CORE COURSE – XIII - ENTREPRENEURIAL DEVELOPMENT

Unit – I
Two Mark Q&A:
1. Define Entrepreneur.
Peter F. Drucker defines an entrepreneur as “one who always searches for
change, responds to it and exploits it as an opportunity. Innovation is the
specific tool of entrepreneurs, the means by which they exploit change as an
opportunity for a different business or service.”

2. What are Franchisees?

It is a method of doing business wherein the parent owner licenses his
trademarks and tried and proves methods of doing business to a franchisee
in exchange for a recurring payment.

3. Who is Pure Entrepreneur?

Those individuals who are the founder of the business. They are the ones
who conceptualize a business plan and then put in efforts to make the plan
a success.

4. Who is Corporate Entrepreneur?

Corporate entrepreneur is a person who demonstrates his innovative skill in
organizing and managing a corporate undertaking which is registered under
some act that given it a separate legal entity.

5. What is National Income?

National Income consists of goods & services produced in the country and
those imported. The goods & services produced are for consumption within
the country as well as to meet the demand of exports. The domestic demand
increases with ever increasing population and standard of living. The export
demand also increases to meet the needs of growing import due to various
reasons. An increasing number of entrepreneurs are required to meet this
increasing demand for goods and services. Thus entrepreneurship increases
the national income.

6. Who is Drone Entrepreneur?

 Drone entrepreneurs are not open to creativity and change. They do not like
changing the working of organizations with the changing times.

7. Who are Co-preneurs?

When both husband and wife together start and run a business venture then
they are called co-preneurs.

8. Who is Agricultural Entrepreneur?

Agricultural entrepreneurs are those entrepreneurs who undertake business
related to agricultural activities. Like farm equipment, fertilizers and other
inputs of agriculture.

9. What is the meaning of “Entrepreneurship”?

B. Higgins, in his book "The economic Development" has said.
"Entrepreneurship is meant the function of seeking investment and
production opportunity, organizing an enterprise to undertake a new
production process, raising capital, hiring labor, arranging the supply of raw
materials, finding site, introducing a new technique and commodities,
discovering new sources of raw materials and selecting top managers of day
to day operations of the enterprise."

10. Who are Trading Entrepreneurs?

Trading entrepreneur is one who undertakes trading
activities and is not concerned with the manufacturing of products. He
identifies potential markets, stimulates demands and generates interest
among buyers to purchase a product.

Five/Ten Mark Q&A:

11. Define Entrepreneurship. Discuss the main Entrepreneurship Traits.

Meaning of Entrepreneurship: Entrepreneurship refers to a process of

action an entrepreneur undertakes to establish his enterprise. It is a creative
and innovative response to the environment. In other words,
entrepreneurship can be defined as an ability to discover, create or invent
opportunities and exploit them to the benefit of the society, which in turn
brings prosperity to the innovator and his organization.
Definition:
B. Higgins, in his book "The economic Development" has said.
"Entrepreneurship is meant the function of seeking investment and
production opportunity, organizing an enterprise to undertake a new
production process, raising capital, hiring labor, arranging the supply of raw
materials, finding site, introducing a new technique and commodities,
discovering new sources of raw materials and selecting top managers of day
to day operations of the enterprise."

Entrepreneurship Traits: A successful entrepreneur must possess the

following traits:
 Mental Ability: Mental ability consists of intelligence and creative
thinking. An entrepreneur should be intelligent and must have an
analytical mine. He should have the capacity to analyze the problem
and able to study the various situation under which decision have to
be made.
 Clear Objectives: An entrepreneur should have a clear objective.
Without objective an entrepreneur cannot success. So, a successful
entrepreneur must have the objective to establish his product in the
market, make profit and also render social service.
 Business Secrecy: An entrepreneur must be able to guard business
secrets. Leakage of business secrets to trade competitors is a serious
matter. So, the entrepreneur should be able to make a proper
selection of his subordinates.
 Human Relations Ability: An entrepreneur must have good relations
with his customers to earn profit and win their confidence in his
product. He must also maintain good relation with his employees.
 Effective Communication: Good communication also means that the
entrepreneur has the ability to put his point effectively and with
clarity. Communication ability is the secret of the success of most
entrepreneurs.
 Technical Knowledge: The entrepreneurs are dealing with situations
where sophisticated technology is involved. The entrepreneur must
have a reasonable level of technical knowledge.
 Decision-Making: Running a business requires taking a number of
decisions. Hence an entrepreneur should have the capacity to analyze
the various aspects of the business for arriving at a decision.
  Risk-Bearing: 'No risk, no business' or 'no risk, no gains. Risk is an
inherent and inseparable element of entrepreneurship. He assumes
the uncertainty of future.
 Self-Confidence: Entrepreneurs must have the mental capacity to face
any situation. They should also have the ability to inspire other. They
must have the confidence in themselves and the determination to
achieve their goals.

12. Explain the Types of Entrepreneur.

Meaning of Entrepreneur: An Entrepreneur is a person who perceives a

need and then brings together manpower, material and capital required to
meet that need. In other words, an entrepreneur is an individual or team
that identifies the opportunity, gathers the necessary resources, creates
and ultimately responsible for the performance of the organization.

Types of Entrepreneur: Types of entrepreneur are:

Classification on the Basis of Ownership:

 Founder or "Pure Entrepreneurs": Those individuals who are the
founder of the business. They are the ones who conceptualize a
business plan and then put in efforts to make the plan a success.
Example: Dhirubhai Ambani of the Reliance Group.
 Second-generation operators of family-owned business: They are
individuals who have inherited the business from their fathers and
forefathers.
Example: Like Mukesh Ambani and Anil Ambani sons of Dhirubhai
Ambani of the Reliance Group now split into two: Reliance Industries
Limited and Reliance-Anil Dhirubhai Ambani Group.
 Franchisees: It is a method of doing business wherein the parent
owner licenses his trademarks and tried and proves methods of doing
business to a franchisee in exchange for a recurring payment.
Example: NIIT has given its franchisee operations to local players after
thorough scrutiny and proper training.
 Owner-Manager: When a person buys a business from the founder
and then invests his time and resources in it, he is called the owner-
manager.
 Example: Like Sabeer Bhatia is the founder entrepreneur of Hotmail.
Classification on the basis of Personality Traits and their style of running
the business:
 The Achiever: These types of entrepreneurs have personal desires to
excel. The only drive that pushes them is the desire to achieve
something in life, the desire to make a mark in society, the desire to
prove their excellence. They do not need any external stimulus but are
self-driven.
 The Induced Entrepreneur: These types of entrepreneurs are induced
by some external factors to start a business. The external factors could
be like:
i. Government Policies
ii. Unemployment
iii. Family Support
iv. Facilitating Institutional Support etc.

 The Idea Generator: These kinds of entrepreneurs are highly creative

people who are always in search of innovative ideas for setting up new
business ventures. They enjoy the First Movers' Advantage and are
able to skim higher profits from the market.
 The Real Manager: The real managers run the business in a systematic
manner. They analyze business situation, assess the demands of
future, both in terms of opportunities and threats and then take
actions based on the above assessments.
 The Real Achievers: The real achievers are full of life. They are looking
for the achievement of not even their goals but also of people
associated with themselves like employees, suppliers and distributors.

Classification based on the type of Business:
 Industrial Entrepreneur: Industrial entrepreneur is an entrepreneur
who is into manufacturing of a product. He identifies the needs and
wants of customers and accordingly manufactures products to satisfy
these needs and wants.
 Trading Entrepreneurs: Trading entrepreneur is one who undertakes
trading
activities and is not concerned with the manufacturing of products. He
identifies potential markets, stimulates demands and generates interest
among buyers to purchase a product.
 Corporate Entrepreneur: Corporate entrepreneur is a person who
demonstrates his innovative skill in organizing and managing a
corporate undertaking which is registered under some act that given
it a separate legal entity.
 Agricultural Entrepreneur: Agricultural entrepreneurs are those
entrepreneurs who undertake business related to agricultural
activities. Like farm equipment, fertilizers and other inputs of
agriculture.

Classification on the Stages of Development:

 First Generation Entrepreneur: A first-generation entrepreneur is one
who starts an industrial unit by means of an innovative skill. He is
essentially an innovator combining different technologies to produce
a marketable product or service.
 Modern Entrepreneur: A modern entrepreneur is one who
undertakes business to satisfy the contemporary demands of the
market. They undertake those ventures which suit the current socio-
cultural trends.
 Classical Entrepreneur: A classical entrepreneur a stereo-type
entrepreneur is one whose aim is to maximize the economic returns
at a level consistent with the survival of the firm, with or without
element of growth.

Other:
 Innovative Entrepreneur: Innovative entrepreneurs are full of creative
ideas and offer innovate products to the society. It is because of these
innovative entrepreneurs that many important changes occur in our
society.
 Imitative Entrepreneurs: Imitative entrepreneur adapt a successful
innovation. They are risk-aversive and so they do not try out new ideas
or products.
 Drone Entrepreneurs: Drone entrepreneurs are not open to creativity
and change. They do not like changing the working of organizations
with the changing times.
  Co-preneurs: When both husband and wife together start and run a
business venture then they are called co-preneurs.

13. Explain the qualities and functions of the entrepreneurs.

Qualities of An Entrepreneur: An entrepreneur is a person who takes risk of

setting up his own venture for perceived reward. He is a person who initiates
the idea, formulates the plan, organizes resources and puts the plan into
action to achieve his goals.
The entrepreneur must have following qualities: -
 Planner: Entrepreneur has a strong desire to achieve a higher goal and
make their dreams come true. So, the entrepreneur must have these
quality to achieve the target an entrepreneur cannot achieve the
target.
 Technician: An entrepreneur must have the technical knowledge. He
should know that how to use the resources and achieve the target.
 Risk Bearing Ability: Risk is very important element. An entrepreneur
must have capacity to bearing risk an entrepreneur cannot success.
 Decision Maker: Decision making is the process of choosing best
alternative among various alternatives. An entrepreneur must have
these qualities because decision making affects the profitability and
reputation of the enterprise.
 Ability to Find and Explore Opportunities: Entrepreneurial persons
are quick to see and seize opportunities. They show an innovative turn
of mind and convert difficulties into opportunities.
 Motivator: An entrepreneur must have a motivator. He inspires the
employees to achieving the target. Without motivation an
entrepreneur cannot achieve the target. So, motivation is very
necessary for achieving the target.
 Future Oriented: Entrepreneur shows a high level of future
orientation. They do not allow the past to obsess them. They are
oriented towards present and future.
 Interpersonal Skills: An entrepreneur is a person who during the
course of his activities he should be a person who likes working with
people and who has skills of dealing with people.
  Facing Uncertainty: An entrepreneur is a person who faces
uncertainty. The future is uncertain. So, the decision of entrepreneur
affects the profitability and reputation of the enterprise.
 Coordination: An entrepreneur must have a coordinator. He allocates
the resources and utilizes the resources for achieving the target.
Without coordination an entrepreneur cannot achieve the target.

Functions of Entrepreneur: An entrepreneur has to perform the following

function:
 Risk taking and Uncertainty Bearing: The future is unpredictable. The
entrepreneur has to take risks in these circumstances. If the venture
succeeds, the entrepreneur profits; if it does not, losses occur. Thus, taking
risks forms an important entrepreneurial function.
 Taking Business Decisions: All decision concerning business are taken
by the entrepreneur. He has to formulate an action plan regarding the
product and quality of the product to be produced. He has to evolve
the best possible method of production which would earn him a
sizeable profit.
 Managerial Functions: The entrepreneur performs various managerial
functions. The entrepreneur arranges finance, purchase raw materials,
provides the necessary infrastructure for production. The
entrepreneur has a multifaced personality when he undertakes
managerial functions.
 Innovation: The most important function of an entrepreneur is
innovation. He introduces far-reaching improvements in the quantity
and quality of production line. He considers the economic viability and
technical feasibility of an invention.
 Coordination: The entrepreneur coordinates the other factors of
production. Coordination involves selection of the right type of
factors, employment of each factor in the right quantity, use of the
best technical devices, division of labor, reduction of waste etc.
 Maintain Good-Relations: An entrepreneur must have good relations
with his customer to earn profit and win their confidence in his
product. He must also maintain good relations with his employees.
 Analysis the Environment: An entrepreneur analysis the environment.
Environment are those factors which affect the business. There are
two type of environment:
 i. Internal Environment: Internal environment are
controllable
ii. External Environment: External environment are beyond
the control of the business.
 Planning: Planning is the first function of the management. Planning
is deciding in advance what is to be done, how is to be done, which is
to be done, by whom is to be done. It is very necessary function of
entrepreneur. Without planning an entrepreneur cannot achieve the
target.
 Utilizes the Resources: An entrepreneur allocates the resources and
utilizes the resources. An entrepreneur must utilize the resources for
the achievement of the objectives. If the entrepreneur does not utilize
the resources, he cannot become a successful entrepreneur.

14. Explain the Role and Importance of Entrepreneur in Economic Growth.

Role of Entrepreneur in Economic Growth: The position of the entrepreneur

in modern production is like that of the director of a play. Modern economic
development is closely linked with production. Modern production is higher
complex. The entrepreneur directs production and he must do whatever is
necessary for its success. His role in modern economic development has at
least three aspects:
 The entrepreneur co-ordinates the other factors of production. This
involves not only assembling the factors, but also to see that the best
combination of factors is made available for the production process.
 The entrepreneur takes risks. This is the important function of the
entrepreneur and the quantum of profit he receives is directly
proportionate to the risks he takes. Risks are generally based on the
anticipation of demand.
 Finally, the entrepreneur innovates. Innovation is different from
invention. Invention is the work of scientists. Innovation implies the
commercial application of an invention. As an innovator the
entrepreneur assumes the role of a pioneer and an industrial leader.
The entrepreneur can undertake anyone type of the following five
categories of innovation:
(i) The introduction of a new good or a new quality of a good
(ii) The introduction of a new method of production
 (iii) The opening of a new market
(iv) The conquest of a new source of supply of raw materials
(v) The carrying out of a new organization of any industry.

Importance of Entrepreneur in Economic Development: Every country tries

to achieve maximum economic development. The economic development of
a country to a large extent depends on human resources. But human
resource alone will not produce economic development-there must be
dynamic entrepreneurs. Importance of entrepreneurs in economic
development are:
 Employment Generation: Growing unemployment particularly
educated unemployment is an acute problem of the nation. If a
hundred persons become entrepreneur, they not only create a
hundred jobs for themselves but also provide employment to many
more. These enterprises grow providing direct and indirect
employment to many more. Thus, entrepreneurship is the best way
to fight the evil of unemployment.
 National Income: National Income consists of goods & services
produced in the country and those imported. The goods & services
produced are for consumption within the country as well as to
meet the demand of exports. The domestic demand increases with
ever increasing population and standard of living. The export
demand also increases to meet the needs of growing import due to
various reasons. An increasing number of entrepreneurs are
required to meet this increasing demand for goods and services.
Thus, entrepreneurship increases the national income.
 Dispersal of Economic Power: When a society produces a small
number of entrepreneurs the enterprise due to lack of competition
grow into a few big business houses. This results in concentration
of wealth in a few families. This can have a serious social and
national implication. When the number of entrepreneurs
increases, a large amount of national wealth is also shared by a
large number of entrepreneurs, thus dispersing wealth. This
dispersal of wealth promotes the real socialism and makes the
economy healthy.
 Balance Regional Development: The growth of industry and
business leads to a large number of public benefits like road,
 transport, health, education, entertainment etc. A rapid
development of entrepreneurship ensures a balanced regional
development. When the new entrepreneurs grow at a faster pace,
in view of the increasing competition in and around the cities, they
are forced to set up their enterprise in the smaller towns away from
big cities. This helps in the development of the backward regions.
 Economic Independence: Entrepreneurship is essential for
national self-reliance. Businessman export goods and services on a
large scale and earn the scarce foreign exchange for the country.
Such import substitution and export promotion help to ensure the
economic independence of the country.
 Reducing Unrest and Social Tension Amongst Youth: Many
problems associated with youth and social tensions are rightly
considered to be due to youth not being engaged in productive
work. In the changing environment where we are faced with the
problem of recession in wage employment opportunities,
alternative to wage career is the only viable option. The country is
required to divert the youth with latent entrepreneurial traits from
wage career to self-employment career. Such alternate path
through entrepreneurship could help the country in defusing social
tension and unrest amongst youth.
 Improvement in Living Standards: Entrepreneurs set up industries
which remove scarcity of essential commodities and introduce new
products. Production of goods on mass scale and manufacture
handicrafts etc. in the small-scale sector help to improve the
standard of life of a common man. These offer goods at lower costs
and increase variety in consumption.
 Harnessing Locally Available Resources and Entrepreneurship:
India is considered to be very rich in natural resources. A few large-
scale industries started by entrepreneurs from outside the state in
economically backward areas may help as models of pioneering
efforts, but ultimately the real strength of industrialization in
backward areas depends upon the involvement of local
entrepreneurship in such activities. Increased activities of local
entrepreneurs will also result in making use of abundantly available
local resources.
 Innovations in Enterprises: Business enterprises need to be
innovative for their survival and better performance.
Entrepreneurship development Programmes are aimed at
accelerating the pace of small firms' growth in India. Increased
number of small firms is expected to result in more innovations and
make the Indian industry compete in international market.