entrepreneur always thinks that is this risk worth the cost of career,
time and money? And, what will he do if this venture doesn’t pay off?

3. High level of confidenceEntrepreneurs that have a high level of confidence are able to get
the job done even under the most stressful conditions. They understand that big
challenges breed big rewards. This is the same mentality that allows successful
entrepreneurs to spot an opportunity when most just see a possible challenge. When
most focus on the challenge, a successful entrepreneur focuses on the finish line and the
end reward.

4. Craves learningIndustries constantly change and evolve . Only those that are also
growing through constant learning will stay ahead. There will always be competitors
trying to surpass . There will always be someone claiming to be the next greatest
thing.A successful entrepreneur always stay sharp,through constant learning about the
competitors and the industry.

5. Understands failure is part of the gameFailure is one of the secrets to success, since some of
the best ideas arise from the ashes of a shuttered business. A successful entrepreneur
knows that failure is part of success. He will take those failures and use them as
learning experiences. Real world experience, even failing, will teach more than what
one would ever learn in a classroom.

6. Passionate

Passion fuels the drive and determination required to be successful. If one isn’t fully
passionate about what he/she is doing the added stress and obstacles will build up on
shoulders and eventually be responsible for collapse.
7. Adaptability and FlexibilityIf entrepreneurs had the ability to see what was hiding around
each turn it would make it much easier, but unfortunately that is not the case. There can
be surprises around every corner, even with a well thought out plan and strategy.A
successful entrepreneur is extremely adaptable and has ability to respond quickly in any
situation. It’s good to be passionate or even stubborn about what you do. But being
inflexible about client or market needs will lead to failure. Market needs are dynamic:
changes are a recurring phenomenon. Successful entrepreneurs welcome all suggestions
for optimization or customization that enhances their offering and satisfies client and

8.Money ManagementSuccessful Entrepreneur must have excellent money management

skills. Poor financial decisions, such as overspending or allocating funds to less important
tasks can quickly ruin a business. It takes time to get to profitability for any
entrepreneurial venture. Till then, capital is limited and needs to be utilized wisely.
Successful entrepreneurs realize this mandatory money management requirement and
plan for present and future financial obligations (with some additional buffer). Even after
securing funding or going fully operational, a successful businessman keeps a complete
handle on cash flows, as it is the most important aspect of any business.

9. Networking AbilitiesA large collection of business cards and a huge contact list doesn’t
make an expert at networking. Building value-based relationships that are truly
meaningful is what networking is all about — these are the relationships that lead to
business opportunities and long-term relationships that are mutually beneficial.
Constantly networking with people that can not only help my business currently, but also
have the potential to help you in the future as well.

10. Ability to sell and promoteKnowing how to sell is an absolutely essential part of being a
successful business owner.If you can’t express what it is that makes your product or
service a solution to a problem, you will be in for a rough ride.

11. Planning (But not Over-planning) Entrepreneurship is about building a business from
scratch while managing limited resources (including time, moneyand personal
relationships). It is a long-term commitment, and attempting to plan as much as
possible at the beginning is a noble impulse. In reality, however, planning for everything
and having a ready solution for all possible risks may prevent you from even taking the
first step. Successful entrepreneurs have a mindset and temperament to capable of
dealing with unforeseen possibilities.

12.Creativity and PersuasivenessSuccessful entrepreneurs have the creative capacity to

recognize and pursue opportunities. They possess strong selling skills and are both
persuasive and persistent. Are you willing to promote your business tirelessly and look
for new ways to get the word out about your product or service?

13. Interpersonal Skills

Entrepreneurs are always comfortable while dealing with people at all levels. During the
course of their action,they come across a cross section of individuals with whom they
have to deal. They interact with raw material suppliers, customers,bankers etc. for
different activities.As successful entrepreneurs,they should be persons who like working
with others possessing the much needed quality of interpersonal skill to deal with

14. Time orientationEntrepreneurs anticipate future trends basing upon their past
experience and exposure.They stick to the timepragmatically while doing their jobs.

15. LeadershipEntrepreneurs should posses the quality of leadership.Leadership is the

ability to exert interpersonal influence by means of communication towards the
achievement of goals.Entrepreneurs as the leaders should provide the necessary spark
to motivation by guiding,inspiring,assisting and directing the members of the group for
achievement of unity of action,efforts and purpose.

16. Internal Locus of ControlSuccessful entrepreneurs believe in themselves.They do not

believe that the success or failure or their venture will be governed by fate,luck or
similar forces.They believe that their accomplishments and setbacks are within their own
control and influence and that they can affect the outcome of their actions.

17. Tolerance for AmbiguityStar up entrepreneurs face uncertainty compounded by constant

changes that introduce ambiguity and stress into every aspect of the enterprise.
Setbacks and surprises are inevitable.A tolerance for ambiguity exists when the
entrepreneur can deal with the various setbacks and changes that constantly confront
him or her.

18. Integrity and ReliabilityIntegrity and reliability are the glue and fiber that bind
successful personal and business relationships and make them strong.Integrity and
reliability help build and sustain trust and confidence among
investors,partners,customers and creditors.Small business entrepreneurs in particular
find these two characteristics crucial to success.

19. Tolerance for FailureSuccessful Entrepreneurs use failure as a learning experience.In

adverse and difficult times they look for opportunity.

Women Entrepreneurs
Women Entrepreneurs may be defined as the women or a group of women who initiate,
organize and operate a business enterprise.

Government of India has defined women entrepreneurs as an enterprise owned and

controlled by a women having a minimum financial interest of 1% of the capital and
giving at least 51% of employment generated in the enterprise to women.

Problems of Women Entrepreneurs in India/Challenges faced by Women Entrepreneurs

Women in India have faced many problems to get ahead their life in business. Women
entrepreneurs face a series of problems right from the beginning till the enterprise
functions. The problems of Indian women pertains to her responsibility towards family,
society and work.
The traditions, customs, socio cultural values, ethics, motherhood, physically weak,
feeling of insecurity etc. are some peculiar problems that the Indian women are coming
across while they jump into entrepreneurship.

Women in rural areas have to suffer still further. They face tough resistance from men.
They are considered as helpers. The attitude of society towards her and constraints in
which she has to live and work are not very conducive.

Besides the above basic problems the other problems faced by women entrepreneurs
are as follows:

1. Family ties Women in India are very emotionally attached to their families. They are
supposed to attend to all the domestic work, to look after the children and other
members of the family. They are over burden with family responsibilities like extra
attention to husband, children and in laws, which take away a lots of their time and
energy. In such situation, it will be very difficult to concentrate and run the enterprise

2. Male dominated society Even though our constitution speaks of equality between sexes,
male chauvinism is still the order of the day. Women are not treated equal to men. Their
entry to business requires the approval of the head of the family. Entrepreneurship has
traditionally been seen as a male preserve. All these put a break in the growth of women

3. Lack of education Women in India are lagging far behind in the field of education. Most
of the women (around sixty per cent of total women) are illiterate. Those who are
educated are provided either less or inadequate education than their male counterpart
partly due to early marriage, partly due to son’s higher education and partly due to
poverty. Due to lack of proper education, women entrepreneurs remain in dark about
the development of new technology, new methods of production, marketing and other
governmental support which will encourage them to flourish.

4. Social barriers The traditions and customs prevailed in Indian societies towards women
sometimes stand as an obstacle before them to grow and prosper. Castes and religions
dominate with one another and hinders women entrepreneurs too. In rural areas, they
face more social barriers. They are always seen with suspicious eyes.

5. Shortage of raw materials Neither the scarcity of raw materials nor availability of proper
and adequate raw materials sounds the death-knell of the enterprises run by women
entrepreneurs. Women entrepreneurs really face a tough task in getting the required
raw material and other necessary inputs for the enterprises when the prices are very

6. Problem of finance Women entrepreneurs have to struggle a lot in raising and meeting
the financial needs of the business. Bankers, creditors and financial institutes are not
coming forward to provide financial assistance to women borrowers on the ground of
their less credit worthiness and more chances of business failure. They also face
financial problem due to blockage of funds in raw materials, work-in-progress finished
goods and non-receipt of payment from customers in time.

7. Tough competition Usually women entrepreneurs employ low technology in the process
of production. In a market where the competition is too high, they have to fight hard to
survive in the market against the organized sector and their male counterpart who have
vast experience and capacity to adopt advanced technology in managing enterprises

8. High cost of production Several factors including inefficient management contribute to the
high cost of production, which stands as a stumbling block before women entrepreneurs.
Women entrepreneurs face technology obsolescence due to non-adoption or slow
adoption to changing technology, which is a major factor of high cost of production.

9. Low risk-bearing capacity Women in India are by nature weak, shy and mild. They cannot
bear the amount risk which is essential for running an enterprise. Lack of education,
training and financial support from outsides also reduce their ability to bear the risk
involved in an enterprises.

10. Limited mobility Women mobility in India is highly limited and has become a problem
due to traditional values and inability to drive vehicles. Moving alone and asking for a
room to stay out in the night for business purposes are still looked upon with suspicious
eyes. Sometimes, younger women feel uncomfortable in dealing with men who show
extra interest in them than work related aspects.

11. Lack of entrepreneurial aptitude Lack of entrepreneurial aptitude is a matter of concern

for women entrepreneurs. They have no entrepreneurial bent of mind. Even after
attending various training programmes on entrepreneur ship women entrepreneurs fail
to tide over the risks and troubles that may come up in an organizational working.

12. Limited managerial ability Management has become a specializedjob which only efficient
managers perform. Women entrepreneurs are not efficient in managerial functions like
planning, organizing, controlling, coordinating, staffing, directing, motivating etc. of an
enterprise. Therefore, less and limited managerial ability of women has become a
problem for them to run the enterprise successfully.

13. Legal formalities Fulfilling the legal formalities required for running an enterprise
becomes an upheaval task on the part of an women entrepreneur because of the
prevalence of corrupt practices in government offices and procedural delays for various
licenses, electricity, water and shed allotments. In such situations women entrepreneurs
find it hard to concentrate on the smooth working of the enterprise.

14. Exploitation by middle men Since women cannot run around for marketing, distribution
and money collection, they have to depend on middlemen for the above activities.
Middlemen tend to exploit them in the guise of helping. They add their own profit
margin, which result in less sales and lesser profit.
15. Lack of self-confidence Women entrepreneurs because of their inherent nature, lack of
self-confidence, which is essentially a motivating factor in running an enterprise
successfully. They have to strive hard to strike a balance between managing a family
and managing an enterprise. Sometimes she has to sacrifice her entrepreneurial urge in
order to strike a balance between the two.

How to Develop Women Entrepreneur Or Measures for Development of Women Entrepreneurs

Right efforts on all areas are required in the development of women entrepreneurs and
their greater participation in the entrepreneurial activities. Following efforts can be
taken into account for effective development of women entrepreneurs.

Consider women as specific target group for all developmental programmes.

Better educational facilities and schemes should be extended to women folk from government part.

Adequate training programmes on management skills to be provided to women community.

Encourage women’s participation in decision-making.

Vocational training to be extended to women community that enables them to understand the
production process and production management.

Skill development to be done in women’s polytechnics and industrial training institutes. Skills are put
to work in training-cum-production workshops.

Training on professional competence and leadership skill to be extended to women entrepreneurs.

Training and counselling on a large scale of existing women entrepreneurs to remove psychological
causes like lack of self-confidence and fear of success.

Counselling through the aid of committed NGOs, psychologists, managerial experts and technical
personnel should be provided to existing and emerging women entrepreneurs.

Continuous monitoring and improvement of training programmes.

Activities in which women are trained should focus on their marketability and profitability.

Making provision of marketing and sales assistance from government part.

To encourage more passive women entrepreneurs the Women training programmes should be
organized that taught to recognize her own psychological needs and express them.

State finance corporations and financing institutions should permit by statute to extend purely trade
related finance to women entrepreneurs.

Women’s development corporations have to gain access to open-ended financing.

The financial institutions should provide more working capital assistance both for small scale venture
and large scale ventures.

Making provision of micro credit system and enterprise credit system to the women entrepreneurs at
local level.

Repeated gender sensitization programmes should be held to train financiers to treat women with
dignity and respect as persons in their own right.

Infrastructure, in the form of industrial plots and sheds, to set up industries is to be provided by state
run agencies.

Industrial estates could also provide marketing outlets for the display and sale of products made by

A Women Entrepreneur’s Guidance Cell set up to handle the various problems of women entrepreneurs
all over the state.

District Industries Centers and Single Window Agencies should make use of assisting women in their
trade and business guidance.

Programmes for encouraging entrepreneurship among women are to be extended at local level.

Training in entrepreneurial attitudes should start at the high school level through well-designed
courses, which build confidence through behavioural games.

More governmental schemes to motivate women entrepreneurs to engage in small scale and large-scale
business ventures.

Involvement of Non Governmental Organizations in women entrepreneurial training programmes and


Women Entrepreneurship in India

The Indian Government has adapted the principle of Women’s equality in all spheres of
life. Since Independence several steps has been taken by the government for the
progress of women through successive Five Year Plans.

The draft of Sixth Five Year Plan for the first time, incorporated a new chapter entitled
‘Women and Development’ with a special stress on the issue of the development of
women entrepreneurship.

In order to promote women entrepreneurship, multifaceted efforts have been made in

India, which are enumerated below:

1. Direct and Indirect Financial SupportTo overcome financial bottlenecks in the way of
running enterprises, the National Banks, State Finance Corporation, State Industrial
Development Corporation and District Industries Centers provide loans, subsidies and
grants to women entrepreneurs. In addition, Equity Fund Schemes provide interest free
loans to new units and repayment is allowed for 10-12 years. Further, Differential
Interest rate Scheme, Mahila Ayog Nidhi Scheme by Industrial Development Bank of
India(IDBI) has been introduced for setting up of new industrial projects by women
entrepreneurs. Besides, the direct financial support, Indirect financial assistance is also
available from Small Industries Development Bank of India(SIDBI),National Small
Industries Corporation(NSIC),Industrial Finance Corporation of India(IFCI), State Small
Industrial Development Corporations(SSIDCs),National Bank for Agricultural and Rural
Development(NABARD), etc. which provide refinance small scale industries and
rendering assistance to women entrepreneurs.

2. Yojna, Schemes and ProgramDuring the successive Five Year Plans, different schemes,
yojna and programmes have been launched to safeguard the interest and functioning of
women entrepreneurs. Under Nehru Rojgar Yojna, 75 per cent of the funds are provided
by the banks and 25 percent by the Women’s Finance Commission (WFC) out of which
20 percent is provided as a subsidy to women. Similarly, The Prime Minister’s Integrated
Urban Poverty Eradication Programme, WFC provides financial assistance to the women
entrepreneurs for setting up units with less than 10 lakhs capital.

3. Technological Trainings and AwardsFor stemming and improving entrepreneurship

programmes, training and awards have been started. Entrepreneurship Development
Institute of India, Ahmedabad conducts result oriented entrepreneurship development
programmes for industrially backward and rural areas especially for women
entrepreneurs. Again ‘Stree Shakti’Package for women entrepreneurs started by State
Bank of India(SBI),which provide concessions and special training facilities. Award for
women entrepreneurship is given by Indian Institute of Marketing Management, and
Women’s University of Mumbai.

4. Federations and AssociationsThere are Federations and associations for women, which are
making continuous and valuable efforts in the field of entrepreneurship. Large number of
women entrepreneur are operating at national and international levels to provide
meeting grounds of women entrepreneurs. At national level, some are as follows:

National Alliance of you of Entrepreneurs (NAYE)

Indian Council of Women Entrepreneurs (ICWE)

Self employed Women’s Association (SEWA)

Association of Women Entrepreneurs of Karnataka (AWEK)

At International level, there are two associations:

Associated Country Women of the World (ACWW) with 30 million women entrepreneurs as its members

World Association of Women Entrepreneur (WAWE), which is willing to collaborate with Indian firms for joint
As a result of above mentioned efforts made by the Governments and several other
changes and developments like education, technical upliftment, urbanization, economic
independence, legislations for empowerment and so on, the women entrepreneurs have
gained momentum.

Role Models of Woman Entrepreneurs Or Profiles of successful Women

1. Kiran Mazumdar Shaw Kiran Mazumdar Shaw (born 23 March 1953) is
an Indian entrepreneur.She is the chairman and managing director of Biocon Limited, a
biotechnology company based in Bangalore (Bengaluru), India and the current
chairperson of IIM-Bangalore. She is on the Financial Times’ top 50 women in business
list. As of 2015, she is listed as the 85th most powerful woman in the world by Forbes.

2. Vidya Chhabria Vidya Chhabria was thrust into the spotlight after the 2002 death of her
husband, Indian business tycoon Manu Chhabria. She became chairman of Jumbo
Group, whose flagship company, Jumbo Electronics, is one of the largest distributors of
consumer electronics, IT and telecom in the Middle East. It has partnerships with
companies like Sony, IBM and Microsoft

3. Priya Paul Priya Paul (born 1967) is a prominent woman entrepreneur of India, and
currently the Chairperson of Apeejay Surrendra Park Hotels The Park Hotels chain of
boutique hotels. She joined the company after finishing her studies at the Wellesley
College (US) working under her father, as Marketing Manager at The Park New Delhi, at
the age of 21.

After the death of Surrendra Paul, she succeeded him in 1990 as the Chairperson of the
Hospitality Division of the Apeejay Surendra Group.

Her contributions to industry and commerce, particularly in the field of hospitality, have
been repeatedly recognized and she has received several awards and citations, including
the following:

4. Swati Piramal

Swati Piramal is one of India’s leading scientists and industrialists, and is involved in
healthcare, focusing on public health and innovation. Her contributions in innovations in
new medicines and public health services have touched thousands of lives. She is the
Vice Chairperson of Piramal Enterprises Ltd (formerly known as Piramal Healthcare), a
leading drug discovery company which aims to bring affordable medicines to reduce the
burden of disease globally.Born on 28 March 1956, Piramal earned her medical degree,
an M.B.B.S from Mumbai University in 1980. She is an alumnus of the Harvard School of
Public Health where she received her Master’s degree in 1992.

Awards and Honours

2004–05 – BMA Management Woman Achiever of the Year Award

2007 – Rajiv Gandhi Award for Outstanding Woman Achiever by the Rajiv Gandhi

2012 – One of India’s high civilian honours, the Padma Shri award, by the President of
India, Ms. Pratibha Patil

2014 – Received the Kelvinator Stree Shakti Award

5. Lalita D. Gupte Lalita Gupte, Joint Managing Director of ICICI Bank (India’s second
largest commercial bank), until 31 October 2006, is an important figure in
India’s banking and financial services sector. An INSEAD alumnus, Gupte was listed by
the Fortune “as one of the fifty most powerful women in international business.” She is
currently the Chairperson on the Board of ICICI Venture and a board member of Nokia
Corporation.On 22 June 2010 she was appointed as member of Alstom’s Board of

Her contributions have been widely recognized, and the awards conferred on her include
the following:

The twenty First Century for Banking Finance and Banking award (1997) by Ladies Wing of the Indian
Merchants’ Chamber

The Women Achievers Award (2001) from the Women graduates’ Association.

Women of the Year Award (2002) by the International Women’s’ Association.

6. Ekta Kapoor Ekta Kapoor is an Indian TV and film producer. She is the Joint Managing
Director and Creative Director of Balaji Telefilms, her production company.

Awards and Honours

2012 Asia’s Social Empowerment Award-Freedom Through Education

7. Shehnaz Husain Shahnaz Husain is the CEO of Shahnaz Herbals Inc. She is a
prominent Indian female entrepreneur, who is best known for her herbal cosmetics,
particularly care products. In 2006 she was awarded the, Padam Shreea civilian award
by the Government of India in 2006,and in 1996 Success Magazine’s “World’s Greatest
Woman Entrepreneur” award.

8. Ritu Kumar Ritu Kumar is an Indian fashion designer. Kumar began her fashion
business in Kolkata, using two small tables and hand-block printing
techniques. Beginning with bridal wear and evening clothes in the 1960s and 70s, she
eventually moved into the international market in the subsequent two decades. As well
as shops in India, Kumar’s company has also opened branches in Paris, London and New
York. The London branch closed after three years, in 1999. Her company’s annual
turnover at the time was the highest of any Indian fashion outlet, estimated at around
₹10 billion. In 2002 she launched the “Label” line in partnership with her son Amrish. In
2013 she was given the Padma Shri award by the Government of India. In addition, she
was recently featured in the Creating Emerging Markets project at the Harvard Business
School, which includes interviews with long-time leaders of firms and NGOs in Latin
America, South Asia, Turkey and Africa.

Social entrepreneurship-Introduction,Characteristics,Types
and Examples Social entrepreneurship
Social entrepreneurship is the attempt to draw upon business techniques to
find solutions to social problems. This concept may be applied to a variety
of organizations with different sizes, aims, and beliefs.

The social entrepreneur is a mission-driven individual who uses a set of

entrepreneurial behaviours to deliver a social value to the less privileged, all
through an entrepreneurially oriented entity that is financially independent,
self-sufficient, or sustainable.
Characteristics of Social Entrepreneur

The usual ideologies and principals do not holdback social Entrepreneurs. They are always looking at
breaking them.

Social Entrepreneurs are impatient. They do not go well with the bureaucracy around them.

Social Entrepreneurs have the patience, energy and enthusiasm to teach others.

Social Entrepreneurs combine Innovation, Resources and Opportunity to derive solutions to Social

This should be first in the list, Social Entrepreneurs DO NOT loose their FOCUS anytime.

Social Entrepreneurs always jump in before having their resources in place. They are not traditional.

Social Entrepreneurs ALWAYS believe that every one can Perform and have the capacity to do so.

Social Entrepreneurs ALWAYS display DETERMINATION

Social Entrepreneurs can ALWAYS measure and monitor their results.

Types of social entrepreneurship

1.The Leveraged Non-Profit:

This business model leverages resources in order to respond to social needs. Leveraged
non-profits make innovative use of available funds, in order to impact a need. These
leveraged non-profits are more traditional ways of dealing with issues, though are
distinguished by their innovative approaches.

The entrepreneur sets up a non-profit organization to drive the adoption of an

innovation that addresses a market or government failure. In doing so, the entrepreneur
engages a cross section of society, including private and public organizations, to drive
forward the innovation through a multiplier effect. Leveraged non-profit ventures
continuously depend on outside philanthropic funding, but their longer-term
sustainability is often enhanced given that the partners have a vested interest in the
continuation of the venture.

2. The Hybrid Non-Profit:

This organizational structure can take on a variety of forms, but is distinctive because
the hybrid non-profit is willing to use profit to sustain its operations. Hybrid non-profits
are often created to deal with government or market failures, as they generate revenue
to sustain the operation outside of loans, grants, and other forms of traditional funding.

The entrepreneur sets up a non-profit organization but the model includes some degree
of cost-recovery through the sale of goods and services to a cross section of institutions,
public and private, as well as to target population groups. Often, the entrepreneur sets
up several legal entities to accommodate the earning of an income and the charitable
expenditures in an optimal structure. To be able to sustain the transformation activities
in full and address the needs of clients, who are often poor or marginalized from society,
the entrepreneur must mobilize other sources of funding from the public and/or
philanthropic sectors. Such funds can be in the form of grants or loans, and even quasi-

3. The Social Business Venture:

These models are set up as businesses designed to create change through social means.
Social business ventures evolved through a lack of funding—social entrepreneurs in this
situation were forced to become for-profit ventures.

The entrepreneur sets up a for-profit entity or business to provide a social or ecological

product or service. While profits are ideally generated, the main aim is not to maximize
financial returns for shareholders but to grow the social venture and reach more people
in need. Wealth accumulation is not a priority and profits are reinvested in the enterprise
to fund expansion. The entrepreneur of a social business venture seeks investors who
are interested in combining financial and social returns on their investments.

Examples of Social Enterprises

1. Aravind Eye Hospital & Aurolab

Social Entrepreneur: Dr.Govindappa Venkataswamy (Dr. V) & David Green

Type of Organization: Trust

Location: Madurai, India


Mission: Making medical technology and health care services accessible, affordable and
financially self-sustaining

Founded in 1976 by Dr. G. Venkataswamy, Aravind Eye Care System today is the largest
and most productive eye care facility in the world. From April 2007 to March 2008, about
2.4 million persons have received outpatient eye care and over 285,000 have undergone
eye surgeries at the Aravind Eye Hospitals at Madurai, Theni, Tirunelveli, Coimbatore
and Puducherry. Blending traditional hospitality with state-of-the-art ophthalmic care,
Aravind offers comprehensive eye care in the most systematic way attracting patients
from all around the world.

2. SKS India

Social Entrepreneur: Vikram Akula, Type of Organization: For-profit, Website:

Mission: Empowering the poor to become self-reliant through affordable loans

SKS believes that access to basic financial services can significantly increase economic
opportunities for poor families and in turn help improve their lives. Since inception, SKS
has delivered a full portfolio of microfinance to the poor in India and we are proud of our
current outreach. As a leader in technological innovation and operational excellence,
SKS is excited about setting the course for the industry over the next five years and is
striving to reach our goal of 15 million members by 2012.

3. AMUL (Anand Milk Union Limited)

Social Entrepreneur: Dr. Verghese Kurien, Type of Organization: Co-operative, Website:

Amul has been a sterling example of a co-operative organization’s success in the long
term. It is one of the best examples of co-operative achievement in the developing
economy. The Amul Pattern has established itself as a uniquely appropriate model for
rural development. Amul has spurred the White Revolution of India, which has made
India the largest producer of milk and milk products in the world.

4. Grameen Bank

Social Entrepreneur: Muhammad Yunus,Type of Organization: Body Corporate ,Website:
Grameen Bank (GB) has reversed conventional banking practice by removing the need
for collateral and created a banking system based on mutual trust, accountability,
participation and creativity. GB provides credit to the poorest of the poor in rural
Bangladesh, without any collateral. At GB, credit is a cost effective weapon to fight
poverty and it serves as a catalyst in the over all development of socio-economic
conditions of the poor who have been kept outside the banking orbit on the ground that
they are poor and hence not bankable. Professor Muhammad Yunus, the founder of
“Grameen Bank” and its Managing Director, reasoned that if financial resources can be
made available to the poor people on terms and conditions that are appropriate and
reasonable, “these millions of small people with their millions of small pursuits can add
up to create the biggest development wonder.”

As of May 2009, it has 7.86 million borrowers, 97 percent of whom are women. With
2,556 branches, GB provides services in 84,388 villages, covering more than 100
percent of the total villages in Bangladesh.

5. Shri Mahila Griha Udyog Lijjat Papad

Type of Organization: Society, Website:

Shri Mahila Griha Udyog Lijjat Papad is a Women’s organization manufacturing various
products from Papad, Khakhra, Appalam, Masala, Vadi, Gehu Atta, Bakery Products,
Chapati, SASA Detergent Powder, SASA Detergent Cake (Tikia), SASA Nilam Detergent
Powder, SASA Liquid Detergent. The organization is wide-spread, with it’s Central Office
at Mumbai and it’s 67 Branches and 35 Divisions in different states all over India.

The organization started of with a paltry sum of Rs.80 and has achieved sales of over
Rs.300 crores with exports itself exceeding Rs.12 crores. Membership has also expanded
from an initial number of 7 sisters from one building to over 40,000 sisters throughout
India. The success of the organization stems from the efforts of it’s member sisters who
have withstood several hardships with unshakable belief in ‘the strength of a woman’.

The Importance of Social Entrepreneurship for Development

Especially since Muhammad Yunus, founder of the Grameen Bank and a renowned
example of a social enterprise, won the Nobel Peace Price in 2006 there is increasing
interest in social entrepreneurship for development yet the current academic literature
does not provide is a sufficient link between social entrepreneurship and economic
development policies. How important are social entrepreneurs for economic
development? What value is created by social entrepreneurship?

The social entrepreneur sector is increasingly important for economic (and social)
development because it creates social and economic values:

1. Employment Development

The first major economic value that social entrepreneurship creates is the most obvious
one because it is shared with entrepreneurs and businesses alike: job and employment
creation. Estimates ranges from one to seven percent of people employed in the social
entrepreneurship sector. Secondly, social enterprises provide employment opportunities
and job training to segments of society at an employment disadvantage (long-term
unemployed, disabled, homeless, at-risk youth and gender-discriminated women). In
the case of Grameen the economic situation of six million disadvantaged women micro-
entrepreneurs were improved.

2. Innovation/ New Goods and Services

Social enterprises develop and apply innovation important to social and economic
development and develop new goods and services. Issues addressed include some of the
biggest societal problems such as HIV, mental ill-health, illiteracy, crime and drug abuse
which, importantly, are confronted in innovative ways. An example showing that these
new approaches in some cases are transferable to the public sector is the Brazilian social
entrepreneur Veronica Khosa, who developed a home-based care model for AIDS
patients which later changed government health policy.

3. Social Capital

Next to economic capital one of the most important values created by social
entrepreneurship is social capital (usually understood as “the resources which are linked
to possession of a durable network of … relationships of mutual acquaintance and
recognition”). Examples are the success of the German and Japanese economies, which
have their roots in long-term relationships and the ethics of cooperation, in both
essential innovation and industrial development. The World Bank also sees social capital
as critical for poverty alleviation and sustainable human and economic development.
Investments in social capital can start a virtuous cycle.

i. EndowmentThe first job of social entrepreneur is to take whatever endowment of

social capital he is given and to use these relationships to create more social capital,by
getting more people and organizations involved with the project,by building a wider web
of trust and cooperation around the project.

ii. Physical capitalThe initial endowment of social capital often brings access to
physical capital,usually in the form of rather run-down buildings.Getting access to a
physical base is vital.It provides a focus,a base for new services and a tangible sign that
the project is achieving something.

iii. Financial CapitalThe initial network of supporters and helpers is vital to bring
access to funds,through fundraising,donations and corporate giving.The more diverse
and richer the network,the easier it will be to raise the funds.

iv. Human CapitalThe project has to recruit and pull in more key people to help it
move from start-up into growth,creating products and services.

v. Organisational capitalAs the project grows,becomes larger and more complex,its

management will need to become more organized.It will need stronger financial systems
and legal help.With more staff involved,people management may become more
complicated.So the project needs to develop organizational capital,a more formalized
management structure,financial systems and a stronger set of relationships with

vi. Paying dividendsIn the first phase of project,the social entrepreneur inherits and
creates social capital.Then he starts to accumulate more capital in the form of buildings
and finance.Then the capital is invested in creating new services and products.In the
final phase,if the investment has been successful the project starts to pay dividends in
several different forms.Perhaps the most valuable dividend is yet more social capital,in
the form of stronger bonds of trust and cooperation,within the community and outside
partners and funders.

Equity PromotionSocial entrepreneurship fosters a more equitable society by addressing

social issues and trying to achieve ongoing sustainable impact through their social
mission rather than purely profit-maximization. In Yunus’s example, the Grameen Bank
supports disadvantaged women. Another case is the American social entrepreneur J.B.
Schramm who has helped thousands of low-income high-school students to get into
tertiary education.

To sum up, social enterprises should be seen as a positive force, as change agents
providing leading-edge innovation to unmet social needs. Social entrepreneurship is not
a panacea because it works within the overall social and economic framework, but as it
starts at the grassroot level it is often overlooked and deserves much more attention
from academic theorists as well as policy makers. This is especially important in
developing countries and welfare states facing increasing financial stress.

Theories of Entrepreneurship
1) X-Efficiency Theory by LeibensteinHarvey Leibenstein was a Ukrainian-born American
Jewish economist. One of his most important contributions to economics was the
concept of x-efficiency. The concept of x-efficiency is also used in the theory
of bureaucracy.

In economics, x-efficiency is the effectiveness with which a given set of inputs are used
to produce outputs. If a firm is producing the maximum output it can, given the
resources it employs, such as men and machinery, and the best technology available, it
is said to be technical-efficient. x-inefficiency occurs when technical-efficiency is not

This theory, originally developed for another purpose, has recently been applied to
analyse the role of the entrepreneur. Basically, X-efficiency is the degree of inefficiency
in the use of resources within the firm: it measures the extent to which the firm fails to
realize its productive potential. According to Leibenstein, When an input is not used
effectively the difference between the actual output and the maximum output
attributable to that input is a measure of the degree of X-efficiency.

Leibenstein identifies two main roles for the entrepreneur: (i) a gap filler and (ii) an
input completer. These functions arise from the basic assumptions of X-efficiency theory.
Thus it is clear that “if not all factors of production are marketed or if there are
imperfections in markets, the entrepreneur has to fill the gaps in the market. To put the
enterprise in motion, the entrepreneur should fill enough of gaps.” The second role is
input completion, which involves making available inputs that improve the efficiency of
existing production methods or facilitate the introduction of new ones. The role of the
entrepreneur is to improve the flow of information in the market.

The theory concludes that an entrepreneur has to act as gap filler and an input
completer if there are imperfections in markets. For using there unusual skills, he gets
profits as well as a variety of non-peculiar advantages. According to him there are two
types of entrepreneurship.
Routine entrepreneurship – deals with normal business functions like co-ordinating the business activities.

(ii) Innovative entrepreneurship – wherein an entrepreneur is innovative in his approach. It includes the
activities necessary to create an enterprise where not all the markets are well established or clearly defined.

2) Innovation Theory by Schumpeter

The innovative theory is one of the most famous theories of entrepreneurship used all
around the world. The theory was advanced by one famous scholar, Schumpeter, in
1991. Schumpeter analyzed the theory proposed by Marshall, and he concluded that the
theory was wrong.

Schumpeter believes that creativity or innovation is the key factor in any entrepreneur’s
field of specialization. He argued that knowledge can only go a long way in helping an
entrepreneur to become successful.

However, Schumpeter viewed innovation along with knowledge as the main catalysts of
successful entrepreneurship. He believed that creativity was necessary if an
entrepreneur was to accumulate a lot of profits in a heavily competitive market.

Many business people support this theory, and hence its popularity over other theories
of entrepreneurship.

A dynamic theory of entrepreneurship was first advocated by Schumpeter (1949) who

considered entrepreneurship as the catalyst that disrupts the stationary circular flow of
the economy and thereby initiates and sustains the process of development. Embarking
upon ‘new combinations’ of the factors of production – which he succinctly terms,
innovation – the entrepreneur activates the economy to a new level of development.

Schumpeter introduced a concept of innovation as key factor in entrepreneurship in

addition to assuming risks and organizing factor of production. Schumpeter defines
entrepreneurship as “a creative activity”. An innovator who brings new products or
services into economy is given the status of an entrepreneur. He regards innovation as a
tool of entrepreneur, The entrepreneur is viewed as the ‘engine of growth’, He sees the
opportunity for introducing new products, new markets, new sources of supply, new
forms of industrial organization or for the development of newly discovered resources.
The concept of innovation and its corollary development embraces five functions:

The introduction of a new product with which consumers are not yet familiar or introduction of av new quality
of an existing product,

The introduction of new method of production that is not yet tested by experience in the branch ofv manufacture
concerned, which need by no means be founded upon a discovery scientifically new and can also exist in a new
way of handling a commodity commercially,
The opening of new market that is a market on to which the particular branch of manufacturer of thev country in
question has not previously entered, whether or not this market has existed before,

Conquest of a new source of supply of raw material and

The carrying out of the new organization of any industry.

Schumpeter is the first major theorist to put the human agent at the center of the
process of economic development. He is very explicit about the economic function of the
entrepreneur. The entrepreneur is the prime mover in economic development; his
function, to innovate or carry out new combinations. Schumpeter makes a distinction
between an innovator and an inventor. An inventor discovers new methods and new
materials. On the contrary, an innovator is one who utilizes or applies inventions and
discoveries in order to make new combinations. An inventor is concerned with his
technical work of invention whereas an entrepreneur converts the technical work into
economic performance. An innovator is more than an inventor because he does not only
originate as the inventor does but goes much farther in exploiting the invention

Innovation Theory Of Entrepreneurship

To Schumpeter, entrepreneurs are individuals motivated by a will for power; their

special characteristic being an inherent capacity to select correct answers, energy, will
and mind to overcome fixed talents of thoughts, and a capacity to withstand social
opposition. The factors that contribute to the development of entrepreneurship would
essentially be a suitable environment in grasping the essential facts. It can be noted that
this theory’s main figure, the “innovating entrepreneur” has played an important role in
the rise of modem capitalism. The entrepreneur has been the prime mover – for
economic development process. On the criticism side, this theory seems one-sided as it
puts too much emphasis on innovative functions. It ignores the risk taking and
organizing aspects of entrepreneurship. An entrepreneur has not only to innovate but
also assemble the resources and put them to optimum use. While stressing upon the
innovative function of the entrepreneur, Schumpeter ignored the risk-taking function,
which is equally important. When an entrepreneur develops a new combination of
factors of production, there is enough risk involved. In spite of these lacking, the theory
supports the “enterprising spirit” of entrepreneur to innovate. It is the act that endows
resources with a new capacity to create wealth. Drucker says, “Innovation, indeed,
creates a resource. It endows it with economic value.” Schumpeter’s views are
particularly relevant to developing countries where innovations need to be encouraged.
The transformation of an agrarian economy into an industrial economy required a great
deal of initiative and changes on the part of businessmen and managers.

3) Need for Achievement Theory of McClelland

According to McClelland the characteristics of entrepreneur has two features – first doing
things in a new and better way and second decision making under uncertainty.
McClelland emphasizes achievement orientation as most important factor for
entrepreneurs. Individuals with high. Achievement orientation is not influenced by
considerations of money or any other external incentives. Profit and incentives are
merely yardsticks of measurement of success of entrepreneurs with high achievement
orientation. People with high achievement are not influenced by money rewards as
compared to people with low achievement. The latter types are prepared to work harder
for money or such other external incentives. On the contrary, profit is merely a measure
of success and competency for people with high achievement need. Professor David
McClelland, in his book The Achieving Society, has propounded a theory based on his
research that entrepreneurship ultimately depends on motivation. It is the need for
achievement, the sense of doing and getting things done, that promote
entrepreneurship. According to him, N-Ach is a relatively stable personality characteristic
rooted in experiences in middle childhood through family socialization and child-learning
practices which stress standards of excellence, material warmth, self-reliance training
and 30 low father dominance.

According to David McClelland, regardless of culture or gender, people are driven by

three motives:



Need for Achievement

A drive to excel, advance and grow. The need for achievement is characterized by the
wish to take responsibility for finding solutions to problems, master complex tasks, set
goals, get feedback on level of success.

Need for Affiliation

A drive for friendly and close inter-personal relationships. The need for affiliation is
characterized by a desire to belong, an enjoyment of teamwork, a concern about
interpersonal relationships, and a need reduce uncertainty.

Need for Power

A drive to dominate or influence others and situations. The need for power is
characterized by a drive to control and influence others, a need to win arguments, a
need to persuade and prevail.

McClelland found that certain societies tended to produce a large percentage of people
with high achievement. He pointed out that individuals, indeed whole societies that
possess N-ach will have higher levels of economic well-being than those that do not.
McClelland’s work indicated that there are five major components to the N-ach trait: (a)
responsibility for problem solving, (b) setting goals, (c) reaching goals through one’s
own effort, (d) the need for and use of feedback, and (e) a preference for moderate
levels of risk-taking. The individual with high levels of need achievement is a potential
entrepreneur. The specific characteristics of a high achiever (entrepreneur) can be
summarized as follows:

(i) They set moderate realistic and attainable goals for them.

(ii) They take calculated risks.

(iii) They prefer situations wherein they can take personal responsibility for solving

(iv) They need concrete feedback on how well they are doing.

(v) Their need for achievement exist not merely for the sake of economic rewards or
social recognition rather personal accomplishment is intrinsically more satisfying to

According to McClelland, motivation, abilities and congenial environment, all combine to

promote entrepreneurship. Since entrepreneurial motivation and abilities are long run
sociological issues; he opined it is better to make political, Social and economic
environments congenial for the growth of entrepreneurship in underdeveloped and
developing countries.

4) Theory of Profit by Knight

This theory is propounded by Knight. According to this theory, profit is reward for
bearing uncertainty. Uncertainty is due to unforeseeable or non-insurable risk. A key
element of entrepreneurship is risk bearing. Prof. Knight and John Staurt Mill saw risk
bearing as the important function of entrepreneurs. Some important features of this
theoryare as follows:

i. Risk creates Profit: According to the risk-bearing theory, the entrepreneur earns profits
because he undertakes risks.

ii. More Risk More Gain: The degree of risk varies in different industries. Entrepreneurs
undertake different degrees of risk according to their ability ad inclination. The risk
theory proposes that the more risky the nature of business, the greater must be the
profit earned by it.

iii. Profit as Reward and Cost: Profit is the reward of entrepreneur for assuming risks.
Hence, it is also treated as a part of the normal cost of production.

iv. Entrepreneur’s Income is Uncertain: He identifies uncertainty with a situation where the
probabilities of alternative outcomes cannot be determined either by a priori reasoning
or by statistical inference. A priori reasoning is simply irrelevant to economic situation
involving a unique event. This theory summarizes that profit is the reward of an
entrepreneur effort which arises for bearing non insurable risks and uncertainties and
the amount of profit earned depends upon the degree of uncertainty bearing. Knight
argues that business enterprises the level of uncertainty can be reduced through
‘consolidation’. Consolidation is to uncertainty is what insurance is to risk; it is a method
of reducing total uncertainty by pooling individual instance. The elasticity of the supply
of self-confidence is the single most important determinant of the level of profit and the
number of entrepreneurs.

5) Hagen’s Theory of Entrepreneurship

One important theory of entrepreneurial behaviour has been propounded by Hagen,

which is referred to as the withdrawal of status respect. Hagen has attributed the
withdrawal of status respect of a group to genesis of entrepreneurship. Hagen considers
the withdrawal of status, of respect, as the trigger mechanism for changes in personality
formation. Status withdrawal occurs when members of some social group perceive that
their purposes and values in life are not respected by the groups in the society they
respect, and whose esteem they value. Hagen postulates four types of events, which can
produce status withdrawal:

Displacement of a traditional elite group from its previous status by another traditional supply physical force.

Denigration of valued symbols through some change in the attitude of the superior group.

Inconsistency of status symbols with a changing’ distribution of economic power.

Non-acceptance of expected status on migration to a new society.

Hagen further postulates that withdrawal of status respect would give to four possible
reactions and create four different personality types:

(a)Retreatist: Entrepreneur who continues to work in society but remains indifferent to his
work or status.

(b)Ritualist: One who works as per the norms in the society hut with no hope of
improvement in the working conditions or his status.

(c)Reformist: One who is a rebellion and tries to bring in new ways of working and new

(d)Innovator: An entrepreneur who is creative and try to achieve his goals set by himself.

Forms of Business Ownership

The perspective entrepreneurs need to identify the legal structure that will
best suit the demands of the venture before deciding how to organize an
operation for business. For establishing a business the most important task
is to select a proper form of organization as the conduct of business, its
control, acquisition of capital, extent of risk, distribution of profit, legal
formalities, etc. all depend on the form of organization. The necessity for
choosing a suitable form derives from changing tax laws, the availability of
capital or fund, liability situations, and the complexity involved in formation
of business. The most important forms of business organization are as
Sole Proprietorship



1. Sole Proprietorship

A sole proprietorship is owned by only one person. This is the most

common form of business ownership. It can include small retail stores,
mechanic services and even inventors or musicians seeking to sell their
products online. It is fairly easy to establish a sole proprietorship, and the
process of running them is fairly simple.
Advantages of Sole Proprietorships

i. Ease of starting and ending the business ii. Being your own boss. iii.
Pride of ownership as sole proprietors have taken the risk and deserve the
credit. iv. Leaving a legacy behind for future generations. v. Retention of
company profit vi. No special taxes
Disadvantages of Sole Proprietorships.

i. Unlimited liability is the responsibility of business owners for all of the

debts of the business.

ii. Limited financial resources. funds available are limited to the funds that
the sole owner can gather.

iii. Management difficulties. many owners are not skilled at record keeping.

iv. Overwhelming time commitment. the owner has no one with whom to
share the burden.

v. Few fringe benefits. fringe benefits can add up to 30% of a worker’s

vi. Limited growth

vii. Limited life span. if the sole proprietor dies or leaves, the business ends.
2. Partnership

A partnership is similar to sole proprietorship, except more than one person

is involved. Two or more people come together to work at a given business
and share in the profits (or losses) or that business. Like sole
proprietorship, a partnership is relatively easy to set up and doesn’t have to
pay the sort of taxes that larger corporations do. However, the partners
themselves are responsible for business losses and liabilities, and
partnerships founded on informal agreements may run into interpersonal
problems when the company struggles.

Advantages of Partnerships

i. More financial resources. two or more people pool their money and

ii. Shared management and pooled/ complementary knowledge. partners

provide different skills and perspectives.

iii. Longer survival. partners are four times as likely to succeed as sole

iv. No special taxes.all profits of partners are taxed as personal income of

the owners.
Disadvantages of Partnerships

i. Unlimited liability.

ii. Each general partner is liable for the debts of the firm, no matter who
was responsible for causing those debts.

iii. You are liable for your partners’ mistakes as well as your own.

iv. Division of profits. sharing profits can cause conflicts.

v. Disagreements among partners.

vi. Disagreements can arise over division of authority, purchasing decisions,

and so on.
vii. Because of such potential conflicts, all terms of partnership should be
spelled out in writing to protect all parties.

viii. Difficult to terminate. for example: Who gets what and what happens
3. Company

A company is a business, which is considered a separate entity from owner;

even having the legal rights of a person.
Advantages of Corporations.

i. Limited liability.

Limited liability is probably the most significant advantage of

corporations. Limited liability means that the owners of a business are
responsible for losses only up to the amount they invest.

ii. More money for investment

To raise money, a corporation sells ownership (stock) to anyone interested

or corporations can also raise money from investors through issuing bonds.
Corporations may also find it easier to obtain loans.

iii. Size.

Corporations have the size and resources to take advantage of

opportunities anywhere in the world.

iv. Perpetual life

The death of one or more owners does not terminate the corporation.

v. Ease of ownership change i.e. selling stock changes ownership.

Disadvantages of corporations.

i. Extensive paperwork

A corporation must prove all its expenses and deductions are

legitimate.A corporation must keep detailed records.

ii. Double taxation

Corporate income is taxed twice.The corporation pays tax on income before
it can distribute to stockholders.The stockholders pay tax on the income
they receive from the corporation.

iii. Two tax returns

A corporate owner must file both a corporate tax return and an individual
tax return

iv. Initial cost.

Incorporation may cost thousands of dollars and involve expensive lawyers

and accountants.
4. Franchising

Franchising is a business arrangement in which the owner of a trademark,

trade name, or copyright has licensed others to use it in selling goods or
services. It can be sole proprietorship, partnership or company form.

Advantages of franchises:

i. Personal ownership

You are still your own boss, although you must follow the rules, regulations,
and procedures of the franchise.

ii. An Established Business

A franchise offers the advantage of operating under the banner of an

already established business. The ideas, the brand, the operating
techniques and much more are already tried and tested and in place ready
to be implemented again and again at a new location as each franchisee
takes up the mantle.

iii. A Known Brand

Operating under the banner of a franchise allows a franchisee to take

advantage of the previously established brand of the business. This means
there will (in theory) be far less work (and cost) involved in trying to
establish and build on the brand of the business. It will already be known
and trusted by the market and therefore should produced a steady stream
of brand-loyal customers.
Disadvantages of a Franchise

i. No Control

The first and most significant disadvantage of a franchise is the fact that the
franchisee has no control of the business or how it is run (or very limited
control). The rules of the business are already established and part of the
franchise agreement. How the business operates is set out by the brand of
the franchise and it is very rare that a new franchisee will be able to
operate outside of these borders.

ii. Tied To Suppliers

Operating a business, you’d probably like to keep costs down. Finding the
cheapest suppliers to minimise your overheads and maximise your profits.
But being part of a franchise means you’ll be required to use the franchise
supply network.

iii. Cut Of Your Profit

The franchisor will expect a cut of your profit. You do all the hard work and
still have to pay them for the privilege of using their name (and support).
When times are hard, this might mean a further reduction in already low
profits and a struggle for your business.

Each form has its advantages and disadvantages. And the choice of form of
business ownership will directly affect how much taxes owner have to pay
and what business licenses and documents are required. In majority of
cases and is perfectly acceptable that small businesses start as one form of
ownership and changes to another with its growth. Entrepreneur is not
bounded by their first choice of form of business. Entrepreneur can decide
to hire help form a lawyer or an attorney who specializes in small
businesses and will help an entrepreneur to choose a form of business
ownership and ensure him about getting all the required permits and

Entrepreneurial Process
Entrepreneurship is a process, a journey, not the destination; a means, not
an end. All the successful entrepreneurs like Bill Gates (Microsoft), Warren
Buffet (Hathaway), Gordon Moore (Intel) Steve Jobs (Apple Computers),
Jack Welch (GE) GD Birla, Jamshedji Tata and others all went through this

To establish and run an enterprise it is divided into three parts – the

entrepreneurial job, the promotion, and the operation. Entrepreneurial job
is restricted to two steps, i.e., generation of an idea and preparation of
feasibility report.

1. Idea Generation To generate an idea, the entrepreneurial process

has to pass through three stages:

i. Germination: This is like seeding process, not like planting seed. It is more
like the natural seeding. Most creative ideas can be linked to an individual’s
interest or curiosity about a specific problem or area of study.

Once the seed of interest curiosity has taken the shape of a

ii. Preparation:
focused idea, creative people start a search for answers to the problems.
Inventors will go on for setting up laboratories; designers will think of
engineering new product ideas and marketers will study consumer buying
This is a stage where the entrepreneurial process enters the
iii. Incubation:
subconscious intellectualization. The sub-conscious mind joins the unrelated
ideas so as to find a resolution.

2. Feasibility study: Feasibility study is done to see if the idea can be

commercially viable.

It passes through two steps:

After the generation of idea, this is the stage when the idea is
i. Illumination:
thought of as a realistic creation. The stage of idea blossoming is critical
because ideas by themselves have no meaning.

This is the last thing to verify the idea as realistic and useful
ii. Verification:
for application. Verification is concerned about practicality to implement an
idea and explore its usefulness to the society and the entrepreneur.

Challenges faced by new Entrepreneurs

An entrepreneur is one who plays significant role in the economic
development of a country. Basically an entrepreneur can be regarded as a
person who has the initiative, skill and motivation to set up a business or an
enterprise of his own and who always looks for high achievement.
Entrepreneurs have to face numerous challenges on the road to success, in
particular with regard to access to finance. All entrepreneurs will at some
point feel overwhelmed with the many responsibilities that fall on their
shoulders. The common challenges faced by entrepreneurs are
Overestimating Success, Misplaced Purpose, Negative Mindset, Poor
Organization, Jack of All Trades, Employee Motivation, Lack of Support.

1. FinanceEntrepreneurship means having access to capital, understanding

business finance and building successful relationship with lenders. When
starting a venture, however, an unprepared entrepreneur may encounter
cash flow problems when he doesn’t have a network of dependable lenders
or investors. Any successful entrepreneur needs a list of people in and out
of the business world to depend on. An entrepreneur must understand
business finance, or risk overpricing offered services. Overpricing your
product causes insufficient sales and cash.

2. Business Management About one-quarter of entrepreneurs cited management

problems as another challenge with entrepreneurship, explains Researching
Small Business and Entrepreneurship. A successful entrepreneur needs
passion to get a business started and make it stable. Thus, personal
problems, such as not setting goals, measuring performance and controlling
your time can prohibit your from managing your business properly. In
addition, an entrepreneur must have access to useful business information.
Starting a business venture involves learning as much about your business
and product as you can before securing capital. Managing a business also
mean finding and retaining qualified employees.

Whether an entrepreneur plans to sell products like

3. Marketing the Business
computers or services like repairing computers, she needs to market the
business. Entrepreneurship problems can arise when an effective marketing
plan doesn’t exist or you don’t have the ability to actually sell the products
or services. Another problem involves using effective advertising. In a
society where placing flyers on street poles may not gain a customer’s
attention, you need an effective and thorough marketing plan to inform
people about your business.

Location finding a good business location at the

4. Finding the Right Business
right place is definitely not easy. An efficient location that has a rapidly
growing population, good road network and other amenities at a good place

Just as a sailor prepares for

5. Unforeseen Business Challenges and Expenses
unexpected storm, just as a pilot is always on the watch for unpredictable
bad weather and thunderstorms, so must an entrepreneur prepared for
whatever comes in the form of:.

6. Finding Good Customers The sixth challenge an entrepreneur will face in the
process of starting a small business from scratch is finding good customers.
In the process of building a business, an entrepreneur will come to find out
that there are good customers as well as bad customers.. Good customers
are really hard to find. A good customer will be loyal to the company and
will be willing to forgive if the business make a mistake and apologize. A
good customer will try to do the right thing that will benefit both him and
company mutually.

Change in trends is a challenge

7. Keeping Up With Industrial Changes and Trends
an entrepreneur must be prepared for when starting a small business.
Trends have made and broken lot of businesses. Profitable businesses that
have been wiped out by slight industrial changes and trends. A typical
example is the Dot com trend, where many established industrial based
businesses were wiped out by new web based dot com companies.
Seasoned entrepreneurs know that trend is a friend and are always willing
to swiftly adjust their business to the current trend.

8. Focus One of the biggest mistakes entrepreneurs make in their early

days is trying to be all things to all people. They attempt to sell their
product or service to too wide of a market. Entrepreneurs also face another
challenge in this area. They focus on the wrong things. They spend too
much time building their product without validating that the marketplace
wants needs and will actually pay for it.

9. Finding Good Employees Most writers and managers crank up the process of
finding good employees as an easy task. They define the process of finding
an employee as simply presenting the job description and the right
employee will surface. Business owners know how difficult it is to find a
hardworking, trustworthy employee. Most employees want to work less and
get paid more. Finding a good employee who will be passionate about
delivering his or her services is quite difficult. Finding good employees is a
minor task compared to the business challenge of forging the hired
employees into a team.

10.Assembling a Business Team The third business challenge that an

entrepreneur will face in the course of starting a small business from
scratch is assembling the right business management team. The process of
building a business team starts even before the issue of raising initial start-
up capital arises. Most brilliant ideas and products never get funded
because the entrepreneur is trying to raise capital as an individual. A
business team is a vital, yet often ignored key to raising venture capital


The following are the important challenges faced by Indian Entrepreneurs.

Convincing to opt for business over job is easy is not an

1. Family Challenges:
easy task for an individual. The first thing compared is – Will you make
more money in business of your choice or as a successor of family business.
This is where it becomes almost impossible to convince that you can
generate more cash with your passion than doing what your Dad is doing.

Family challenges are always at the top because that is

2. Social Challenges:
what matter the most but at times social challenges also are very
important. This is also a big challenge before Indian entrepreneurs. They
must balance between earning high profit and doing social-welfare
activities. They must use modern machines without causing unemployment
and harm to the environment. They must earn a profit without reducing
quality of their goods and services. They must earn a profit without
charging high prices for their products. They must not cause any type of
pollution in the society. They must accept their communal responsibilities
and donate a small part of their profit (money) for social causes. They must
pay all their taxes and duties. They must not use unfair and unethical
practices to fight cutthroat competition.

3. Technological Challenges: With each passing day, Science and Technology are
developing rapidly. Modern technology not only improves quality of
produced goods and services, but it also helps to reduce their cost of
production. It speeds up their process of production. High-quality
commodities, lower cost of production, and faster production rate makes
any company a highly competitive one. Therefore, it becomes mandatory
for every company to keep pace with new emerging technologies and adapt
it regularly to remain as cutthroat as possible.
So, it is always better to replace outdated technology with the new
technology. Old machines must be replaced by modern machines. This is a
big challenge before an Indian entrepreneur. If he has a financial problem,
then he must try to maintain a good balance between old and new
technology. He also has a challenge to train his staff well to make them
able to use (handle) the modern machines and technology properly.

Financial challenges are a lot

4. Financial Challenges (Difficulty in borrowing fund):
different in India especially for online entrepreneurs. When you are starting
out as an entrepreneur you don’t opt for venture funding but try to go with
funding from small to medium business people. Many such non-technical
business people don’t understand the online business models as a whole
and so getting an initial business funding from them becomes challenging.
The other option you can think of is loan but bank loan is not at all an
option in India for new online entrepreneurs.

5. Policy Challenges: Now and then there is lot of changes in the policies with
change in the government problems of raising equity capital problems of
availing raw-materials, Problems of obsolescence of indigenous technology,
increased pollutions ecological imbalanced,Exploitation of small and poor
countries, etc.

6. Challenge of globalization A few years back the Indian entrepreneurs

had to fight regional and national competition. However, today, the scenario
has changed and become much more complex than what it was earlier.
Now, almost all countries have opened up their economies, and the world
(globe) has become one giant global market.

7. Hiring right talent:-During the earlier days of our start-up, the biggest
challenge was to find the right team who share a common vision about the
goals and work towards making that a reality.

Problems faced by Entrepreneurs

Entrepreneurs face a number of problems in the promotion of units and
during production,marketing,distribution,procurement of raw material,and
availing of incentives offered by the State government.

The problems of entrepreneurs may be divided into two groups-external

and internal.External problems are those, which result from factors beyond
the control of entrepreneurs while internal problems are those, which are
not influenced by external factors.

The problems of industries,whether in the small sector or in organized

sector are almost identical.However,given that the organized industry is
financially very strong and its resources large,it can therefore,face its
problems more effectively.Owing to its weak financial structure,the
resources of the small sector are limited.While the large sector can employ
trained and experienced managers,in the small industry,its proprietor or
partners or if the unit is a company, its director or directors themselves
have to take care of all the problems.The large sector can influence its raw
material suppliers,its customers and at times even the government in
framing its policies, but the small entrepreneur is helpless in this respect.

I. Internal Problems of Entrepreneurs

1. Planning a) Technical
feasibility , Inadequate technical know-how. Locational disadvantage , Outdated
production process
b) Economic viability, High cost of input., Break-even point too high,
Uneconomic size of project , Choice of idea, Feeble structure, Faulty planning, ,Poor
project implementation, Lack of strategies, Lack of vision, Inadequate connections,
Lack of motivation, Underestimation of financial requirements , Unduly large investment in
fixed assets , Overestimation of demand

2. Implementation: Cost over-runs resulting from delays in

getting licenses,sanctions and so on and inadequate mobilization
of finance.

3. Production a) Production management , Inappropriate product mix ,

Poor quality control , Poor capacity utilization , High cost of production , ,Poor inventory
maintenance and replacement , Lack of timely and adequate modernization and so on , ,High
wastage , Poor production

b) Labour management , Excising high wage structure , Inefficient handling of

labour problems , Excessive manpower , ,Poor Labour productivity , Poor labour relations
, Lack of trained skilled labour or technically competent personnel

c) Marketing Management : Dependence on a single customer or a limited

number of customers/single or a limited number of products. , ,Poor sales realization ,
Defective pricing policy , Booking of large orders at fixed prices in an inflationary
marketWeak market organization

Lack of market feed back and market research

Unsrupulous sale purchase practices

d) Financial management
Poor resource management and financial planning

Faulty costing

Dividend policy

General financial indiscipline and application of funds for unauthorized purposes

Deficiency of funds

Over trading
Unfavourable gearing or keeping adverse debt equity ratio

Inadequate working capital

Absence of cost consciousness

Lack of effective collection machinery

e) Administrative management
Over centralization

Lack of professionalism

Lack of feedback to management (management Information System)

Lack of timely diversification

Excessive expenditure on R&D

II. External Problems of Entrepreneurs

a) Infrastructure



Post Office and so on


Non-availability or irregular supply of critical raw materials or other inputs

Transport bottlenecks


Working capital

Long term funds


Marketing Taxation
Raw material

Industrial and financial regulations



Government policy Administrative hurdles

Rampant corruption

Lack of direction

Competitive and volatile environment

Specific Management Problems

Besides internal and external problems of entrepreneurs,some specific problems faced

by the entrepreneurs are discussed:

a)Management deficiency

It is well known factor that management deficiency is one of the main reasons for poor
performance and sickness of small enterprises.The new entrants in the field of small
industries in general do not have any prior training or background in the management of
their units. With growing sophistication and modernization of market requirements for
their products,it is very important for entrepreneurs to employ modern methods of
management.Entrepreneurship is not only inborn gift; it can be cultivated through
application and training.


Financial inadequacy is alsoreported to be one of he most important causes leading to

sickness of small scale units. Critical issues in financial management require to be
constantly borne in mind to ensure that a small scale business enterprise remains
healthy.Planning for profits must be ensured at all times by resorting to periodical
performance evaluation and while reporting such performance actual or planned the
merits of being conservative should not be lost sight of.Poor utilization of various assets
is critical to profit maximization.Along with credibility,solvency and liquidity are essential
for enterprise growth.

c)Manufacturing and technical problems

Most units face production problems due to lack of raw material availability,skilled labour
shortage,under utilization of capacity and time and cost overrun.Manufacturing and
technical problems arise right at the stages of project planning and feasibility report
preparation.Problem areas are product pricing,selection of right equipment,plant and
machinery,selection of personnel and training them,technical know how,technology
transfer,industrial engineering,production engineering use of standard quality control
and use of high tech equipment.

e)Product planning

The election of product depends on technical know-how,infrastructure facilities and

managerial abilities of entrepreneurs to complete a project successfully.

Selection of equipment,plant and machinery.No detailed scrutiny is done before selecting

equipment,plant and machinery.However,this needs to be done and while doing so,
entrepreneurs should give importance to production capacity,process capability,accuracy
requirements and other supporting facilities.They are required to look for alternative and
appropriate high tech equipment if they are technology-economically feasible.

f)Human Resource Development

Selecting the right person for the right job would contribute for smooth and efficient
working of the enterprise.After selecting the right personnel on scientific lines,it is very
essential to train them at appropriate organizations so that they have both theoretical
and on the job training in improving the productivity of the enterprise.Entrepreneurs
should know that it is not the machine alone that work but the people behind the
machines who make it work.

g)Technical know how

Most small scale units are neither technical equipped nor do the possess technical know-
how. While there are numerous ways of doing a job, there is only one way of doing it in
a manner that is more effective,efficient and highly productive. Many entrepreneurs do
not realize that their trial and error method wastes time,money,energy and other

Entrepreneurial Competency

The business operation is considered to be very complex in a competitive business

environment, which is constantly changing with fast technological advancements. An
entrepreneur is expected to interact with these environmental forces which require him
to be highly competent in different dimensions like intellectual, attitudinal, behavioral,
technical, and managerial aspects. Entrepreneurs are therefore permanently challenged
to deploy a set of competencies to succeed in their entrepreneurial endeavors.
Entrepreneurial competencies are defined as underlying characteristics possessed by a
person, which result in new venture creation. These characteristics include generic and
specific knowledge, motives, traits, self-images, social roles, and skills that may or may
not be known to the person. That is, these characteristics may be even unconscious
attributes of an individual. Some of these competencies are innate while others are
acquired in the process of learning and training and development.

DefinitionEntrepreneurial competencies can be defined as underlying characteristics

such as generic and specific knowledge, motives, traits, self-images, social roles, and
skills that result in venture birth, survival, and/or growth.

– Bird (1995)

“Total ability the entrepreneur to perform this role successfully. Several studies have
found positive relationship between existences of competencies and venture

– Man, Lau& Chan

Types of Competencies

The competencies may be classified into following categories:

1.Personal entrepreneurial competencies

2.Venture initiation and success competencies

a) Enterprise launching competencies

b) Enterprise management competencies

1.Personal Entrepreneurial competencies

It is the personal characteristics of an individual who possess to perform the task

effectively and efficiently.Personal entrepreneurial competencies include the following:

a) Initiative

The entrepreneur should be able to take actions that go beyond his job requirements
and to act faster. He is always ahead of others and able to become a leader in the field
of business.He Does things before being asked or compelled by the situation and acts to
extend the business into new areas, products or services.
b) Sees and acts on opportunities

An entrepreneur always looks for and takes action on opportunities. He Sees and acts on
new business opportunities and Seizes unusual opportunities to obtain financing,
equipment, land, work space or assistance.

c) Persistence

An entrepreneur is able to make repeated efforts or to take different actions to

overcome an obstacle that get in the way of reaching goals. An entrepreneur takes
repeated or different actions to overcome an obstacle and Takes action in the face of a
significant obstacle.

d) Information Seeking

An entrepreneur is able to take action on how to seek information to help achieve

business objectives or clarify business problems.They do personal research on how to
provide a product or service.They seek information or ask questions to clarify what is
wanted or needed.They personally undertake research and use contacts or information
networks to obtain useful information.

e) Concern for High Quality of Work

An entrepreneur acts to do things that meet certain standards of excellence that gives
him greater satisfaction. An entrepreneur states a desire to produce or sell a top or
better quality product or service. They compare own work or own company’s work
favourably to that of others.

f) Commitment to Work Contract

An entrepreneur places the highest priority on getting a job completed.They make a

personal sacrifice or take extraordinary effort to complete a job.They accept full
responsibility for problems in completing a job for others and express concern for
satisfying the customer.

g) Efficiency Orientation

A successful entrepreneur always finds ways to do things faster or with fewer resources
or at a lower cost.They look for or finds ways to do things faster or at less cost.An
entrepreneur uses information or business tools to improve efficiency. He expresses
concern about costs vs. benefits of some improvement, change, or course of action.

h)Systematic Planning

An entrepreneur develops and uses logical, step-by-step plans to reach goals.They plan
by breaking a large task into subtask and develop plans,then anticipate obstacles and
evaluate alternatives.They take a logical and systematic approach to activities.

i) Problem Solving
Entrepreneurs identify new and potentially unique ideas to achieve his goals.They
generate new ideas or innovative solutions to solve problems and they take alternative
strategies to solve the problems.

j) Self-Confidence

Entrepreneur with this competency will have a strong belief in self and own abilities.They
express confidence in their own ability to complete a task or meet a challenge.They stick
to their own judgment while taking decision.

k) Assertiveness

An entrepreneur confronts problems and issues with others directly.Entrepreneur with

this competency vindicate the claim to asset their own rights on others.They demand
recognition and disciplines those failing to perform as expected.They asset own
competence,reliability or other personal or company’s qualities.They also assert strong
confidence in own company’s or organization’s products or service.

l) Persuasion

Entrepreneurs with this competency successfully pursue others to perform the activities
effectively and efficiently.An entrepreneur can persuade or influence others for
mobilizing resources, obtaining inputs, organizing productions and selling his products or

m) Use of Influence Strategies

An entrepreneur is able to make use of influential people to reach his business

goals.Entrepreneurs with this competency influence the environment
(Individuals/Institution) for mobilizing resources organizing production and selling goods
and services to develop business contacts.

n) Monitoring

Entrepreneurs with this competency normally monitor or surprise all the activities of the
concern to ensure that the work is completed by maintaining good quality.

o) Concern for Employee Welfare

Entrepreneurs with this competency take action to improve the welfare of employees
and take positive action in response of employee’s personal concerns.

2.Venture Initiation and success Competencies

In addition to personal competencies Entrepreneur must also possess the competencies

required to launch the enterprise and for its growth and survival.

It is further divided into two categories of competencies:

i. Enterprise launching competencies

ii. Enterprise management competencies

i. Enterprise launching competencies

Competency to understand the nature of business

-To analyse the personal advantage of owning a small business.

-To analyse the personal risks of owning a small business.

-To analyse how to maximize the opportunities and minimize the risks of owning a

Competency to determine the potential as an entrepreneur

-To consider the personal qualification and abilities needed to manage own business.

-To evaluate the own potentials for decision-making,problem solving and creativity.

-To determine own potential for management,planning,operations,personnel and public


Competency to develop a business plan

-To identify how a business plan helps the entrepreneur.

-To recognize how a business plan should be organized.

-To identify and use the mechanisms for developing a business plan.

Competency to obtain technical assistance

-To prepare for using technical assistance.

-To select professional consultants.

-To work effectively with consultants.

Competency to a choose the type of ownership

-To analyse the type of ownership of business.

-To follow the steps necessary to file for ownership of the business.

-To define politics and procedures for a successful multi-owner.

Competency to plan the market strategy

-To use goods classification and life cycle analysis as planning tools for marketing.

-To develop and modify marketing mixes for a business.

-To use decision making tools and aid in evaluating marketing activities.

-To evaluate operations to improve decision making about marketing.

Competency to locate the business

-To analyse customer transportation,access,parking and so forth. i.e. relative to

alternative site locations.

-To complete a location feasibility study for the business.

-To determine the cost of renovating or improving a site for the business.

-To prepare an occupancy contrast for the business.

Competency to finance the business

-To describe the source of information available to help in estimating the financing
necessary to start a new business.

-To determine the finance necessary to start a new business.

-To prepare a project profit and loss statement and a projected cash flow statement for
the new business.

-To prepare a loan application package.

Competency to deal with the business

-To determine the need for legal assistance.

-To select the provisions that is desired in the lease.

-To prepare sales contract(such a s credit sales or long term sales) that may be utilized
in the contracts

-To evaluate contracts.

-To determine the need for protection of ideas and intentions.

Competency to comply with government regulations

-To appraise the effects of various regulations on the business operations.

-To acquire the information necessary to comply with the various rules and regulations
affecting the business.

-To develop policies for the business to comply with the Government rules and

ii. Enterprise Management Competencies

Competency to manage the business

-To plan goals and objectives for the business.

-To develop a diagram showing the organizational structure for the business.

-To establish control practices and procedures for the business

Competency to manage human resources

-To plan goals and objectives for the business.

-To develop a diagram showing the organizational structure for the business.

-To establish control practices and procedures for the business.

Competency to manage human resources

-To write a job description for a position in the business.

-To develop a training programme online for employees.

-To develop a list of personnel for employees in the business.

-To develop an outline for an employee evaluation system.

-To plan a corrective interview with an employee concerning a selected problem.

Competency to promote the business

-To create a long-term promotional plan.

-To describe the techniques used to prepare advertising and promotion

-To analyse competitive promotional activities.

-To evaluate promotional effectiveness.

-To plan a community relations programme.

Competency to manage sales efforts.

-To develop a sales plan for the business.

-To develop policies and procedures for serving the customers.

-To develop a plan for training and motivating sales people.

Competency to keep business records

-To determine who will keep the books for the business and how they will be
-To describe double-entry bookkeeping.

-Select the types of journals and ledges that you will use in the business.

-To identify the types of records that will be used in the business to record sales,cash
receipts,cash disbursements,accounts receivable,accounts payable,payroll,petty
cash,inventory,budgets and other items.

-To evaluate the business records.

-To identify how a micro-computer may be used to keep he business records.

Competency to manage the finances

-To explain the importance of cash flow management.

-To identify financial control procedures.

-To describe how to find cash flow patterns.

-To analyse trouble spots in financial management.

-To describe how to prepare an owner’s equity financial statement.

-To analyse financial management ratios applicable to a small business.

-To identify the components of break even point problem.

-To review microcomputer application for financial management.

Competency to manage customer credit and collection

-To analyse the legal rights and resource of credit guarantors.

-To develop a series of credit collection reminders and the follow up activities.

-To develop various credit and collection policies.

-To prepare a credit promotion plan.

-To discuss information resources and systems that apply to credit and collection

Competency to protect the business

-To prepare policies for the firm that will help minimize losses due to employee theft,
vendor theft, bad cheques, shoplifting, robbery, injury or product liability.

-To determine the kinds,amounts and costs of insurance needed by the firm.

Role of Government in promoting Entrepreneurship

Government plays a very important role in developing entrepreneurship. Government
develop industries in rural and backward areas by giving various facilities with the
objective of balances regional development.The government set programmes to help
entrepreneurs in the field of technique,finance,market and entrepreneurial development
so that they help to accelerate and adopt the changes in industrial development.Various
institutions were set up by the central and state governments in order to fulfil this

A. Institutions set up by Central Government

1. Small industries development organization (SIDO)

SIDO was established in October 1973 now under Ministry of Trade, Industry and
Marketing. SIDO is an apex body at Central level for formulating policy for the
development of Small Scale Industries in the country,headed by the Additional Secretary
& Development Commissioner(Small Scale Industries)under Ministry of Small Scale
Industries Govt. of India. SIDO is playing a very constructive role for strengthening this
vital sector, which has proved to be one of the strong pillars of the economy of the
country. SIDO also provides extended support through Comprehensive plan for
promotion of rural entrepreneurship.

2. Management development Institute(MDI)

MDI is located at Gurgaon(Haryana).It was established in 1973 and is sponsored by

Industrial Finance Corporation Of India,with objectives of improving managerial
effectiveness in the industry.It conducts management development programs in various
fields.In also includes the programmes for the officers of IAS,IES,BHEL,ONGC and many
other leading PSU’s.

3. Entrepreneurship development institute of India (EDI)

Entrepreneurship Development Institute of India (EDI), an autonomous and not-for-

profit institute, set up in 1983, is sponsored by apex financial institutions – the IDBI
Bank Ltd., IFCI Ltd., ICICI Bank Ltd. and the State Bank of India (SBI). EDI has helped
set up twelve state-level exclusive entrepreneurship development centres and institutes.
One of the satisfying achievements, however, was taking entrepreneurship to a large
number of schools, colleges, science and technology institutions and management
schools in several states by including entrepreneurship inputs in their curricula. In the
international arena, efforts to develop entrepreneurship by way of sharing resources and
organizing training programmes, have helped EDI earn accolades and support from the
World Bank, Commonwealth Secretariat, UNIDO, ILO, British Council, Ford Foundation,
European Union, ASEAN Secretariat and several other renowned agencies. EDI has also
set up Entrepreneurship Development Centre at Cambodia, Lao PDR, Myanmar and
Vietnam and is in the process of setting up such centres at Uzbekistan and five African

4. All India Small Scale Industries Board(AISSIB)

The Small Scale Industries Board (SSI Board) is the apex advisory body constituted to
render advise to the Government on all issues pertaining to the small scale sector.It
determines the policies and programmes for the development of small industries with a
Central Government Minister as its president and the representatives of various
organization i.e. Central Government,State Government,National Small Industries
Corporations,State Financial Corporation,Reserve Bank of India,State Bank of
India,Indian Small Industries Board,Non government members such as Public Service
Commission,Trade and Industries Members.

5. National Institution of Entrepreneurship and Small Business Development(NIESBUD),New Delhi

It was established in 1983 by the Government of India.It is an apex body to supervise

the activities of various agencies in the entrepreneurial development programmes.It is a
society under Government of India Society Act of 1860.The major activities of institute

i) To make effective strategies and methods

ii) To standardize model syllabus for training

iii) To develop training aids,tools and manuals

iv) To conduct workshops,seminars and conferences.

v) To evaluate the benefits of EDPs and promote the process of Entrepreneurial


vi) To help support government and other agencies in executing entrepreneur

development programmes.

vii) To undertake research and development in the field of EDPs.

6. National Institute of Small Industries Extension Training

It was established in 1960 with its headquarters at Hyderabad.The main objectives of

national Institute of Small Industries Extension Training are:

i) Directing and Coordinating syllabi for training of small entrepreneurs.

ii) Advising managerial and technical aspects.

iii) Organizing seminars for small entrepreneurs and managers.

iv) Providing services regarding research and documentation.

7. National Small Industries Corporation Ltd. (NSIC)

The NSIC was established in 1995 by the Central Government with the objective of
assisting the small industries in the Government purchase programmes.The corporation
provides a vast-market for the products of small industries through its marketing
network.It also assists the small units in exporting their products in foreign countries.

8. Risk Capital and Technology Finance Corporation Ltd.(RCTFC)

RCTFC was established in 1988 with an authorized capital of 15 crores rupees.The main
objectives of RCTFC are provision of risk capital for the extension and expansion of
entrepreneurial development and venture capital for the projects with high techniques
for technology development and transfer.

. Natioanl Research and development corporation (NRDC)

NRDC was established in 1953 under Department of Science and Industrial Research
under Government of India.Its main objectives are:

i) Providing assistance in technology transfer

ii) Transfer of technology

iii) Establishing relations with various technology institutions and collecting various
indigenous techniques developed by them.

10. Indian Investment Centre

This is an autonomous organization established by Central Government.Its main

objective is to assist in promoting foreign cooperation with Indian entrepreneurs and
providing necessary information to foreign entrepreneurs.

11. Khadi and village industries Commission(KVIC)

Khadi and Village Industries Commission established by an Act of Parliament in 1956.It

is a service organization engaged in promotion and development of Khadi and Village
Industries in rural areas. Its main objectives are:

i) Providing employment in rural areas.

ii) Improvement of skills

iii) Rural Industrialisation

iv) Transfer of Technology

v) Building strong rural community base and self reliance among rural people.

12. Indian Institute of Entrepreneurship(IIE)

It was established by the Department of Small Scale Industries and Agro and Rural
Industries in 1953.It is autonomous organization with its headquarters at Guwahati. Its
main objective is to undertake research,training and consultancy activities in the field of
small industry and entrepreneurship.
13. Miscellaneous Organisation

In addition to above various organizations at all India level are assisting and are
engaged in entrepreneur development.These include ICICI, IFCI, SIDBI, UTI, IDBI, IIBI

14. National Alliance of Young Entrepreneurs(NAYE)

It has sponsored number of entrepreneurial development acheme in collaboration with

various public sector banks.The main objective of the scheme is to encourage young
entrepreneurs to explore investment and self –employment opportunities .It arranges
for their training and assists them in procuring necessary finance.In 1975 NAYE also set
up a Women’s Wing to make women self-relaint and to raise their status.

15. Centre for Entrepreneurial Development(CED) Ahmedabad

It was sponsored by the Government of Gujrat and public financial institutions operating
in the State.It conducts entrepreneurial development programmes at various
centres.The important features of training programme are:

i) Training programmes were conducted after survey for opportunities was made.

ii) Appropriate linkage was established with supporting agencies supplying

finance,factory sheds,raw materials, etc.

iii) Behavioural tests were conducted to select the entrepreneurs.

iv) Training programmes covered theoretical and practical aspects.

v) Full time project leader took follow up action after the training was over.

16. Institute for Entrepreneurial Development (IED)

It was set up by the IDBI in association with other financial institutions,public sector
banks and the State Governments.The IEDs was set up to fulfil the entrepreneurial
development needs of the industrially backward States in the country.

17. Technical Consultancy Organisation (TCOs)

A network of TCOs has been established by All India Financial Institutions and State
Government throughout the country.These organizations have been set up to provide
comprehensive package of services to entrepreneurs in general and to small business
entrepreneurs in particular.Their main functions include the following:

i) Identifying potential industrial project.

ii) Preparing project reports,feasibility reports and pre-investment status.

iii. Identifying potential entrepreneurs.

iv. Providing technical and administrative support.

v. Conducting techno-economic studies of the projects.

vi. Conducting market research and surveys.

vi. Rendering advice to set up laboratories and design centre.

18. Public Sector Banks.

Public sector banks in association with NAYE have been conducting entrepreneurial
development programmes.The main thrust of these banks has been to identify potential
entrepreneurs in rural and backward areas.For example Punjab National Bank started
entrepreneurial assistance programme in March 1977 in th States of West Bengal and
Bihar. Similarly,Bank of India started entrepreneurial assistance programme since
August 1972 in the States of Punjab, Rajasthan , Himachal Pradesh,J& k and the Union
Territories of Chandigarh and Delhi.

The important Forms of entrepreneurial assistance are:

i) Identifying potential entrepreneurs

ii) Identifying viable projects.

iii) Assisting in preparation of project profiles

iv) Helping in project evaluation.

v) Arranging practical training.

vi) Financing the projects.

B) Institutions set up at State Level

There are a number of institutions establishes at state level for

organizing,developing,developing,assisting and making successful entrepreneurial
development programmes.Prominent among these are:

i) Small Industries Service Institute (SISI)

ii) State Financial Corporation (SFC)

iii) State Small Industries Corporation (SSIC)

iv) District Industries Centres(DIC)

v) Technical Consulting Organisation Ltd. (TCO)

vi) Industrial Directorates

vii) Commercial and Cooperative Banks

viii) State Industrial Development Corporation

ix) Industrial Estates

x) State Industries Corporation

The above mentioned State and Central level Institutions have provided a number of
concessions and facilities to promote entrepreneur development in India.They have also
played an important role in balanced industrial development in the country.

Entrepreneurial Motivation-Meaning ,Definition,Nature

and Factors
Entrepreneurial Motivation


The entrepreneurial motivation is the process that activates and motivates the entrepreneur to
exert higher level of efforts for the achievement of his/her entrepreneurial goals. In other words,
the entrepreneurial motivation refers to the forces or drive within an entrepreneur that affect the
direction, intensity, and persistence of his / her voluntary behaviour as entrepreneur. So to say,
a motivational entrepreneur will be willing to exert a particular level of effort (intensity), for a
certain period of time (persistence) toward a particular goal (direction).


Motivation is regarded as “the inner state that energizes activities and directs or channels
behavior towards the goal”.

Motivation is the process that arouses action, sustains the activity in progress and that regulates
the pattern of activity.

Nature of Motivation

The nature of motivation emerging out of above definitions can be expressed as follows:

1. Motivation is internal to man

Motivation cannot be seen because it is internal to man. It is externalized via behaviour. It

activates the man to move toward his / her goal.

2. A Single motive can cause different behaviours

A person with a single desire or motive to earn prestige in the society may move towards to join
politics, attain additional education and training, join identical groups, and change his outward

3.Different motives may result in single behaviour

It is also possible that the same or single behaviour may be caused by many motives. For
example, if a person buys a car, his such behaviour may be caused by different motives such as
to look attractive, be respectable, gain acceptance from similar group of persons, differentiate
the status, and so on.

4.Motives come and go

Like tides, motives can emerge and then disappear. Motives emerged at a point of time may not
remain with the same intensity at other point of time. For instance, an entrepreneur overly
concerned about maximization of profit earning during his initial age as entrepreneur may turn
his concern towards other higher things like contributing towards philanthropic activities in social
health and education once he starts earning sufficient profits.

5.Motives interact with the environment

The environment in which we live at a point of time may either trigger or suppress our motives.
You probably have experienced environment or situation when the intensity of your hunger
picked up just you smelled the odour of palatable food.

You may desire an excellent performance bagging the first position in your examination but at
the same time may also be quite sensitive to being shunned and disliked by your class mates if
you really perform too well and get too much of praise and appreciation from your teachers.
Thus, what all this indicates is that human behaviour is the result of several forces differing in
both direction and intent.

Entrepreneurial Motivating Factors Most of the researchers have classified all the factors motivating
entrepreneurs into internal and external factors as follows:

Internal Factors
These include the following factors:

Desire to do something new.

Become independent.

Achieve what one wants to have in life.

Be recognized for one’s contribution.

One’s educational background.

One’s occupational background and experience in the relevant field.

External Factors

These include:
Government assistance and support.

Availability of labour and raw material.

Encouragement from big business houses.

Promising demand for the product.