ENTREPRENEURSHIP

UNIT-I
INTRODUCTION- CONCEPT
 Entrepreneur is a person who creates an enterprise. The
process of creation is called as “entrepreneurship”.
 The word “entrepreneur” is derived from the French
Verb enterprendre, means ‘to undertake’. This refers to
those who “ undertook” the risk of new enterprises.
 Entrepreneurship can be defined as a process of action an
entrepreneur undertakes to establish his enterprise.
DEFINITIONS OF AN ENTREPRENEUR
 An individual who bears the risk of operating a
business in the face of uncertainty about the
future conditions.- Encyclopedia Britannica
 He searches for change, responds to it and
exploits opportunities. Innovation is the specific
tool of an entrepreneur.- Peter F. Drucker
 He is the one who innovates, and introduces
something new in the economy- Joseph A.
Schumpeter
SKILLS REQUIRED IN ENTREPRENEURSHIP
I Technical Skills
 Writing
 Oral Communication

 Monitoring Environment

 Technical Business Management

 Technology

 Ability to organize

 Being a team player

 Coaching
CONTD…
II Business Management skills
 Planning and goal setting
 Decision making
 Human relations
 Marketing
 Finance
 Accounting
 Control
 Management
 Venture Launch
 Negotiation
CONTD…
III Personal Entrepreneurial skills
 Inner control/ disciplined
 Risk taker

 Innovative

 Change oriented

 Visionary leader

 Ability to manage change

SOME SUCCESSFUL ENTREPRENEURS
 Dhirajlal Hirachand Ambani-
Reliance Group of Industries
 Karsanbhai Patel- Nirma Industries
 Ratan Tata- Tata Group of
Industries
 Rahul Bajaj- Bajaj Group of
Industries
 Azim Premji- Wipro Co Ltd
CHARACTERISTICS OF SUCCESSFUL
ENTREPRENEURS- 14 DOMINANT
CHARACTERISTICS

 Need to Achieve( Desire to be a winner)

 Perseverance( Quality to stick to it)

 Moderate Risk taker ( Prefer Middle of the road)

 Use of feedback ( Knowing How they perform)

 Facing Uncertainty ( Tolerance for Ambiguity

and unfamiliar situations)
 Stress takers ( Possess Drive and energy)

 Self confidence ( Faith in their abilities)

 Initiative ( seeking responsibility)

 Positive self concept( Aware of one self and

internal control)
CONTD…
 Motivators( Possess Interpersonal skills)
 Flexibility ( Flexible in decisions)

 Analytical ability ( Unaffected by personal likes

and dislikes)
 Independence ( Dislike working for others)

 Ability to find and explore opportunity

ENTREPRENEURSHIP PROCESS
The process has four distinct phases:
 1. Idea Generation: Every new venture begins with
an idea. In our context, we take an idea to be a
description of a need or problem of some constituency
coupled with a concept of a possible solution.
 2. Opportunity Evaluation: this is the step where
you ask the question of whether there is an
opportunity worth investing in. Investment is
principally capital, whether from individuals in the
company or from outside investors, and the time and
energy of a set of people. But you should also consider
other assets such as intellectual property, personal
relationships, physical property, etc.
CONTD…
 3. Planning: Once you have decided that an
opportunity, you need a plan for how to capitalize
on that opportunity. A plan begins as a fairly
simple set of ideas, and then becomes more
complex as the business takes shape. In the
planning phase you will need to create two
things: strategy and operating plan.
 4. Company formation/launch: Once there is a
sufficiently compelling opportunity and a plan,
the entrepreneurial team will go through the
process of choosing the right form of corporate
entity and actually creating the venture as a
legal entity.
CONTD…
 5. Growth: After launch, the company works
toward creating its product or service, generating
revenue and moving toward sustainable
performance. The emphasis shifts from planning
to execution. At this point, you continue to ask
questions but spend more of your time carrying
out your plans.
EXAMPLE
FACTORS IMPACTING EMERGENCE
OF ENTREPRENEURSHIP
ECONOMIC FACTORS
 Capital- Most important to start the enterprise.
No capital no enterprise.
 Labour - Quality rather than quantity is
another factor which influences the emergence
of factor of entrepreneurship. Entrepreneurship
is developed if there is mobile and flexible
labor force. Labor problems can be solved more
easily comparatively than capital.
 Raw Materials-Without it no enterprise can be
set up hence no entrepreneurs.
CONTD…

 Market-Whether a market is available or the

rate at which it is expanding are the most
significant characteristics for entrepreneurial
emergence. Monopoly in a particular product in a
market becomes more influential
for entrepreneurship than a competitive market.
 Infrastructure- Expansion of transport facilities,
establishment of posts, construction of roads,
construction of highways and communication
expands the horizon of business. This led to the
development of industrial revolution in the1850’s.
SOCIAL FACTORS
 Caste factor-The caste system does not permit an
individual who is born a shudra to move to a higher
caste. Commercial activities were the monopoly of the
vaishyas. The others were just not interested in trade
and commerce. Dominance of certain ethnical groups
in in entrepreneurship is a global phenomenon.
 Cultural Values- For the motives to be strong like
profit making , wealth maximization, enhancing
social status. All this depends on the culture of the
society. If the culture is economically oriented
,entrepreneurship is applauded and praised. However
in less developed countries, people are not
economically motivated.
CONTD….
 Family background- includes size, type, economic
status of family. In a study it has been revealed
that Zamindar family helped to gain access to
political power and exhibit higher levels
of entrepreneurship..
 Education plays a significant role in inculcating
entrepreneurial values. In India education was
based on religion. critical and questioning
attitude were discouraged. It promoted the idea
that business was not respectable.
Our education system prepares students for jobs
rather than making them stand on their feet.
POLITICAL FACTORS
 The govt society has to ensure the availability
of required resources for the entrepreneurs.
 This is because a 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 , taxation, affects the
growth of entrepreneurship. Promotive govt activities
such as incentives and subsidies contribute
substantially.
 Govt policies like licenses, regulations, favoritism,
govt monopolies are favoritism, govt monopolies are
undesirable for the growth of business enterprises.
Characteristics Entrepreneur Manager

Behavior Characterized Desire for control Delegation of Authority

by
Management Style One man show Management Team

Driving force Creativity- Innovation Establish and Preserve

the Status Quo

Organizational Growth Rapid reaction Strategic Planning

Organization Structure Informal, Flexible Organised

Decision Making Intutive Collect information and

seek advice

Definition of aims In terms of vision In Commercial terms

Attitude to money A by-product Measure of success

Attitude to risk Calculated risks Avoidance of risk

FUNCTIONS OF AN ENTREPRENEUR
 Innovation
 Risk Taking

 Organisation building
 EMERGENCE OF ENTREPRENEURIAL CLASS

The story of business in India is the history of the

business families. The seeds of entrepreneurship
were sown in the 1860’s – when the first cotton
mill came up in Mumbai. Over the years,
entrepreneurship multiplied in all directions.

History of entrepreneurship in India

In the historical past Indian communities

consists of four main castes, i.e.,brahmins,
Kshtriyas, vaishyas & shoodras. The caste group
was rigidly separated on a functional basis. The
vaishya community were engaged in trade &
commerce & industrial productive activities.
 The brief description of history of
entrepreneurship in India during the past
is as follows :
 The industrial activity was influenced by the
caste system
 The skill for any enterprise was inherited from
ancestors
 The trading class use to take care of providing
forward & backward linkages to craftsmen and
skilled artisans
 There were no formal organizational units. All
family members use to associate themselves in
production process of an enterprise
 The trading class use to help in getting orders
from buyer and communicate it to the producer
 THE PAST INDIAN BUSINESS SCENE

 Before 1943, the Indian business scene was

completely dominated by British companies
 There were few Parsi families, the Tatas in steel &
the Wadias in shipbuilding and the scattered Gujrati
and Bohri Muslim businessmen in India.
 WHY BECOME AN ENTREPRENEUR?

The three primary reasons that people become

entrepreneurs and start their own firms are to:

1. to be their own boss

2. pursue their own ideas
3. realize financial rewards
KINDS OF ENTREPRENEUR
 Innovating entrepreneurs: one who introduces
something new to the economy or employs a new
technique of production, opens a new market,
exploits a new source of raw materials and
organizes the whole enterprise.
 Imitating entrepreneurs: they follow the
innovations brought by innovating
entrepreneurs. They are suited to developing
countries which are constrained to take up
expensive research. They face lesser risks than
the innovative entrepreneurs.

Nishant
 Fabian entrepreneurs: such entrepreneurs are very
conscious and afraid of adopting any change. They are
very lazy and shy and lack the will to adopt new
techniques and methods.
 Drone entrepreneurs: drone entrepreneurs are
characterized by refusal to adopt and use opportunities
to make changes in production. They stick to
conventional ideas and products. When their product
loses marketability and their operations become
uneconomical, they are pushed out of the market.

Nishant
BENEFITS OF ENTREPRENEURSHIP
1. Opportunity to get control.
Owning a firm or a business endows the
entrepreneurs with the independence and opportunity
to control their own business. They can aim to achieve
targets that are important to them. Entrepreneurship
provides entrepreneurs a chance to take decisions
according to their own wishes.
2. Offers a chance to make a difference
Some people begin and put a lot of effort just to make
a difference in society. This has given rise to the
concept of social entrepreneurship, which is a recent
phenomenon. Such people search for opportunities to
serve a cause that is significant to them and try to
find pioneering solutions to some of the most pressing
and challenging problems of society.
3. To reap high Profits
Reaping high profits by being an entrepreneur is one of the
most important factors that motivate people to become one
and take up all the challenges associated with it. The profits
their companies and businesses make play a vital role in any
decision made by entrepreneurs. Owning a business or a
firm is the best way towards accumulation of wealth.
4. Helps people work to their full potential
Many entrepreneurs find their work to be extremely
enjoyable. They consider their business as an instrument of
self-actualization and self-expression. Owning a firm or a
business acts as a test for the creativity skills, abilities, and
determination of an entrepreneur and is taken up as a
challenge towards success.
5. Offers a chance to pursue their interests.
Most entrepreneurs don’t believe their work to be actual
work. Most of them establish businesses closely associated
with their interests. As such, there is no particular age for
retirement of entrepreneurs.
With all these benefits people now consider the alternative
of running their own small businesses rather than doing jobs
for others.
POTENTIAL DRAWBACKS OF ENTREPRENEURSHIP
Uncertainty of Income
There are no guarantees that an entrepreneur will make
enough money to survive. Some small businesses barely
make enough to pay the owner-manager with adequate
income.
Risk of Losing Invested Capital
When a business fails it can be financially and emotionally
devastating. People contemplating entrepreneurship
should decide how much they are willing to risk.
Long Hours and Hard Work
The average small business owner works 52 hours per
week. In many start-up business, 10 - 12 hour work days on
6 - 7 days of the week with no paid vacations is the norm.
Because owners must often do everything themselves, they
experience long, intense, draining work days.
Lower Quality of Life Until the Business is
Established
Long hours and hard work can effect the entrepreneur's
outside life. Business owners often put their role as company
founder ahead of their role as husband, wife, or parent.
High Levels of Stress
Most entrepreneurs make significant investments in their
companies; they leave behind a steady paycheck, and
mortgage everything to get into business. Failure can mean
total financial failure as well as a psychological blow. This
creates high levels of stress and anxiety.
Complete Responsibility
Entrepreneurship is highly rewarding, but many
entrepreneurs find that they must make decisions on issues
they are not very knowledgeable about. When there is no one
to ask for answers, the pressure can build quickly. The
knowledge that these decisions could decide the success or
failure of a business can have a devastating effect on the
business owner.
Discouragement
Launching a business requires much dedication and
discipline. Entrepreneurs may run into many obstacles,
some may even appear to be insurmountable.
7 DISADVANTAGES OF BEING AN ENTREPRENEUR

 You will not get a regular monthly salary – how much you
make will depend on how good business is.
 You risk losing everything you have worked for – some of the
most successful business owners have failed before. You can
always make a comeback.
 Successful business owners have all failed at some time in
their life. Failing is sometimes good for an entrepreneur, as
long as they learn from the experience.
 Inexperience – you will have to learn a whole lot of new
skills. You can fast track this by attending business courses
and consulting a mentor or good business advisor.
 A change in lifestyle – you will be working long hours
initially. As your business develops and you become more
organised, your lifestyle improves dramatically.
 You can’t pass the buck – you are responsible for every
decision you make in your business, good or bad. Bad
decisions can cost a lot of money.
 You have to be a Jack or Jill of all trades initially. You have
to understand a little about each section of your business.
THE CULTURAL DIVERSITY OF ENTREPRENEURSHIP
Entrepreneurs are found virtually every walk of
life. This includes:
 Young Entrepreneurs
 Women Entrepreneurs
 Minority Enterprepreneurs
 Part–time Entrepreneurs
 Family Businesses
 Corporate Dropouts
 Copreneurs
 Corporate Castoffs
 Social Entrepreneurs
 Retired Baby Boomers
There is not a set “profile” for entrepreneurs. This
is a group that is diverse in every way and
appreciating these types of entrepreneurs
illustrates this variety of people and lifestyles.

Young people can apply their knowledge and

skills to take advantage of the Internet, new
technology and market opportunities.
Women often face discrimination in the
workplace. Entrepreneurship offers women
opportunities for economic growth.
Minorities also face discrimination in the
workplace and can benefit from
entrepreneurship.
Social Entrepreneurs address social problem
and apply entrepreneurial principles to organize,
create and manage a social venture to achieve a
desired social change to further broaden social,
cultural, and environmental goals.
Retired Baby Boomers are often experienced
business people and remain active and the level
of entrepreneurial activity among people ages 55
to 64 is higher that people between 20 to 34.
Copreneurs are entrepreneurial couples that
work together. They represent the fastest
growing business sector.
Corporate Castoffs have extensive on–the–job
experience and are dislocated workers due
primarily to corporate downsizing.
 Corporate Dropouts leave organizations to
pursue a better way of life spearheaded by the
“trust gap” over job security.

 Part–timers have the best of both worlds and can

ease into a business without sacrificing a steady
paycheck and benefits
SMALL BUSINESS
 Two standards to define a small business
1. Size of the business
2. Qualitative criteria
 Size of a business
1. Number of persons employed
2. Amount of capital invested
3. Value of annual sales turnover
 Qualitative Criteria

1. ownership in few hands

2. Independent & personalised management
3. Local area of operations
4. Low capital-output ratio (labour intensive
technology)
5. Limited employment & investment
CHARACTERISTICS
 Personal Character
 Independent management

 Limited investment

 Simple technology

 Local areas of operation

ROLE OF SMALL BUSINESS
 Employment generation
 Balanced regional development

 Optimization of capital

 Mobilization of local resources

 Exchange earnings

 Egalitarian society

 Feeder to large industries

 Social advantage
SCOPE OF SMALL BUSINESS
 Manufacturing
 Wholesale Trade

 Retail Trade

 Services
RATIONALE OF SMALL BUSINESS
 Limited Demand
 Specialised service

 Flexibiltiy

 Employee relations

 Introduction to new products

 Direct motivation
PROBLEMS OF SMALL BUSINESS
 Shortage of Material and Power
 Lack of Adequate Finance

 Outdated technology

 Inadequate marketing facilities

 Weak organization and management

 Lack of trained personnel

 MEASURES TAKEN BY GOVERNMENT,
GOVERNMENT POLICY TOWARDS SMALL BUSINESS

Protective Measures
 More than 800 products have been reserved for
exclusive production in small sector (Buckets,
Cotton Ropes, Drawing & Mathematical
Instruments, Pickles & pappad)
 Cess has been imposed on certain products of
organized sector
 Legislative protection to small scale industries
Promotional Measures
 Scarce & imported raw materials provided at
reasonable prices & priority basis (e.g. steel)
 Industrial estates: industrial sheds at
concessional rates
 Central & state government extends preferences
in the purchase of goods from SSI
 Increasing sum of money allocated for SSI
developments in five year plans
 Providing assistance in various matters by
National Small Industries Corporation, Central
Small Industries Organisation
 SIDBI: Small Industries Development Bank of
India
 SIDF: Small Industries Development Fund
Institutional Arrangements
 NSIC- National Small Industries Corporation

 SSIDO- Small Scale Industries development

Organization
 All India Boards- All India Handicrafts Board,
All India Khadi and Village Industries Board &
Commission, The central Silk Board
 District Industries Centres
 Industrial Estates- 585 Industrial estates
providing infrastructure
 Industrial Cooperatives- Voluntary organisations
of small scale entrepreneurs formed on the
principles of cooperation
GOVT. POLICY TOWARDS SMALL
BUSINESS
REASONS FOR NATIONAL POLICY
 Small scale industries operate at the local or
state level. Different state governments & local
bodies have framed their own regulations and it
is necessary to coordinate and supplement their
efforts
 Full employment as a fundamental goal of
economic planning
 To tap local & latent resources & skills
 To preserve traditional skills

 Balanced development of all regions

 To provide technical & financial assistance to

Small Scale Sector
SMALL SECTOR INDUSTRIAL POLICY, 1991
 De-regulation & simplification of regulations &
procedures
 Increase in the investment limit in plant &
machinery of tiny enterprise from Rs. 2 lakh to
Rs. 5lakh irrespective of location
 Ensuring adequate flow of credit on a normative
basis
 Setting up of a special monitoring agency to
oversee the genuine credit needs of small scale
sector
 Integrated infrastructural development &
Technological Backup Services
 Technology Development cell setting up

 Setting up an Export Development Centre

MISTAKES OF ENTREPRENEURSHIP
There are common reasons for new business ventures
to fail. These causes of small business failure may
include:

1. Management mistakes
2. Lack of experience
3.Poor financial control
4.Weak marketing efforts
5. Failure to develop a strategic plan
6. Uncontrolled growth
7. Poor location
8. Improper inventory control
9. Incorrect pricing
10.Inability to make the “entrepreneurial transition”
HOW TO AVOID THE PITFALLS
 Know their business in depth.
 Develop a solid business plan in writing.

 Manage financial resources.

 Understand financial statements.

 Learn to manage people effectively.

 Set your business apart from the competition.

 Maintain a positive attitude.