entrepreneurship ramky

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ENTREPRENEURSHIP BMS SEM VI

MODULE- I

Ø The Concept of Entrepreneurship

v Definition of Entrepreneurshipv Need for Entrepreneurshipv Factors Influencing Entrepreneurship

Ø Emergence of Entrepreneurial Class

v Introductionv Communities that promoted entrepreneurship in Indiav Causes of slow growth of Entrepreneurship in India

Family Business in Indiav Stages of Evolution of Entrepreneurship

Ø Characteristics of Entrepreneurship

v Qualities of Entrepreneurshipv Entrepreneurial functionsv Classification of Entrepreneurs

Ø Difference between

v Entrepreneur & Managerv Entrepreneur and Entrepreneurshipv Entrepreneur and Enterprisesv Entrepreneur and Administratorv Entrepreneur & Intrapreneurship

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INTRODUCTION

The ultimate measure of a manIs not where he stands

In moments of comfort and convenienceBut where he stands

At times of challenge and controversy.

- Martin Luther King.

The words entrepreneur, intrapreneur and entrepreneurship have acquiredspecial significance in the context of economic growth in a rapidly changingsocio-economic and socio-cultural climates, particularly in industry, both indeveloped and developing countries. Entrepreneurial development is acomplex phenomenon. Productive activity undertaken by him and constantendeavor to sustain and improve it are the outward expression of this processof development of his personality.

WHO IS AN ENTREPRENEUR?

An entrepreneur is a person with a dream, originality and daring, who acts asthe boss, who decides as to how the commercial organization shall run, whoco-ordinates all activities or other factors of production, who anticipates thefuture trend of demand and prices of products.

An entrepreneur is one of the important segments of economic growth.Basically he is a person responsible for setting up a business or an enterprise.Infact, he is one who has the initiative, skill for innovation and who looks forhigh achievements. He is a catalytic agent of change and works for the goodof people. He puts up new green-field projects that create wealth, open upmany employment opportunities and leads to the growth of other sectors.

The entrepreneur displays courage to take risk of putting his money into anidea, courage to face the competition and courage to take a leap into unknownfuture and create new enterprises/ business. This creative process is the lifeblood of the strong enterprise that leads to the growth and contributes to thenational development.

The entrepreneur will always work towards the creation and enhancement ofentrepreneurial society.


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The best entrepreneur in any developing country is not the one who usesmuch capital but an individual who knows how to organize the employmentand training of his employees.

A classic example is that of Mr. Dhirubhai Ambani because he had all thedynamic qualities of a successful entrepreneur, as a result of which today, hewas the owner of the largest private company in India. All decisions which hehad taken to grow were instinct and no one had taught him to take decisions.

BASICS OF AN ENTREPRENEUR

We can define entrepreneur as one who innovates, raises money, assemblesinputs, choose managers and sets the organization going with his ability toidentify them.

As per Peter Drucker- “An entrepreneur is one who always searches forchange, responds to it as an opportunity. Entrepreneurs innovate. Innovationis a specific instrument of entrepreneurship”.

As per Joseph A. Schumpeter- “Entrepreneur is one who innovates, raisesmoney, and assembles inputs, chooses managers and sets the commercialorganization going with his ability to identify them and opportunities whichothers are not able to identify and is able to fulfill such economicopportunities”.

Organization

Urge Innovation

Skill Risk

Vision Enterprise

Growth

Management


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As per Walker- “An entrepreneur is one who is endowed with more thanaverage capacities in the task of organizing and co-coordinating the variousfactors of production. He should be a pioneer, a captain of industry.

The process undertaken by an entrepreneur to augment his business interestsgave birth to “ENTREPRENEURSHIP”.

THE CONCEPT OF ENTREPRENEURSHIP

Fig 1. Concept of Entrepreneurship

ENTREPRENEURSHIP DEFINED:

Entrepreneurship is an elusive concept.

“Entrepreneurship is based on purposeful and systematic innovation. Itincluded not only the independent businessman but also companydirectors and managers who actually carry out innovative functions.”

Schumpeter

In the above definition, entrepreneurship refers to the functions performed byan entrepreneur in establishing an enterprise. Just as management is regardedas what managers do, entrepreneurship may be regarded as whatentrepreneurs do. In other words, entrepreneurship is the act of being anentrepreneur. Entrepreneurship is a process involving various actions to beundertaken to establish an enterprise. It is thus, process of giving birth to anew enterprise. Entrepreneurship is composite skill, the resultant of a mix ofmany qualities and traits- these include tangible factors as imagination,readiness to take risks, ability to bring together and put to use other factors ofproduction, capital, labour, land, as also tangible factors such as the ability tomobilize scientific and technological advances. A practical approach isnecessary to implement and mange a project by securing the required

Entrepreneur Entrepreneurship Enterprise

Person ObjectProcess of action


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licenses, approvals and finance from governmental and financial agencies.The personal incentive is to make profits from the successful management ofthe project. A sense of cost consciousness is even more necessary for the long-term success of the enterprise. However, both are different sides of the samecoin. Entrepreneurship lies more in the ability to minimize the use ofresources and put them to maximum advantage. Without any awareness ofquality and desire for excellence, consumer acceptance cannot be achievedand sustained. Above all, entrepreneurship today is the product of teamworkand the ability to create, build and work as a team. The entrepreneur is themaestro of the business orchestra, wielding his baton to which the band isplayed.

The basic two elements involved in entrepreneurship are as follows;-

INNOVATION

Innovation, i.e. doing something new or something different is a necessarycondition to be called a person as an entrepreneur. The entrepreneurs areconstantly on the look out to do something different and unique to meet therequirements of the customers. They may or may not be inventors of newproducts or new methods f production but they possess the ability to foreseethe possibility of making use of the inventions for their enterprises. In order tosatisfy the changing preference of customers nowadays many enterpriseshave adopted the technique of innovation. For instance, pidilite industriesinnovated the new 5.rs pack of fevi quick which was accepted by thecustomers as it was easy to use when it was needed. Other example would beof the mobile enterprise which came up with the scheme for the customers ofrefill pack of 999.rs which says “Zindagi bhar mobile raho” which wasaccepted bye the customers. Since customers taste and preferences alwayskeep on changing, hence the entrepreneur needs to apply invention on acontinuous basis to meet the customers changing demand for products.

RISK- BEARING

Entrepreneurship is the propensity of mind to take calculated risks withconfidence to achieve a predetermined business or Industrial objective. Thecapacity to take risk independently and individually with a view to makingprofits and seizing the opportunity to make more earnings in the market-

Entrepreneurship

Innovation Risk- bearing


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oriented economy is the dominant characteristic of modern entrepreneurship.In fact he needs to be a risk taker, not risk avoider. His risk bearing abilityenables him even if he fails in one succeed. The Japanese proverb says “Fallseven times, stand up eight”. Though the term entrepreneur is often usedinterchangeably with entrepreneurship, yet they are conceptually different.The relationship between the two is just like the two sides of the same coin.Thus, entrepreneurship is concerned with the performance and co-ordinationof the entrepreneurial functions. This also means that entrepreneur precedesentrepreneurship.

NEED FOR ENTREPRENEURSHIP

Entrepreneurship promotes small business in the society. Government hasaccepted the fact that small firms have a crucial role to play in the economicdevelopment of the country. Small businesses are an essential part of ourfuture economic prosperity because of the following reasons-

v EMPLOYMENT GENERATION:

Entrepreneurial development is looked at as a vehicle for employmentgeneration through promotion of small business. India, being far moredeveloped and forward looking country than some of the third worldcountries, can provide lead to entrepreneurial development activities.However, India can benefit from the well- documented success experiences ofdeveloped countries like USA, Japan and UK in the field of employmentgeneration and small business promotion.

Steady growth in consumer spending, expanding retail sales, a stronghousing market, continued expansion of the service sector, low rates ofinflation and of labour cost increases and failing interest rates contributed to ahealthy environment for small business.

In India, the government policies, political and economic environment greatlyencourage the establishment of new and small enterprises. Self- employmentand small scale industry schemes have been further liberalized during the lastdecade. The employment in the small-sector increased from 9.00 millionpeople in 1984-85 to 13.9 million people in 1994-95. This indicates an increaseof 5.4% p.a in employment in this sector.

v SMALL BUSINESS DYNAMISM:

Great dynamism is one of the qualities of the small and medium enterprises.This quality of dynamism originates in the inherent nature of the smallbusiness. The structure of small and medium enterprises is less complex than


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that of large enterprises and therefore facilitates quicker and smoothercommunication and decision- making. This allows for the greater flexibilityand mobility of small business management. Also, small enterprises, moreoften make it possible for owners, who have a stronger entrepreneurial spiritthan employed mangers, to undertake risk and challenges.

v BALANCED ECONOMIC DEVELOPMENT:

Small business promotion needs relatively low investment and therefore canbe easily undertaken in rural and semi-urban areas. This in turn createsadditional employment in these areas and prevents migration of people fromrural to urban areas. Since majority of the people are living in the rural areas,therefore, more of our development efforts should be directed towards thissector. Small enterprises use local resources and are best suited to rural andunderdeveloped sector. This in turn will also lead to dispersal of industries,reduction in concentration of economic power and balanced regionaldevelopment.

v INNOVATIONS IN ENTERPRISES:

Business enterprises need to be innovative for survival and betterperformance. It is believed that smaller firms have a relatively highernecessity and capability to innovate. The smaller firms do not face theconstraints imposed by large investment in existing technology. Thus they areboth free and compelled to innovate.

Entrepreneurship development is accelerating the pace of small firm’s growthin India. An increased number of small firms are expected to result in moreinnovations and make the Indian industry compete in the internationalmarket.

FACTORS INFLUENCING ENTERPRENURESHIP

The emergence of entrepreneurs in a society depends upon closely interlinkedsocial, religious, cultural, psychological, and political and economic factors.

v FAMILY TRADITION:

Individuals who for some reason, initiate, establish maintain and expand newenterprises generate entrepreneurship in society. It is observed thatentrepreneurs grow in the tradition of their families and society and acceptcertain values and norms from these sources.


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v RELIGIOUS, SOCIAL AND CULTURAL FACTORS:

Religious, social and cultural factors also influence the individual taking upan entrepreneurial career, in some countries there is religious and culturalbelief that high profit is unethical. This type of belief inhibits growth ofentrepreneurship.

v PSYCHOLOGICAL FACTORS:

The psychological factors like high need for achievement, determination ofunique accomplishment, self confidence, creativity, vision, leadership etc,promote entrepreneurship among individuals. On the other handpsychological factors like security, conformity and compliance, need foraffiliation etc restrict promotion of entrepreneurship.

v POLITICAL FACTORS:

The political and also the political stability of country influence the growth ofentrepreneurship. The political system, which promotes free market,individual freedom and private enterprise, will promote entrepreneurship.

v ECONOMIC POLICIES:

The economic policies of the government and other financial institutions andthe opportunities available in a society as a result of such policies play acrucial role in exerting direct influence on entrepreneurship.

In view of the haphazard development of economic zones, Government isencouraging the entrepreneurs to establish their business in backward andtribal areas. This is primarily to arrest the migration of people from thevillages to cities and to create employment opportunities locally. Governmentis promoting such development by giving incentives like tax holidays (bothsales and income), subsidized power tariff, raw materials, transportation costetc.

EMERGENCE OF ENTREPRENEURIAL CLASS

From times immemorial, the Indian society has been characterized by a kindof stratification of religious and regional sections. The Hindu society projecteda type of hierarchy in which the caste groups were separated from each otheron the basis of function. Every member of the society followed the familyoccupation. This caused immobility between occupations.


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The Bania was a caste that carried on the trading and money lendingbusiness. They specialized in trade and commerce and came from urbanareas. In fact, because of their good financial, standing, their position was anenviable one in the urban centers. However they ranked third in the caste-hierarchy. The Brahmins ranked first and kshatriyas second.The caste system was so rigid, that people were afraid of ostracisation .But inplaces where the caste system was relatively loose and the trading caste weremissing, people from other castes, undertook commercial activities and werealso regarded as the members of the business community.

The mid nineteenth century witnessed a fairly developed businesscommunity in India. Saurasthra (now known as Gujarat) was the mostdeveloped and urbanized region in the whole of India. It had a continuousrecord of foreign trade, which had lasted for centuries. This tract had adeveloped Bania (both Hindu and Jain) community and also large tradingcommunities, popularly known as the Bohras, Khojas and Kacchi, Memone.They were converts from Hinduism. Trading was their occupation. Theymainly dealt in cotton. They also carried out overseas trade. They hadbusiness dealing with Persian Gulf, Arabia and Africa to the west and withMalaya (now known as Malaysia), Indonesia to the south and south east coastIndia. The above trading communities are responsible for the supply ofentrepreneurs in India. Following important communities can take the creditfor the supply of entrepreneurs in India.

COMMUNITIES THAT PROMOTEDENTREPRENEURSHIP IN INDIA

1. THE PARSIS:

Parsis migrated from Persia in the century. They performed artisans,carpenters, weavers etc, in the 17th century. By 18th century, they became well-known shipbuilders; they had set merchant houses in Bombay, Burma,China and London. Their chief overseas trade comprised of yarn and opium.They acted as brokers for the European traders at Bombay and Surat. Theywere regarded as merchants and traders of repute. They emerged as the mostprominent trading and financing community or Bombay and Gujarat. Parseesand Gujarat trading castes that controlled even foreign trade become thewealthiest Indian communities by the 19th century.

2. TRADERS FROM SOUTH INDIA:

The trading castes of South India were the chettis. They were dividing intovarious groups such as the Telugu komatia, the Tamil, Nattukottai Chettis,and Beri- Chettis etc. The Komatia were the chief traders not only in the


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Telugu districts but also in Mysore, Coimbatore, Canara and other places. Thechief financiers are bankers of South India were the Nattukottai Chettis.Trading in drugs grain and cloth was done by the Beri-Chettis. In the early19th century they were known to be respectable peddlers who traveled incaravans. The communities that traded had trade relations with South- EastAsian countries like Burma, Ceylon, and Malaya, Singapore etc. The chettiarsestablished connections with reputed Indian business firms and also madegood investments in and property. They became important suppliers of ruralcredit. The Nattukottai Chettiars were a well- known business community inBurma. Their working funds invested abroad were mainly employed inBurma.

Trading was done by Syrian Christians called Nazrani Mappilas andMohammedan merchants known as Moplahs on the West coast in SouthIndia. The Nazrani Mappilas financed internal trading activities of Travancoreand Cochin. Moplahs traded in Malabar and Canara. They shared thefunctions of trade with the koknies who conducted banking business in thecountry.

When the monopoly of the East India Company ended in 1857, a period ofboom began for the Christians who prospered as merchants. They played therole of private bankers. The Syrian and Chaldean Christians were active inpromoting Joint Stock Banks at the end of the 19th century.

3. THE MARWARI COMMUNITY:

This important and fairly developed business community came from Marwariin Rajasthan. The trading and money lending cases got tremendousdevelopment in Gujarat and Rajputana on account of the famous route fromGujarat ports to the historical center of the Great Mughal state.

Rajputana was torn by feudal strife during the first half of the 19th century. Itwas not the place for large scale trading and money lending operations.Though the local trade was good, it provided a limited scope fordevelopment. Trade remained fairly constant and it was because of this thatinvestment crossed the borders of Rajputana. Trade spread in townsthroughout the north, east and west of India, especially to the commercialcenters of Bombay and Calcutta.

With the rise of British commerce, these traders gradually replaced theBengalis who served as British agents in Calcutta. The Brahmins and theKayasthas of Bengal who operated as the British agents started tuning theirattention to investments in land. They even got into 9 professions andadministrative services. But the Subarna Banika, a Bengal trading communityfilled the void created by such an occurrence. But Bengal soon became thecenter for political revolution. The Britishers both rulers and traders did not


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approve of this. Wherever possible, they tried to replace a Bengali bysomeone who proved to be more dependable. The Rajasthani traders tried tobe more co-operative than the Bengali Commercial castes. It is because of thisthat the Bengali names in business are relatively un important and where theyoccur; they mostly represent the professional agent class and not theindigenous trading class.

Besides the above trading, money- lending communities that could beregarded as the source of entrepreneurs in India. There were the Bhatia’s andLohanas. These communities carried out local trade and were spread all overthe country. The “Khatris’ a community that trade not only in Punjab but alsoin Afghanistan, Central Asia etc. has also been a source of entrepreneurs. InMaharashtra the contribution of Yajurvedi Brahmins and the ChitapavanBrahmans who took active part in trading, money lending ad indigenousbanking cannot be forgotten.

The above was on account of the origin of entrepreneurs in India.

CAUSES OF SLOW GROWTH OF ENTREPRENEURSHIPIN INDIA

Entrepreneurship developed only in the beginning of the 19th century andthough the base for industrialization had been laid a century ago. Thefollowing be the main reasons, which could be responsible for lack ofinitiative and entrepreneurial spirit among the Indians.

1. Caste System: - This decided occupation for members from each caste.The altitudes were restrictive and therefore there were no changes ofaccumulating wealth and promoting production.

2. Agriculture: - Agriculture was the main occupation. Farmers andcultivators were always in the clutches of the money lenders. Thezamindars, nawabs and rajahs exploited the laborers. They spentmoney on enjoyment and luxury and never risked money in industry.Banking and commercial system was also absent so even if there weresavings, they could not be utilized for productive use.

3. Educational System: - Talented young men were prepared to takewhite collared jobs or join government or professional services. Manywere attracted towards politics. The result was that very few youngmen got attracted towards becoming efficient, industrialists,technicians, managers etc.


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4. Colonial Rules: - The British rulers adopted discriminatory policy RichIndian businessman had special connections with foreign rulers andboth satisfied their self interests. Even the few insurance and bankingservices catered to the needs of some rich Indian businessman,Britishers in India did also not encourage Industrialization.

5. Managing Agents: - There were just a handful of people who wereknown to be having managerial skills. On common basis, these agentswould lend their skills to some top industries. Industrialists could notmanage their own units. They were always at the mercy of themanaging agents who filled their pockets with big chunks of thecompanies’ profits and took full advantage of Indian industrialists tillthe managing agency system was abolished in 1970.

6. Joint Family System: - Younger members of the family alwaysdepended on the Head who never gave any kind of independence orencouraged units other than family business ones. A number of youngmen were discouraged from diversifying from family business anddoing something new and different.

7. Religious attitude: - Indians were very religious mi9nded. They gavemore time to religion than to earning material wealth. Religion gotpriority over business. Some religions even condemned excess earningsand indulgence I in comforts. Industrial activity was, therefore, givensecondary consideration by the religious Indians.

8. Mindset: - The mindset of the average Indian was neverentrepreneurial. Our religious literature and epics told us to havepatience and to keep on working without expecting the fruits of labor.This also killed the drive and desire to get into entrepreneurialactivities.

9. Recognition by the society: - In earlier days, the heroes India were thesocial reformers and the politicians. Now it is the era of sportsmen,models and film stars. It is sad that successful or the strugglingentrepreneurs have never been recognized as heroes. Entrepreneurialactivity did not get due importance in the India society.

10. Family Background: - Empirical studies have shown that a goodnumber of entrepreneurs come from families with industrialbackgrounds. Unfortunately, only a few entrepreneurial communitiesin India made entrepreneurial contribution. These communities couldalso not make headway in the entrepreneurial field on account of thecolonial rule, lack of infrastructure and other facilities.Entrepreneurship development could only take place afterindependence in India.


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FAMILY BUSINESS IN INDIA

In India, family business accounts for about 70prcent of the total sales and netprofits of the biggest 250 private sector companies. Big families’ have carvedup the big industries. In vehicles, for example, the Tatas make Lorries, theBirlas make ambassador cars, the Bajaj family makes two wheelers and theMahindras make jeeps. They diversified into any business where they couldget a permit to operate. Borrowing, mainly from public sector institutions,was easy, and company law makes it simple to control subsidiaries throughvery small shareholdings. The Tata Empire, for example, embraces some 70companies, making everything from tea to watches in which the parentcompany’s average stake is rarely above 15 percent.

Entrepreneurship is not just a way to- increase the level of innovation andproductivity of organizations, although it will do it. More importantly, it is away of initiating vast business so that work becomes a joyful expression ofone’s contribution to society. The Indian entrepreneur, intrapreneur and/ormanger of the 90’s have to be molded in psycho- philosophy rooted in theIndian context and values.

“The crisis in business is spiritual” says Prof. Sitangshu Kumar Chakraborty,“All management ideas till now have been external directed paradigms,developing behavior, skills, not character, and values. But meaning andrichness must flow from mind to work, not the other way. We need afundamental shift from the current reductionism, fragmentize andmaterialistic paradigm to one which recognizes consciousness and spirit asthe right approach”.

The concept of entrepreneur and entrepreneurship incorporates basicqualities of leadership, innovation, enterprise, hard work, vision andmaximization of profits. All his socio-economic, organizational and societyand the community. He is committed to progress. He is a catalytic agent ofdevelopment and change. Personal satisfaction and monetary rewards areblended with social betterment and welfare of mankind.

In August 1992, with their combined savings of Rs. 25,000, Alka and AnupamJoshi launched premier clothing as an export- oriented unit. The premierclothing has been licensed to market, for the first time, The Disney babies’range of products in India.

Having several information mail- order companies, not to mention storechains, in the bag isn’t enough for Joshi. Now, he’s planning a move into thebooming readymade shirts business. As always, Joshi plans to hedge his bets:he’s talking to some foreign companies about starting off by producing shirts


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for them. That’s clearly part of his philosophy of manufacturing for a ready-made market. And, as in the case of the Disney babies’ line, to a ready- mademindset, either ways, it’s a premier strategy.

Chandan Sumaya look plunge in 1985 armed with only” a passion for cars”borrowing Rs 30,000 from his mother to float Kent. This name he chosebecause it rhymed with rent and had an international ring- car. Apparently,he fell in love with the business while helping his uncle run one. Working outof his home in Bombay’s Nepean Sea Road, Sumaya installed a desk and atelephone in the front half of his garage; the car took up the rest. Only by theend of the second year could he afford to invest in two more Ambassadorscars.

He has invested in a fleet of 136 cars and concentrates on the corporate sector,where they are market leaders. Kent Cars is now poised to drive into thenational market place through the franchising route. Whether or not he doesas well in these cities as he is in Mumbai, Chandan Sumaya has driven a longway from the home garage he started from. And that’s the spirit of Kent.

STAGES OF EVOLUTION OF ENTREPRENEURSHIP

The evolutionary process of entrepreneurship activities may be divided intothe following broad stages:

1. Hunting Stage: - The primary stage of the evolution of the economic lifeof man was hunting stage. Wants were limited and very few in numbers.The family members themselves satisfied problems of food, clothing andshelter. Producers were the consumers also. Robinson Crusoe, living inthe deserted island, satisfying his own requirements had no knowledge ofbusiness. People in some parts of Africa and India still lead this type oflife. In this stage problems of production and distribution were notcomplexed since wants were simple and limited.

2. Pastoral Stage: - With the progress of mankind gradually mentalunderstanding developed and people started realizing that instead ofkilling animals, they should breed and rear them. Thus cattle breedingencouraged the use of milk, and they had to think in terms of grazingareas for their cattle. The surplus milk, meat and other related productswere spared of exchange. This stage can be termed as the first stage ofeconomic development and the beginning of commerce.

3. Agricultural Stage: - In search of grazing areas, they further realized thatthey should grow plants as food for animals. They started testing somegrain products and slowly developed a taste in plants and the land wasused for cultivation. Groups of persons started living together on their


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agricultural fields, which were subsequently converted into small villageswith their farms. Free exchange of goods was started and the activitieswere also divided to the extent of division of labor at the village level tocomplement the needs of each other. Initially each village was self-sufficient, but later they began small trading activities on barter basis.

4. Handicraft Stage: - In the agricultural stage, people started learning theuse of cloth made of cotton products, and they developed the segments ofthe workers for different activities. Cottage scale setup was developed atthe village level to nearby villages, and in exchange they broughtrequirements either to consume themselves or for their village friends.Since the demand for gold coins, silver coins, skin and hide etc increasedthe activities of cobblers, gold smiths, and blacksmiths, laborers alsorapidly increased, and caste system was also formed on the basis ofactivities they did. Everybody selected their job according to their ownchoice and taste.

5. Present Industrial Stage: - The use of mechanical devices and thecommonly acceptable form of monetary system accelerated the growth ofentrepreneurship activities. The progress of science and the increase in themeans of transportation and communication enabled to travel widely andthe markets were developed in the country and abroad.

QUALITIES OF ENTREPRENEURSHIP

The qualities that contribute to the success of an entrepreneur are as follows: -

1. Risk Taking: - Entrepreneurs are moderate risk takers. They enjoy heexcitement of a challenge, but they do not gamble. Entrepreneurs avoidlow- risk situations because there is a lack of challenge. They avoidhigh risk situations because they want to succeed. They like achievablechallenges. They do not tend to like situations where the outcome of aquest depends upon a chance and not on their efforts. They like toinfluence the outcome of their quest by putting in more efforts andthen experiencing a sense of accomplishment. A risk situation occurswhen an entrepreneur is required to make a choice between two ormore alternatives whose potential outcomes are not known and mustbe evaluated in advance, with limited information. A risk situationinvolves potential gain and potential loss. As the size of the businessexpands the problems and opportunities become more numerous andcomplex. Business growth and development require an entrepreneurnot to be afraid of taking decisions and certain risks. Most people areafraid to take risks because they want to be safe and avoid failure. Anentrepreneur always takes a calculated risk and is not afraid of failure.


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2. Self- Confidence: - A man with self – confidence has clear thoughtsand well- defined goals to achieve in his life. An entrepreneur gets intobusiness or industry with a high level of self- confidence. He is able toevaluate his competencies and capabilities in a realistic manner. He canset realistic and challenging goals. He is confident of achieving thesegoals. He possesses a sense of effectiveness, which ultimatelycontributes to success of his venture. He puts forward his caseconfidently and gets needed help from concerned agencies/authorities.

3. Optimist: - An entrepreneur is able to visualize the hiddenopportunities in the environment and translate them into businessrealities. An entrepreneur exhibits a positive and optimistic attitudetowards such opportunities. The entrepreneur approaches his taskwith the hope of success and not with a fear of failure. In the process ofaccomplishing his task he may also fail but the failure experience doesnot change his thinking. He is always an optimist in his outlook. Thepositive outlook develops a drive in the entrepreneur to attempt newthings and innovate.

4. Need for achievement: - The need to excel known as achievement is acritical factor in the personality of an entrepreneur. People with highneed for achievement have desire for success in competition withothers or with a self- imposed standard of excellence. They try toaccomplish something new and try to innovate themselves in long-term goals. They try to accomplish challenging tasks. They know theirown strengths and weaknesses, the facilitating factors and constraintsin the environment and the resources needed to accomplish their tasks.If the objectives are accomplished they feel elated.

5. Need for independence: - The need for independence is the primecharacteristic that has driven the entrepreneurs to start their ownbusiness. These entrepreneurs do not like to be controlled by others.They do not wait for direction from others and choose their own courseof action. They set their own challenging goals and put efforts toachieve this goal. The independence provides opportunity for tryingout new ideas and helps them achieve their goals.

6. Creativity: - Entrepreneurs are highly creative people. They always tryto develop new products, processes or markets. They are innovative,flexible and are willing to adopt changes. They are not satisfied withconventional and routine way of doing things. They involvethemselves in finding new ways of doing the things for the better.


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7. Imaginative: - Successful entrepreneurs possess a high degree ofimagination and foresightedness. Entrepreneurs have a great vision.Knowing the present and the past the entrepreneur is able to predictthe future events the business more accurately than others. It is becauseof their visionary nature and power of imagination that helps them inanticipating problems and evolving actions strategies for suchproblems.

8. Administrative ability: - A successful entrepreneur is always a goodadministrator. He knows the art of getting things done by other peoplewithout hurting their feelings of self- respect. He has strong motivationtowards the achievement of a task and puts in necessary efforts ingetting things done by others.

9. Communication ability: - Communication ability is the ability tocommunicate effectively. Good communications also means that boththe sender and the receiver understand each other and are beingunderstood. An entrepreneur who can effectively communicate withcustomers, employees, suppliers and bankers will always succeed intheir business.

10. Clear objectives: - An entrepreneur has clear objectives as to the exactnature of the business, the nature of the goods to be produced and thesubsidiary activities to be undertaken. A successful entrepreneur hasthe objective to establish the product to make profit or to render socialservice.

11. Business Secrecy: - An entrepreneur who is successful always guardshis business secrets. Leakage of business secrets to trade competitors isa serious matter; therefore an entrepreneur should carefully guard it.An entrepreneur must be able to make a proper selection of hisassistant since most of the time it is the assistant who leaks the tradesecret.

12. Emotional stability: - The most important personality factorscontributing to the success of an entrepreneur are emotional stability,personal relations, consideration and tactfulness. An entrepreneurmust maintain good relations with the customers if he wishes to enjoytheir continued patronage. He must also maintain good relation withhis employees, whom he shall motivate to perform their jobs at a highlevel of efficiency. An entrepreneur who maintains good humanrelations with customers, employees, suppliers and the community hasa better chance to succeed in his/ her business.

13. Open-mindedness: - Open- mindedness means a free and frankapproach in accepting one’s own errors and change for the better. An


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entrepreneur must be willing to learn from his past experience,mistakes and moulds himself for better.

14. Technical knowledge: - Technical knowledge implies knowledgeabout the product, process or technology used in manufacturing. Anentrepreneur who has reasonable level of technical knowledge willalways be successful. Technical knowledge is easy to acquire if theentrepreneur tries hard to acquire it.

15. Patience: - Patience means ability to wait. Patience also means doingthe work and waiting for the result. A certain amount of patience isnecessary in any type of vocation. An entrepreneur should not wait foractions but can certainly wait for result for his efforts.

16. Hard working and energetic: - Ability and willingness to work hard isan important quality of an entrepreneur. A person having physical andmental stamina to cope with the hard work and human relation is fit tobecome a successful entrepreneur. By carrying out well- planned andsystematic work, success is always the end result.

17. Good organizer: - Entrepreneurs are good organizers of resources likemen, machines, materials and money needed to start and run thebusiness smoothly. They can convince the employees, investors,customers and co- ordinate the activities of individuals and groups inthe accomplishment of business objectives. An entrepreneur works likea coordinating force among the resources, mould and manages themeffectively.

ENTREPRENEURIAL FUNCTIONS

An entrepreneur is said to perform the following functions:

1. Assumption of risk: - Risk bearing or uncertainty bearing is the mostimportant function of an entrepreneur which he tries to reduce by hisinitiative, skill and good judgment.

2. Business decisions: - The entrepreneur has to decide

a. To enter the industry this offers him the best prospectsb. To produce goods that he thinks will pay him the mostc. To employ those methods of production which seem to him the

most profitable.d. To effect suitable changes in the size of the business, its location

that are needed for the development of his business.


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3. Managerial Functions: - The entrepreneur performs the managerialfunctions such as

a. Formulating production plansb. Overseeing financesc. Dealing with the purchases of raw materialsd. Providing production facilitiese. Organizing sales

In large establishments these management functions are delegated toprofessional managers an entrepreneur performs many useful functions suchas

v Undertakes a venturev Assumes risk andv Earns profitsv Identifies opportunities to start business either as a manufacturer or a

distributor.

The entrepreneurship exists in every field of economic endeavor.Entrepreneurship has also been developed in the trading sector. Amanufacturing entrepreneur demonstrates his entrepreneurial talents bybringing out new products while a trading entrepreneur performs hisentrepreneurial functions in creating demand for the business he deals.

Fig.2 Entrepreneurial function

RaisingFinance

Deciding theProject.

PlanningProduction

Risk -Taking

Innovation

ManagingEnterprise

Earning Profits

Entrepreneur


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CLASSIFICATION OF ENTREPRENEURS

The entrepreneurs have been broadly classified according to

v Types of businessv Use of professional skillv Motivationv Growthv Stages of development

ENTREPRENEURS ACCORDING TO TYPES OF BUSINESS

v Business entrepreneurs are those individuals for a new product orservice and then translate the same into business reality. Tap bothproduction and marketing resources to develop a new businessopportunity. Setup big establishment or small unit such as printingpress, textile processing house, advertising agency, readymadegarments or confectionery. In majority of cases, entrepreneurs arefound in small trading and manufacturing business. Entrepreneurshipflourishes when the size of business is small.

v Industrial entrepreneurs are essentially a manufacturer who identifiespotential needs of customers and products or service to meet themarketing needs. He should have the ability to convert economicresources and technology into a profitable venture.

v Corporate entrepreneur is an individual who demonstrates hisinnovative skill in organizing and managing corporate undertaking.He plans, develop and manage a corporate body.

v Agricultural entrepreneur are the ones who undertake agriculturalactivities such as raising and marketing of crops, fertilizers and otherinputs of agriculture. They are motivated to improve agriculturethrough mechanization, irrigation, and application of technologies fordry land agricultural products.

ENTREPRENEURS IN TECHNOLOGY

v Technical entrepreneur is the one who is essentially a craftsman. Hedevelops improved quality of goods because of his craftsmanship. Heconcentrates more on production than on marketing. He demonstrateshis innovative capabilities in matter of production of goods andrendering of services.


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v Non- technical entrepreneur are those who are not concerned with thetechnical aspects of the product in which they deal. They are concernedonly with developing alternative marketing and distribution strategiesto promote their business.

v Professional entrepreneur is interested in establishing a business butdoes not have interest in managing or operating it once it isestablished. He sells out the running business and starts anotherventure with the sales proceeds.

ENTREPRENEUR AND MOTIVATION

An entrepreneur is motivated to achieve or prove his excellence in jobperformance. He influences others by demonstrating his business acumen.

v Pure entrepreneur is an individual who is motivated by psychologicaland economic rewards. He undertakes entrepreneurial activity for hispersonal satisfaction in work, ego and status.

v Induced entrepreneur is one who is induced to take up anentrepreneurial task due to policy measures of the government thatprovides assistance, incentives, and concessions and other facilities tostart a venture. Enter business due to financial, technical and otherfacilities provided to them by the state agencies to promoteentrepreneurship.

v Motivated entrepreneur: they come into being because of the challengeinvolved in developing and marketing a new product for thesatisfaction of consumers. If the product succeeds, the entrepreneur isfurther motivated for launching of newer products.

v Growth and entrepreneur are those who take up a high growthindustry which has substantial growth prospects. Super growthentrepreneurs are those who show enormous growth or performancein their venture.

ENTREPRENEUR AND STAGES OF DEVELOPMENT

v First generation entrepreneur is the one who starts an industrial unitby his innovative skill. He is the one who combines differenttechnologies to produce a marketable product or services.

v Modern entrepreneur is one who undertakes those ventures which gowell with the changing demand in the market. He undertakes thoseventures that suit the current market needs.


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v Classic entrepreneur is one who is concerned with maximizing theeconomic returns at consistent level. He is concerned more about thesurvival of the firm with or without an element of growth. Apart fromthe above, there are entrepreneurs who can be classified intoinnovative and imitative categories.

v Innovating entrepreneurs are generally aggressive in collectinginformation, analyzing and experimenting attractive possibilities intopractice. They are quick to convert old established products or servicesby changing their utility, their value, their economic characteristics intosomething new, attractive and utilitarian. They can see the opportunityfor introducing a new technique of production process or a newcommodity or a new service or even the reorganization of an existingenterprise. They are very commonly found in developed countrieswhile there is dearth of such entrepreneurs in underdevelopedcountries. They are always creative and bringing in innovation in theirwork.

v Imitative entrepreneurs are ready to adopt and are more flexible inimitating techniques developed by others. They exploit opportunitiesas they come and are mostly on a small scale. He is more of anorganizer of factors of production than a creator. In the context of apoor country, he is definitely a change agent and hence he is importantin underdeveloped countries.

DIFFERENCE BETWEEN

A. ENTREPRENEUR & MANAGER

No. ENTERPRENEUR MANAGER

1. The main motive of anentrepreneur is to start a ventureby setting up an enterprise. Heunderstands the venture for hispersonal gratification.

The main motive of a manager is torender his services in an enterprisealready set up by someone else.

2. An entrepreneur is the owner ofthe enterprise.

A manger is the servant in theenterprise owned by the entrepreneur.


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3. An entrepreneur being the ownerof the enterprise assumes all riskand uncertainty involved inrunning the enterprise.

A manger is a servant does not bearany risk involved in the enterprise.

4. The reward an entrepreneur getsfor baring risks involved in theenterprise is profit which ishighly uncertain.

A manger gets salary for the servicesrendered by him in the enterprise.

5. Entrepreneur himself thinks overwhat and how to produce goodsto meet the changing demands ofthe customers. Hence, he acts asan innovator also called as achange agent.

A manager simply executes the planprepared by the entrepreneur. Thus, amanger simply translates theentrepreneur’s ideas into practice.

6. An entrepreneur needs topossess qualities andqualification like highachievement motive, originalityin thinking, foresight, risk-bearing, ability and soon.

On the contrary a manger needs topossess distinct qualifications in termsof sound knowledge in management,theory and practice.

B. ENTREPRENEUR AND ENTREPRENEURSHIP

NO ENTREPRENEUR ENTREPRENEURSHIP

1. Refers to a person Refers to a process2. Is a visualiser Is a vision3. Is a creator Is a creation4. Is an organizer Is an organization5. Is an innovator Is an innovation6. Is a technician Is a technology7. Is an initiator Is an initiative8. Is a decision- maker Involves decision making9. Is a planner Involves planning10. Is a leader Involves leadership


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C. ENTREPRENEUR AND ENTERPRISES

Entrepreneur is the fourth factor of enterprise

The entrepreneur and enterprise are Inter- linked. Enterprise is an offshoot ofan entrepreneur. Its success is dependent on the entrepreneur.

D. ENTREPRENEUR AND ADMINISTRATOR

No. ENTREPRENEUR ADMINSTRATOR

1. Entrepreneurship are associatedwith connotations of enterprise,opportunism, individuality

Administrations are associatedwith notions of organization,planning, professionalism,rationality and predictivemanagement processes.

2. The entrepreneur of a smallbusiness organization needsprimarily to perform activitiesrelevant to adaptivemanagement process, activitiesthat enable him to exploit theadvantages he has in being asmall enterprise.

The administrator in a large firm isprimarily concerned with thoseactivities relevant top predictivemanagement processes that arewith activities related to predictionand control.

3. An entrepreneur puts emphasison the entrepreneurial activitiesof management process, so hishold attitudes related toentrepreneurial orientation.

An administrator of a largeorganization would hold attitudesrelated to the administrativeorientation of the managementprocess.

ENTREPRENEUR

LABOUR ENTERPRISE CAPITAL

LAND


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E. ENTREPRENEUR & INTRAPRENEURSHIP

No. ENTREPRENEUR INTRAPRENEURSHIP

1. An entrepreneur is independentin his operations

An intrapreneur is dependent onthe entrepreneur i.e. the owner

2. An entrepreneur himself raisesfunds required for theenterprise.

The intrapreneur does not raisefunds.

3. Entrepreneur bears the riskinvolved in the business.

An intrapreneur does not fullybear the risk involved in theenterprise.

4. An entrepreneur operates fromoutside.

An intrapreneur operates fromwithin the organization itself.

END OF MODULE I


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MODULE – II

THEORIES OF ENTREPRENEURSHIP

Ø Knight on the Role of Uncertainty

Ø Schumpeter on Innovation

Ø Mc Clelland’s Achievement and Motivation theory

Ø Peter Druckers views on Entrepreneurship


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KNIGHT ON THE ROLE OF UNCERTAINTY

Knight identifies the entrepreneur as a recipient of pure profit. Profit is theresidual income available after all contractual payments have been deductedfrom the revenues of the enterprise. It is the reward to the entrepreneur forbearing the costs of uncertainty.

Knight identifies uncertainty with a situation where the probabilities ofalternative outcomes cannot be determined either by a priori reasoning or bystatistical interference. A priori reasoning is simply irrelevant to economicsituations. Statistical interference is impossible because the situation involvesa unique event. It does not belong to a larger population of identical events. Inparticular there is no precedent for it, so that no assessment of probability canbe made on the basis of relative frequency. This is the foundation for Knight’sdistinction between uncertainty and risk.

Uncertainty is a ubiquitous aspect of business decisions because productiontakes time. Decisions on inputs must be made now in order to create outputfor the future. Households as factor owners demand spot payment for theirservices. At the same time they are unwilling to commit themselves on futuredemand for the product because they anticipate that unforeseeable changeswill occur.

But the consumer does not even contract for his goods in advance, generallyspeaking. A part of the reason might be the consumer’s uncertainty as to hisability to pay the end of the period, but this does not seem to be important infact. The main reason is that he does not know what he will want, and howmuch, and how badly. Consequently, he leaves it to producers to create goodsand hold them ready for his decision when the time comes. The clue to theapparent paradox is of course in the law of large numbers. The consolidationof risks (or uncertainties). The consumer is to himself only one to the producerhe is a mere multitude in which individuality is lost. It turns out that anoutsider can foresee the wants of am multitude with more ease and accuracythan an individual can attain with respect to his own. This phenomenon givesus the most fundamental feature of the economic system, production for amarket.

Knight is mainly concerned to show how markets, together withinstitutions such as the large corporation, contribute to specializinguncertainty-bearing in the hands of those best equipped to make decisionsunder uncertainty. The main quality required for making productiondecisions is foresight they have, and competition ensures that individuals


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with the greatest degree of foresight (relative to other abilities) specialize inmaking production decisions.

However, it does not follow that individuals with foresight will become self-employed and make decisions on their own behalf. They may instead becomemanagers of a large firm. Knight argues that business uncertainty can bereduced through ‘consolidation’. Consolidation is to uncertainty whatinsurance is to risk: It is a method of reducing total uncertainty by poolingindividual instances and allowing each individual to hold a share of the pool.It is widely recognized today that an individual’s exposure to uncertainty canbe reduced through portfolio diversification in the equity market. Knightrecognizes this possibility which he calls ‘diffusion’ but he does not accord itmuch prominence as a vehicle for the reduction of uncertainty. He believesthat uncertainty is reduced mainly through the pooling of uncertainties by thelarge firm.

The gains in uncertainty- reduction from large scale organization are, inKnight’s view, quite considerable. So much so, that the most importantuncertainties relate not to producing for a market itself, but to the selectionof suitable mangers to take production decisions. Once the firm hasrecruited a person with foresight much of the uncertainty in producing of amarket is eliminated. The crucial decisions made within the large firm aredecisions about personal recruitment. The pure profit generated by a firm iscompensation to people for bearing uncertainty that they have delegateddecisions to the wrong sort of person.

Knight does not seem to anticipate that there will be much difficulty inensuring that managers with foresight exercise it properly on the stockholdersbehalf. The moral hazard problem is negligible. Presumably, because closesupervision of the manager is possible. Much greater moral hazard ariseswith the directors of the firm who recruit the managers and supervise themon the stock holder’s behalf. The unavoidable moral hazard involved indelegating direction means that directors cannot possibly be fully insuredagainst the consequences of their decisions. They must operate under profitrelated incentives and so effectively they must become stock holders in thefirm. Thus, directors who make decisions under uncertainty also bear theconsequences of those decisions and are ipso facto recipients of pure profit.

Some people have good judgment of other people’s abilities and others donot. But no one can be certain of his or her own judgment of other people’sabilities. As a result, confidence in his own judgment is perhaps the mostimportant characteristic of the entrepreneur. This has to be coupled with alow version to risk, as reflected in a disposition to back up his judgment withhis own capital. The elasticity of supply of self- confident people is, inKnight’s view, the single- most important determinant of the level of profitand of the number of entrepreneurs.


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The income of nay particular entrepreneur will, in general, tend to be larger(i) as he himself as ability and good luck but (ii) perhaps more important , asthere is in the society a scarcity itself- confidence combined with the power tomake effective guarantees to employees. The abundance or scarcity of mereability to mange business successfully exerts relatively little influence onprofit. The main thing is the rashness or timidity of entrepreneurs (actual andpotential) as a class in bidding up the prices of productive services.

Entrepreneur’s income, being residual, is determined by the demand for theseother services, where demand is a matter of the self- confidence ofentrepreneurs as a class, rather than upon a demand for entrepreneur servicesin a direct sense. We must see at once that it is perfectly possible forentrepreneurs as a class to sustain a net loss, which would merely have to bemade up out of their earnings in some other capacity. This would be thenatural result in a population combining low ability with high courage. Onthe other hand, if men generally judge their own abilities well, the generalrate of profit will probably be low, whether ability itself is low or high, butmuch more variable and fluctuating for a low level of real capacity. Thecondition for large profit is a narrowly limited supply of high- grade abilitywith a low level of initiative as well as ability.

Knight’s analysis exhibits very clearly the difficulties in theorizing aboutentrepreneurship, and in particular the problems of structuring the analysis ina coherent way. As a result, Knight’s views have been widely misinterpretedin the past. Many parts of the present work are simply a reformulation ofideas first presented by Knight. The concepts of probability and judgment areslightly different but the basic view of the way that market system allocatesjudgmental decision- making to entrepreneurs is the same both in cases.

SCHUMPETER ON INNOVATION

Schumpeter, perhaps more than any other writer, is very explicit about theeconomic function of the entrepreneur. The entrepreneur is the prime moverin economic development and his function is to innovate or to carry out newcombinations. Five types of innovation are distinguished the introduction ofnew good (or an improvement in the quality of an existing good); theintroduction of anew method of production; the opening of an new market, inparticular, a export a market in a new territory the ‘conquest of a new sourceof supply of raw materials or half- manufactured goods’ and the creation ofa new type of industrial organization, in particular, the formation of a trust orsome other type of monopoly.


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Anyone who performs this function is an entrepreneur whether he is atindependent businessman or a “dependent” employee of a company such as amanager or a director. Not all businessmen are entrepreneurs; the typicalentrepreneur is the founder of a new firm rather than the manager of anestablished one.

Schumpeter is adamant that the entrepreneur is not a risk- bearer. Riskbearing is the function of the capitalist who lends his funds to theentrepreneur. The entrepreneur bears risk only in so far as he acts as his owncapitalist. Unlike Knight, Schumpeter does not perceive much problem ofmoral hazard for a capitalist lending to an entrepreneur.

Entrepreneurs spend a lot of heir time doing non-entrepreneurial things:The entrepreneur of earlier times was not only as a rule a capitalist too; alsohe was also often- as he is still today in the case of small concerns- his owntechnical expert, in so far as a professional specialist was not called in forspecial cases. Likewise he was (and is) often his own buying and sellingagent, the head of his office, his own personal manager, and sometimes, eventhough as a rule he, of course employed solicitors, his own legal advisor incurrent affairs. And it was performing some or all of these functions thatregularly filled his days.

The carrying out of new combinations can no more be a vocation than themaking and execution of strategically decisions, although it is this functionand not his routine work that characterizes the military leader. Therefore, theentrepreneur’s essential function must always appear mixed with other kindsof activity which as a rule must be much more conspicuous than the essentialone. Hence, the Marshallian definition of the entrepreneur, which simplytreats the entrepreneurial function as ‘management’ in the widest meaning,will naturally appeal to most of us. We do not accept it, simply because itdoes not bring out what we consider to be the salient point and the only onewhich specifically distinguishes entrepreneurial from other activities.

The climate most favorable to innovation is when the economy is approachingin equilibrium for then the future seems relatively easy to foresee. The firstinnovations made by the most talented entrepreneurs prove successful andthis encourages less talented entrepreneurs to follow suit in a swarm. Becausethey are adapting ideas which are pioneers have already tried out the risksthat the capitalists perceive in backing the less talented entrepreneurs arerelatively low.

A wave of innovation follows which then, for a variety of reasons quicklyrecedes.Schumpeter believed that talented entrepreneurs were very scarce breed.Their scarcity lays not so much in their alertness or their professionalism as in


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their psychology. While entrepreneurs are rational economic men, theirobjective is not to the pursuit of consumption in the usual sense of that word.The motivating factors are three fold:

First of all there is the dream and the will to found a private kingdom usuallythough not necessarily also a dynasty. The modern world really does notknow any such positions but what may be maintained by industrial orcommercial success is still the nearest approach to medieval lordship possibleto modern man. Its fascination is especially strong for people we have noother chance of achieving social distinction.

Then there is the will to conquer- the impulse to fight, to prove one superiorto others, to succeed for the sake, not of the fruits of success itself. From thisaspect economic action becomes akin to sport- there are financial races, orother boxing- matches.

Finally, there is the joy of creating of getting things done or simply ofexercising one’s energy and ingenuity. Our type seeks out difficulties,changes in order, delight in ventures. This group of motives is the distinctlyanti-hedonist among the three.

The precursor to innovation is invention, which is a field of imaginativeactivity outside the province of the entrepreneur. The process of inventionforms no part of Schumpeter’s theory, but one of the attractive features of thetheory is how easily the dynamics of invention can be grafted on it.Schumpeter recognized that invention could be an endogenous processstimulated by the desire to alleviate pressing scarcities, but his attitude isbasically to regard it as autonomous.

The possibility of grafting on a theory of invention may be illustrated asfollows. It is often suggested that modern economic growth related to theinnovation of the mass market. Multipurpose goods, such was the typicalconsumer durable. The innovation of these goods often depends criticallyupon the invention of components from which they can be made up.Innovation of a new multi-purpose good is possible when the design of eachof the constituent components has involved sufficiently providing therequisite standards of compactness, reliability and performance.

If an autonomous random process of invention generates improvements incomponent design then there will come a critical point at which massproduction of themulti- purpose good becomes viable. This is the point atwhich each of the components has jus evolved to the requisite standard. Thismay trigger of a major innovation, such as the railway or the motorcar, whoserepercussions are sufficiently widespread to stimulate a wave of subsidiaryinnovations. This wave of innovations uses up the outstanding stock of


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inventions, which were pending adoption and lead to a subsequent fall ininvention until the stock of inventions builds up again to a threshold level.

Schumpeter himself was very cautious about relying upon major innovationand their consequent economies and spins off as an explanation for theclustering of innovation observed during the business cycle. Basically, heregarded wave of innovation and their creative destruction as a basicphenomenon of capitalist economic development so much that he dated theorigin of capitalist from the first appearance of these waves. He recognizedthat the waves could take different forms in different times and places. Hewas concerned to offer analytical frame work for the interpretation of variedhistorical experience rather than to formulate a narrow theory to which allhistorical experience was alleged to conform.

MC CLELLAND’S THEORY OF ACHIEVEMENTAND MOTIVATION

David McClelland has developed an achievement motivation theory.According to this theory, an individual’s need for achievement refers to theneed for personal accomplishment. It is the drive excel, to strive for successand to achieve in relation to a set standards. People with high achievementmotive like take calculated risks and want to win; they like to take onpersonal responsibility for solving problems and want to know how well theyare doing. High achievers are not motivated by money; but instead employmoney as a method of keeping sure of the achievements. Such people strivefor personal achievement rather than the rewards of success. They want to dosomething better and more efficiently than has been done before.

Need for achievement is simply the desire to do well not so much for the sakeof social recognition or prestige but for the sake of an inner feeling of personalaccomplishment. It is the need for achievement that motivates people to takerisk. People with high need for achievement behave in an entrepreneurialway. Need for achievement stimulates the behavior of a person to be anentrepreneur.

The following psychological factors contribute to an entrepreneurialmotivation:

1. Need for achievement through self- study, goal setting and inter-personal support.

2. Keen interest in situations involving moderate risk.3. Desire for taking responsibility.


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4. Concrete measures of task performance.5. Anticipation of future responsibilities.6. Energetic or novel instrumental activity7. Organizational skills, etc.

Some societies produce a large percentage of people with high need forachievement. Entrepreneurship becomes the link between need achievementand economic growth.

Mc Clelland considers the need for achievement to be most critical to anation’s economic development. He held that a strong ‘inner spirit’ inindividuals to attain is a measurable variable arising from a need, which theindividual develops mainly in childhood and seeks to satisfy throughout hislife. This ‘inner spirit’ which he called need for achievement, if higher, wouldproduce more energetic entrepreneurs capable of generating rapid economicdevelopment. High need for achievement or ambition motivates anentrepreneur to take risks, work hard, find new things, save more, andreinvest the savings in industry and so on. The limited empirical evidencesupports the hypothesis that need for achievement contributes toentrepreneurial success.

Mc Clelland rated the achievement motivation of different countries on thebasis of ideas related to need for achievement contained in the children’sstories. This has come to be known as n-factor rating. He established acorrelation between n- factor rating and the prosperity of the countries ageneration ahead.

The criterion on n- factor rating was the inherent concern for achievement ornon- induced achievement motivation.

Mc Clelland found that achievement motivation was lower among peopleunder developed countries than among these of developed nations. Even inUSA only about ten percent of the people were actually high achievers. It isthe level of aspirations or ambitions that explains the lack of enterpriseunderdeveloped countries. Ambition is the level of all motives and aimlesslife a goal- less game. Ambitions motivate men, activate them, broaden theirvision and make life meaningful. Ambition builds up achievement pressure inthe individual and provides the base for Mc Clelland’s n- factor. Ambition isthe lever of all motives. The initiative intentions of an individual are directedby his ambitions. It is the ambition electrifies man’s actions. Therefore, whatmatters are not merely the people are their aspirations and the means toachieve the goals? Therefore, it is the duty leaders and teachers to build upambitions into the minds of the young people however ambitions differ greedand windfall. Greed results in disaster a windfall makes one speculator.Sometimes personal ambitions may come in way of family aspirations or


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national aspirations. Unfulfilled ambitions passed to the next generation whomay chase the goal with redoubled effort and vigor

Thus, ambition nourishes achievement motivation and brings economicgrowth. The biggest obstacle to economic progress in countries like India isperhaps the limited ambition of people. The initiative of an individual isdirected by his ambitions, which nourish the entrepreneurial spirit and bringabout economic development. Hence, what matters are not merely the peopleand then talents but their aspirations? However, ambitions differ amongindividuals on the basis of environment in which they are born and broughtup. Galbraith has also attributed the backwardness of many Asian andAfrican countries to lack ambition.

PETER DRUCKERS VIEW ONENTREPRENEURSHIP

Peter Drucker has aptly observed that, “Innovation is the specific tool ofentrepreneur’s, the means by which they exploit changes as an opportunityfor a different business or a different service. It is capable of being presentedas a discipline, capable of being learned and practiced. Entrepreneurs need tosearch purposefully for the sources of innovation, the changes and theirsymptoms that indicate opportunities for successful innovation. And theyneed to know and apply the principles of successful innovation.”

Systematic innovation, according to him, consists in the purposeful andorganized search for changes and in the systematic analysis of theopportunities such changes might offer scope for economic and socialinnovation.

According to Drucker, three conditions have to be fulfilled.

1. Innovation at work. It requires knowledge and ingenuity. It makesgreat demands on diligence, persistence and commitment.

2. To succeed, innovation must build on their strengths

3. Innovation always has to be closed to the market focused on themarket, indeed market- driven.

Specially, systematic innovation means monitoring sources for innovativeopportunity.

The first three sources lie within the enterprise, whether it be a business ora public service institution or within an industry or service sector. They


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are therefore, visible primarily to people within that industry or servicesector. They are basically symptoms. But they are highly reliable indicatorsof changes that have already occurred or can be made to occur with littleeffort.

These four source areas are:

1. The unexpected success, the unexpected failure, the unexpectedoutside event.

2. The incongruity between reality as it actually is and reality as it isassumed to be or as it “ought to be”.

3. Innovation in industry structure or market structure that catcheseveryone unawares.

4. The second set of sources for innovative opportunity, a set of three,involves changes outside the enterprise or industry:

Ø Demographics (population changes).

Ø Changes in perception, mood and meaning.

Ø New knowledge, scientific and non- scientific.

END OF MODULE II


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MODULE –III

BUSINESS PLAN PROJECTMANAGEMENT

Ø Search of a Business Idea.

Ø Selection of a Product.

Ø Adoption Process.

Ø Concept of Project and itsClassification.

Ø Basic Components of aProject.

Ø Introduction

Ø Writing a Business Plan

Ø Contents of a Business Plan

Ø Failure of a Business Plan


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INTRODUCTION TO BUSINESS PLAN

The business plan is written document prepared by the entrepreneur thatdescribes all the relevant external and internal involved in starting a venture.Entrepreneur should consult with many other sources in its preparation likelawyers, accountants, marketing consultants and engineers. Business plancould take more than 200 hrs to prepare but varies from person to personaccording to their knowledge and experience, with purpose about a newventure to a potential investor.

CONTENTS OF A BUSINESS PLAN

I. INTRODUCTORY PAGE

A. Name and address of business.B. Name(s) and address (es) of principals.C. Nature of business.D. Statement of financing method.E. Statement of confidentiality of report.

II. EXECUTIVE SUMMARY

Three to four pages summarizing the complete business Plan.

III. INDUSTRY ANALYSIS

A. Future outlook and trends.B. Analysis of competitors.C. Market Segmentation.D. Industry forecasts.

IV. DESCRIPTION OF VENTURE

A. Product(s)B. Service(s)C. Size of business.D. Office equipment and personnel.E. Background of entrepreneurs.


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V. PRODUCTION PLAN

A. Manufacturing process (amount subcontracted)B. Physical Plant.C. Machinery and Equipment.D. Names of Suppliers of raw materials.

VI. MARKETING PLAN

A. Pricing.B. Distribution.C. Promotion.D. Product forecasts.E. Controls.

VII. ORGANIZATIONAL PLAN

A. Form of ownership.B. Identification of partners or principal shareholders.C. Authority of principals.D. Management- team background.E. Roles and responsibilities of members of organization.

VIII. ASSESSMENT OF RISK

A. Evaluate weakness of business.B. New technologies.C. Contingency Plans.

IX. FINANCIAL PLAN

A. Proforma income statement.B. Cash Flow Projections.C. Proforma balance sheetD. Break-Even analysis.E. Sources and application of funds.

X. APPENDIX (contains backup material)

A. Letters.B. Market Research Data.C. Leases or contracts.D. Price lists from suppliers.


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HOW TO WRITE A BUSINESS PLAN

The business plan can take more than 200 hours to prepare, depending on theexperience and knowledge of the entrepreneur as well as the purpose it isintended to serve. It should be comprehensive enough to give any potentialinvestor a complete picture and understanding of the new venture and willhelp the entrepreneur clarify his or her thinking about the business. Manyentrepreneurs incorrectly estimate the length of time that an effective planwill take to prepare. Once the process has begun, however, the entrepreneurwill realize that it is invaluable in sorting out the business functions of a newventure. Each of the items in the contents of the business plan is explained indetail as follows.

INTRODUCTORY PAGE:

This is the title page or cover that provides a brief summary of the ventureand should include the following things:

Ø Name and address of the company.Ø Name of the entrepreneur(s) and telephone number.Ø Description about the company and also stating nature of

business.Ø Stating their financial requirements.Ø A statement of the confidentiality of the report.

EXECUTIVE SUMMARY:

This is prepared after total plan is written. This about 3 to 4pages in length,this summary should stimulate the interest of the potential investor. Thishighlight concise and convincing manner the key point in the business planstating the nature of the venture, financing needed, market potential, andsupports to why it will succeed.

INDUSTRIAL ANALYSIS:

This reviews industry trends and competitive strategies. The industryoutlook, including future trends and historical achievements, insight of newproduct developments in this industry. Competitor should be identified, withappropriate strengths and weakness described and how will it affect the newventures potential success in the market.


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DESCRIPTION OF VENTURE:

It states the product produced by venture which includes patent, copyright,or trademark status. It also gives a brief idea where the business will belocated including the construction of building, leased or owned. Indescription of venture the type of office equipment will be required whether itwill be purchased or leased. He (entrepreneur) should also look at themanagement experience, stating their education, age, special abilities andinterest.

PRODUCTION PLAN:

This includes details of manufacturing process a product, which is verynecessary. If the manufacturing is to be carried out in whole or in part by theentrepreneur, he or she will need to describe to physical plan layout: themachinery and equipment needed to perform the manufacturing operations:raw material and suppliers names, addresses, and the terms; costs ofmanufacturing and any future capital equipment needs. It should also includestate subcontractors name and addresses; costs of subcontractedmanufacturing; raw material required for manufacturing.

MARKETING PLAN:

The marketing plan represents a significant element in the business plan for anew venture. Marketing planning should be an annual activity that focuses onimplementing decisions related to the marketing mix variables (product,price, distribution, and promotion). Like the annual budgeting cycle, marketplanning has also become an annual activity and should be incorporated byall the entrepreneurs, regardless of the size or type of the business. Thesemarketing plans must be monitored frequently, especially in the early stagesof start up.

ORGANIZATIONAL PLAN:

The organizational plan describes the venture form of ownership i.e. whetherit is proprietorship, partnership or a corporation. If the venture is apartnership, the term of partnership should be included, name of partners,term of agreement, specimen signatures of the partners etc. If it is acorporation venture than it is important to detail the shares of the stockauthorized, share options, names and address, resumes of the directors andofficers of the corporation. If it is an incorporation venture than it should statethe principal shareholders and shares owned by them; type and number ofshares stating voting or non-voting stocks have been issued, members ofboard of directors, check signing authority or control. The plan also stateshow many members are there in management team and their background,their roles and responsibilities stating their salaries, bonuses or other forms of


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payment for each members of the management team. This is also helpful toprovide an organization chart indicating the line of authority andresponsibilities of the members of the organization. This information providesthe potential investor with a clear understanding of who controls theorganization and how other members will interact in performing theirmanagement functions.

ASSESSMENT OF RISK:

All ventures face some potential hazards, given the particular industry andcompetitive environment. An entrepreneur should make assessment of riskand prepare an effective strategy to deal with them. Even if these factorspresent no risks to the new venture, the business plan should discuss whythat is the case. Contingency plans and strategies illustrate to the potentialinvestor that the entrepreneur is sensitive to important risks and is preparedshould any occur.

FINANCIAL PLAN:

The financial plan should include proforma income statements, break -evenanalysis, proforma cash flow, proforma balance sheet, and proforma sourcesand uses of funds.

APPENDIX:

It generally contains business plan generally back up material that is notnecessary in the text of the document. Reference to any of the documents inthe appendix should be made in the plan itself. Letters from customers,distributors or subcontractors are examples of information that should beincluded in the appendix. Any documentation of information that issecondary data or primary research data used to support plan decisionsshould also be included. Leases, contracts or any others types of agreementthat have been initiated may also are included in the appendix. It should alsoinclude price lists from suppliers and competitors may be added.

CONCLUSION

A business plan is a crucial component for an entrepreneur. A business plan ispresented to a bank to obtain funds in the initial stage of a project. It is amonetary rule that a business plan has to be presented to a bank before therelease of funds by the financial institutions. Hence, business plan is astepping- stone for an entrepreneur in the commencement of a project.


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WHY BUSINESS PLANS FAIL?

Generally a poorly prepared business plan can be blamed on one or more ofthe following factors:

v Goals set by the entrepreneur are unreasonable.v Goals are not measurable.v The entrepreneur has not made a total commitment to the business or

to the family.v The entrepreneur has no experience in the planned business.v The entrepreneur has no sense of potential threats or weaknesses to the

business.v No customer need was established for the proposed product or service.

Setting goals requires the entrepreneur to be well informed about the type ofbusiness and the competitive environment. Goals should be specific and notso mundane as to lack any basis of control. For example, the entrepreneurmay target a specific market share, units sold, or revenue. These goals aremeasurable and be monitored overtime.

In addition, the entrepreneur and his or her family must make a totalcommitment to the business in order to be able to meet the demands of a newventure. For example, it is difficult to operate a new venture on a part- timebasis while still holding on to a full- time position. And it is difficult tooperate a business without an understanding from family members as to thetime and resources that will be needed. Lenders or investors will not befavorably inclined toward a venture that does not have full- timecommitment. Moreover, lenders or investors will expect the entrepreneur tomake a significant financial commitment to the business even if it means asecond mortgage or a depletion of savings.

Generally, a lack of experience will result in failure unless the entrepreneurcan either attain the necessary knowledge or team up with someone whoalready has it. For example, an entrepreneur trying to start a new restaurantwithout any experience or knowledge of the restaurant business would bedisastrous.

The entrepreneur should also document customer needs before preparing theplan. Customer needs can be identified from direct experience, letters fromcustomers, or from marketing research. A clear understanding of these needsand how the entrepreneur’s business will effectively meet them is vital to thesuccess of the new venture.


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PROJECT MANAGEMENT

WHAT IS A PROJECT MANAGEMENT ?

It is a specialized branch of management that includes variety of factors suchas organization structure, the process of planning and control, humanrelations etc. It is executed as under:

a) Decide the scheme of operations.b) Break down work into series of operations.c) Evolve an orderly sequence or programme.

Every project has three basic attributes, namely

v The input characteristicsv Output characteristics, andv Social cost benefit characteristics

The input characteristics define what the project requires such as rawmaterials, energy, manpower, financial resources and organizationalstructure.

The output characteristics define what the project will generate viz.production of additional goods, provision of additional services etc. Thesocial cost benefit aspect affects the equilibrium of availabilities and non-availabilities in an economy. Thus the benefits which will be accrued to thesociety have to be carefully evaluated.

The project idea needs to be evaluated for its feasibility and the setting up ofan enterprise should be based on careful and sound evaluation. Projectappraisal brings credibility to a project and projects from in built weaknessesand consequently a healthy and viable industry comes up.

SEARCH FOR A BUSINESS IDEA

CHOOSING AN IDEA

To get established as a successful entrepreneur depends to a large extent on agood idea.

Idea must not only be good for the market, but good for the project and goodfor the entrepreneurs.


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Further, it should be manageable without much dependence on others andshould provide satisfactory results to the entrepreneur.

In the idea stage, suggestions for new products are obtained from all possiblesources viz. customers, competitors, R&D, distributors and companyemployees. Essentially the entrepreneur needs to scan the environment.

THE VARIOUS SOURCES ARE

Ø Personal Informal Sources

a. Familyb. Customersc. Friendsd. Colleaguese. Salesmanf. Social Contactsg. Employees

Ø Personal Formal Sources

a. Bankersb. Business Consultants

Ø Impersonal Written Sources

a. Magazinesb. Journalsc. Booksd. Newslettere. Newspapersf. Catalogues

Ø Impersonal Oral Sources

a. Trade Showsb. Seminars/ Workshopsc. Professional Organizationsd. Small Business Organizationse. Suppliers/ Dealers

One should use as many resources as possible for the purpose of scanning theenvironment.


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OBSERVATIONS

Ø With constant observation, entrepreneurs target potential market,consumers, products and availability raw materials and widening ofmarket demand.

Ø Entrepreneurs get tempted to step into the field that profit potentialand is socially acceptable.

SELECTION OF A PRODUCT

Very essential for being success in business venture. The various factors thatinfluence the entrepreneur in selecting the right product are:

v The import restrictions or whether the import of the selected items isbanned- In case of banned item, the domestic market will offerconsiderable scope for selling as the demand for such a product wouldnot be met by import.

v Whether the entrepreneur or his partners have substantial experiencein the manufacture and marketing of certain products. Most often, theitems selected are of those lines of products in which entrepreneur orhis colleagues have gathered enough experience.

v Degree of profitability that rules in the market. Such information canbe obtained from the banks or the financial corporations or the marketitself.

v Concessions available from the government for producing a productthat may be import substitution. Entrepreneur will select a particularproduct that enjoys a substantial amount of incentives, concessions,liberal taxation policies etc.

v Products belonging to priority industries or smallscale sector- certainproducts are listed by the government for purchasing exclusively fromthe small- sector.

v Market for the product – if the product also has an export market, itwidens the scope of marketing and hence the success of the enterprise.

v Certain products are permitted for production only if the others belongto de- licensed category. Hence a product belonging to licensed


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category or de- licensed category is also considered before selecting theproduct.

v Products enjoying specific advantages such as locations viz, ifproduced in free trade zone in a backward area.

v Product belonging to an ancillary unit serves as a major component forthe OEM- provides a ready demand and hence ensures easymarketability.

v Finally, whether the machinery and raw materials required tomanufacture the product would be imported or indigenous,requirement of skilled/ unskilled labor, indigenous technical know-how or foreign collaboration. The study of project idea is the startingpoint of the feasibility analysis.

THE ADOPTION PROCESS

A process to bring about a change in buyer’s attitudes and perception. Aconsumer invariably undergoes the following steps in determining thefeasibility of buying the new products

1. Awareness2. Interest3. Evaluation or mental trial4. Trial- physical

Awareness:

A consumer learns about anew idea or a product and obtains limitedinformation about its qualities, usefulness, performance throughadvertisements etc.

Interest:

Once the consumer develops an interest in the innovation, he demandsdetailed information about the new products, its utility, its performance, etc.He gets more information through jingles on radio or TV ads and teachesthrough sales- persons, opinion leaders, peers, friends etc.

Evaluation:

The consumer tries to weigh the value of the new product in relation to thebenefits obtained from it i.e. conducts a mental trial of the new product.


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Trial:

The consumer is now ready to put the idea into practice. Competentassistance may become necessary to put the innovation to use.

Adoption:

1. The consumer mow decides to adopt the new idea or a product forcontinued use.

2. Depending the post- purchase experience the consumer becomes arepeat buyer and consequently the advocate for the innovation.

PRODUCT INNOVATION

Product Innovation takes place through the process of product planning anddevelopment.

Covers search for new products and innovations as well as the improvementof existing products.

PRODUCT INNOVATION

INTERNAL DEVELOPMENT

Discovering and developing new products by the firm itself a desirablemeans.

LICENSING

Securing right to produce the product from a patent holder i.e. contractualarrangement e.g. coca cola.

ACQUISITION

Buying the firm that developed or patented the product- a costly means.

InternalDevelopment

Licensing Acquisition


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CONCEPT OF PROJECT AND ITS CLASSIFICATION

CONCEPT OF PROJECT

The term “project” connotes programme of action. Project is alwaysinterwoven with all socio- economic and cultural activities the projectinvolves a scheme and a speculative imagination.

The kinds of projects

1. Agricultural projects- relating to

a. Land developmentb. Irrigationc. Soil- conservationd. Fertilizers, ande. Seeds etc.

2. Research projects

Definition of “Project”- According to World Bank, project can be defined as“An approval for a capital investment to develop facilities to provide goodsand services”.

Little and Mireless defines project as “A scheme or a part of scheme forinvesting resources which can be reasonably analyzed and evaluated as anindependent unit”. “It is an appraisal for investment with the definite aim ofproducing a flow of output over a specific period of time”.

Gittinger has defined it as the whole gamut of activities involved in usingresources to gain benefits.

According to Dr. Albert O. Hirchman” The development project connotespurposefulness, some minimum size, a specific location, the introduction ofsomething qualitative new, and the expectation that a sequence of furtherdevelopment will be set in motion”.

Project can be defined as a scientifically evolved work plan devised to achievea specific objective with a specified period of time. The three basic attributesof a project are1. A course of action2. Specific objectives, and3. Definite time perspective.


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CLASSIFICATION OF PROJECTS

Establishment of a new business unit to manufacture some product or arrangefor the distribution of products of another company poses a challenge to theentrepreneur.

Ø Helps in expressing and highlighting the essential features of theproject.

Ø Project includes all activities aimed at:

a. Increased production of goods and/ or services.b. Increasing the capability of existing projects andc. Increasing the productivity of these goods/ services.

The projects can be classified as under:

1. Quantifiable and Non- quantifiable projects

v Quantifiable projects- quantitative assessment of benefits can bemade. Concerned with industrial development, powergeneration, and mineral development.

v Non- quantifiable projects- where quantitative assessment is notpossible. Concerned with health, education, defense etc.

2. Sectoral Projects

In India planning commission has accepted the Sectoral basis as the criterionfor classification

v Agriculture & Allied sectorv Irrigation and power sectorv Industry and Mining sectorv Transport and communicationv Social service sectorv Miscellaneous

Useful in resource allocation at macro level

3. Techno- Economic Projects

Based on their techno- economic characteristics


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(a) Factor intensity- oriented classification

v Capital intensivev Labour- intensive

(b) Causation-oriented classification

v Demand based or,v Raw materials based

Dominant reasons for starting a project

Ø Non- availability of certain goods or services and consequent demandfor such goods or services.

Ø Availability of certain raw materials, skills or other inputs.

(c) Magnitude- oriented classification- based on the size of the investment.

v Large- scale.v Medium- scale.v Small- scale.

Techno- economic classification facilitates the process of project feasibilityappraisal.

4. Financial Institution Classification

All India and state financial institutions classify projects according to theirage, experience and the purpose.

v New projectsv Expansion projectsv Modernization projectsv Diversification projects

These projects are invariably are profit- oriented.

5. Services Projects

v Welfare projectsv Service projectsv Research and development projectsv Educational projects


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BASIC COMPONENTS OF A PROJECT

Conceptual Framework of a Project

v A productive activity, which can be analyzed appraised and monitoredindependently.

v A specific objective in terms of a geographic location, specific startingand end point

v Serve the target population by achieving good returns on investment.

v Has an organization to implement it.

PHASES OF PROJECT MANAGEMENT

Objective

Size

A Scheme

Organization

Internal rate ofreturn

SocialBenefits

Start Identification Formulation Appraisal

Selection Implementation Management


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v Identification: - Careful scanning of the environment for investmentopportunity and the ROI.

v Formulation: - Translation of idea into a concrete project, scrutiny andpreparation of feasibility report.

v Appraisal: - Analysis and evaluation of market, technical, financial andeconomic variables, return on investment and break- even point.

v Selection: - Rational choice considering objectives and limitations.

v Implementation: - Expeditious completion within allocated resources.

v Management: - Operation of an enterprise with maximum of netpresent value, maximization of return. Increase in rate of return at lowrisk.

To summarize, it can be said that

v Project is a scheme for investing resources in an enterprise.

v It can be a massive scheme like a multipurpose river valley project or aventure with small investment.

v It provides complete details and analysis of technical, marketing andeconomic aspects.

v To an entrepreneur it opens up a programme for action, profitabilityand economic viability.

v A sound project will definitely contribute towards economicdevelopment.

END OF MODULE III


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MODULE- IV

WOMEN ENTREPRENEURSHIP

Ø Concept of Women entrepreneurship

Ø Growth of women entrepreneurship

Ø Problems of women entrepreneurship

Ø Special schemes for women entrepreneurship


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CONCEPT OF WOMEN ENTREPRENEURSHIP

Based on the general concept of entrepreneurship women entrepreneurs maybe defined as a woman or group of women who initiate, organize and run abusiness enterprise. In terms of Schumpeterian concept of innovativeentrepreneurs, women who innovate, imitate or adopt a business activity arecalled “women entrepreneurs”. The government of India has defined womenentrepreneurs based on women participation in equity and employment of abusiness enterprise. Accordingly, a women entrepreneur is defined as an“enterprise owned and controlled by a women having a minimum financialinterest of 51 percent of the capital and giving at least 51 percent of theemployment generated in the enterprise to women”. However, this definitionis subject to criticism mainly on the condition of employing more than 50percent women workers in the enterprises owned and run by the women.

In nutshell, women entrepreneurs are those women who think of a businessenterprise, initiate it, organize and combine the factors of production, operatethe enterprise and undertake risks and handle economic uncertainty involvedin running a business enterprise.

GROWTH OF WOMEN ENTREPRENEURS

Women entrepreneurs in India accounted for 9.01% of the total value 11.70million entrepreneurs during 1988-89.

A cross country comparison reveals that emergence and development ofentrepreneurship is largely caused by the availability of supportingconditions in a country. To quote, with improving supporting conditions, theshare of women owned enterprises in the United States has risen from 7.1% in1977 to 32% in 1990. It is likely to reach to 50% by the turn of the 20th century.

In India, women entry into business is a new phenomenon. Women entry intobusiness, or say, entrepreneurship is traced out as an extension of theirkitchen activities mainly to 3 Ps viz, pickles, powder and pappad. Women inIndia plugged into business for both pull and push factors. Pull factors implythe factors, which encourage women to start an occupation or venture with anurge to do something independently. Push factors refer to those factors,which compel to take up their own business to tide over their economicdifficulties and responsibilities.

With growing awareness about business and spread of education amongwomen over the period, women have started shifting from 3 Ps to engross to 3modern E’s, viz. Engineering, Electronics and Energy. They have excelled inthese activities. Women entrepreneurs manufacturing solar cookers in


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Gujarat, small foundries in Maharashtra and T.V. capacitors in Orissa haveproved beyond doubt that given the opportunities, they can excel their malecounterparts. Smt. Sumati Morarji (Shipping Corporation), Smt. YumutaiKirloskar (Mahila Udyog Limited), Smt. Neena Malhotra (Exports) and Smt.Shahnaz Hussain (Beauty Clinic) are some exemplary names of successful andaccomplished women entrepreneurs in our country.

In India, Kerela is a state with highest literacy (including women literacy)reflecting a congenial atmosphere for the emergence and development ofwomen entrepreneurship in the state. According to a study, the number ofwomen’s industrial units in Kerela was 358 in 1981, which rose to 782 inMarch 1984. These 782 units included 592 proprietary concerns, 43partnership firms, 42 charitable institutions, 3 joint stock companies and 102co- operative societies covering a wide range of activities. On the whole,proper education of women in Kerela resulted in high motivation amongthem to enter into business. The financial, marketing and training assistanceprovided by the state government also helped motivate women to assumeentrepreneurial career. Women’s desire to work at the place of residence,difficulty of getting jobs in the public and private sectors and the desire forsocial recognition also motivated women in Kerela for self- employment. LikeKerela, an increasing number of women are entering the business in the stateof Maharashtra also.

PROBLEMS OF WOMEN ENTREPRENEURSHIP

Women entrepreneurs encounter two sets of problems, viz, general problemsof entrepreneurs and problems specific to women entrepreneurs. These arediscussed as follows:

1. Problem of finance: Finance is regarded as “life blood” for anyenterprise, be it big or small. However, women entrepreneurs sufferfrom shortage of finance on two counts. Firstly, women do notgenerally have property on their names to use them as collateral forobtaining funds from external sources. Thus, their access to theexternal sources of funds is limited. Secondly, the banks also considerwomen less credit- worthy and discourage women borrowers on thebelief that they can at any time leave their business. Given suchsituation, women entrepreneurs are bound to rely on their ownsavings, if any and loans from friends and relatives who are expectedlymeager and negligible. Thus, women enterprises fail due to theshortage of finance.

2. Scarcity of raw material: Most of the women enterprises areplagued by the scarcity of raw material and necessary inputs. Addedto this are the high prices of raw material, on the other. The failure of


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nay women co- operatives in 1971 engaged in basket making is anexample how the scarcity of raw material sounds the dealth- knell ofenterprises run by women.

3. Stiff Competition: Women entrepreneurs do not have organizationset- up to pump in a lot of money for canvassing and advertisement.Thus, they have to face a stiff competition for marketing their productswith both organized sector and their male counterparts. Such acompetition ultimately results in the liquidation of women enterprises.

4. Limited Mobility: Unlike men, women mobility in India is highlylimited due to various reasons. A single woman asking for room is stillupon suspicion. Cumbersome exercise involved in starting anenterprise coupled with the officials humiliating attitude towardswomen compels them to give up an idea of starting an enterprise.

5. Family Ties: In India, it is mainly a woman’s duty to look after thechildren and other members of the family. Man plays a secondary roleonly. In case of married woman, she has to strike a fine balancebetween her business and family. Her total involvement in familyleaves little or no energy and time to devote for business. Support andapproval of husbands seem necessary condition or women’s entry in tobusiness. Accordingly, the educational level and family background ofhusbands positively influence women’s entry into business activities.

6. Lack of Education: In India, around three- fifths (60%) of womenare still illiterate illiteracy is the root cause of socio- economicproblems. Due to the lack of education and that too qualitativeeducation, women are not aware of business, technology and marketknowledge. Also, lack of education cases low achievement motivationamong women. Thus, lack of education creates problems for women inthe setting up and running of business enterprises.

7. Male dominated Society: Male chauvinism is till the order of theday in India. The constitution of India speaks of equality betweensexes. But, in practice women are looked upon as able i.e. Weak in allrespects. Women suffer from male reservations about a women’s role,ability and capacity and are treated accordingly. In nutshell, in themale-dominated Indian society, women are not treated equal to men.This in turn, serves as a barrier to women entry into business.

8. Low Risk- Bearing Ability: Women in India lead a protected life.They are less educated and economically not self- dependent. All thesereduce their ability to bear risk involved in running an enterprise. Riskbearing is an essential requisite of a successful entrepreneur. In


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addition to above problems, inadequate infra structural facilities,shortage of power, high cost of production, social attitude, low needfor achievement and socio- economic constraints also hold the womenback from entering into business.

SPECIAL SCHEME FOR WOMEN ENTREPRENEURS

With a view that women entrepreneurs should come forward in industrialfield and become self- sufficient, government and financial institutions haveannounced many schemes of providing financial assistance.

1. Seed Capital Scheme: In order to start one’s own business thisscheme is undertaken by the government. Government provides funds@ 10% to unemployed youths and women. The seed capital provided is10% to 15% of the total cost of the project. The percentage of seedcapitalist 22.5% for backward class candidates. The woman is treatedunemployed even if their husbands are in business or service. Thequalification is they should have passed at least the standard andshould be between 18- 50 years of age. The maximum capital availableis 5 lacs. For a partnership firm, the contribution of employed shouldbe more than 75%. The seed capital granted is to be aid within theperiod of 7 years. More details in regard are provided by DistrictIndustries Centre.

2. National equity Fund: National Bank or State finance Corporationimplements this scheme. There is no condition of age or educationunder this scheme. Loan granted for industrial or service orientedbusiness purpose. It is expected that the candidate should contributeminimum 105 of the cost of the project. 15% of the project cost isgranted by the bank towards capital @ 10% equity fund as loan.75% ofproject cost is granted by the bank in the form of loan.

3. Finance Corporation Scheme: All the schemes announced by thefinance corporation scheme are applicable to women entrepreneurs.Prime minister’s employment guarantee scheme, Centralgovernment’s scheme for educated unemployment: This scheme issponsored by central government. The age limit applicant is 35 yearsand minimum education is Std.Xth. Under this scheme 95% of loan isgranted by the bank. 15% subsidy is available. Rs. 5,000 for businesspurpose. Rs. 25,000 for service industry and Rs. 35,000 for the purposeof individual loan is granted. The candidate is not expected tocontribute his share. 15% of subsidy is directly remitted to bank bycentral government. This scheme has been revised from April 1999.The income limit of the partners of the women should not be more


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than Rs. 24,000 p.a. for availing loan under this scheme, the candidatehas to make an application to District Industries Center.

4. Women Industries Fund scheme: Under this scheme womenentrepreneur’s get 15% seed capital of total cost of the project forstarting a new business. The seed capital money is restricted to Rs. 4lacs. The cost of the project should not exceed 10 lacs. It is expected thatwomen entrepreneurs should contribute 10% of total project cost.Incase of partnership firms/ private limited company the contributionof women entrepreneurs should be minimum 51% of the total projectcost. For availing this facility application must be made to nationalizedbanks or State Finance Corporation.

5. Single Window Scheme: To facilitate women entrepreneurs ingetting term loan and working capital from one and the sameinstitution, the Small Industrial Development bank of India has startedthis scheme. It is applicable to both, male and female entrepreneurs.This scheme is applicable to project where total expenses are up to 20lacs (excluding working capital and margin money). The loan is toorepaid within the period of 1 year. Entrepreneurs share in the projectshould be 25%. This scheme is implemented through FinanceCorporation. The corporation also provides term loan and workingcapital. Bank has to take the responsibility of providing workingcapital.

6. Joint Loan Scheme: Under this scheme, the artisans living in ruralareas, where the populations is up to 5 lacs get the loans to purchaseinstruments and working capital needs. Financial assistance isavailable cent per up to Rs. 50,000 lacs with minimum rate of interest.Loan granted is to repaid within a period of 8 years. There is norestriction of age education qualification of the candidate.

7. District Industries Center Scheme: The main objective of thisscheme is to start industries in rural areas where the population is lessthan 1 lacs. The industries with investment in machinery not exceedingRs. 2 lacs are eligible for financial assistance under this scheme. 20% of2 lacs for general category and 30%incase of backward people aregranted as seed capital from the District Industries Center. Theremaining amount of entrepreneur has to invest rest of the amount.The government sponsors this scheme. The rate of interest on seedcapital is 4%. The District Industries Center implements the schemeand the applicant has to apply to them for financial assistance.


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8. Scheme of KVIC: Many schemes are implemented by KVIC forwomen entrepreneurs to start their own business (cottage industries) inrural and semi- urban areas.

9. Women Financial Corporation: For overall financialdevelopment of women, Government establishes Women FinancialCorporation.

10. Training For Women Entrepreneurs: The Indian smalldevelopment bank has undertaken training programme for womenentrepreneurs with an object of getting more opportunities for startingself employment industries/ business for women. This scheme isimplemented in the state of Maharashtra at Maharashtra DistrictCenter, Aurangabad and other centers.

11. Banks Scheme for women entrepreneurs: Bank implementsvarious scheme for women entrepreneurs, one of which is “stree-shakti” in State bank of India.

12. Subsidy on Interest Scheme: The Indian Finance Corporation ahsimplemented this scheme. The subsidy is granted loans up to Rs. 10lacs. The women entrepreneurs are encouraged to start their ownbusiness. They are encouraged to undergo training in industrialdevelopment. The industry should be run by the women entrepreneurwith the contribution of 51% of total cost of project. The amount ofsubsidy available is interest for 1 year or Rs. 20,000 granted throughfinancial institution to women entrepreneurs. Indian FinancialCorporation reimburses this amount to the financial institutions.

END OF MODULE IV


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MODULE- V

ANCILLARIZATION

Ø What is an ancillary unit?

Ø Development of ancillary industry in India

Ø Factors affecting ancillarization

Ø Role played by Financial Institutions and commercialbanks

Ø Meaning of sub- contracting

Ø Advantages and disadvantages of sub- contracting

Ø Franchising


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WHAT IS AN ANCILLARY UNIT?

An industrial unit which is engaged or is proposed to be engaged in themanufacture or production of parts, components, sub- assemblies, tooling orintermediaries, or the rendering of services and the undertaking supplies orrenders or proposes to supply or render not less than 5o percent of itsproduction or services, as the case may be, to one or more other industrialtakings and whose investment in fixed assets in plant and machinery whetherheld on ownership terms or on lease or on hire purchase, does not exceed Rs75 lacs.

DEVELOPMENT OF ANCILLARY INDUSTRY IN INDIA

The programme of ancillarisation includes motivation of public and privatesector units to offload production of components, parts, sub- assemblies,tools, intermediates, services etc to ancillary units. The programme ofancillary development has specific advantages for both for large as well assmall industries and also for the total economy of the country. The large scaleunits have the advantages in the form of savings in investments, inventories,employment of labour, etc. and getting the items of the desired specifications,while the small scale units have the advantage of getting assured market fortheir products, availability of technical assistance and improved technologyfrom the parent units. This programme also helps in overall economy of thecountry. The strategy for ancillary development was originally outlined withthe objective of:

1. Development of employment opportunities coupled with growth ofentrepreneurship in different fields and different parts of the country.

2. Increase in productivity of the small scale units.3. Growth of a low cost economy through reduction in costs brought by

appropriate technology followed by ancillary units.4. Development of a single or multi discipline expertise in different fields

to bring about economies of scale.

FACTORS AFFECTING ANCILLARISATION

Recently there has been a growing trend towards ancillarisation due to theseries of rapid developments that have been taken place in the industrialstructure in the country.


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Ø The size of operations of industrial units has increased enormously;with the result that they are compelled to sub- contract some of theitems of production to ancillaries.

Ø It was more convenient for large scale manufactures to get the ancillaryunits to produce certain items for them. With the growing complexityof management, the large scale manufacturer can now concentrate onthe problems of organization, marketing etc, rather than concentratingon availability of raw materials etc.

Ø Large scale manufacturers can economize on transport costs, storagespace, etc, by contracting rather than by producing the samecomponents themselves.

Ø It is economic to have some items manufactured by ancillary unitsbecause the cost of these items is higher when they are fabricated bylarge scale manufacturers.

Ø By outsourcing, large scale manufacturer is able to insulate him againstfluctuations in the prices of raw materials over a period of time byentering into contracts for the supply of these items.

All these facts underscore the point that the development of ancillaries andtheir growing popularity have been well supported by economic andmanagement considerations.

ROLE PLAYED BY FINANCIAL INSTITUTIONS ANDCOMMERCIAL BANKS.

Role played by financial institutions and commercial banks in providingfinancial assistance to small scale entrepreneurs.

The small scale industrial sector raises term credit and working, capitalrequired by it from commercial banks, co- operative banks, regional ruralbanks and state- financial corporations. The banking system provided mainlyworking capital and the State Financial Corporations mainly providesinvestment capital.

Financial assistance in kind is available to the smallscale industrial sectorfrom the National Small Industries Corporation (NSIC) at the national level,the State Small Industries Development Corporations (SSIDCs) at the statelevel which supply machinery on hire- purchase basis. The IndustrialDevelopment Bank of India (IDBI), the National Bank for Agriculture and


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Rural Development (NABARD) and the Industrial Reconstruction Bank ofIndia (IRBI) provides refinance facilities to banks and financial corporationsfor financing the small scale industrial sector.

The credit provided by banks to the small scale industrial sector is treated ascredit to the ‘priority sector’. The commercial banks are required to lend 40%of their total loans to the ‘priority sector’, of which 15% to 16% are required tobe in the form of direct agricultural advances and the rest can be to small scaleindustry, small business, small transport, operators etc.

State Financial Corporations provide financial assistance up to Rs. 60 Lakhs toprivate/ public limited companies and up to Rs. 30 Lakhs to proprietors andpartnership firms. Rates of interest charged vary according to the size of theloan and category of entrepreneurs like SC/ ST, women entrepreneurs, ex-servicemen, physically handicapped persons etc. Composite loans up to Rs.50,000 are provided form meeting both term- loan and working capital sothat, the small scale entrepreneurs does not have to go to other institutions.

Locus of control is an attribute indicating the sense of control that a personhas over life. One of the concerns the people have when considering forminga new venture is, whether they will be able to sustain the drive and energyrequired not only to overcome the inertia in forming something new but alsoto manage the new enterprise and make it grow.

MEANING OF SUB- CONTRACTING

Sub- contracting system is a mutually beneficial commercial relationshipbetween the two companies. This is known as ancillarisation in India andmore generally as sub- contracting. Sub- contracting can be defined asfollows:

A sub- contracting relationship exists when a company (called the sub-contractee) places on order with another company (called the sub- contractee0for the production of parts, components, sub- assemblies or assemblies to beincorporated into a product sold by the contractor. Such orders may includethe processing, transformation or finishing of materials or parts by the sub-contractor at the request of the contractor.

In practice, large scale industries do not produce all goods on their owninstead they rely on small scale enterprises called subcontractors for a greatdeal of production. When the work assigned to small enterprises involvesmanufacturing works, it is called Industrial Sub- contracting. In other cases, itis known as commercial sub- contracting. It is not unusual for sub- contractorsto work for more than one contractor.


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ADVANTAGES AND DISADVANTAGES OF SUB-CONTRACTING

ADVANTAGES

1. It increases production in the fastest way without making much effort.2. The contractor can produce products without investing in plant and

machinery.3. Sub- contracting is particularly suitable to manufacture goods

temporarily.4. It enables the contractor to make use of technical and managerial

abilities of the sub-contractors.5. Despite leading to dependence, sub- contracting ensures existence of

subcontractors by providing them business.6. Last but no means the least; sub- contracting makes the core firms

more flexible in their production.

DISADVANTAGES

However, sub-contracting is not an unmixed blessing. It has somedisadvantages also. These are:

1. It does not ensure the regular and uninterrupted supply of goods to thecore firms, i.e. contractors that adversely affect the functioning of thecore firms.

2. Goods produced under sub- contracting system are often qualitativelyinferior.

3. Sub- contracting also delimits the expansion and the diversification ofthe core firms.

4. Delays in payments, a common feature by the contractor to the sub-contractor’s endanger the very survival of the latter.

FRANCHISING

In a sense, franchising is very much similar to branching. Franchising is asystem for selectively distributing goods or services through outlets owned bythe retailer or dealer. Basically, a franchise is a patent or trademark license,entitling the holder to market particular products or services under a brandname or trademark according the different terms and conditions.

According to David D. Settz “A franchisee is a form of business ownershipcreated by contract whereby a company grants a buyer the rights to engage inselling or distributing its product or services under a prescribed business


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format in exchange for royalties or shares or profits. The buyer is called the“franchisee” and the company that sells rights to its business concept is calledthe “franchiser”.

David H. Holt has defined franchising as a ‘business system created by acontract between a parent company, called the franchiser and the acquiringbusiness owner, called the franchisee, giving the acquiring owner the right tosell goods or services, to use certain products, names, or branded, or tomanufacture certain brands”. Now, franchising can simply be defined as aform of contractual arrangement in which a retailer (Franchisee) enters into anagreement with a producer (Franchiser) to sell the producers goods orservices for a specified fee or commission. Franchising arrangements arebroadly classified into three types:

1. Product Franchising2. Manufacturing Franchising3. Business- Format Franchising

PRODUCT FRANCHISING:

This is the earliest type of franchising. Under this dealers were given the rightto distribute goods for a manufacturer. For this right, the dealer pays a fee forthe right to sell the trademarked goods of the producer. The SingerCorporation used product franchising perhaps for the first time during the1800s to distribute its sewing machines. This practice subsequently becamepopular in the petroleum and automobile machines also.

MANUFACTURING FRANCHISING:

Under this agreement, the franchiser (manufacturer) gives the dealer (bottler)the exclusive right to produce and distribute the product in a particular area.This type of franchising is commonly used in the soft- drink industry.

BUSINESS- FORMAT FRANCHISING:

This is recent type of franchising and is the most popular one at present. Thisis the type that most people today mean when they use the term franchising.In the United States, this form accounts for nearly three- fourth of allfranchised outlets. Business- format wide range of services to the franchisee,including marketing, advertising, strategic planning, training, production ofoperations manuals and standards and quality – control guidance. TheInternational Franchise Association (IFA) of America has defined formatfranchising as follows:“A franchise operation is a contractual relationship between the franchiserand franchisee in which the franchiser offers or is obligated to maintain acontinuing interest in the business of the franchisee in such areas as know


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how and training, wherein the franchisee operates under a common tradename, format and or procedure owned or controlled by the franchiser and inwhich the franchisee has or will make a substantial capital investment in hisbusiness from his own resources”.

ADVANTAGES

Franchising agreement is a symbolic one for the franchiser and the franchisee.Following are the advantages that franchising provides to the franchisee.

1) Franchising makes the task of getting started easier because thefranchisee gets a business format already market tested and found towork. Hence buying a franchise is so far safer than trying to start a newbusiness.

2) It reduces chances for failure. Here significant to mention is that lessthan 10 percent of all franchise fails. In dramatic contrast with this isthe fact that two out of every five entrepreneurs who start on their ownfail within three years and eight out of every ten fail within ten years.

3) A well established franchise brings with it the very importantadvantage of recognition. Many new businesses experience leanmonths or years after start up. Obviously, the longer the period thebusiness must experience it, the greater the chances of failure. With thewell tested franchise, this period of agency may reduce to only weeksor perhaps just days.

4) Franchising may increase the franchisee’s purchasing power also.Because, being part of a large and that too recognized organizationmeans paying less for a variety of things such as supplies equipment,inventory, services, insurance and so on. It also can mean getting betterservice from suppliers because of the importance of the organization(franchise) of you is part franchisee).

5) One gets the benefit of the franchiser’s research and development inimproving the product.

6) The franchisee has the protected or privileged rights to franchisewithin a given area.

7) The prospects of obtaining loan facilities from the bank are alsoimproved.

8) The banking of a known trading name (franchiser) becomes quitehelpful while negotiating for good sites with setting agents or buildingowners.


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DISADVANTAGES

Franchising is not an unmixed blessing. There are some disadvantages as wellassociated with a franchise arrangement. The main ones are listed as follows:

1) Unlike entrepreneurs who start their own business, the franchisees findno room or scope for enjoying their creativity. They have to work asper the given format. One classic example of regimentation infranchising can be found in the Mc Donald’s restaurant organization. AMc Donald’s franchise is given very little operational latitude, indeedthe operations manual attends to such minor details as when to boil thebearings on the potato slicer. The purpose of these restrictions is not tofrustrate the franchises, but to ensure that each outlet is run in auniform correct manner.

2) A number of restrictions are also imposed upon the franchisees.Restrictions may relate to remain confined to product line or aparticular geographical location only.

3) Franchisees usually do not have the right to sell their business to thehighest bidder or to leave it to a member of their family withoutapproval from the franchiser.

4) Though the franchisee can build up goodwill for his or her business byhis or her efforts goodwill still remains the property of the franchiser.

5) The franchisee may become subject to fail with the failure of thefranchiser, another disadvantage facing franchisees is that franchisersgenerally reserve the option to buy back an outlet upon termination ofthe contract. Many franchisees become vulnerable to this option. Assuch, they operate under the constant fear of non- renewal of thefranchise agreements.

Then do these disadvantages mean that franchising is no longer desirable wayto go small business? Certainly not franchising is a proven and completebusiness concept. In fact, what do they really mean is that the security thatsome people associate with franchising is an illusion? Hard work, realisticexpectations, and very careful investigation are required if becoming afranchisee is to be a successful, satisfying experience. This underlines the needfor evaluation of a franchising agreement.

END OF MODULE V


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MODULE-VI

ENVIRONMENTAL SCANNINGAND SECTORAL STUDIES

Ø Swot Analysis

Ø Entrepreneurial Environment

Ø Environmental Analysis

Ø Scope for Entrepreneurship in small business sector

Ø Entrepreneurship process of liberalization

Ø Changing Role of Entrepreneurship in the era ofliberalization, privatization and globalization

Ø Entrepreneurship as a Catalyst for meeting globalchanges

Ø Creativity & Innovation

Ø Key sectors for the new age Entrepreneurs


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SWOT ANALYSIS

The business environment keeps changing. Government policies andregulations, economic conditions, social conditions, technological factors,competitive situation etc. Undergo changes. The environmental changes mayopen up new opportunities or pose new threats.

Constant monitoring of the environment is therefore, necessary to identify theemerging opportunities and threats. In order to understand to what extent afirm will be able to exploit the opportunities and fight the threats, it isnecessary to evaluate the strengths and weaknesses of the firm. Thus, ananalysis of the strengths and weaknesses of the firm and the opportunitiesand threats in the environment that is the ‘SWOT’ analysis is essential forframing the business strategies.

S- Strengths.W- Weaknesses.O- Opportunities.T- Threats.

v STRENGTHS AND WEAKNESSES:

Strengths and weakness analysis is a real test for management. The strengthand weaknesses would decide whether a company should continue in abusiness, take up new lines of business, as well as the strategy to be employedin doing so.

For e.g. in case of some products, small scale units have definite advantageover large- scale units in costs. If a large scale unit were not able to competewith the smallscale units, in such a case, it would be wise on the part of thelarge unit to give up the business of such products.

The strengths and weakness analysis is done by functional audit of differentareas like marketing, finance, design/ engineering, operations etc. The auditis to be done on the basis of the quantity and quality of skills and theinfrastructures support 3 available facilities in terms of physical facilities,resource available, speed and flexibility in arranging them.


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v OPPORTUNITIES AND THREATS:

Monitoring of the environmental changes is necessary to reshape thecompany’s business and products, if needed, to ensure survival and growth.Certain changes in the environment may bring about new opportunities forsome companies while they pose new threats for some others.

For e.g. the new industrial policy of India has brought about enormous newbusiness opportunities but at the same time it poses new threats or challengesto many existing firms because of the increase in competition. The existingfirms should therefore, frame strategies to effectively fight the increasingcompetition.

The primary reason of the environmental analysis is to identify the threats aswell as the opportunities developing in the business environment. The searchfor opportunities may start on account of increased aspiration forperformance of the organization. While the analysis of threat is to examine thedevelopment in the environment that may affect the current strategiesineffective and irrelevant and thus, affect the survival of the organization. Thethreats or opportunities for any business developed because the needs of thecustomer keep on changing. For e.g. a customer who was happy with theproduct now wants another because of change in his needs. In view of theabove, many companies have to reframe their objectives and strategies inorder to survive in the changing business environment.

ENTREPRENEURIAL ENVIRONMENT

Entrepreneurship environment refers to the various facets within whichenterprises- big, medium and small and others have to operate. Theenvironment therefore, influences the enterprise. By and large, anenvironment created by political, social, economic, national, legal forces etcinfluences entrepreneurship.

v INTERNAL ENVIRONMENT (Micro Environment)


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A) PRODUCT:

The business has to produce a product that people want to buy. Theyhave to decide which ‘market segment’ they are aiming at – age, income,geographical location etc. They then have to differentiate their product so thatit is slightly different from what is on offer at present so that people can bepersuaded to ‘give them a try’.In other words product is a bundle of satisfaction that a costumer buys. Itrepresent solution to a customer’s problem .It is in this context thatmarketing definition of a product is more than just what the manufacturerunderstand it.

B) PRICE:

To a manufacturer, price represent quantity of money received by the firm orseller .To customer, it represent sacrifice and hence his perception of the valueof product.

The price must be high enough to cover costs and make a profit but lowenough to attract customers. There are a number of possible pricing strategies.The most commonly used are:

PRODUCT

PLACE

PRICE

PROMOTION

COMPANY

LEGALENVIRONMENT

TECHNOLOGICALENVIRONMENT

ECONOMICENVIRONMENT

POLITICALENVIRONMENT

SOCIO-CULTURALENVIRONMENT


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• PENETRATION PRICING – charging a low price, possibly not quitecovering costs, to gain a position in the market. This is quite popularwith new businesses trying to get a ‘toehold’.

• CREAMING – the opposite to penetration pricing, this involvescharging a deliberately high price to persuade people that the productis of high quality. Luxury car makers often use this strategy

• COST PLUS PRICING – this is the most common form of pricing.Costs are totaled and a margin is added on for profit to make the totalprice.

C) PLACE:

The business must have a location that it can afford, and that is convenientand suitable for customers and any supplier.

D) PROMOTION:

Promotion means moving from one end to another. Promotion means allthose tools that a marketer uses to take his product from the factory to thecustomer and hence involves advertising, sales promotion, personal selling,public relations publicity and merchandising.

Customers have to be made aware of the product. The two mainconsiderations are target market and cost. A new business will not be able toafford to advertise on national television, for instance and would not wish tobecause its market will be local to start with. Leaflets, billboards,advertisements in local newspapers, Yellow Pages and ‘word of mouth’would be more appropriate.

v EXTERNAL ENVIRONMENT (Macro Environment)

External Environment:

Also known as Macro Environment, are the “uncontrollable factors” which acompany must monitor and respond to. They consist of economic, political,technological, social-cultural and legal.

Economic Environment:

It consists of factors that affect consumer purchasing power and spendingpatterns. Markets require purchasing power as well as people. Economicconditions, economic policies and economic systems are the importantexternal factors that constitute the economic environment of a business.For example, the economic conditions of a country, the nature of theeconomy, the stage of development of the economy, economic resources, the


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level of income, the distribution of income and assets etc. are among veryimportant determinants of business strategies.

Technological Environment:

Technology is the most dramatic force shaping people’s lives. Factors such as–technological development, stages of development, change and rate ofchange in technology and research and development affect marketingstrategies. Also the cost of technology acquisition, impact of technology onhuman beings and the environmental effects of technology affect marketingdecisions.

Political environment:

Political environment is composed of laws, government agencies and pressuregroups that influence and limit various organizations and individuals in asociety. The main political trends are:

(a) Substantial amount of legislation regulating business.(b) Growth of public interest groups and(c) Changing government agency enforcement.

Socio-cultural environment:

The basic beliefs, values and norms shape the society and its people. Evenwhen people of different cultures use the same basic product, the mode ofconsumption, condition of use, purpose of use or the perception of theproduct attributes may vary so much so that the product attributes, method ofpromoting the product may have to be varied to suit the characteristics ofdifferent markets. Even the value and beliefs associated with colour varysignificantly between different cultures.

Legal environment:

Government all over the world are an important aspects of their economy andeven in the so called free economy, viz.US, government intervention inindustry is a reality. The extent of intervention varies .while in US this isrelatively low; in developing countries this is quite high. India ,for example,has had a history of a controlled economy with the government deciding therules of the game ,be it the extent of foreign private investment ,or goods to beexported or imported or even whether a unit can be allowed to produce aproduct Regulation in advertising ,like ban on advertising a specific productlike cigarettes, pan masala, liquor and distribution of goods as in the case ofkerosene and earlier in case of food product too, is the reality of Indianscenario.


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ENVIRONMENTAL ANALYSIS

This integrated approach which is the key to the development of backwardareas implies a very careful environment analysis or research study of thetarget groups of beneficiaries, their activities and differential needs and thepractical modes of operation by which their activities can be linked with thecovering enterprise. Unless these studies are made meticulously, the entireplanning will only give unproductive results. Most of the developmentschemes fail to benefit the target clientele because elaborate linkages are notidentified and built up. An imaginative study should

1. Identify the beneficiaries or target groups.2. Analyze the environment for immediate feasible enterprises in an

integrated manner.3. Delineate the linkages and institutional arrangements.4. Recommend appropriate organizational structures to provide

necessary promotional support.

Unfortunately, in most of the studies on backward areas, there is a tendencyto make generalizations and ignore the specific details of feasible projects. Asa result, immediate perception of concrete opportunities by interestedentrepreneurs is left in confusion. Sometime! “Area studies” make a generalstatement of demand and resources and recommend certain enterprises,which are not immediately feasible due to important reasons unaccounted forin such studies. It is also not seriously contemplated whether therecommended enterprises are feasible within the capabilities and investmentcapacity of the target- group.

In short, most of the studies fail to disconcern the real issues of growth in thetarget area and fail to identify the concrete and specific needs of theseendowments like resource skill etc. to flourish. Enunciation of generalobjectives, generic beneficiaries tend to blur the distinct contours of onehomogeneous group from the other. Also, the extension of certain standardfacilities or services does not serve their actual needs. All this possiblyhappens because in such basic studies we fail to identify clearly the target-groups and their specific problems, and make theoretical studies on resourcesand demand in an impersonal manner, as a result of which even the schemesdevised on the basis of such studies tend to become too impersonal and rigid.Sometimes, the scheme become so flexible on account of a standardizedpetrified approach that in some most genuine cases demanding a certaindeparture from the fixed framework, the scheme is incapable of givingrequisite help. It is therefore, absolutely necessary that any action plan for abackward area must first identify the target- group, identify the specific


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services they need for monitoring their enterprises and devise an appropriatestructural support for comprehensive coverage of their needs.

SCOPE FOR ENTREPRENEURSHIP IN SMALLBUSINESS SECTOR

Small- scale business provides good scope for the growth of entrepreneurialactivities .An entrepreneur has good opportunity and vast scope in sellingservice rather than manufacturing a product. The entrepreneur can achievebetter results if the size of the business is small. It is for this reason that smallfirms have higher productivity, greater efficiency and low labour turnover.The scope for entrepreneurial activities in small business sector can broadlybe classified into:

1. Industrial sector2. Agricultural and allied industrial sector3. Service sector

Ø INDUSTRIAL SECTOR

Small scale industries occupy an important place in the industrial sector. Theyhave contributed over 40% in the gross industrial production in 1998.

Small- scale industries: The basic objectives underlying the development ofsmall- scale are the increase in the supply of manufactured goods, promotionof capital information the development of indigenous entrepreneurial talentsand skills and the creation of broader employment opportunities. This sectorprovides a wider scope for the potential entrepreneur to develop his or herown industry. There is a good scope and enormous potential to usetechnology based products in the smallscale sector. An entrepreneur canexploit a profitable venture in any of the industries reserved for exclusivedepartment under the smallscale sector. There are as many at 384 items forexclusive purchase from the smallscale industries.

Small- scale industries play an important role in increasing the nationalincome, in meeting the shortage of consumer’s goods, in promoting balancedregional development, in reducing inequalities in the distribution of incomeand wealth and in relieving the economic pressure on land and overcrowding in urban areas. Outdated technology, shortage of finance, shortageof raw material and inadequate marketing facilities are some of the problemsfaced by small entrepreneurs.


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Ø AGRICULTURAL AND ALLIED INDUSTRIAL SECTOR

There is a vast cope for entrepreneurial activities in the agricultural sector. Byestablishing a link between agriculture and allied industries, the ruralentrepreneur can exploit opportunities in areas of farming, agriculturalprocessing and marketing. The government has given priority to IRDPprogramme and ensured adequate flow of credit to small and marginalfarmers through re-financing facilities and by establishing national bank foragriculture and small development.

Trade: Trading takes place in wholesaling and retailing. It may be in domesticor overseas market. The retailer entrepreneur makes the goods available at thetime and places the consumer wants them. He may decide to start single linestore, specialty shop, departmental store etc. trade in overseas market is inwholesale. The business environment directly influences the growth ofentrepreneurship in a particular line of trade. The trade policy of India hasbeen directed to promote export. Hence incentives and facilities have beenprovided to the entrepreneurs to motivate them to develop export.

Ø SERVICE SECTOR

The service sector has gained importance for the entrepreneurs because of itsrapid expansion. Service sector includes all kinds of business and providesopportunities to the entrepreneurs in business such as hotels, tourist services,personal services such as dry cleaning, beauty shops, photographic studies,auto repair, electric repair shops, wielding repair etc.

Transport: They provide time and place utilities in urban and rural areas toboth men and material. The different modes or transport are of immenseimportance in the areas, which are not served by roads and railways. There isa scope for entrepreneur to design prototypes of new carts with theapplication of indigenous technology so that they may have better mobilityand greater carrying capacity. The primary need in the rural area is anefficient system of road transport.

The rural economy has a good opportunity for an entrepreneur to developsome business. They can exploit possibilities for a venture in some shops orservices. Entrepreneurship flourishes in small business sector for they haveenormous opportunities in manufacturing and non- manufacturing activities.The government is keen in encouraging the competitive strength of the smallscale producers and it has taken a number of measures such as:-

§ The establishment of a network of industrial estates through ought thecountry where work sheds equipped with the necessary facilities madeavailable to prospective entrepreneurs on subsidized rental basis.


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§ The reservation of a number of products for the exclusive productionto small sector

§ The introduction of ancillarization programme under which large andsmall industries are to be linked in a harmonious productiverelationship

§ The supply of machines on hire purchase basis to the smallentrepreneurs on easy terms of payment

§ Technical counseling to small units so as to improve their efficiencyand viability

These are golden opportunities for the prospective entrepreneurs to self-employed independent businessman. The future is very bright.

ENTREPRENEURSHIP AND PROCESS OFLIBERALIZATION

The process of liberalization and privatization initiated since 1991 is trying tomake environment more conducive to growth of entrepreneurship. Manyareas like telecommunication, power, generation, oil and natural gas, coaland steel, civil aviation, banking etc. which were earlier reserved for publicsector are now made open to private participation also. The process ofliberalization has opened the floodgates of entrepreneurial opportunities.Private initiative and funds have started flowing into these sectors. Reformshave swept all major sectors of the economy, opening up the country for theeasier movement of the population and material across the nationalboundaries. Foreign trade and investment regime points to liberal orderwhich is welcome to domestic and foreign private sector entrepreneurs. Theopening up has been substantial and going by the ratio of foreign tradeturnover to GDP and flows of market based foreign capital, India had trulyentered the global regime.

The world is shrinking into a global village due to economic interdependenceand the revolution in communication technology. ‘Globalization’ has becomethe password. Today changes are taking place at a greater pace and the worldis passing through an exciting stage of technological progress on severalfronts.

Technology is perhaps the most important resource for any nation. Invention,innovation, adoption of new technologies, processes and theircommercialization are the major factors in wealth creation and making thecountry technologically superior, which in turn, leads to economicsupremacy. India has a large reservoir of qualified science and technology


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manpower and the necessary infrastructure for indigenous R&D andindustrial development. It cannot lag behind in this regard and should beprepared to be a global player in its own right in the coming century.

Now we face the implication of anew international economy, which is lessenergy- intensive and more knowledge- intensive. New materials arereducing the demand for ferrous and non- ferrous materials; transportationcosts are falling as products become lighter and smaller; internationalcommunication is instantaneous. It is a new order in which central planningby large institutions is becoming less effective, and smallscale enterprises arebecoming more efficient and effective.

Entrepreneurs and new enterprises, rather than governments and majorcorporations are the instruments of change. The relative growth of theinformation/service sector in the new international economy that is emergingis removing many of the traditional barriers. In this sector, geography accessto capital and access to resources is of less importance.

CHANGING ROLE OF ENTREPRENEURSHIP IN THEERA OF LIBERALIZATION, PRIVATIZATION AND

GLOBALIZATION

Challenges of liberalization, privatization and globalization call upon theentrepreneurship to play amore creative and dynamic role than ever before.Entrepreneurship can now set the goal of making India a developed country.They need not just aspire but make it a mission take it up and accomplish it.Ignited mind of entrepreneurs can be powerful resources, which can helpIndia, becoming a big economic power in the years to come.

It is indeed characteristic of entrepreneurs to have foresight, a vision and skillto see an opportunity and exploit it. Globalization, which means integrationwith the world economy, brings the influence of external sources into oursociety. Experts have pointed out that these are economic of trade or marketforces and the have a beneficial influence in developing our corecompetencies in area which have a competitive advantage. As alreadydiscussed we have a good scope for developing our services. Entrepreneurshave to exploit this opportunity and with their sense of efficiency help theservice sector to start, grow and develop perfectly. Direct linkages oftechnology to the nation’s strategic strengths are becoming clear since the lastdecade. Entrepreneurs have to realize that technology is the core strength ofour nation and therefore help it get on the path of technological development.By core strength and competency it is meant that in certain areas we have


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inherent strength and therefore show better result in a shorter period of time.Indian human resource based is one of the greatest core competencies.

India is known for A-1 class entrepreneurs. The Indian entrepreneurialhistory is rich with examples or entrepreneurs who have contributed towardsIndia’s economic activity even during the colonial rule and in the face of allopposition. Indians not only have a greater learning capability but alsocompetitive entrepreneurial spirit. It is this spirit that is to be released to meetthe challenges of 21st century.

India has the core strength of its natural resources. It is abundant supplies ofmost of them; it has a vast coast line, which stores resource and energysupply. The can become our future strength if entrepreneurs, exploit themand put them to productive use. Entrepreneur’s role is even called upon toexplore undersea resources.

Services in India have a vast scope of development in India. Entrepreneurs arecalled upon to study and identify India’s strong base and to initiate activitiesin those specific areas, there are technologies that dramatically change India’ssocial and economic conditions. India can excel and usher in a new era inagriculture. India can emerge as a global power in terms of agriculturalproduce and agro- based industries.

Entrepreneurs have the p [potential to explore the spirit of adventure, thecapability to initiate, organize and undertake risks and the ability to facechallenges. It is the role of an entrepreneur that is called upon in this new erathe role of innovating and imitating entrepreneurs. The slogan of theentrepreneurs in the new international scenario, in the words of SubrahmanyaBharathi can be

“We will take many mines,And take out gold and many other things,

And go eight directions to sell these,And bring home many things!”

Changing role of entrepreneurs may be summed up as follows:

In the era of liberalization, privatization and globalization, an entrepreneurwill have to

v Explore and exploit opportunities for trade in the worldeconomy

v Discover, utilize, and develop the core strength of the economy.v Conduct R&D activities to meet the global standardsv Improve the quality of technology and quality of manufacture to

be able to complete well with foreign competition.


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v Reduction of cost of production to make the product/serviceavailable at a competitive price.

v Undertake advertising, sales promotion, marketing, packagingeffectively for capturing foreign markets.

v Develop new products, new areas of production for wideningthe countries trade.

v Search new markets and capture more and more markets.v Expanding the geographical base of the marketing.v Increase production to accelerate economic growth ratev Come up with innovative ideas to solve financial, economic and

other problems of the countries.v Play the role of imitating entrepreneurs i.e. study the latest

changes in the advanced countries- and use them gainfully.v Utilize the underutilized/ unutilized capacity so that full

benefits can be enjoyed e.g. Hydropower capacities are stillunutilized.

ENTREPRENEURSHIP AS A CATALYST FOR MEETINGGLOBAL CHANGES AND CHALLENGES

The relationship between entrepreneurship and economic growthdevelopment has already been analyzed. The later is the result ofentrepreneurship. Every process of economic growth/ development is theoutcome of changes that occur in various spheres. Infact one cannot imagineeither of them without a change. Change is therefore the essence of growthand development. Entrepreneurs are some times called carriers or agents ofchange. It is in this context that entrepreneurs are known as catalysts ofchange. In the capacity of catalyst an entrepreneur reaches for opportunitiesand areas- where changes can be expected and are necessary. An innovativeentrepreneur is instrumental in bringing about a change. He introduces newideas, new techniques, new combinations, discovers new sources of suppliesetc. An imitating entrepreneur on the other hand uses the changes launchedby others.

Changes and entrepreneurship go together. Drucker says, “Entrepreneurs seechanges as the norm and all healthy. Usually they do not bring about thechanges themselves. But the entrepreneur always searches for change,responds to it and exploits it as an opportunity”. Entrepreneurs have to playan important role- the role of catalysts in the new international scenario that isgoing to open the economy to new areas and prospects.

Entrepreneurs are supposed to visualize and utilize the opportunities that aregoing to occur. The world trade is going to open doors to new challenges.


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New and changed approaches will have to be adopted for meeting thesechallenges successfully. As a catalyst an entrepreneur will have to:-

v Foresee prospect changes in the global economic and socialenvironment. He will also have to be instrumental in bringing aboutchanges.

v Absorb new inventions and innovations in the technological sphere astechnology plays an important role in the world of trade andcommerce.

v Initiate new activities in both business and non- business spheres. Inthe capacity of an innovative entrepreneur. He has to introduce newcombination of resources, come up with bright ideas to utilizeunderutilized resources, to put them to multiple uses and apply themto new and unknown activities.

v Bring about an attitudinal change in the minds of the people and thesociety in general. A conservative and religious society or a society thatis bound by customs and traditions cannot take full advantage ofentrepreneurial opportunities. An entrepreneur may have to strive toconvert the society into a dynamic, rational and a progressive one. Hemay have to influence the government into bringing about economicreforms of various types for exploiting global opportunities.

v Exploit change and use it not only for his and for the benefit of hisorganization but also for the benefit of his economy.

Entrepreneurs play a crucial role in the development of an economy. Theyplay the role of catalysts of change and are capable of converting anunderdeveloped economy into a developing one and a developing economyinto a developed one.

Global changes and challenges may be compared to a knife. A knife whenused properly brings benefits or serves as a tool for work. The same knife cancut and harm if used wrongly. Entrepreneurs have to convert global changesand challenges into opportunities, exploit them effectively and intelligently sothat the economy emerges a winner, a beneficiary of globalization and not asits victim.

CREATIVITY

Creativity implies conceptualizing, visualizing or bringing into beingsomething that does not yet exist. It is about curiosity and observation. In thehistory of science, there are interesting examples of creativity occurring at the


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same time with no contact between the individuals involved. Newton andLeibritz created the mathematics of calculus in the seventeenth century quiteindependently of each other, despite their allegations of plagiarism.

Creativity seems to come “out of the blue” triggered by a problem to besolved or an idea to be expressed. Its roots and origins are mysterious andunknown but its existence cannot be denied. This meta- physical aspect hasmeant that science has shied away from the topic though it is now becoming asubject of serious study among cognitive scientists and experimentalpsychologists.Entrepreneurs are familiar with ideas that suddenly come to mind and are nottoo concerned with their origins. This is the starting point of theentrepreneurial process. We see creativity as a talent, an innate ability, thoughwe recognize that it can be developed and that there are techniques thatpromote creativity and problem solving. Creativity is also a function of howpeople feel. Some are more creative under pressure whilst others needcomplete relaxation. Some use divergent thinking in their creativity whilstothers prefer convergent thinking.

One thing that seems common to all forms of creativity is joy. Einsteincomments that the idea that the gravitational field has only a relativeexistence was the happiest thought of my life. His creative genius had comeup with the idea of relativity and it made him happy. There is an intensepersonal satisfaction in having come up with something new and novel. Thisis one reason why entrepreneurs see their activities as fun. There is the joy ofcreativity all around them. For the entrepreneur, creativity is both the startingpoint and the reason for continued success. It is the secret formula by whichhe or she overcomes obstacles and outsmarts the competition. Arguably everyone of us has the ability to be creative but do we all use and exploit thisability? Many of us simply do not act creatively much of the time.

Possibly we are not motivated and encouraged perhaps we do not believe inourselves and the contribution and difference we could make. There iscertainly a skills and technique element to creativity- in a business context, forexample, we can be taught creative thinking and behaviour in the context ofdecision making but this is clearly only part of the explanation. The issue ofmaking is also a critical element.

Many people have the ability to play a musical instrument. They have a skilland possibly natural talent and they can be taught more skills and techniqueswhilst they are willing to persevere and practice. Furthermore, some peoplewho play music naturally appreciate the meaning the composer was trying toconvey when the work was written. Others have to be taught thisinterpretation. Some people simply see things that others cannot until they aregiven a detailed explanation. The same implies to opportunity spotting.


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People who miss the valuable opportunities that others see first often haveaccess to the same information but it means something different to them.

Discovery consists of looking at the same thing as everyone else and thinkingsomething different. In just the same way many young people can dribble,head and pass a football, and their skills can be improved with coaching. Butwhen they watch a football match or play in one are they able to see the wholegame? Can they spot goal scoring opportunities and positions and get thereahead of a defender? Most people who watch team sports such as footballsimply follow the movement of the ball exactly as the television camera tendsto do. They ignore or miss the emerging patterns as the other player’s move ofthe ball in search of good positions. This partially explains why we do not allseem to see the same game evolve, even though we are present at the samematch.

INNOVATION

Innovation builds creativity when something new, tangible and valuecreating is developed from the ideas, innovation can be focused on the themeof being better-incremental improvements-as well as the theme of beingradically different. The former will often form the world of the entrepreneur,who us attempting to make his or her organization d stronger than his rivals.The later is often ,but certainly not always, reserved for the trueentrepreneur, who is more concerned with doing something genuinely newand different rather than improving on ideas that have gone before.

Innovation is about seeing the creative new idea through to completion, tofinal application but, of course, this will not necessarily be a business. It is theentrepreneur who builds a business around the idea and innovation. Both cane difficult roads and require courage and perseverance as well as creativityand imagination. These are attributes that the entrepreneur brings and his orher role in innovation is crucial.

There are the basic approaches with innovation, which are not mutuallyexclusive, and we have seen illustrated in the stories in part two. First, it ispossible to have a problem and to be seeking solution, or at least a resolution.Edwin Land invented Polaroid camera because his young daughter could notunderstand why she had to wait for the pictures to be printed when he tookher photograph. Second, we might have an idea in effect a solution and besearching for a problem to which it can be applied 3Ms. Post- it noteshappened when a 3m employee created a glue with only loose stickingproperties, and a college applied it to a need he had for making page in amanuscript. Third, we might identify a need and design something that fits.James Dyson’s dual cyclone cleaner came about because of his frustration


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with his existing machine, which was providing inadequate for cleaning upthe dirt and dust he generated when he converted an old property.

Generating opportunities form ideas requires us to attribute meaning to theideas. Ideas from in our minds and at this stage they mean something to us,personally. Typically, they became a real opportunity when we expose theideas and share them with other people, who may well have differentperceptions, attribute different meanings and see something we miss initially.This process of exploration is fundamental for determining where theopportunities for building new values are. In other words, innovation comesfrom the way we use our ideas.

Crucially the person with the initial idea may not be the person who realizeswhere the real opportunity lies. An inventor is not always an opportunity-spotter and often not a natural project champion. Picasso claimed that greatpeople steal ideas and create opportunities where others cannot see thepotential. Creativity is the talent of the inventor and innovation is the talent ofthe project champion who turns ideas into reality. Entrepreneurs do boththese things but they do more. They do not just complete the successfulapplication of an idea; they build something of value in the process.

The Sony walkman provides an excellent illustration of what happens. Theidea came to Sony co- founder Akio Morita when he was questioning why hewas finding it difficult to listen to music when he was in public places orwalking round a golf course. The idea became an innovative new product anda valuable opportunity when Morita shared his idea with other colleagues inSony, and existing technologies and competencies were used to develop thecompact personal radio with adequate playing time from its batteries andindividual headphones.

The project was championed, resourced and implemented. Personal cassetteand CD players have systematically joined the original radio. It was simply agreat idea that rejuvenated Sony at the time it was conceived; and it hasbrought value and affected the lives of millions of people around the world.

This endeavors to pull the stand together. Creativity (the idea) is the startingpoint whether it is associated with invention or opportunity spotting. Thiscreativity is turned to a practical reality (a product, for example) throughinnovation. Entrepreneurship then sets that innovation in the context of anenterprise (the actual business), which is something of recognized value.

To be exploited fully and effectively, creativity and innovation need to besupported by certain talents and aspects of temperament. We also need a baseof knowledge, which we use to help generate and develop our new ideas. Inpart of this is developed through our experiences but it also needs to besupplemented further by certain key skills. In very simple terms, talent and


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temperament combined with knowledge helps us find out and discovernew possibilities. Key skills can enhance the discovery process, whilstother skills help us design and craft new opportunities from the ideas.

KEY SECTORS FOR THE NEW AGE ENTREPRENEURS

v Cyber Cafesv Bio Techv Apparelsv Rural Products like Handicrafts etcv Beauty Parlours……

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