Definitions : Entrepreneur

Entreprende to undertake
An entrepreneur is a person who is responsible
for setting up an enterprise. He is one who has the
initiative, skill for innovation and who looks for high
achievements. He is a catalytic agent of change and
works for the good of people. He puts up new
Greenfield projects that actually creates wealth, opens
up employment opportunities and fosters other sectors.
The entrepreneur is a critical factor in the socioeconomic change. He is the key man who envisages
new opportunities, new techniques, new line of
production, new products and co-ordinates all other
activities.
1. J. B. Say
An entrepreneur is the economic agent who
unites all means of production, the labour force of the
one and the capital or land of others and who finds in
the value of the products which results from their
employment, the reconstitution of the entire capital that
he utilises and the value of the wages, the interest and
the rent which he pays as well as profit belonging to
himself.
2. The New Encyclopaedia defines an Entrepreneur as
An individual who bears the risk of operating a
business in the face of uncertainty about the future
conditions.
3. Joseph A. Schumpeter

The entrepreneur in an advanced economy is an

individual who introduces something new in the
economy a method of production not yet tested by
experience in the branch of manufacture concerned, a
product with which consumers are not yet familiar, new
source of raw material or of new markets and the like.
The function of an entrepreneur is to reform or
revolutionise the pattern of production by exploiting an
invention or more generally an untried technological
possibility for producing a new commodity.
4. Peter Drucker defines
An entrepreneur as one who always searches for
change, responds to it, and exploits it as an opportunity.
Entrepreneurs innovate.
Innovation is the specific tool of entrepreneurs,
the means by which they exploit changes as an
opportunity for a different business or a different
service. It is capable of being presented as a discipline,
capable of being learned, capable of being practised.
Entrepreneurs need to search purposefully for the
sources of innovation, the changes and their symptoms
that indicate opportunities for successful innovation.
And they need to know and to apply the principles of
successful innovation.
(Systematic innovation consists in the purposeful
and organised search for changes and in the systematic
analysis of the opportunities such changes might offer
scope for economic and social innovation.)

5. Francis walker
The true entrepreneur is one who is endowed
with more than a average capacities in the task of
organising and coordinating the various other factors of
production. He should be a pioneer, a captain of
industry.
6.
A good entrepreneur is one who is capable of
inspiring confidence in people, and has the ability to
motivate them to work with him in fulfilling the
economic goals set by him.

New Concept of Entrepreneur :

The term entrepreneur has been defined as one
who detects and evaluates a new situation in his
environment and directs the making of such
adjustments in the economic systems, as he deems
necessary. He conceives of an industrial enterprise for
the purpose, displays considerable initiative, grit and
determination in bringing his project to fruition, and in
this process, performs one or more of the following:
a. Perceives opportunities for profitable
investments,
b. Explores the prospects of starting such a
manufacturing enterprise,
c. Obtains necessary industrial licenses,
d. Arranges initial capital,
e. Provides personal guarantees to the financial
institutions,
f. Promises to meet the shortfalls in the capital,
and
g. Supplies technical know-how.
Not entrepreneur in strict sense:
Copy
Imitation
Not entrepreneur

Drug peddler
Bootlegger
Black marketer
Brothel keeper

Definition Entrepreneurship
It refers to a process of action an entrepreneur
undertakes to establish his/her enterprise. It is a creative
and innovative response to the environment.
Difference :
Entrepreneur
Refers to a person:
Visualiser
Creator
Organiser
Innovator
Technician
Initiator
Decision-maker
Planner
Leader
Motivator
Programmer
Risk-taker
Communicator
Administrator

Entrepreneurship
Refers to a process:
Vision
Creation
Organization
Innovation
Technology
Initiative
Decision
Planning
Leadership
Motivation
Action
Risk-taking
Communication
Administration

Entrepreneur v/s Professional Manager

According to the Sachar Committee on Company Law
A Professional Manager is an individual who
a. Belongs to the profession of law, accountancy,
medicine, engineering or architecture, or
b. Is a member of a recognised professional body or
institutional body or institution exercising
supervisory jurisdiction over its members, or
c. Is a holder of a degree or diploma in
management from any recognised university and
possesses not less than five years experience in
an executive capacity in a company, corporation
or a body corporate or in the government, or
possess minimum of ten years experience in an
executive capacity in a company, corporation or
a body corporate or in the government.
Professional Manager

Entrepreneur

A Professional Manager is one

who specialises in the work of
planning, organising, leading
and controlling the efforts of
others. He does so through
systematic use of classified
knowledge and principles. He
subscribes to the standards of
practice and code of ethics
established by a recognised
body.

An entrepreneur has great

motivation to manage his
business successfully. He is
keenly devoted to develop
business through innovation
and is satisfied when his
efforts give him positive
results. He is the investor,
risk-bearer, manager and
controller. The entrepreneur
may appoint a manager and
delegate
some
of
his
functions.
The entrepreneur lays down
broad policy for business,
assumes risk and makes the
business a going concern.

The entrepreneur may be a manager but a paid manager

cannot acquire the position of an entrepreneur.

Entrepreneurial Environment
a.
b.
c.
d.
e.
f.

Political
Economic
Social
Technological
Legal
Cultural

a. Political
i.
ii.
b. Economic
i.
ii.
iii.
iv.
v.
vi.
c. Social
i.
ii.
iii.
iv.
v.

Political Atmosphere
Quality of Leadership
Economic Policies
Labour
Trade
Tariffs
Incentives
Subsidies
Consumer
Labour
Attitudes
Opinions
Motives

d. Technological
i. Competition & Risk
ii. Efficiency
iii. Productivity
iv. Profitability
e. Legal
i. Rules & Regulations
f. Cultural
i. Structure
ii. Aspirations & Values

Environment for Entrepreneurship

Entrepreneurs appear to have been motivated by
a combination and interaction of the following factors
of environment:
1.
2.
3.
4.
5.
6.
7.
8.
9.

Socio-economic environment
Family background
Standard of education and technical
knowledge
Financial Stability
Political stability and governments policy
Caste and religious affiliation
Availability of supporting facilities
Achievement motivation, and
Personality and personal skill

The environmental factors may be summarised as

follows:
1.
2.
3.
4.
5.

Entrepreneurship is not influenced by a single

factor but is the outcome of the interaction and
combination of various environmental factors.
By changing the environment, society can be
recreated.
It is the desire to make money that drives one
to start an industry rather than the amount one
owns.
Encouraging government policy and social
recognition influence a person to become an
entrepreneur.
Modify the educational system so as to produce
more job-creators rather than job-seekers.

Classification of Industries
Indicators
Capital Invested
Output Volume
No. of Employees employed
Raw Material Consumption
Production Capacity
Home Industries

Cottage Industries

Small Scale Industries

Tiny Industries

Medium Scale Industries

Large Scale Industries

Cottage Industry:
Manufacturing activity is carried out by the
owner himself along with his family members &
relatives or at the most with a maximum of 9
employees.

Small Scale Industry

Large Scale Industry

Low Capital
Low financial resources
Small Scale operations
Traditionally managed
Sole
proprietorship/Partnership
Limited local coverage
Labour intensive
Autocratic leadership
Less Legal formalities

High Capital
High financial resources
Large Scale operations
Professionally managed
Company form

Flexible structure
High Government
assistance
Low output volume
Low managerial skills

Wide area coverage

Capital intensive
Participative leadership
Complex Legal
formalities
Rigid structure
Normal Government
assistance
High output volume
High managerial skills

Advantages:
Small Scale Industry

Large Scale Industry

Provide
employment High bargaining power,
opportunities
low ordering cost, High
Discount, bulk purchase
Promoting local talent, Expertise
knowledge
resources and local self back up
sufficiency
Removes
regional Wide
distribution
discrepancies
channels
Integration with large Integration
with
sector
Technical,
financial,
marketing
and
managerial economies

Classification of Industries
a. Use Based Classification :
i. Basic Industries
Which provide essential input for the
development of the other industries
and the economy. E.g. iron & steel
industry forms a basis for the
development of the engineering
industry. Fertilizer for agriculture,
coal, oil & electricity, cement etc.

ii. Capital Goods Industries

Which produce machinery, equipment
or tools. A capital good is one which is
instrumental in producing other goods
& services. Capital goods do not
directly serve any consumption
requirement. They are used to produce
consumer goods and service.
e.g.
Hand tools and machine tools
Specialized equipments
Electric Motors
Heavy Vehicles etc.

iii. Intermediate Goods Industries

Those which manufacture goods that
have already undergone manufacturing
process but which form input for other
industries as material for further
processing, part or component.
e.g.
Cotton Spinning
Tyers & Tubes
Manmade fibers
Bolts, nuts, screws, spring
Metal etc

iv. Consumer Goods Industries

The output of which serve the final
consumption requirement.
a. Consumer Durable
-Serve the consumer
over a relatively long
periods.
b. Consumer Non-durable
-Goods which are
used up at once or
within a relatively
short periods.

b. Based on Ownership
i.
ii.
iii.
iv.
v.
vi.

Central Government
State Government
Statutory Corporations
Government Departments
Private Sector
Joint Sector

c. Size of Industries
i.
ii.
iii.
iv.
v.

Tiny
Small
Medium
Large
Very Large

- 5 lakh
- 5-100 lakh
- 100 500 lakh
- 5 100 Crore
- Over 100 Crore

d. Input Based Classification

i. Agro-based
-Which uses agricultural product as the
major input, like sugar, jute textiles
etc.,

ii. Forest-based
- Which use forest products as their
major inputs, like plywood, paper
industry

iii. Marine-based
- Which depend mostly on marine
products like fish etc.,

iv. Metal-based
- Which are based on metals like,
engineering industries

v. Chemical-base
- Industries like fertilizers, pesticides,
paints and varnishes, drugs &
medicines etc. as chemicals are their
major or basic inputs.

Cottage Industries :
o Those industries and crafts which are
carried on, in the home of the artisan.
o Assisted by family members.
o No power is used.
o Tools and instruments used are simple.
o E.g. hand-spinning, handloom-weaving,
toy-making, rope-making, wood-work
etc.

 Small Scale Industries :

o Factory-type
industries
having
investment in plant & Machinery does
not exceed Rs. 100 lakh.
o Mostly use power and small machines
o Employ small number of workers.
o Include Ancillary Industries having
investment in plant & machinery does
not exceed Rs. 75 lakh.
o Manufactures
parts,
components,
intermediate products, render services
like repairs etc.
o Also includes Tiny Industries in which
investment in plant and machinery is
worth below Rs. 5 lakh regardless of
the location.
Traditional Small Industries:
Khadi and other village industries,
Handloom industry
Sericulture
Handicrafts etc.
Modern small Industries :
Using power and employing labour and with
investment in plant & machinery not exceeding Rs. 60
lakhs.
Village Industries
Any industry with a capital investment up to Rs.
15000 per artisan and located in a village with a
population below 10000 and produces any goods or
renders any services with or without the use of power
and in which the fixed capital investment in plant &

machinery, land and building per artisan or worker does

not exceed Rs. 15,000.
Investment Limits :
The definitions of small scale industries has
undergone changes over the years in terms of
investment limits in the following manner:
Year
1950

1960
1966
1975
1980
1985
1991
1997
2006

Investment
limit
(Rs.)
Up to Rs. 5 lakh in
fixed assets

Additional
conditions
<50 persons
with power
<100 without
power
Up to Rs. 5 lakh in No condition
plant & machinery
7.5

10

20

35

60

100

200-Service
500-Manufacturing

Project:
A Project is a specific activity on which money is
spent in expectation of returns.
Specific starting point
Specific end point
Specific Objectives
A project has a specific geographic location and
would serve a group of population.
Every project has three basic attributes.
1. The Input: What project will consume.
Raw Materials, Energy, Manpower, Financial
Resources, Organisational Set-up
2. The Out put: What project will generate.
Production of Goods, Services, Financial Output
3. The Social Cost Benefit Characteristics.
The sacrifice, which the society will be called
upon to make and the benefits, which will accrue
to the society.

Scouting for Project Ideas:

1. Analyse the Performance of Existing Industries
2. Examine the Inputs & Outputs of Various
Industries
3. Review Imports & Exports
4. Study Plan Outlays and Government Guidelines
5. Guidelines to Industries
6. Look at the Suggestions of Financial Institutions
and Developmental Agencies
7. Investigate Local Materials & Resources
8. Analyse Economic and Social Trends
9. Study New Technological Developments
10.Draw Clues from Consumption Abroad
11.Explore the Possibility of Reviving Sick Units
12.Identify Unfulfilled Psychological Needs
13.Attend Trade Fairs
14.Stimulate Creativity for Generating New Product
Ideas.

Facets of Project Analysis

Market Analysis
Technical Analysis
Financial Analysis
Economic Analysis
Ecological Analysis

Market Analysis:
Is concerned primarily with two questions:
What would be the aggregate demand of the
proposed product/service in future?
What would be the market share the project
under appraisal?
The kind of information required are :
Consumption trends in the past and the
present consumption level
Past and present supply position
Production possibilities and constraints
Imports and exports
Structure of competition
Cost structure
Elasticity of demand
Consumer behaviour, intentions, motivations,
attitudes, preferences, and requirements
Distribution channels and marketing policies
in use
Administrative,
technical,
and
legal
constraints

Technical Analysis:
The questions raised in technical analysis are:
Whether the preliminary tests and studies have
been done or provided for?
Whether the availability of raw materials, power
and other inputs has been established?
Whether the selected scale of operation is optimal?
Whether the production process chosen is suitable?
Whether the equipment and machines chosen are
appropriate?
Whether
the
auxiliary
equipments
and
supplementary engineering works have been
proved for?
Whether provision has been made for the treatment
of effluents?
Whether the proposed layout of the site, buildings,
and plant is sound?
Whether work schedule have been realistically
drawn up?
Whether the technology proposed to be employed
is appropriate from the social point of view?
Financial Analysis:
The aspects, which have to be looked into, are:
Investment outlay and cost of project
Cost of capital
Projected profitability
Break-even point
Cash flows of the project
Investment worthwhile ness judged in terms
of various criteria of merit
Projected financial position
Level of risk

Economic Analysis:
Also referred to as social cost benefit analysis, is
concerned with judging a project from the larger social
point of view. The questions sought to be answered are:
What are the direct economic benefits and
costs of the project measured in terms of
shadow (efficiency) prices and not in terms of
market prices?
What would be the impact f the project on the
distribution of income in the society?
What would be the impact of the project on
the level of savings and investment in the
society?
What would be the contribution of the project
towards the fulfilment of certain merit wants
like self-sufficiency, employment, and social
order?
Ecological Analysis:
Ecological analysis should be done particularly
for major projects, which have significant ecological
implications like power plants and irrigation schemes,
and environmental polluting industries (like bulk
drugs, chemicals, and leather processing). The key
questions raised in ecological analysis are :
What is the likely damage caused by the
project to the environment?
What is the cost of restoration measures
required to ensure that the damage to the
environment is contained within acceptable
limits?

Market & Demand Analysis

Key Steps:
1. Situational Analysis and Specification
objectives
2. Collection of Secondary information
3. Conduct of market survey
4. Characterisation of the market
5. Demand Forecasting
6. Market Planning

of

1. Situational
objectives

of

Analysis

and

Specification

To get a feel for the relationship between the

product and its market.
2. Collection of Secondary information
General Sources of Secondary Information:
a. Census of India
b. National sample survey reports
c. Plan Reports
d. Statistical Abstract of the Indian Union
e. India Year Book
f. Statistical Year Book
g. Economic Survey
h. Annual Survey of Industries
i. Guidelines to Industries
j. Annual Reports of the Development Wing,
Ministry of Commerce and Industry
k. Annual Bulletin of Statistics of Exports
and Imports
l. Techno-Economic Survey
m. Industry Potential Surveys
n. The Stock Exchange Directory

o. Monthly Studies of Production of Selected

Industries
p. Monthly Bulletin of Reserve Bank of India
q. Publications of Advertising Agencies
r. Other Publications
3. Conduct of Market Survey
The information sought may relate to one or
more of the following.
Total Demand and rate of growth of demand
Demand in different segments of the market
Income and price elasticity of demand
Motives for buying
Purchasing plans and intentions
Satisfaction with existing products
Unsatisfied needs
Attitudes toward various products
Distributive trade practices & preferences
Socio economic characteristics of buyers
4. Characterisation of the Market
Effective demand in the past & present
Breakdown of demand
Price
Methods of distribution and sales promotion
Consumers
Supply and Competition
Government Policy
5. Demand Forecasting
6. Market Planning
Pricing
Distribution
Promotion
Service

Technical Analysis
Technical Analysis is concerned primarily with:

Material inputs and utilities

Manufacturing process / technology
Product Mix
Plant Capacity
Location and site
Machineries and equipments
Structures and civil works
Project charts and layouts
Work schedule

1. Material inputs and Utilities

May be classified into four broad categories;
a. Raw Materials
I. Agricultural products
II. Mineral Products
III. Livestock and forest products
IV. Marine products
b. Processed Industrial Materials and components
Base
metals,
semi-processed
materials,
manufactured parts, components, sub-assemblies
c. Auxiliary materials and factory supplies
Chemicals, additives, packaging materials,
paints, varnishes, oils, grease, cleaning materials
etc.
d. Utilities Power, water, steam, fuel etc.

2. Manufacturing Process / Technology

a.

Choice of Technology

Plant Capacity
Principal Inputs
Investment outlay and production cost
Use by other units
Product mix
Latest developments
Ease of operation

b. Acquiring Technology
Technology licensing
Outright purchase
Joint venture arrangement
c. Appropriateness of Technology
3. Product Mix
4. Plant Capacity

Technology requirement
Input Constraints
Investment Cost
Market Conditions
Resources of the firm
Government policy

5. Location and Site

Proximity to Raw materials and markets
Availability of infrastructure
Government Policy

 Other Factors
6. Machineries and Equipments
a.
b.
c.
d.
e.
f.
g.

Plant (Process) Equipments

Mechanical
Electrical
Instruments
Controls
Internal Transportation System
Others

Constraints in selecting M / E
Procurement of Plant & Machinery
7. Structures and Civil Works
Site Preparation and Development
Buildings and Structures
Outdoor Works
8. Project Charts & Layouts
a.
b.
c.
d.
e.
f.
g.
h.

General Functional Layout

Material Flow Diagram
Production Line Diagram
Transport Layout
Utility Consumption layout
Communication Layout
Organisational Layout
Plant Layout

9. Work Schedule
Reflects the plan of work concerning installation
as well as initial operation.

 To anticipate problems
To establish the phasing of investments
To develop a plan of operations
Financial Analysis

Cost of Project
Means of Financing
Estimates of sales & production
Cost of production
Working capital requirement and its financing
Estimates of working results
Break-even point
Projected cash flow statements
Projected balance sheets

1. Cost of project

Land and site development

Building and civil works
Plant and machinery
Technical know-how and engineering fees
Expenses on foreign technicians and training
of Indian technicians abroad
Miscellaneous fixed assets
Preliminary and capital issue expenses
Pre-operative expenses
Provision for contingencies
Margin money for working capital
Initial cash losses

3. Means of finance
4. Estimates of Sales & Production
5. Cost of Production

Material Cost
Utilities Cost
Labour Cost
Factory overhead cost

6. Working capital requirements & its financing

7. Profitability Projections
a. Cost of Production
b. Total administrative expenses
c. Total sales expenses
d. Royalty and know-how payable
e. Total cost of production (a+b+c+d)
f. Expected sales
g. Gross profit before interest
h. Total financial expenses
i. Depreciation
j. Operating profit (g-h-i)
k. Other income
l. Preliminary expenses written off
m. Profit /loss before taxation (j+k-l)
n. Provision for taxation
o. Profit after tax (m-n)
Less dividend on - Preference capital
- Equity capital
p. Retained profit
q. Net cash accrual (p+i+l)
8. Break even point
9. Projected cash flow statements
10.Projected Balance sheets

Check List for Feasibility Report

1. Examination of public policy with respect to the
Industry.
2. Broad specifications of outputs and alternative
techniques of production.
3. Listing and description of alternative locations.
4. Preliminary estimates of sales revenue, capital
costs and operating costs of different alternatives.
5. Preliminary analysis of profitability for different
alternatives.
6. Marketing analysis.
7. Specification of product pattern and product
prices.
8. Raw material investigation and specification of
sources of raw material supply.
9. Estimation of material energy, flow balance and
input prices.
10.Listing of major equipment by type, size and
cost.
11.Listing of auxiliary equipment by type, size and
cost.
12.Specification of sources of supply for equipment
and process know-how.

13.Specification of site and completion of necessary

investigation.
14.Listing of buildings, structures and yard facilities
by type, size and cost.
15.Specification of supply sources, connection costs
and other costs for transportation services, water
supply and power.
16.Preparation of lay-out.
17.Specification of skill-wise labour requirements
and labour costs.
18.Estimation of working capital requirements.
19.Phasing of activities and expenditure during
construction.
20.Analysis of profitability.
21.Determination of measures
environmental problems.

for

combating

22.Analysis of the past performance of the

enterprise responsible for implementing and
running the project with respect to project
completion, capacity utilisation and profitability.
23.State of preparedness to implement the project
rapidly.

Contents of a Project Report.

1. Objective and scope of the report.
2. Product characteristics ( Specifications, product
uses and application, standards and quality)
3. Market position and trends (installed capacity,
production and anticipated demand, export
prospects and information on import and export,
price structure and trends).
4. Raw materials (requirement of raw materials,
prices, sources and properties of raw materials).
5. Manufacture
(Processes
of
manufacture,
selection of process, production schedule and
production technique).
6. Plant and machinery (Equipment and machinery,
instruments, laboratory equipments, electric load
and water supply and the essential infrastructure).
7. Land and Building (Requirement of land area,
building, construction schedule).
8. Financial implications (Fixed and working
capital investment, project cost and profitability).
9. Marketing channels (Trading Practices and
marketing strategy).
10. Personnel (Requirement of staff, labour and

expenses on wage payments).

Entrepreneurs:
a. Phanendra Sama www.redbus.in
i. Inspiring Leadership
(Will, Vision, Values, Skill)
ii. Innovative Strategies
iii.
iv.
v.

Distinct Identity ( Purpose, Value,

Culture)
Process Driven Implementation
Win-Win relationship with stake
holders

b. Ashank Desai Mastek

i. Risk Taking
ii. Look at Opportunities
iii. Find Right Business for you
iv. Being adaptive to Change yourself
& business
v. Build business for scalability
vi. Values and Vision
vii. You are
accountable

responsible

Enablers :
1. Education
2. Value
3. Relationship

be

Innovation : One should be Fast, Smart & Simple

To innovate product
Innovate Process
Innovate people.
Todays requirement
1. Portability
2. Flexibility
Leverage Technology (to understand
Future).
C. Sumant Yatn Foundation
1. Comprehension
2. Analysis
3. Conceptualisation
4. Implementation
Emotional Attachment is must to make difference.
Manoj Sharma uniqoteq, Finland
1. Risk Taker from
uncomfortable zone
2. Believing in oneself
3. No Degree Dream
4. Courage Not to give up.
5. Ready for change
6. Dont listen to Negativity

comfort

zone

to

Success Creating environment for success for

others.
Money is just like Soldiers.