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
anidea. In our context, we take anideato 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:strategyandoperating 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
anotherfactor which influences the emergence
offactor ofentrepreneurship. Entrepreneurship
is developed if there is mobile and flexible
laborforce. 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
forentrepreneurship 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 the1850s.
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
ofentrepreneurship..
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

ofrequired resources for the entrepreneurs.

This is because a successful
entrepreneurcontributes 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
ofentrepreneurship. 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 1860s 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 dont 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 ANENTREPRENEUR

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 cant 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 Enterprises

Parttime 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 onthejob
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.

Parttimers 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.