enterpreneur notes

8/6/2019 Enterpreneur Notes

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Entrepreneurial Development

Entrepreneur meaning: Evolution

1. The word entrepreneur is derived from French verb entrepreneur which meansto

undertake, entrepreneur means an organizer of musical or other entertainments.

2. Oxford English dictionary 1897 entrepreneur means the director or a manager of public

musical institution.

3. In 16th century it was applied to those who were engaged in military expeditions.

4. In 17th century it was extended to cover civil engineering activities likeconstruction

and fortification.

5. 18th century entrepreneur used to refer economic aspects.

The term entrepreneur used in various views they are classified into three types

1. Risk Bearer

Richarde cantillon an Irishman living in France who used first this term entrepreneurin

18th century.

He defined entrepreneur as an agent who buys factors of production of certainprices

in order to combine them into a product with a view to selling it at uncertain pricesin

future.

F.H. Knight: entrepreneur to be a specialized group of persons who bear uncertainty

which means the risk which cannot be insured against and is incalculable. He says arisk


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can be reduced through the insurance principles where the distribution of theoutcome is

known, but uncertainty is the risk which cannot be calculated.

2. As an organizer:

Jean Baptiste says an aristocratic industrialist, according to him entrepreneur is one

who combines the land of one , the labor of another and the capital of yet anotherand

produces a product by setting the product in the market , he pays interest oncapital, rent

on land and wages to laborers and what remains is his profit . so he is an organizer.

3. As an innovator:

Joseph A Schumpeter says that entrepreneur is one who

- introduces a new product in the market,

- instituting of a new production technology.

- Opening of a new market.

- The discovery of new sources of supply of raw material

The carrying out of the new form of organization of any industry by creating of a

monopoly position or breaking up of it.

Thus entrepreneur can be defined as a person who tries to create something new,

organizes production and undertakes risks and handles economic uncertaintyinvolved in

enterprise.

The difference between an inventor and innovator.

Inventor is one who discovers new methods and new materials.

Innovator is one who utilizes inventors and discoveries in order to make new

combinations.


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Who is an entrepreneur: is a person responsible for setting a business. He whobrings

2

Unit 1

over all change innovation and looks for high achievements. He is an integratedman with

outstanding leadership qualities. He works for well being of the society.

Definitions: according to walker a true enterprise is one who is endowed with more

than average capacity in the task of organizing and coordinating the various factorsof

production he should be a pioneer captain of industry

According to J.B.Say an entrepreneur is an economic agent who unit all means of

production the labor force of the one and capital or land of the other and who findsthe

value of the product its results from their employment The reconstitution of theentire

capital that he utilizes and the values of the wages, the interest and the rent whichhe pays

as well as profit belonging to himself.

Definitions: Peter F Drucker : an entrepreneur is one who always searches for

change responds to it and exploits it an opportunity., innovation is the specific toolof

entrepreneurs the means by which they exploit change as an opportunity for adifferent

business or service.

Robert D hisrucich : believed that an entrepreneur is the person who will establish a


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successful new business venture. Besides he must also be a visionary leader aperson

who has great dreams.

Martin Luther King believed that an entrepreneur should have a dream and work

against all obstacles to achieved it.

Hagen E E feels an entrepreneur is an economic man who tries to maximize hisprofits

by innovators and problem solving.

The new encyclopedia Britannica: says that an entrepreneur is an individual whobears

the risk of operating a business in the face of uncertainty about future conditions.

Characteristics of an entrepreneur:

Hard work (Long hours) willing ness to work hard, endlessly in the beginning andthe

same becomes their whole life.

Desire for high achievement: they have a strong desire to achieve high goals in

business, which helps them to overcome from obstacles, suppress anxieties and soon.

Highly optimistic: they are not disturbed by the present problems faced by them. They

are optimistic for future course of action.

Independence: they do not like to be guided by others ad to follow the routine, theylike

to be independent in the matter of their business.

Foresight: they will visualize the like changes to take place in the market, consumer

attitude, technological developments etc.

Good organizer: they bring together all reasons required for starting up anenterprise and


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then to produce goods.

Innovative: they understand the changing taste of customers from time to time and

according them produce the product.

Organizer, Capitalist, Change agency, Risk taker, Decision maker, Visionary,

Problem solver, High achiever, Sound technological knowledge, Self confidence,

Functions of an entrepreneur

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Idea generation and scanning of the best suitable idea.

Determination of the business objectives

Product analysis and market research

Determination of form of ownership / organization

Completion of promotional formalities

Raising necessary funds

Procuring machinery and material

Recruitment of men

Undertaking the business operation.

Concept of entrepreneurship:

According to A.H. Cole enterprise is the purposeful activity of an individual or a

group of associated individuals, undertaken to initiate, maintain profit by productionor

distribution of economic goods and services.


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According to Schumpeter: entrepreneur is based on purposeful and systematic

innovation. it included not only the independent businessman but also companydirectors

and managers who actually carry out innovative functions.

Entrepreneurship according to Higgins entrepreneurship is meant by the function of

seeking investments and production opportunities, organizing an enterprise toundertake

a new production process raising capital, arranging supply of raw materials, findingsite,

introducing a new techniques and commodities, discovering new sources of rawmaterials

and selecting top managers for days to day operations of the enterprise.

Types of entrepreneurs: Clarence danhof: classified entrepreneurs into four types

1 Innovating Entrepreneurs: one who introduces new goods, inaugurates newmethod

of production, discovers new market and reorganizes the enterprises they alwayslook

forward to change and improvement

2. Imitative Entrepreneurs: they will not innovate the changes by themselves, they

will only imitate new techniques and technology innovated by others, they aresuitable

for the under developed regions.

3. Fabian Entrepreneurs: they initiate when it becomes perfectly clear that failure to

so would result in a loss of the relative position in the enterprise

4. Drone Entrepreneur: they are refused to adopt opportunities and changes in


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production formulae even if returns reduced, they suffer from losses but they arenot

ready to make changes in their existing production methods.

Some more types of entrepreneurs listed by behavioral aspects.

Solo operators who essentially work alone and if needed, employ a few employeesin the

beginning, most of them start business like them.

Active Entrepreneurs: who start an enterprise as a joint venture all of them actively

participate in the operation of the business.

Inventors: by their competence inventiveness invent new products, they areinterested in

research and innovation activities.

Challengers: who enter into industry because of the challengers it presents whenone

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challenge seems to be met they begin to look for new challenges.

Buyers: they do not like to bear much risk, in order to reduce risk involved inbusiness in

setting up a new enterprise they like to buy the ongoing one.

Life timers: they take business as an integral part of the family enterprise whichmainly

depends on exercises and personal skill fall in this type of enterprise.

Distinction between an Entrepreneur and a Manager


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Particulars

Entrepreneur

Motive

The main motive of an

entrepreneur is to start a

venture by setting up an

enterprise

Status

An entrepreneur is the

owner of the enterprise

Risk Bearing

Rewards

Innovation

Qualification

He bears all risks and

uncertainty involved in

running the business.

He gets profit which is

highly uncertain

He thinks an produces

goods according to the


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changing demands. he is

innovator

An entrepreneur needs

to possess qualities and

qualifications like high

achievement

motive,

foresight,

riskbearing

abilities and so on.

Manager

The main motive of a

manager is to render these

services in an organization

which is already set up.

A manager is an employee

of the enterprises owned by

the entrepreneur.

A manager as a servant

does not bear any risk

involved in the enterprise

He gets salary which is

certain and fixed


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He executes the plan

prepared by entrepreneur.

he

transfers

the

entrepreneurs idea into

practice.

A manager needs to possess

distinct qualifications in

terms of sound knowledgeand management theory and

practice

Intrapreneur : they emerge from within the confines of an existing enterprise

Difference between Intrapreneur and Entrepreneur

Entrepreneur

Intrapreneur

An entrepreneur is independent in his An intrapreneur is dependent on the

operations.

entrepreneur the owner.

An entrepreneur himself raises funds Funds are not raised by the Intrapreneur.

required for the enterprise.

Entrepreneur bears the risk involved in An Intrapreneur does not fully bear the risk

business.

involved in business.


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The entrepreneurial scene in India

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It is divided into 3 parts

1. the past scenario Pre- Independence and Post Independence

2. the Current scenario

3. the future

The past scenario: Evolution of Indian Entrepreneurship: the evolution of Indian

Entrepreneurship can be early as Rig Veda, when metal handicrafts had existed;people

were organized in a particular type of economic and social grouping of the village

community. The elaborate caste based division of the population consisted of farmers,

artisans, soldiers and priests. The society was divided into four main castes sych as

shudra, vaishya, kshatriya, Brahmin. The shudras provided services, vaishya business,

kshatriya protection, and Brahmin knowledge. There was localization in thesense

that whatever that was produced, it was for the use of their won village. Theconcept of

self sufficiency was the order of the day.

First, on the banks of the river cities flourished , later on organized industrialactivity

developed among the Indian artisans in few products in the cities of Benaras,Allalabad,

Gaya, Puri and Mirzapur in the north, Bombay and Ahmedabad in the west, Madrasin

the south slowly workshops called Kharkhanas came into existence and theorganized


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activity took shape. The craftsman was brought into associations of guilds on thewhole,

perfection in art, durability, attraction, qualities that brought name and fame toIndia in

the past.

The kings and rulers encouraged and promoted the craft. Bengal enjoyed world

wide celbrity for cotton silk, Ahmedabad for duppattas and dhotis, Nagpur for silkand

metal ware, kanchepuram and mysore for silk sarees. Thus India enjoyed a premierstatus

in international trade with the help of its international market because people

startedpreferring imported items and the Indian craftsman did not change their style,design, and

were unwilling to adapt to the changing tastes and needs of the people.

East India Company: the manufacturing entrepreneurship in India emerged due to

the arrival of British East Indian Company. The company exports of raw materialsand

import of finished goods. In India labor was inexpensive, so it was beneficial for the

British to manufacture in India.

Swadeshi Campaign : i.e. emphasis on the use of indigenous goods provided the

required boost to Indian entrepreneurship . jamshedji tata even named his first millas

swadeshi mill . the second wave of entrepreneurial growth began after the firstworld

war. During this priod the relative importance of parses declined and Gujaratis,Marwaris

Vaishyas and in south India raja Muthiah chettiar , T.V.Sundaram Iyengar and others

emerged as entrepreneurs. In 1936 the managing agency system attracted many tothe


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entrepreneurial scene sri Dwarkanath Tagore encouraged others to form joint stock

companies and invented a distinct method of management

Thus the four factors that contributed to the growth of entrepreneurship in the

preindipendence era were the advent of East India Company, the swadeshicampaign, the

First World War and emergence of managing agency system.

Ideology of Mahatma Gandhi on entrepreneurship

After independence the ideology of Mahatma Gandhi greatly influenced the policies

of the new government, he had stressed on six important considerations in policy

formulation. They are

1. large size and population of the country swadeshi movement

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2. wide agricultural base diversified culture

3. self confidence

4. trustee ship

5. 80% rural population

6. low level of education

According to the post independence period witnessed the Indian governmentforming

various institutions such as small scale institutions and financial corporationsbecause

of the support of the government the number of small scale enterprise increasedfrom

121619 in 1966 to 190727 in 1970 registering an increase of 17000 units per year

the family entrepreneurship units like Tata , Birla, Mafatlal,Dalmia, Kirloskar andothers


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grew in their business and successfully diversified into various other areas.

Thus the entrepreneurship in India moved from farmers to artisans and then to the

manufacturers.

The current scenario

Due to technological advancement the business environment has changed. Some

individuals saw an opportunity in the emerging IT industry. Now we see NArayan

Moorthy , Azim Premji , Raju, Shiv Nadar . Dominating the scene. India has beenable

to demonstrate its caliber and play a dominat role at present. dhirbhai ambani hadset

up world class petroleum plan in jamnagar. Raghavendra roa has set up a chemicaland

pharmaceutical plant matching international standards in madras and is exploringthe

products.

The future:

The service sector will further grow in future; the bio technology may shine infuture.

Basically Indians are considered to be very knowledgeable and intelligent. HenceIndian

entrepreneurs can do well and improve their performance further.

The contribution of entrepreneurs in economic development by khanka

1. Entrepreneurs promote capital formulation by mobilizing the ideal saving of the

public.

2. It provides immediate large scale employment, this it helps to reduce

unemployment problem in the country.

3. it promotes balanced regional development


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4. it helps to reduce the concentration of economic power

5. it stimulates the equitable redistribution of wealth, income and even political

power in the interest of the country.

6. it encourages effective resources mobilization of capital and skill which might

otherwise remain unutilized and ideal.

7. it also induces backwards and forwards linkages which stimulate the process of

economic development of the country.

8. it promotes countrys export trade which is an important ingredient to economic

development.

Women entrepreneurs

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Defined as a women or a group of women who initiate organize and run a business

enterprise. The Government of India has defined as an enterprise owned andcontrolled

by a women having a minimum financial interest of 51 % of the capital and givingat

least 51% of the employment generated in the enterprise to women.

Women entrepreneurs are those women who think o a business enterprise initiate it

organize and combine the factors of production, operate the enterprise andundertake risk

and handle economic uncertainty involved in running a business enterprise.

Functions of Women Entrepreneur

A women entrepreneur has to perform all the functions involved in establishing an

enterprise.


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These include

idea generation and screening, determination of objectives, project preparation,

product analysis, determination of forms of business organization, completion of

promotional formalities, raising funds, procuring men, machine and materials,

operations of business.

Fredrick Harbison has enumerated the following five functions;

1. Exploration of the prospects of starting a new business enterprise.

2. Undertaking of risks and the handling of economic uncertainties.

3. Introduction of innovations or imitation of innovations.

4. Coordination, administration and control.5. Supervisor and leadership.

Problems of women entrepreneurs

They are encounter with two sets of problems

General problems of entrepreneurs,

Problems specific to women entrepreneurs

1. Problems of finance: finance is regarded as life blood for any enterprise. Women

entrepreneurs suffer from shortage of finance on two counts. Women so not have

properly on their names to use them as collateral for obtaining funds from external

sources. The banks also consider women less credit worthy an discourage women

borrowers on the belief that they can at any time leave their business thereforethey are

bound to relay on their own savings loans from friends and relatives

2. Scarcity of raw material: most of the women enterprises are plagued by thescarcity

of raw material and necessary inputs, high prices of raw material, getting rawmaterial at

the minimum of discount.


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3. Stiff competition: women entrepreneur do not have more money to spend for

canvassing and advertisement. Thus they have to face a stiff competition formarketing

their products with both organized sector and their male counterparts.

4. Limited mobility: women mobility in India is highly limited due to various reasons.

A single woman asking for room is still looked upon suspicion. Cumbersomeexercise

involved in starting an enterprise.

5. Family ties: it is a womans duty to look after the children and their familymembers,

her total involvement in family leaves little or no energy and time to devote forbusiness,

and support and approval of husband seem necessary condition for womens entryinto

business.

6. lack of education: in India around three fifth ie 60 % of women still illiterate, due

to the lack of education and qualitative education , women are not aware of business,

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technology and marketing knowledge.

7. Male dominated society: the constitution of India speaks of equality betweensexes,

but in practice women are looked upon as weak in all respects. In the maledominated

Indian society women are not treated equal to men. This becomes a barrier towomen

entry into business.


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8. Low risk bearing ability: they are less educated and economically not self dependent.

All these reduce their ability to bear risk involved in running an enterprise.

In addition to above problems inadequate infrastructural facilities, shortage of power,

high cost of production, social attitude low need for achievement and socioeconomic

constraints also hold the women back form entering into business.

Factors influencing entrepreneurship

Legal

Motiva

tion of

family

Economic Government

Attitude

Individual Entrepreneur

S

P

V


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C

Political

Personality

Technology

The emergence and development of entrepreneurship are not spontaneous, but are

dependent on several factors. There are some factors which have a positiveinfluence

in facilitating the emergence and growth of entrepreneurship. Some others are

negative factors which inhibit the emergence of entrepreneurs

The factors influencing the emergence of entrepreneurship can categorized as a)

Internal and External or economic or non economic factors:

Internal factors : the internal factors are related to the personality of an individual

and they are psychological in nature that motivated a person to become an

entrepreneur such factors are like a seed of entrepreneurship ,existing within an

individual, all that us required is the right type of external environment for the seedto

grow.

Family atmosphere: family background plays a very significant role in developing

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entrepreneurship; personality of a person is influenced by the family background. The

seed of entrepreneurship in an individual develops roots in the right familyatmosphere.

For ex: children in the marwari families in India brought up in an environment which

develops entrepreneurial qualities in them from an early age.

In north Indian families a lot of factors and facilities are given to children do notgive

importance to education; they do not have to hunt for ideas but have teady to takeup

business. South Indian families believe in high dedcuation as they go in for jobs.

The risktaking abilities.

External factors: the external factors lay outside in the environment and theyinfluence

the internal factors. They also motivate and push a person to take decisions tobecome an

entrepreneur. The various factors are:

1. Political environment: this influences government policies which in turn influence

entrepreneur ship. Entrepreneurship will invest only where there is political stability.In

case of unstable Government then there will be more entrepreneurs, stablegovernment

motivate entrepreneurs to start business.

2. Social and cultural environment: the Hindu Joint Family system helps the

entrepreneurs to grow the elders give them guidance and they help them to takeright

decision. The values of sharing, sacrifice and adjustment develop in a joint family.

It promotes joint ownership, capital, and decision making . the Jains, Gujaratis and

marvaris business man can be seen in almost every part of the world in south India


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we have shettys in karnataka, chettiars in tamilnadu and komtis in Andhra Pradesh.

Gujarathis andmarwaris are engaged in manufacturing, banking and trading, pawn

brokers are usually from the marwari community , pawn brokers are money lenderswho

lend money against jewellery, property etc. diamond industry both export anddomestic is

dominated by jains from palanpur.

3.Economic Environment : this pertains to the economic background of theindividuals

such as whether a person has ancestral property or property earned on his own,details

regarding current income., standard of living and financial status that he enjoys etc.they

will influence the size of business and the capacity to take risks. These are microlevel

factors. Similarly macro level factors such as market structure, competition,profitability,

investments , availability of land, capital, raw materials market etc also haveinfluence on

entrepreneurship.

4. Legal environment: business has to operate in a legal environment. There arelaws

rules and regulations framed by various acts under the constitution which have tobe

followed by entrepreneurs. For ex if we want to start a business we have to register

our firm under shops and establishments act. The act has certain rules andregulations

which specify that their should be a weekly holiday, child labor cannot beemployed,

lunch break should be provided the labor inspectors appointed by the governmentare


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empowered to visit any firm and verify various functioning. If rules and regulationsare

not followed then the inspector will impose penalty.

5. Technological environment: the new entrepreneurs must have knowledge about

the latest technological developments and also should be able to protect the life of the

technology. Many of the entrepreneurs are hesitant to enter into the business whichare

technology oriented.

6. Government and non government policies, programmes, incentives: the support

provided by government and not government organizations will induce andmotivate

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entrepreneurs. For ex liberal tax and excise duty concessions will encourage morepeople

to become entrepreneurs.

UNIT - II

Entrepreneurship development programmes:

Need for EDPs

Entrepreneur posses certain traits or competencies, they are inborn are developedor

entrepreneur are born or made? Behavioral scientist David McClelland at HarwardUniversity


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made an interesting investigation and found that the need for achievement was theanswer. It

has the need for the achieve to motivate people to work hard.

The next question is whether they need for achievement could be induced for thishe conducted

a five year experimental study is one of the district of AP in collaboration with smallindustries

extension and training institute (SIET) this experiment is known as KakinadaExperiment. Here

young persons were selected and put through a three month training programmeand the result

is that suitable training can provide the necessary motivation to the entrepreneurs.

II objectives of EDPS

1. Develop and strengthen their entrepreneurial quality i.e. motivation or need for

achievement.

2. analyze environment set up relating to small industry and small business

3. select product

4. formulate project for the product

5. Understand the process and procedure involved in setting up a small unit.

6. to know the source of help and support available for starting a small scaleindustry

7. acquire the necessary managerial skills required to run a small enterprise

8. Know the pros and cons in becoming an entrepreneur.

9. Appreciate the needed entrepreneurial discipline.

Other important objectives:

1. Let the entrepreneur himself set the objectives for this business.

2. prepare him t accept the uncertainty involved in running business


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3. enable him to take decisions

4. enable him to communicate clearly and effectively

5. develop a broad vision about the business

6. develop passion for integrity and honesty

7. make him learn compliance with law

III Course contents in curriculum of EDPs

The training program is usually to six weeks it consists of six inputs

1. General introduction to entrepreneurship.

The participants are exposed to general knowledge of entrepreneurs. Such asfactors

affecting SSIs. The role of entrepreneurs in economic development, entrepreneur

behavior, and facilitates available for establishing small scale enterprise

2. Motivation Training:

It aims at inducing and increasing the need for achievement among the

participants, efforts are made to inject confidence and positive attitude andbehavior

among the participants towards business. Here they try to make the participants to

start their own enterprise and successful entrepreneurs are invited to speak abouttheir

experience in setting up and running a business.

3. Management skills:

A small entrepreneur cannot employ management expert to manage his businesshe

needs to be imparted basic and essential managerial skills in the functional areaslike


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finance, production and marketing so that he can run the organizations smoothlyand

successfully.

4. Support system and procedure:

The participants need to be exposed tot eh support available from differentinstitutions

and agencies for setting up and running small scale industries.

5. Fundamentals of project feasibility study:

The participants are provided guidelines on the effective analysis of feasibility of the

particular project in view of marketing, technical, financial and social aspectsknowledge

is given how to prepare the project for certain products.

6. Plant visits:

In order to familiarize the participants with real life situations in small business in

business, plant visits are arranged. Such trips helps the participants know moreabout an

entrepreneur, behavior, personality, thoughts and aspirations.

Finally the ultimate objective of entrepreneurs training programme is to make thetrainers

prepared to start their own enterprise after the completion of the trainingprogramme.

Phases of EDPs an entrepreneurship development programme consist of threephases.

1. re training phase: the activities and preparations required to

P

launch the training prograamne.

1. selection of entrepreneur or participants.


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2. arrangement of infrastructure

3. tie up of guest faculty for the training purpose.

4. arrangement for inauguration of the programme

5. selection of necessary tools, techniques to select the suitable

entrepreneur.

6. formation of selection committee for selecting trainees

7. arrangement of publicity media

8. development of application form

9. finalization of training syllabus

10.Pre potential survey of opportunities available in the givenenvironment conditions.

2.Training phase: the purpose of training is to develop need for

achievement i.e. motivation among the trainees. They should see

the following changes in the behavior of the trainees.

a) is he tuned towards his proposed project ideas

b) is he trainee motivated to entrepreneurial career and bear risks

involved in it

c) is there any change in his entrepreneurial attitude, outlook, skill,

role etc.

d) how should he behave like an entrepreneur

e) what kinds of entrepreneurial traits the trainee lacks

f) hether the trainee possesses the knowledge of technology,

W

resources, and other knowledge related to entrepreneurs.


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3.

Post training phase: this involves assessment of judge how

far the objectives of the programme have been achieved this

follows up indicated past performance and drawbacks and it

suggests guidelines for framing future policies to improve our

performance.

the purpose behind the EDP follow up is to

1.Review the pre training work.

2.review the process of training programme

3.review past training approachEvaluation of EDPS

EDPS have been considered as an effective instrument for developingentrepreneurs,

hundred of EDPs are conducted by some 686 organization to impart entrepreneurial

training to participate in thousands the objective of evaluation of EDPs is to look

how many participants have actually started their own enterprise after completing

the

training . it s is observed that one out of the every four trainees actually started his

enterprise after undergoing entrepreneurial training

Problems faced by EDPs : the problem are on the part of those who involved in the

process, the trainers, the trainees, ED organizations the supporting organizationsand the

state Governments.

trainer motivations are not found up to the mark in motivating the trainees tostart their

own enterprise

1.ED organizations lack in commitment and sincerity in conducting


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the EDPs in some cases EDPs are conducted as a means to

generate income for the ED organizations

2. on conductive environment and constraints make the trainer

N

motivators role ineffective.

3. he altitude of the supporting agencies like banks and financial

t

institutions serves as stumbling block in the success of the EDP

4.selection of wrong trainees leads to low success rate of EDPs

enterpreneur notes

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