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Other Traits:
a. Support to Govt. in policy making
b. Searching for new market
c. Establishment of new ventures
d. Conscious/ watchful about economic development of country
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [1]
6. Development of science and technological parks
7. Organization of seminars and workshops
8. Creation of literature
9. National Awards
10. Self-employment scheme
11. Development of special scheme
12. Increasing expenditure on research and development
13. Increase in subsidies
14. Preparation of Industrial map
15. Quick approval of project reports
Project Appraisal
Meaning of project appraisal: Appraisal of feasibility, Future profitability
Objectives behind project appraisal:
o Selection of project
o Evaluation of financial management
o Testing of proper investment
Feasibility criteria of a new project proposal:
(I) Technical feasibility:
a. Site and Position
b. Plant establishment
c. Technology and machinery
d. Building and plant
e. Availability of important resources: Rail, water, electricity, road, Land
f. Labor: skilled labor, source of labor
g. Planning and Indexation
h. A Management of waste and scrap material
(II) Commercial/Economic Feasibility:
a. Demand and supply of products
b. Size of market and future growth opportunity
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [2]
c. Type of competition
d. Marketing plan
e. Price strategy
f. Export and import opportunity
g. Sales/ Distribution of product
h. Future demand of product
(III) Financial Feasibility:
a. Cost of project and sources of finance
b. Production cost and profitability analysis
c. Analysis of financial statements: Balance sheet, ratios, fund flow, income statements.
d. Financial ratio analysis: capital structure, profitability
e. BEP Analysis
(IV) Managerial Feasibility:
a. Evaluation of managerial effectiveness
b. Statutory provisions
c. Evaluation of managerial ventures: Founders background, experience, eligibility, skills
d. Observations: FDI, entrepreneurial reputation
e. Evaluation and ability of promotors
(V) Social-economic feasibility:
a. National benefit
b. Social cost of project
c. Use of natural resources
Steps taken by the Government to develop and promote the small and ancillary
industries in our country
Protective Assistance:
A. Importance place in Industrial policy
B. Provisions in five year plans
C. Constitutions of various committees
D. Legitimate protection
E. Reservation of commodity
F. Exemption in Tax and Sub Tax
G. Exemption in Investment Limitations
Promotional Assistance:
A. Financial assistance
B. Technical Assistance
C. Industrial Estate
D. Industrial progress and development: Tool rooms, process development centers, Skills
Training centers
E. Marketing Assistance
F. Export promotion
G. Self-employment plan
H. Training and Entrepreneurship development program
I. Supply of Raw Material import
J. International coordination
K. Development of ancillary industries
L. Modernization
M. Collection of data
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [3]
N. Exemption in production taxes
O. Margin Money Scheme
P. Re-establishment of sick units
Q. Govt. Assistance scheme (Low interest loans)
R. Small industries Guarantee schemes
S. Transport assistance
T. Re-financing facilities for working capital
U. Instruments purchasing facilities on hire purchase system
V. Special assistance to backward case entrepreneurs
W. Co-Coperationalization
X. Publicity of publications
Y. National awards
Z. Sample Survey
AA. Entrepreneurship development programs
BB. Motivation to women entrepreneurs
CC. Equity Assistance
Institutional Assistance:
A. NSIC
B. SIDO
C. DIC
D. SIDBI
E. KVIC.
F. NIESBUD
G. SFC
Self- Employment
Self-employment: Self-employed is a situation in which an individual works for himself instead of
working for an employer that pays a salary or a wage. A self-employed individual earns his income
through conducting profitable operations from a trade or business that he operates directly.
Need of self-employment program:
1. Unemployment: Nature
a. Open unemployment
b. Semi-unemployment
c. Seasonal unemployment
2. Increasing Population
3. Increase in agricultural labor: High population, decrease in cottage industry, capitalization
4. Rural Poverty
5. Lack of capital
6. Seasonal nature of agriculture/ Dependency on weather
7. Lack of cottage industry
Importance of self-employment scheme in India:
1. Establishment of self-sufficient/dependent society
2. To achieve objectives of five year plans
3. Development of infrastructure facilities
4. Development of entrepreneurial technical skills
5. Creation of wealth/capital
6. Development of managerial capacity
7. Basic solution of unemployment
8. To minimize the socio-economic problems
9. Increase in national income
10. Encouragement of economic decentralization
11. Optimum utilization of human resources
12. Uplifting the weaker section of society
13. Poverty eradication
14. Creation of industrial environment
15. Other importance:
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [6]
a. Growth of economic activities
b. Divert energy in creative activities
c. Development of art, handicraft skills
Psychological and Sociological Theories of Entrepreneurship
1. The Psychological Model: Entrepreneurship gets boost when society has sufficient supply of
individuals with necessary psychological characteristics. These psychological characteristics
include:
Need for Achievement,
A vision Foresight,
Ability to face opposition.
These characteristics are formed during:
The individual’s upbringing:
by high standards of excellence
self-reliance and
Low father dominance
Main Theories are:
A. The Schempeter Model: Innovation
B. The McClelland Model: Theory of needs
C. Everett Hagen’s Model: Status dissonance, displaced groups, status with drawl
D. The John Kunkel Model: Supply of entrepreneurs is a function of social, political and economic
structure. Individuals perform various activities of which some are accepted by society while
others are not.
2. The Sociological Model:
a. Frank W. Young Model
b. The Max Weber Model
c. B.F. Hoselitz Model
d. Cochran’s Theory
e. Stockes’s Theory
Some important variables in Mega Environment
Economic Technological Political and Legal Socio-Cultural
GDP Trends Spending by Govt. for Anti-trust legislation Life style changes
R&D
Interest Rates Total industry Environment Career expectations
spending on R&D protection laws
Money Supply Focus of technology Tax laws Consumer activism
Inflation Rates Patent protection Special incentives Growth rate of
population
Unemployment Rates New products Foreign trade Regional shift in
commercialization and regulations population
Transfer from lab to
market place
Wage/Price controls Productivity Attitude towards Life expectancy
improvements foreign companies
Devaluation/ Recruitment laws Birth rate
Revaluation
Energy Availability Stability of Govt.
Disposable,
Discretionary Income
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [7]
Effectiveness of entrepreneurs
Analyzing the personal efficiency of an entrepreneur
Touch Stone of Entrepreneurs effectiveness
1. Planning orientation
2. Achievement orientation
3. Expansion orientation
4. Operational management
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [9]
The Process for Developing Entrepreneurial Skills:
1. To identify the opportunity
2. Opportunity transformation
3. Arranging necessary resources
4. Project planning
5. Presenting the project
6. Risk calculation
7. Forming the enterprise
8. Launching the project
Factors affecting mobility/speed of Entrepreneurship
1. Stage of technological development
2. Mode of business entrepreneurship
3. Government policy
4. Sources of capital
5. Density of population
6. Effects of war
7. Obstacles of business entrepreneurship
Implications of business entrepreneurship:
a. Internal structural changes
b. Change in pattern of foreign trade
c. Social implications
Characteristics of Entrepreneur
1. An Individual or group of individual
2. Optimistic outlook
3. Profit is the reward of risk
4. Engine of growth
5. Satisfaction is performance of work
6. Fiduciary Relationship
7. Innovative
8. Professional class
9. Autonomy
10. Establishment of new enterprise
11. Opportunity focused
12. Different from capitalist and investors
13. Resource providers
14. High achievers
15. Managerial entrepreneurs
16. Institutional Format
17. Leader
18. Profit return
Functions of entrepreneur:
1. Promotion Function:
a. Establishment of enterprise
b. Analysis of Govt. Policy
c. Market research
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [10]
d. Selection of ownership
e. Objectives formulation
f. Plant layout, location selection
g. Financial estimation, Financial planning
h. Size of business
i. Legal requirement
j. Organization building
k. Arrangement of resources
2. Risk Taking Functions:
a. Accidents
b. Thefts, robbery
c. Recession
d. Change in Govt. policy
e. Change in fashion trend
f. Fire
g. Natural disasters
h. Change in demand
i. Competitors
j. Change in cost of raw material
3. Organizing functions:
a. Right job to right man
b. Allotment of responsibility
4. Managerial Functions:
a. Planning
b. Organizing
c. Staffing
d. Commanding
e. Controlling
5. Financial Functions:
a. Estimating capital requirements
b. Sources of finance
c. Short term and long term finance
6. Innovation
a. New Product
b. New Process
c. New Raw Material
d. New Usage
e. New Designs
7. Marketing Functions:
a. Market analysis
b. Advertising
c. Sales and distribution
d. Packaging and labeling
e. Pricing
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [11]
Traits of successful entrepreneurs:
1. Foresight and forecasting
2. Intelligence
3. Proactive decision making
4. Initiation
5. Technological knowledge
6. Resourcefulness
7. Educated
8. Innovative
9. Progressive angle
10. Organizational ability
11. Honest, Patience, skilled
Pre-requisites of entrepreneurs:
1. Social arrangements
2. Law and Justice
3. Right of individual assets
4. Establishment of financial institutes
5. Capital market
6. Formation of fiscal and monetary policies
7. Development of able personnel
8. Development of fundamental facilities
9. Establishment of industrial estate
10. Others:
a. Entrepreneurship development centers
b. Tax benefits
c. Investment motivations
d. Govt. schemes
Business Qualities:
1. Entrepreneurial Ability
a. Positive attitude
b. Entrepreneurial philosophy
c. Desire of responsibility
d. Hopeful for success
e. Preference for moderate risk taking
f. Stimulation by feedback
g. Energetic behavior
h. Organizational efficiency
i. Monetary angle
j. Future orientation
2. Leadership ability
a. Task oriented
b. People orientated
3. Risk taking abilities
a. Personal risk taking
b. Development of creative ideas
c. Delegation of work
d. Awareness
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [12]
e. Risk analysis process
i. Risk evaluation
ii. Objective and target
iii. Search for options/alternatives
iv. Evaluation of options/alternatives
f. Execution
4. Decision making abilities
a. Problem identification
b. Search for alternatives
c. Selection of best alternative
d. Implementation of alternative (selected choice)
e. Behavioral planning
f. Time management
g. Human relation skills
h. Innovation
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [13]
f. Mechanism for identification of entrepreneurs
g. Research and literature
4. Environmental factors:
a. Physical environment:
i. Raw material
ii. Machines and tools
iii. Agriculture
iv. Plant layout, building
v. Geographical factors: land, forest, weather, sea, river
b. Economic environment
i. Type of economy
ii. Fiscal and monetary policies
iii. Tax system
iv. National income
v. Labor market, minimum wages
c. Morale Environment
i. Health, safety, social welfare
ii. Competition, income distribution
d. Social Environment
i. Industrial relation
ii. Achievement, Power
iii. Materialism
e. Political environment
f. Legal environment: Laws
g. Cultural environment
h. Technological environment
Concept of Entrepreneurship
1. Risk bearing concept
2. Innovative activity
3. Managerial Skill concept
4. Creative and leadership concept
5. High achievement capacity
6. Personality identity, Role transformation process concept
7. Professional concept
8. Organizational and coordination concept
9. Business oriented concept
10. Result oriented concept
Role/Importance of Entrepreneurship in the modern economy
1. Wheel of economic growth
2. Organizer of society’s productive resources
3. Basis of business
4. Helps in capital formulation (Wealth creation)
5. Contribution in production of new products
6. Development of new production techniques
7. Development of new markets
8. Establishment of new industrial enterprise
9. Contribution in development and expansion of existing enterprise
Entrepreneurship: Definition
1. Risk taking abilities
2. Organizational abilities
3. Innovation
Entrepreneurship is a risk bearing capacity as well as a capacity to innovate:
1. Risk bearing capacity
2. Innovative ability
Nature and Characteristics of Entrepreneurship
1. Risk bearing capacity
2. It is not Inborn but an achieved work
3. A life style
4. Innovative
5. Environment oriented activity
6. Existing in all business and economies
7. Motivational/Incentive activities
8. It is a process of developing, the utility, economic values and wealth creation
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [15]
9. Knowledge based on practice
10. Management is the vehicle of entrepreneurship
11. Based on thoughts and certain principles
12. Result oriented behavior
13. Business oriented tendency
14. As a profession
15. This is not personality trait but a behavior
16. Transformation of identity
17. Result of different change
18. Creation of resources
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [16]
Entrepreneurship: is the process of identifying opportunities in the market place, arranging resources
required to exploit the opportunities for long term gains. It is creating wealth by bringing together
resources in new ways to start and operate an enterprise. It is the process of planning, organizing,
operating and assuming the risk of a business venture. It is ability to take risk independently to make
more earnings in the market-oriented economy.
Identifying opportunities
Market
Arranging resources
Long term gains
Wealth creation
New Idea
Planning, Organizing
Risk taking
Entrepreneurship Enterprise
Entrepreneur
(Process of Action, (Object, Innovative
(Person)
Function) Creation)
Definitions of entrepreneurship:
1. Risk and uncertainty oriented definitions
a. Bear risk, risk taking
b. Man to industrialist
c. New product, uncertain price, market
2. Setting-up new venture oriented definitions
a. Seeing investment and production opportunity
b. Managing resources (capital, raw material, location, methods and labor)
c. Building new organization, enterprise
3. Innovation and Leadership oriented definitions
a. Creative and innovative response to environment
b. Schumpeter: Entrepreneurship is an innovative function. It is a leadership rather than an
ownership
c. PF Drucker: Maximization of opportunities in meaningful business
4. Composite skills oriented definitions
a. Many traits and qualities
b. Multi-dimensional performance and talent
c. Haward W Johnson: Entrepreneurship is a composite of these basic elements:
i. Invention
ii. Innovation
iii. Adaption
d. W. N. Loucks: Entrepreneurship is mixture of:
i. Willingness to take risk
ii. A desire for income and prestige
iii. The urge for self-expression
iv. Creativeness
v. Independence
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [18]
Nature and characteristics of Entrepreneurship
The main features of entrepreneurship are described below:
1. Economic Activity:
a. Wealth producing task
b. Putting resources in productive use
c. Production and distribution of goods/service
2. Creative activity:
a. Exploring new opportunities
b. Creates new jobs, new tasks, new ventures
c. Value creation, creation of wealth, capital
3. Purposeful activity
a. Earning Profit
b. Changing needs of society
c. Goal oriented activity
4. Risk bearing capacity:
a. Works under uncertainty
b. Chances of profit and losses
c. Non-insurable risk of future
5. Ability to innovate
a. Introducing something new, better
b. Entrepreneur is change agent
c. Creative response to change
6. Business oriented tendency
a. Starting new venture
b. Promote business orientation in society
7. Organizing Function:
a. Ability to bring productive resources together
b. Land, labor, capital, technology, knowledge and managerial talent
c. Build organization
d. Control and coordinate productive energies
8. Gap-Filling Function:
a. Bridge gab between human wants and available products
b. Satisfy the needs (Gap)
9. Dynamic Function:
a. Thriving(Successful) on chaos (disorder)
b. Copes with challenges and succeed
c. Proactive in changing environment
d. Uncertainties are market opportunities
10. Managerial and leadership function:
a. Direction
b. Create work culture
c. Team work
d. Cohesiveness among employees
11. Knowledge based practices:
a. Neither science or art, its practice
b. Knowledge is base
c. Use of experience for high achievement
d. Long practice of risk bearing behavior
12. Not a personality trait, but a behavior
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a. Risk taking
b. Enterprising behavior
13. Based on principles rather on intuition
a. Not based on inner feelings
b. Developed through certain principles
c. It is improved with subjects like economics, sociology, psychology etc.
14. Result of changes
a. Entrepreneurship grows with PEST changes
15. Essentially in every activity
a. Needed in politics, medicine, games etc.
b. Not confined to solely economic organizations.
16. Environment oriented activity
a. Fast changing environment
b. To survive and succeed, urgent imperative beyond excellence
17. Management is vehicle of entrepreneurship
a. Management is the agent through which all entrepreneurial decisions and plans are
implemented.
b. Bring new changes and improve through management
18. Low Risk:
a. Entrepreneurship is not gambling
b. Always take moderate risk
c. Calculated risk
19. Creation of resources:
a. Transforms raw materials into productive resources
b. Economic value creation and wealth creation
c. Creating utility
20. It is not a Natural but achieved work:
a. Not a natural phenomena
b. Created by efforts, vision and courage
c. Entrepreneurship is “duty”
21. Process of identity transformation:
a. Not only adopting new idea, new behavior
b. Identity formation
c. Role transformation
22. Essential in all economics:
a. Required for all types of businesses
b. Small or big, trading or manufacturing
23. Result oriented behavior
a. Emphasis on result, goal, achievement
b. Not imaginary plans on papers but targets
24. Professional activity:
a. Professional activity like engineering or law
b. Proper training of enterprise and risk taking
25. A life style
a. Systematic way of leading a life
b. Being an entrepreneur is more than a job or a career, it is a life style.
26. Systematic work:
a. Creative and purposeful task.
b. Organized as systematic work
27. Not a new concept:
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [20]
a. As old as humanity
b. America discovered by entrepreneurs, nourished by entrepreneurs, world economy by
entrepreneurs
28. Entrepreneurship vs management
a. Change in production process, discontinue phenomena
b. Management: coordination of on-going production process
29. Practical discipline:
a. Not genetic trait, all learn
30. Diversity:
a. Anyone has potential to become entrepreneur
b. Young, old age, male, female, consumers etc.
31. Independent way of life:
a. Independent, self-sustaining
b. Freedom from work hours, working from home,
c. More control over work-life
Classification of entrepreneurship:
1. Business entrepreneurship:
a. Conceive idea for new business
b. Create a business to earn profit
c. Known as business founders
d. Perform entrepreneurial functions
2. Trading Entrepreneurship
a. Related to trading activities not to manufacturing
b. Identify potential markets
c. Promote exchange of goods/services
3. Industrial entrepreneurship
a. Manufacturing or service units to satisfy needs of industries
b. Produces raw materials, new equipment, new sources of energy, machines and tools,
Packing materials, chemicals, semi-finished goods etc.
4. Service entrepreneurship:
a. Human side of entrepreneurship
b. Entrepreneurs depends on human skills
c. E.g. Fashion, computer retailing, software engineering, telecommunication, salons,
consultancy.
5. Agricultural Entrepreneurship:
a. Undertaking agricultural activities
b. Crops, fertilizers and other inputs
c. Plantation, dairy products, silk worm, farming, fisheries, apiculture, forestry etc.
6. Corporate Entrepreneurship:
a. Also known as intrapreneurship
b. Intra-corporate venturing
c. Entrepreneurship within existing business structure
d. New business venture, new organization structures
7. Small Business Entrepreneurship:
a. Operates local stores, grocery shops, restaurants
8. Women Entrepreneurship:
a. Owned by woman
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [21]
Importance and Benefits of Entrepreneurship
A. Importance to the entrepreneurs and common man
1. Provides independence, Autonomy
2. Means to earn a good living
3. Realizing One’s full potential
4. Opportunity to real high profit
5. Enjoy social status
6. Work as fun
7. Hero status
8. Self-reliant (autonomous) and self-sustaining life
9. Contribution to women liberty
10. Offers part time job opportunities
11. Family support
12. Realizing dreams
B. Importance to national economy and society
1. Dealing with uncertainty
2. Innovation
3. Job creation
4. Number of new start-ups
5. Managing resources
6. Capital formulation
7. Economic growth
8. Productivity
9. Technological advancement
10. Market place change
11. Contribution to large business
12. Promotes service economy
13. Provides international opportunity
14. Creating tomorrow
15. Social and ethical awakening
16. Managing in global environment
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [22]
Entrepreneur
Definition: An entrepreneur is a person who sets up a business or an enterprise. He is one who has
capability of risk bearing, initiative and skills of innovation. He looks for high achievements. He is a
creative thinker, an individual who combines in himself the role of innovator and risk bearer.
The word “entrepreneur” id derived from the French verb ‘entreprendre’. It means to ‘under take’.
Basics of an Entrepreneur:
Innovation
Risk
Enterprise/ Organization
Management
Skills
Urge/Achievement
Leadership
Vision
Growth
Characteristics of Entrepreneurs
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [23]
An Entrepreneur Possesses The Following Characteristics: (Robert D. Hisrich)
1 Motivator 5 Persistent problem solver
2 Self confidence 6 Initiator
3 Long term involvement 7 Goal setter
4 High energy level 8 Moderate risk taker
McClelland: A successful entrepreneur must be a person with technical competence, initiative, good
judgment, intelligence, leadership qualities, self-confidence, energy, attitude, creativeness, fairness,
honesty, tactfulness, and emotional stability.
Mental ability
Clear objectives
Business secrecy
Human relation abilities
Communication abilities
Technical knowledge
Entrepreneur:
1. Administrative Ability 2. Organizational skills 3. Intelligence
4. Creativity 5. Innovation 6. Clear objectives
7. Business secrecy 8. Sound Knowledge 9. Emotional stability
10. Public relation 11. Effective Communication 12. Technical Knowledge
An entrepreneur possesses the following qualities and performs these Leadership roles:
1 Visionary 5 Persistence
2 Urge to achieve 6 Open Discussion
3 Sense of purpose 7 Strategic expertise
4 Teamwork 8 Others: Delegation, conflict resolution, Values, Commination
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [24]
Entrepreneurial Functions
1. Planning the Project:
a. Idea generation
b. Determination of objectives
c. Selection of product line
d. Determination of the form of the organization (Individual, partnership, corporate or
cooperative etc.)
e. Estimation of capital needed
f. Selection of location
g. Selection of the capital resources
h. Studying the Govt. rules, regulations, Fulfilling the formalities
i. Market research and product analysis
2. Organizing:
a. Co-ordination of various factors
b. Optimum utilization of resources
3. Risk bearing:
a. Fire, Flood, Earthquake, War, Windstorm
b. Death of key person
c. Bankruptcy of customer
d. Theft
e. Stock Market/Real state
4. Management
a. Tracking day to day problems
b. Control and Direction of men and machinery efficiently
c. Planning and forecasting future expansion
d. Long term policies
5. Uncertainty Bearing
a. Uncertain trends in market
b. Trade credits
6. Innovation:
a. Better source of raw material
b. New Market, fields
c. Creation of monopoly
7. Implementation: (Later stages)
a. Diversification of production
b. Expansion the enterprise
c. Coordination with outside agencies (like suppliers, customers, financial agencies, Govt.
organizations etc.)
d. Cordial employee-employer relationship
e. Tracking labor problems
f. Keeping in touch with new policies, programs of land
g. Participating in the local industrial associations
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [25]
Environmental Factors
Two categories:
Internal environment: The internal environment is controlled by entrepreneurs up to certain extent,
although it creates complexity and hurdles.
The following components of internal environment must be considered by an entrepreneur:
a) Goals and objects of business
b) Business and managerial policies
c) Business ethics and moral standards
d) Availability of resources
e) Capabilities of business and prospects for development
f) Production methods, plants and machinery
g) Work environment and culture
h) Structure of organization
i) Business policies and strategy
j) Labor-management relations
k) Entrepreneurial development plans
l) Acts, policies towards social responsibilities
m) Achievement motivators
External environment: External forces are not controllable by the entrepreneurs. Hence, he should
take decisions after considering the effects and pressures of external environment. An entrepreneur
faces the following types of external environment:
1) Physical environment
2) Economic environment
3) Technological environment
4) Social Environment
5) Political environment
6) Legal environment
7) Ethical environment
8) Cultural environment
9) Government environment
10)International environment
Physical Environment:
a) Natural resources
b) Climate and temperature
c) Landscape
d) Electricity and Power
e) Road, airways, sea-ports
f) Communication network
g) Ecological conditions (Humidity, rainfall, Wind)
Economic Environment:
a) Economic system: Capitalist, Communist, Socialist and Mixed.
b) Economic Policies: Fiscal, Monetary, taxation system.
c) Nature of economy: Developed/developing
d) Trade cycles: Fluctuations in economy or trade cycles.
e) Structure of economy: National income, rate of capital formation, saving etc.
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [26]
f) Statutory Laws: Regulation of business
g) Consumer factors: Consumer taste, age, gender, living standard, income etc.
h) Financial resources: Availability of capital sources
i) Human capital: Knowledge, skills and abilities (KSA)
j) Raw material and machines: Supply of raw material, energy, tools and machines
k) Labor: Availability of technical labor, physical condition, wage-rates, productivity, unions etc.
l) Market, Price and competition: Size of market, price level of products, position of competitor.
m) Other economic factors: Demand, life cycle, purchasing power, national income, savings,
innovation etc.
Technological environment:
a) Changes in production methods
b) Development of new machinery, tools, and equipment designs
c) Development of new raw materials
d) New inventions to modernize plants, workshops and technical processes.
e) Exchange of technology between entrepreneurs and enterprising nations
f) Effects on purchasing, publicity media and means of transportation.
Social Environment:
a) Culture: ethical and risk bearing
b) Attitude towards business: attitude towards wealth creation, materialism
c) Work ethics: dedication with work, sense of duty, commitment to work
d) Collectivism: No self-motive, society’s welfare, entrepreneurship is social function
e) Ambitions: ambition to grow or remain satisfy
f) Education: Technical and practical education
g) Values: Morals, equity, freedom, work ethics.
h) Social mobility: Social mobility is the movement of individuals, families, households, or other
categories of people within or between social strata (layers) in a society. It is a change in social
status relative to one's current social location within a given society.
i) Religious traditions
j) Life style: Changing role of women, emphasis on quality of goods, recreational activity
k) Social Problems: Population, social responsibilities, need for safety in working
l) Class structure: rural/urban
m) Social institution: Family, marriage etc.
Political environment:
a) Political ideology of the state
b) Political administrative system
c) Public welfare concept of nation
d) Industrial democracy and worker’s participation
e) Functioning of political parties and pressure groups
f) Administrative work culture
g) Political stability in country
h) Constitutional provisions regarding business and industrial culture
i) Foreign policy of government
j) Functioning of political institutions: Legislature, executive and Judiciary
k) Nature and extent of state regulation
l) State intervention and regulation
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Legal Environment:
a) Securities and stockholder matters
b) Consumer complaints and protection
c) Fair employment practices
d) Product safety, worker safety and health
e) Government control
f) Air, water and noise pollution
g) Legislation controlling physical environment
h) Anti-monopolistic laws and regulation of trade practices
i) Legislation regulating competition and protecting consumers.
j) Price discrimination, misleading advertising, deceptive sales promotion
k) Other unfair trade practices
The more important laws that affect entrepreneurs in India includes the following:
Indian contract act 1872
Companies Act 1956
Monopolies and Restricted Trade practice act 1969
Foreign Exchange regulation Act 1973
Factories Act 1948
Import and Export Control Act, 1947
Essential Commodities Act, 1955
Industrial dispute Act 1947
Minimum wages Act
Partnership Act 1932
Sales and Goods Act 1930
Taxation Laws etc.
Ethical Environment:
a) Objective of enterprise: Maximum profit, reasonable profit or social objectives.
b) Investment of capital:
Investment of capital in various projects
Quantum of risk involved in establishing new business
Use and misuse of firm’s property
c) Issues related to customer:
Quality, price and usability of the products
Protection of consumer rights
Misleading publicity and advertising
Monopolistic practices etc.
d) Issues related to competition: Criticizing the policies and products of competitor
e) Issues related to government:
Timely payment of Taxes
Keeping proper accounts and books
Influencing election process
Implementing government policies and decisions
f) Issues related to national interest:
Priority to national schemes
Providing employment
Upliftment of backward classes
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Balanced development of country
Decentralization of economic power
Pollution
Bribery
g) Issues related to Community as a whole:
Paying proper role in civic affairs
Creating better living conditions
Becoming law abiding
Setting up socially desirable units
Improving productivity
Introducing innovation
Maintaining ‘green’ marketing
Cultural Environment:
a) Formed by art, religion, literature and life style
b) Cultural values: women liberalization, son of the soil, innovate or die.
c) Create value for society not for self.
d) Youth oriented society
Government Environment:
a) Laws related to product safety, product labelling, advertising, minority empowerment, and
pollution and worker safety.
b) Govt. supports entrepreneurs.
c) Provides basic facilities (road, rail, ports, energy), services, incentives, concessions
d) Providing peace, freedom, stability and legal protection to entrepreneurs.
e) Govt. commitment to economic development: entrepreneurs prosper
International Environment:
a) Rates of inflation in different countries with it (entrepreneur) trades
b) Trade barriers created by different countries
c) Tariffs imposed on goods
d) Trade promotional activities
e) Innovative products and services
f) Quality excellence of service rendered.
g) Global market structure and demographics
h) Changes in perceptions, knowledge and information technology
i) Research, production of machines and equipment, computers etc.
j) Commercial agreement.
Concept of Self-Employment
Characteristics of self-employed person:
1. He runs his own business independently in the face of risk and uncertainty for the purpose of
achieving profit and growth.
2. Assembles the necessary resources to capitalize on them
3. Has desires for responsibilities, high goals and to bear risk
4. Identifies opportunities
5. Creates own future
6. Entrepreneurial spirit and personality
7. Independent way of life
8. Eager to control his own destiny
9. Confidence in his abilities to succeed
10. More energetic, Future orientation
11. Always see potential rather than problems
12. Skill at organizing, right people putting together
13. Desire to make money, contribution to the country’s economy.
14. Enjoy the challenges of running business.
15. Risk taker, Free thinker and agent of change
Type of self-employment:
1. Aspiring entrepreneurs:
a. They dream to start business
b. Have not made the leap from their current employment into the uncertainty of a start-up
2. Lifestyle entrepreneurs:
a. They have developed an enterprise
b. Earn income for family
c. Small business, mom and pop shops
d. Mostly service entrepreneurs like graphic designers, artists, sales firms
3. Growth entrepreneurs:
a. Both desire and abilities to grow as large as possible
b. Most job generators in national economy
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Importance, Benefits of Self-Employment
Individual benefits or Objects:
1. To create own destiny:
a. Autonomy, independence
b. Control their destiny
c. Become own boss
2. To make the difference:
a. Opportunity to make difference
b. Feel satisfaction in doing differently, serve society
3. Feeling of self-expression or self-actualization
a. Opportunity to reach his full potential
b. Not boring job, entrepreneurship is exciting
c. Vision, enthusiasm
4. Huge Financial reward:
5. Trust and recognition
6. Fun and enjoyment
7. Contribution to women liberty
8. Offers part-time job opportunity
9. Family Support
10. Realizing dreams
11. Independence and freedom
12. Other reasons:
a. Rapid progress
b. Flexibility in life
c. Use their all skills
d. Freedom of decision making
e. To take challenges
Importance for national economy:
1. Creation of new venture and job
2. Innovation
3. Contribution to economic growth
4. Heroes of today’s market place
5. Wealth creators
6. Pioneers of today’s business success
7. Entrepreneurial revolution
8. To meet-socio-economic needs of country
9. Increase in national production
10. Balanced regional development
11. Distribution of economic power
12. Reinvestment of profits
13. Solving unemployment problem
14. Harnessing the youth vigor (strength)
15. Women protection
16. Other reasons:
a. Solving problem of price rise, monopoly
b. Optimum utilization of human resource
c. Self-sufficient society
d. To eliminate problems of large industries
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Potential Drawbacks of Self-Employment
1. Confrontation with risk
2. Uncertainty of Income
3. Long hours and hard work
4. Conflict with family and social life
5. High level of stress
6. Entrepreneurial ego (unrealistic optimism)
7. Entrepreneurial fear: Fear of failure
8. Complete responsibility
9. Discouragement: Obstacles destroys courage and optimism
10. Other problems and challenges:
1. May be Uncomfortable with changes
2. Tough economic choices
3. Both personal and professional sacrifice
4. Many different skills are required.
Self-Employment
Risk Reward
You will be alone You are your own boss
Events may be beyond control You can exercise greater control
May loose self-confidence Develops self-confidence
All decisions will be yours All decision will be yours
All losses will be yours All profits will be yours
Work may not be satisfying It will provide satisfaction in work
Long working hours Status in community
Affect social life Family may be involved in business
May affect family life Provide experience of multiple functions of job
Lack of success may depress you
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Project Report
Project: A project is an organized unit dedicated to the attainment of a goal, the successful completion
of a developed project on time, within budget, in conformance with pre-determined program
specifications.
A project is an approval for capital investment to develop facilities to provide goods and service.
Characteristics of Project:
1. Unique and non-repetitive activity
2. Coordinating inputs in direction of intended outputs
3. A program of action
4. Involves capital investment
5. Allocation of resources and generation of useful resources
6. Time bound investment
7. Distinguished program
8. Purposeful activity, Return
9. One-time activity
10. Has life cycle (start, building project, peak, decline, termination)
11. Interaction with other projects
Features of a project:
Unique and non-repetitive
Has life cycle
Interacts with other projects
Complexity
Define course of action
To have specific objective
Definite period of time
Project objective:
1. Maximization of:
a) Market value of equity
b) Net present value
c) Return
d) Present value of social costs and benefits
2. Increase in:
a) Internal rate of return at low risk
b) Net present value of monetary flows
Project Report
A project report is a written document pertaining to any investment proposal. It contains relevant
data, on the basis of which the project is appraised and found relevant to entrepreneurs.
The project report includes:
a) Written statement of what an entrepreneur proposes to take up
b) Preparation of detailed specifications, designs, drawing, plant layout, detailed design of the
process, time schedule for execution of the project.
c) Collection of details or a complete work plan for various processes of the project to be
implemented after the proposal has been finalized by the entrepreneur.
Nature or Characteristics of a Project Report:
A project report is a synthesis (mixture, combination) of relevant data in respect of a project.
Prepared after detailed study of all the aspects of a project
Complete analysis of inputs and outputs of project
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Working plan for implementation
Thorough investigation process covering economic, technical, social and commercial aspects
Only when a particular investment decision has been taken
Written document to any investment proposal
Blue print of all activities, guide to management
Analyzing opportunities
Objective or Importance of Project Report
1. To plan expected performance
2. Assessment of profitability
3. To know expected Inputs and Outputs
4. To evaluated organizational goals
5. To quantify the objectives
6. To gain financial support
7. Efficiency and control mechanism
8. Guides the course of action
9. Road map
10. To attract the lenders and investors
11. Serve as Master plan
12. Show feasibility
13. Helps in decision making
14. Ensure survival
Feasibility Report
It is a master report prepared from information collected through feasibility studies. It consists of
various tables, reports and statements. It incorporates introductory information on background of the
industry to which the project belongs. It provides adequate information to the project appraisal.
Objectives:
Overall worth of project
Nature and complexity of project
Economic and social benefit of project
Feasibility report is concerned with pre-investment decision. It provides basis on which the investment
decision is taken. Project report concerns with a post-investment decision, used as work plan for the
implementation of project.
Project Feasibility Analysis
Investment proposal must pass through the stage of checking out the feasibility. Project feasibility is a
test where the prima facie viability of the investment is evaluated. Evaluation is based on secondary
data. Project feasibility analysis cover the following areas:
1. Market feasibility
2. Technical feasibility
3. Financial feasibility
4. Economic feasibility
5. Commercial feasibility
6. Social-cost benefit analysis
Market Feasibility: Sales potential of market, also known as economic feasibility
Small Business Management and Entrepreneurship: Compiled by Dr. Vinit Mathur, Assistant Professor, IMS Bikaner. [39]
1. General economic factors and indicators
2. Demand and supply estimation
3. Identification of critical success factors
4. Market growth potential
5. Location of competitors
6. Demand and supply gap
7. Gross domestic production, per capita income, income disparity etc.
8. Population growth rate
9. Channel of distribution
10. Quantity and value of consumption
Technical Feasibility:
1. Availability of commercially exploited technology and its alternatives
2. The transplant ability of technology into local environment
3. Technological innovation rate in the product
4. Production processes
5. Capacity utilization rate
6. Availability of raw materials and other resources like power, gas, water, labor etc.
7. Equipment and fabrication facilities
8. A feasible product mix with by products
9. Facilities for affluent disposal
10. Infrastructural facilities
11. Township development
12. Project location
13. Proposed size in terms of economic size
14. Technical know-how of project
Financial Feasibility:
1. Assessment of the financial requirement both-fixed capital and working capital
2. Assessment of sources of finance
3. Debt equity ratio
4. Paying capacity of project e.g. dividends, interest on loans etc.
5. Projections about price of products
6. Cost of various resources
7. Cost of capital and refund schedule
8. Financial statements:
a. Balance sheet
b. Profit and loss account
c. Fund flow statement
9. Financial indicators are calculated derived from financial statements
Economic Feasibility:
1. Evaluation from the national angle, from the view point of economy as whole
2. Cost and benefit to the nation
3. Generation of employment, Tax revenue, saving from foreign exchange
4. Substitute to the imported products
Commercial Feasibility:
1. Process of procurement of machinery
2. Inviting tenders, placing orders
Social cost benefit analysis:
1. Contribution to the society, nation
2. Impact on economy
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