Entrepreneurship

Development
 INTRODUCTION
Ifyou know that there are millions of
unemployed youth in the country and by
the time you graduate, this number would
have increased substantially? Do you want
to be part of that group which keeps
knocking from pillar to post, checking
with employment exchanges, relatives,
friends, and neighbours and still not able
to get a job to their liking and then settle
for a second or third rate job?
You can also choose to be like Mr. Patel of
Nirma who was a chemist’s assistance and
has a Rs. 2500 crore company today. Did you
know that the original Mr. Bata was a
cobbler? And now has stores in more than
30 countries all over the world. Or you could
be like Dhiru bhai Ambani who started life
as a clerk in a French company in Aden. He
was not born into a business family nor did
he possess an MBA degree and yet, he is a
household name in India and figures in 2
the Forbes list of the richest Asians.
 Lakshmi Mittal, the steel giant, Satbir
Bhatia of Hotmail fame and Narayan
Murthy of Infosys are some other names in
the endless list you could choose from.
You can also definitely have an opportunity
for a career in entrepreneurship.
 Study of “Entrepreneurship
Development” will help you to
understand the process of setting up a
small business, running it successfully
and seeing it grow. And let us remind you
that this career opportunity is not only for
boys but also for girls - all those girls who
think smart, are ready to act and script
the story of their own life - like Shehnaz
Hussain or Ritu Kumar or Kiran
Majumdar Shaw.
 CONCEPTS
ENTREPRENEUR :
An entrepreneur is a person who starts an
enterprise. He searches for change and
responds to it. A number of definitions have
been given of an entrepreneur-
The economists view him as a fourth factor of
production along with land labour and capital.
The sociologists feel that certain communities
and cultures promote entrepreneurship like, for
example in India we say that Gujaratis and
Sindhis are very enterprising.
Still others feel that entrepreneurs are
innovators who come up with new ideas for
products, markets or techniques.
To put it very simply an entrepreneur is
someone who perceives opportunity,
organizes resources needed for exploiting
that opportunity and exploits it. Computers,
mobile phones, washing machines, ATMs,
Credit Cards, Courier Service, and Ready to
eat Foods are all examples of entrepreneurial
ideas that got converted into products or
services.
Definitions of an entrepreneur

From the French word ‘entrependre’ meaning

one who undertakes or one who is a ‘go-
between’.

1725: Richard Cantillon: An entrepreneur is a

person who pays a certain price for a product to
resell it at an uncertain price, thereby making
decisions about obtaining and using the
resources while consequently admitting the risk
of enterprise.
 1803: J.B. Say:
An entrepreneur is an economic agent
who unites all means of production- land of
one, the labour of another and the capital of
yet another and thus produces a product. By
selling the product in the market he pays
rent of land, wages to labour, interest on
capital and what remains is his profit. He
shifts economic resources out of an area of
lower and into an area of higher productivity
and greater yield.
 WHO IS AN ENTREPRENUER
• He is a person who develops and owns his own
enterprise
• He is a moderate risk taker and works under
uncertainty for achieving the goal.
• He is innovative
• He peruses the deviant pursuits
• Reflects strong urge to be independent.
• Persistently tries to do something better.
• Dissatisfied with routine activities.
• Prepared to withstand the hard life.
• Determined but patient
• Exhibits sense of leadership
• Also exhibits sense of competitiveness
• Takes personals responsibility
• Oriented towards the future.
• Tends to persist in the face to adversity
• Convert a situation into opportunity.
 ENTREPRENEURSHIP
Entrepreneurship can be described as a process of
action an entrepreneur undertakes to establish his
enterprise.
 Entrepreneurship is a creative activity. It is the ability
to create and build something from practically
nothing. It is a knack (skilful way) of sensing
opportunity where others see in contradiction and
confusion. Entrepreneurship is the attitude of mind
to seek opportunities, take calculated risks and
derive benefits by setting up a venture. It comprises
of numerous activities involved in your mind,
regarding creation and running an enterprise.
According to Peter Drucker
Entrepreneurship is defined as ‘a
systematic innovation, which consists in
the purposeful and organized search for
changes, and it is the systematic analysis
of the opportunities such changes might
offer for economic and social innovation.’
Entrepreneurship is a discipline with a
knowledge base theory. It is an outcome of
complex socio-economic, psychological,
technological, legal and other factors. It is
a dynamic and risky process. It involves a
fusion of capital, technology and human
talent. Entrepreneurship is equally
applicable to big and small businesses, to
economic and non-economic activities.
AN ENTREPRENEURIAL CAREER

Entrepreneurship plays an important role in

the economic growth and development of
nation. It is a purposeful activity includes in
initiation, promotion and distribution of
wealth and service. An entrepreneur is a critical
factor in economic development and an
integral part of the socio-economic
transformation.
It is a risk taking activity and challenging tasks,
needs utmost devotion, total commitment and
greater sincerity with fullest involvement for his
personal growth and personality. The
entrepreneurial career is not a one day job nor it
is bed of roses. Prosperity and success never
come easily. It takes time and needs hard work.
Systematic planning and business
acumen(ability to make good judgement &
quick decisions) to be successful entrepreneur.
Major Motives Influencing an
Entrepreneur
 Factors Having an Impact on Starting and Operating
a Business
 How Cultural Factors Influence
Entrepreneurship
Culture refers to the customary practices and
beliefs that have a significant impact on the basic
values, perceptions, preferences, and behaviours
of people. Culture and entrepreneurship
intervene in many ways.
 People traditionally engaged in businesses have
a pro business attitude and disdain working as
employees.
 Business school students come under the
missionary zeal of teachers who exhort them to
become entrepreneurs even if the opportunity
cost is very high.
 The culture of consumerism where people
desire material goods encourages
entrepreneurship within the area as returns
from a business become more than returns
from a job.
 People engaged in jobs and other services
pressure their children to find secure jobs and
crush their entrepreneurship spirit at a very
early age.
 A culture of thrift (saving) where people spend
less and save for a rainy day discourages
entrepreneurship within the local community
as the returns from a business become less
attractive compared to returns from a job.
  How Political Environments Support or
Suppress Entrepreneurship
The following are some of the ways in which the
political environment influences
entrepreneurship:
 Unstable political conditions where government
policies change frequently discourage business, as
investors fear for the safety of their investments.
 Government support to economic development
through infrastructure development, industrial
parks, and like to encourage entrepreneurship.
 High taxes that cut into the returns usually
discourage entrepreneurs. On the other hand, tax
holidays to encourage business attract start-ups.
 The availability of infrastructure and utilities such
as good roads, power, communication facilities,
and lack of corruption and bureaucratic delays in
obtaining such utilities encourage
entrepreneurship.
 Economic freedom in the form of favourable
legislation and few hurdles to start and operate
businesses encourage entrepreneurship.
 While most businesses accept laws related to the
safeguard of labour rights and the environment,
some countries have retrograde laws that make
compliance very difficult and time consuming.
Such legal hurdles create a barrier to
entrepreneurship.
 How Economic Factors Influence Entrepreneurship
The nature of the economy is a major factor that
influences entrepreneurship.
 The general purchasing power of the people,
manifested by income levels and economic prosperity
of the region, plays a major role in the success of
entrepreneurial ventures.
 During times of economic slowdown or recession, the
purchasing power declines and people remain reluctant
to invest, affecting entrepreneurship adversely.
 In a subsistence economy, most of the people are
engaged in agriculture, consuming most of their output
and bartering the rest for simple goods and services.
Entrepreneurial opportunities are few in such
scenarios.
 Availability of Resources as a Major Factor that Affects
Entrepreneurship
 Critical factors that influence
entrepreneurship include the availability
of resources such as capital, human assets,
raw materials, infrastructure, and utilities.
 Capital remains indispensable to start an
enterprise. The availability of capital
allows the entrepreneur to bring together
other factors and use them to produce
goods or services.
 The importance of human assets or
employees can never be underestimated. No
enterprise succeeds without a skilled and
committed workforce.
 The very existence of the business depends on
the availability of raw materials to process.
 Physical infrastructure and utilities such as
good roads, parking, communication
facilities, and power all play a crucial factor in
the seamless functioning of a business.
 How Entrepreneurial Skill Sets and Psychological
Orientation Affects Entrepreneurship
 All other factors notwithstanding, the success of
an entrepreneurial venture depends on the
entrepreneur. The entrepreneur is the leader and
driver of the venture, and requires the following
skill-set and orientation for success:
 Hard work and persistence
 Ability to manage and minimize risk
 Ability to draw up a comprehensive business
plan, and having a contingency plan ready
 A strong need-orientation that provides the
inclination to achieve things
 With the collapsing trade barriers bringing in
greater opportunities, and job security passé, the
conditions for entrepreneurship are better than
ever before.
 Factors Affecting
Entrepreneurial Growth
Project Formulation
Normally, small-scale enterprises do not
include sophisticated technique which is
used for preparing project reports of large-
scale enterprises. In fact, what and how
much information will be given in the
project report depends upon the size of
the unit as well as nature of the
production.
 Project formulation divides the process of
project development into eight distinct and
sequential stages are:
1) General Information.
2) Project Description.
3) Market Potential.
4) Capital Costs and Sources of Finance.
5) Assessment of Working Capital
Requirements.
6) Economic and Social Variables.
7) Project Implementation.
1) General Information:
The information of general nature given in
the project include the following,
 Bio-data of Promoter: Name and address
of entrepreneur; Qualification; Experience
and other capabilities of the entrepreneur, if
these are partners, state these characteristics
of all the partners individually.
 Industry Profile: A reference of analysis of
industry to which the project belongs, e.g.
Past performance; present status, its
organisation, its problems etc.
 Constitution and Organisation: The
constitution and organisation structure of
the enterprise; in case of partnership firm,
its registration with Registrar of firms;
application for getting Registration
Certificate from the Directorate of
Industries/District Industry centre.
 Product Details: Product utility, product
range; product design; advantages offered
by the product over its substitutes, if any.
2) Project Description:
A brief description of the project covering
the following aspects is given in the project
report.
 Site: Location of enterprise; owned or
leasehold land; Industrial area; No
objection certificate from the Municipal
Authorities if the enterprise location falls in
the residential area.
 Physical Infrastructure:
i. Raw Material: Requirement of raw
material, whether inland or imported,
sources of raw material supply.
ii. Skilled Labour: Availability of skilled
labour in the area, arrangement for
training labourers in various skills.
 Utilities: These include:
i. Power: Requirement for power, load
sanctioned, availability of power.
ii. Fuel: Requirement for fuel items such as
coal, coke, oil or gas, state of their
availability.
iii. Water: sources and quality of water
should be clearly stated in the project
report.
 Pollution Control: The aspects like scope of dumps,
sewage system and sewage treatment plant should be
clearly stated in case of industries producing
emissions.
 Communication System: Availability of
communication facilities, e.g; telephone, telex etc.
Should be stated in the project report.
 Transport Facilities: Requirement for transport,
mode of transport, distance to be covered, should be
stated in the business plan.
 Other Common Facilities: Availability of common
facilities like machine shops, welding shops and
electrical repair shops etc. Should be stated in the
report.
 Production Process: A mention should be
made for process involved in production
and period of conversion from raw material
into finish goods.
 Machinery and Equipment: A complete
list of items of machinery and equipments
required indicating their size, type, cost
and sources of their supply should be
enclosed with the project report.
 Capacity of the Plant: The installed
licensed capacity of the plant along with
the shifts should also be mentioned in the
project report.
 Technology Selected: The selection of
technology, arrangements made for
acquiring it should be mentioned in the
business plan.

 Research and Development: A mention

should be made in the project report
regarding proposed research and
development activities to be undertaken in
future.
3) Market Potential :
While preparing a project report, the following
aspects relating to market potential of the
product should be stated in the report-
i. Demand and Supply Position: State the
total expected demand for the product and
present supply position. This should also be
mentioned how much of the gap will be filled
up by the proposed unit.
ii. Expected Price: An expected price of the
product to be realised should be mentioned in
the project report.
 Marketing Strategy: Arrangements
made for selling the product should be
clearly stated in the project report.
 After Sales Service: Depending upon the
nature of the product, provisions made for
after-sales service should normally be
stated in the project report.
 Transportation: Requirement for
transportation means indicating whether
public transport or entrepreneur's own
transport should be mentioned in the
project report.
4) Capital Costs and sources of Finance:
An estimate of the various components of
capital items like land and buildings, plant
and machinery, installation costs,
preliminary expenses, margin for working
capital should be given in the project
report. The present probable sources of
finance should also be stated in the project
report. The sources should indicate the
owner’s funds together with funds raised
from financial institutions and banks.
5) Assessment of Working Capital
Requirements:
The requirement for working capital and its
sources of supply should be carefully and clearly
mentioned in the project report. It is always
better to prepare working capital requirements
in the prescribed formats designed by limits of
requirement. It will minimise objections from
the banker’s side.
 Product Development

(Improvement in
its value, quality)
  Product Development
Definition
1) The creation of products with new or
different characteristics that offer new or
additional benefits to the customer.
2) Product development may involve modification of
an existing product or its presentation, or formulation
of an entirely new product that satisfies a newly
defined customer want.
3) The overall process of strategy, organization,
concept generation, product and marketing plan
creation and evaluation, and commercialization of a
new product.
 How do you know when you need new products?
Early detection of a problem with existing products is
critical. The following eight symptoms of a declining
product line will provide clues far enough in advance
to help you do something about the problem before it's
too late. Not all the symptoms will be evident in every
situation, but you can start suspecting your product
line when more than just one or two crop up.
1. You're experiencing slow growth or no growth.
2. Your top customers are giving you less and less
business.
3. You find yourself competing with companies you've
never heard of.
4. You're under increasing pressure to lower
your prices.
5. You're experiencing higher-than-normal
turnover in your sales force.
6. You're getting fewer and fewer inquiries
from prospective customers.
7. Customers are asking for product changes
you can't or don't want to make.
8. Some of your competitors are leaving the
market.
 Market Survey and Research

Businesses use surveys to collect consumer data

 Entrepreneurs specialize at creating innovative
ideas for new products and services, but ideas
that sound good on paper are not always good in
practice. Determining what consumers want and
designing products and services that fulfil those
wants is essential to the success of a business.
Businesses use market surveys to gather
information that aids in market research.
 Market Survey Basics
Market research describes the gathering and
analysis of market data, such as consumer
preferences, trends in market prices and the
presence of competing products.
 A market survey can describe any study
that gathers information directly from
consumers by asking them questions
about their preferences, habits and
experiences. The purpose of a market
survey is to provide business managers
with insight about their target customers,
such as how much money they spend on
certain types of products, whether they
use competing products and the interest
level for new products.
  Types of Market Surveys
Market surveys can be administered in several
ways.
1. Paper surveys
2. questionnaires that businesses hand out in public
3. mail to consumers are common forms of market
surveys.
Businesses such as restaurants and service
companies often use questionnaires to gather
feedback about consumer experience. Some
businesses conduct oral market surveys over the
phone, while others conduct surveys
electronically via email, on official websites or
through third-party websites dedicated to market
surveys.
  Benefits of Surveys
Market surveys help businesses make better
decisions about,
1. Types of products and
2. Services they offer,
3. Prices,
4. How to deal with competitors and
5. Whether to enter or exit markets.
Analysis of market surveys can prevent a
business from making a costly mistake such as
launching a new product or service that doesn't
fulfil a need in the market, getting into a market
that is saturated with competitors and setting
prices too high or too low. Surveys can help
entrepreneurs assess the viability of new ideas.
  Limitations of Surveys
The effectiveness of market surveys can be
limited by a variety of underlying factors.
1. The manner in which market researchers
phrase survey questions can have a large
impact on the way consumers respond, so
researchers that pose leading questions
can get skewed results.
2. In addition, consumers may not always
answer truthfully, and they may feel
pressured to answer in a certain way to
please researchers.
 Demand forecasting techniques
 Demand forecasting is the activity of
estimating the quantity of a product or service
that consumers will purchase. Demand
forecasting involves techniques including both
informal methods, such as educated guesses,
and quantitative methods, such as the use of
historical sales data or current data from test
markets. Demand forecasting may be used in
making pricing decisions, in assessing future
capacity requirements, or in making decisions
on whether to enter a new market.
 What is a demand forecast?
 A demand forecast is the prediction of what will happen to your
company's existing product sales. It would be best to determine
the demand forecast using a multi-functional approach. The
inputs from sales and marketing, finance, and production
should be considered. The final demand forecast is the
consensus of all participating managers. You may also want to
put up a Sales and Operations Planning group composed of
representatives from the different departments that will be
tasked to prepare the demand forecast.
 Determination of the demand forecasts is done through
the following steps:
 • Determine the use of the forecast
 • Select the items to be forecast
 • Determine the time horizon of the forecast
 • Select the forecasting model(s)
 • Gather the data
 • Make the forecast
 • Validate and implement results
 Preparation of Preliminary Project Reports
 A project report is like a road map. It describes the
direction the enterprise is going in, what its goal are, where
it wants to be, and how it is going to get there.
 It also enables an entrepreneur to know that he/she is
proceeding in the right direction.
 CONTENTS OF THE PROJECT REPORT:
1. General information.
2. Promoter. ( education, work experience, project related
exp.)
3. Location.
4. Land & building.
5. Plant & Machinery.
6. Production Process.
7. Utilities.
8. Transport & Communication.
9. Raw Material.
10. Manpower.
11. Products.
12. Market.
13. Requirement of Working Capital.
14. Requirement of Funds.
15. Cost of production & profitability of first ten years.
16. Schedule of Implementation.
 Project Appraisal
 Definition
 Systematic and comprehensive review of the
economic, environmental, financial, social, technical
and other such aspects of a project to determine if it
will meet its objectives.
 Introduction
Project appraisal is the process of assessing and
questioning proposals before resources are committed.
It is an essential tool for effective action in community
renewal. It’s a means by which partnerships can
choose the best projects to help them achieve what
they want for their community.
 But appraisal has been a source of confusion and
difficulty for projects in the past. Audits of the
operation of Single Project Budget schemes have
highlighted concerns about the design and operation
of project appraisal systems, including:
 Mechanistic, inflexible systems
 A lack of independence and objectivity
 A lack of clear definition of the stages of appraisal and
of responsibility for these stages
 A lack of documentary evidence after carrying out the
appraisal