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CONCEPT OF ENTREPRENEURSHIP

ORIGIN:The term ‘entrepreneur first of all appeared in the French Language. In the early 16th century it was applied to a person engaged in military expedition. To was extended to cover the construction and civil engineering activities in the 17th century. It was the only in the 18th century that the word was used to refer to economic activities. Richard Cantillon, a French banker applied the word entrepreneur to mean a person who bears uncertainty and risk ’ Introduction Economic development essentially means a process of upward change. It can be defined as a process of a upward change. It can be define as a process whereby the real per capita income of the country increases over a long period of time. Concept Entrepreneurship is the tendency of a person to organize the business of his own and it run a profitably, using the quality of leadership, decisions making and managerial caliber etc. The term entrepreneurship is often used interchangeably with entrepreneurship. But conceptually they are different ENTREPRENEUR ENTREPRENEURSHIP Refer to a person Refer to a process Creators Creation Organizer Organization Decision Maker Decision making Initiator Initiative

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Leader Leadership Motivator Motivation Risk Taker RiskTaking In a way entrepreneur precedes entrepreneurship. Entrepreneurship is an abstraction and entrepreneur are tangible person. Well designed and controlled research studies on entrepreneurship are very few. Entrepreneurship is an abstraction and entrepreneurs are tangible persons. Well Designed and controlled research studies on entrepreneurship are very few. Entrepreneurship is a role played by or the task performed by the entrepreneur. The central task of the entrepreneur is to take the moderate risk and invest the money to earn profit by the exploiting an opportunity. For this he must posses far sight6edness to perceive an opportunity so that he can exploit it well in time. Entrepreneurship can be defined as the propensity of mind to take calculated risk with confidence to achieve a pre determined business or industrial objectives. The word ‘entrepreneurship’ typically means to undertake. Recently in the west, the entrepreneurship is mainly an attribute of an efficient manager. But the success achived by entrepreneurs in developing countries demolish the contention thet entrepreneur is a rare animal and an elusive character. Incidentally entrepreneurship has engaged the attention of sociologist, psychologists and economist. Sociologist analysis the characteristics of an entrepreneurs in terms of caste, family, social status etc. Psychologists analysis the attribute on the basis of their personality traits such a need of achievement, affiliation and power, risk taking, decision making, creativity and leadership etc. the economist analyses them on the bases of occupational background, access to capital, business to technical experience. According to HIGGINS “Entrepreneurship is meant the function of seeing investment and production opportunity, organizing an enterprises to
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undertaken a new production process, raising capital, hiring labour arranging for supply of raw material and selecting top managers for the day to day operation of the enterprise” According to Josepf. A. Schumpeter Entrepreneurship is essentially a creative activity or it is a innovation function. The process of innovation may be in the form of  Introduction of a new product.  Use of a new method of production.  Opening of a new market.  The conquest of new sources of supplying raw material  A new form of organization According to H.N.Pathak Entrepreneurship involves the wide range of area on which series of decision are requiredwhich can be grouped into 3 categories  Perception of an opportunity  Organizing an industrial unit  Running the industrial unit as a profitable, growing and going concern

CHARACTERISTICS OF ENTREPRENEURSHIP 1) Calculated risk taker:- a risk situation occurs when one required to make a choice between two or more alternatives whose potential outcome are not known and must be subjectively evaluated. A Risk situation involve potential gain or loss. The greater the possible loss, the greater the risk is involved. An entrepreneur is a calculated risk taker. An entrepreneur likes to take a realistic risk because he want to be successful. 2) Innovator:- innovation may occur in the following forms:Notes By: Guljinder Randhawa 3

              3)

Introduction of a new product. Use of a new method of production. Opening of a new market. The conquest of new sources of supplying raw material A new form of organization. Beside this an innovator must have following qualities More educated. Higher in social standing. Better equipped to deal with abstraction More receptive to risk in general Higher in achievement motivation Higher in social participation A more active information seeker An opinion leader More in contact with person outside the social system

Organizer:- An entrepreneur has to bring together various factors of production, minimize losses and reduce the cost of production. Initially, he may take all the decisions but as the enterprise grows, he starts delegating the authority. He produce the best result as an organizer. He select the best person, financer and make their employees to work with their loyalty and dedication. An enterprising entrepreneur should be energetic, resourceful, alert to new opportunities and able to adjust the changing condition.

4) Creative:- creativity as a field knowledge, seeks to explain how human, either individually or collectively, reach solution that are both novel and useful. Innovation means the efforts to create purposeful ventures 5) Achievement Motivated: Achievement motivation is a drive to overcome challenges to advance and to grow. An entrepreneur is achievement oriented person not ‘money hungry’. He works for his desire for challenge, accomplishment and services to other.
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e. vigor. It comprises of such personality traits as responsibility. He attempts any task with the hope that he will succeed rather than with a fear of failure. 7)Self confident: Entrepreneur must be self confident. Such a hope of success enhances his confidence and drives him towards success. creative thinking ability and analytical thinking ability and analytical thinking ability. An entrepreneur must exert considerable efforts in establishing and managing his business.i. He should have faith in himself. Technical knowledge implies his ability to device and use new and better ways of producing and marketing goods and services. Notes By: Guljinder Randhawa 5 . 8)Socially responsible: in the context of the universal urge for the social change and economic development. A dynamic entrepreneur must also be interested in changing the pattern of production to suit the requirement. 11) Blessed with mental ability: this consist of overall intelligence . the old concept of an entrepreneur seeking certain advantages for himself is no longer acceptable.6)Technically Competent: success of an entrepreneur depends largely upon his ability to adopt latest technology. An entrepreneur must have a reasonable level of technical knowledge. 10) Equipped with capability to drive: drive is a person’s motivation towards a task. IQ. The changing environment calls for the socially conscious entrepreneur who is not threatened by the progress of others. only then he can trust others. initiative. 9)Optimistic: an entrepreneur should approach his task with a hope of success and optimistic attitude. persistence and ambition.

12) Human relation ability: personality factors such as emotional stability. 14) Decision making: He must possess ability to take decision effectively. Decisions taken should be based on quantitative facts. consideration and tactfulness are important contributors to entrepreneur’s success. personal relations. Good communication also means that both the sender and receiver understand and are being understood. Notes By: Guljinder Randhawa 6 . 13) Communication ability: An entrepreneur must possess the quality of communicating effectively in written and oral communication. sociability.

CONCEPTUAL MODEL OF ENTREPRENEURSHIP ENTREPRENEURIAL PERSONALITY ORGANISATION AL CONTEXT ENTREPRENEURSHIP ENTREPRENEURIA L TASK ENTREPRENEURIAL ENVIRONMENT In the initial stage of economic development . entrepreneurs tend to be the shy and humble but as the development process pick up the speed. they Notes By: Guljinder Randhawa 7 .

He complies with necessary formalities of getting license. However various types of entrepreneur are classified as under:1)According to the type of business:• • • • • Trading entrepreneur: They are related to trading activities not a manufacturing. Induced entrepreneur: attracted by the various subsidies. 8 Notes By: Guljinder Randhawa . pollution control clearance etc Business entrepreneur: who gave new idea of a new product and services and then translate their idea into reality. an owner as well as entrepreneur. He is promoter. Imitative entrepreneurs are more successful. 2)According to motivation: • • Pure entrepreneur: who may or may not possess an aptitude for entrepreneurship but it is tempted by the monetary rewards. This means buying goods from other producer and selling the goods to consumers Industrial entrepreneur: one who set up industrial units.tend to more enthusiastic and confident. Agriculture entrepreneur: one who engaged in agriculture activities. 3)According to the uses of technology: • Technical entrepreneur: He concentrate more on production than the marketing. an essential part of board of director. These kind of entrepreneur exist in developed countries only as their economic development and technology level reached at a certain level. power connection. develops and manages a corporate body. Corporate entrepreneur: Who plans. They help to make the business environment healthy and development oriented. facilities and incentives offered by the government.

bears the risk and adopt the latest techniques in the business with the intention to earn profit. arrange finance. he or the group is called as private entrepreneur. • State entrepreneur: State entrepreneur means the trading and industrial venture undertaken by the state or the government itself. 6)According to gender and age • • • • • Man entrepreneur Woman entrepreneur Young entrepreneur Old entrepreneur Middle –aged entrepreneur 9 Notes By: Guljinder Randhawa . 4)According to stages of development:• • • First Generation entrepreneur: who do not possess any entrepreneurial background Second Generation entrepreneur: who inherit the family business firms and pass it generation to another Classical Generation entrepreneur: Who want to maximize the profit at consistant level. • Joint entrepreneur: Joint entrepreneur means the combination of private entrepreneur and state entrepreneur who join hands. Professional entrepreneur: Who is interested to float a business but not ready to manage or operate it.• • Non – Technical entrepreneur: Developing alternative strategies for the different marketing and distribution to promote his business activity. 5)According to Capital Ownership: • Private entrepreneur: when a individual and group of individuals setup an enterprises.

per capita income. Environment refers to all external factors which has an impact on the working of the firm. capital market. The success of any enterprises are decided by the economic environment. economic resources. national income. A) ECONOMIC ORIGIN Economic environment influences the entrepreneurship to a great extent. It refers to those aspect of the surrounding of the business enterprises and circumstances of business unit which affect or influence its activities and operations and decide its effectiveness. Notes By: Guljinder Randhawa 10 . The business sectors has economic relation with the govt. The important external factors that affect the economic environment of the business are as follow: • Economic Conditions: the general economic conditions prevailing in the country .e. household and with global sector.i.7)According to area • Urban entrepreneur • Rural entrepreneur 8)According to scale • • • • Large scale industry entrepreneur Medium scale industry entrepreneur Small scale industry entrepreneur Tiny industry entrepreneur SOCIO – ECONOMIC ORIGIN Of ENTREPRENEURSHIP Entrepreneurial environment constitutes both internal and external factors.

education etc. Social environment includes people attitude. religion. Economic System: the economic system of a country may be capitalistic . hydroelectric works. Business cycles and economic growth of the economy are important factors of economic development. Labour: division of labour is very important factor for the development of the any business. Government regulation of economic activities depends upon on the nature of the economic system Economic Planning: economic planning deals with systematic and coordinated efforts on the part of the political authority to improve the effectiveness of the economy. socialistic.• • • • • • distribution of income and assets etc. increase in capital investment leads higher output. . Availability of capital facilities: capital requirement is one of thye basic factor for any business . are important determinants of the entrepreneurship environment. Economic infrastructure: economic infrasturture consist of the provision of roads and railways. The factors are Notes By: Guljinder Randhawa 11 . etc. building highways. communist or mixed. roads constructions. some attempts have been made to involve the private sector is some areas of the infrastructures power generation . family background. Per capita income: with help of more private entrepreneurs there can be higher level of per capita income. and telecommunication but responsibility of infrastructure is with government sector. B) SOCIO ORIGIN Social environment is very comprehensive because it may include the total social factors with in which an business enterprises operates.

Nearly 64% of the population continues to be illiterate. The faculty system of education has compounded the evil of illiteracy. Urban – rural gap is a reality of our society. Notes By: Guljinder Randhawa 12 . Poverty: poverty of the masses ia an important features of the Indian social system. Caste and casteism: Communalism: the presence of communal tension and the periodic outbreak of communal riots have been the bone of the Indian social system. Despite the fact of having made considerable progress in the fields of agriculture and industrialization. The need is for more determined governmental action and strong social support in this respect.• • • • • • • • • • Rural society: about 70% of the Indian people live in villages and Indian villages continue to be under developed even backward. Regionalism. The ruraliti4sfeels that though agriculture accounts for the major part’s of India’s national income. Traditions Problems of social communication. A large number of population lives below poverty line. The constitution of India recognize as many as 15 languages. Illiteracy and ignorance: illiterates constitute a major part of the Indian social system. Indian society stands divided into linguistic groups. Occupational Background. Linguistic diversity: on the basis of language.

ready to learn from his experience • Quality conscious: . In other words. Other people believe that entrepreneurs are not made born. the Entrepreneurship development Institute of India (EDI). • Watching for opportunity and take necessary action. Following are the traits or good qualities of the entrepreneur:• Initiation: given the demand of the situation. • Information seeker:. Entrepreneurs who possess the necessary competencies succeeds while those deficient in these competencies fail in their ventures. • Efficiency lover: . • Persistence: . • Commitment to work: . According to some people.Always put effort to excel better than the existing standard of performance. It is good combination of various qualities and traits required to perform the job effectively. business family background is essential to success for entrepreneurs. • Assertiveness: .succeeds in persuading other to do what he wants • Efficient monitoring: .able to assert his issues. • Persuasion:. entrepreneur takes initiation to start an industry .TRIATS OF A GOOD ENTREPRENEUR The term ‘competence’ implies a person’s underlying characteristics leading to his/ her superior performance. person which proper knowledge and skills acquired through education and experience can become successful entrepreneur.personally supervises the work to ensure that the work is accomplished. Some people believe that entrepreneurs are born not made.he should go for extreme efforts to get rid of the problem. • Proper planning: .Accord upmost priority to accomplish the work.tries to do things at the faster pace incurring minimum cost. Notes By: Guljinder Randhawa 13 .frames realistic business plans and follow them effectively. In other words resolve the controversy on what successful entrepreneurs. • Self confidence: .A strong believer in his strengths and weakness.

Vision and forsightedness. Berna has stressed the following qualities of a good entrepreneur. J. resourceful. • He is enriched by high propensity.• Concern of employees and take proper action to improve the welfare of employees working in his enterprises. Notes By: Guljinder Randhawa 14 . Total commitment. able enough to adopt to the changing condition. an integrated view of the qualities of a successful entrepreneur can be listed as follows:• • • • • • • • • Capacity and willingness to assume risk. determination and perseverance. • He well visualize the likely changes and ready to adapt them According to McClelland the successful entrepreneurs are characterized by the 3 qualities: • He is endowed with an unusual creativeness. • He welcome advanced technology. He is energetic. • He has a strong need for achievement. very alert to new opportunities. High need achievement. High degree of ambition. hardworking. Willingness to hardwork and be always tenacious. • He is an enterprising individual. Having gone through the foregoing qualities of a successful entrepreneur. Several other research studies have tried to identify the qualities and traits of successful entrepreneurs. • He is also interested in expanding the scale of his operation by way of ploughing back his profit. Innovativeness and willingness to adapt change. Ability to utilize resources properly. In the study of entrepreneurial development in Madras city of India. Creative and imaginative thinking.

15 Time Orientation Skills Notes By: Guljinder Randhawa .DIFFERENCE BETWEEEN ENTREPRENEURS AND MANAGER BASIC Primary Motives MANAGER Mangers want promotion and traditional corporate reward Manager respond to quotas and budgets. monthly and yearly. He learns through experience. Mangers are business schools trained ENTREPRENEUR S Entrepreneurs want freedom. a goal oriented self– reliant and self motivated Entrepreneurs end goals of 5 to 10 year growth of business in view as guides He knows business intimately. weekly.

raw materials and markets Notes By: Guljinder Randhawa 16 . Capital. labour. Rather it is dependent rather it is dependent upon several economic. Less well educated.Attention Attention of managers are primary on event inside corporation The attention of entrepreneur is primarily on technology and market place. Risk Status Educational Level Managers are very careful Managers are the employees Highly educated. These environmental factors may have both positive and negative influences on the growth of entrepreneurship. social political and psychological factors. • ECONOMIC CONDITION: Economic environment exercise perhaps the most direct and immediate influence on entrepreneurship. Entrepreneur like calculated risk Entrepreneur are the owner. Various environmental factors inhibiting the emergence of entrepreneurship are given below. FACTORS EFFECTING ENTREPRENEURSHIP Entrepreneurship does not emerge and grow spontaneously.

A. If labour supply is unlimited even then entrepreneur can use labour intensive technology. enterprise. Availability of capital facilities the entrepreneur to bring together the labour of one. • Determinant of probable rewards for the entrepreneurial function. The main component of social environment are as follows • Legitimacy of entrepreneurship: The proponents of non – economic factors give emphasis to the relevance of the system of norms and value with a socio – cultural setting for the emergence of the entrepreneurship. machine of another and raw material yet of another to combine them to produce goods. Which reduce the cost of production and remove the problem of unemployment from the economy. therefore it influence in the emergence of entrepreneurship. such system is referred to as legitimacy of entrepreneurship in which the degree of approval or disapproval of granted entrepreneurial behavior influence its Notes By: Guljinder Randhawa 17 . Capital is regarded lubricant in the production process. In a professional vocabulary. Which help to increase the level of profit and encourage more entrepreneurship. This results in increase in profit which ultimately goes to a capital formation. As the given labour is more efficient it increases the quality as well as production. This suggest that capital supply increases. entrepreneurship increases entrepreneurship.are main economic factors. With an increase in investment. capital – labour ratio tends to increase. In the absence of raw material there is no production which leads to no entrepreneurship. The size and composition of market both influence entrepreneurship in their own way.SOCIAL FACTORS: social environment in a country exercise s significant impact on the emergence of entrepreneurship. • Material: The necessity of the raw material hardly needs any emphasis for establishing any industrial activity.

In situation in which entrepreneurial Legitimacy is low.emergence and its characteristics if it does emerge. mainstream individual will be diverted to non entrepreneurial role and entrepreneurial role will be relegated to the marginals. If it is too rigid . • Social Mobility: Social mobility involves degree of mobility. B. While McClelland speaks of moderate certainty. This is reasonable too because if individuals are fearful of losing their economic assets or being subjected to various negative sanction. Both the needs for “openness” of a system and need for “flexibility” in role relations imply the need for the possibility of mobility within the system for entrepreneurship development. If it is to flexible than the individual will gravitate toward other roles.PSYCOHOLOGICAL FACTORS: Many entrepreneurial theorists have propounded theories of entrepreneurship that concentrate specifically upon psychological factors.Legitimacy of entrepreneurship and Social Mobility largely determine the influence of marginality on entrepreneurship. both the social and geographical. and the nature of the mobility channels with in the system. Notes By: Guljinder Randhawa 18 . The two preceding factors . Some hold the view that a high degree of mobility is conductive to entrepreneurship. On the contrary in the case of the high Legitimacy of entrepreneurship. But this is believe that system should not be to rigid nor to flexible. Yet. entrepreneurship will be restricted along with other activities. mainstreams individual will assume the entrepreneurship and marginal will have to find other role as mean of mobility. • Security: Several scholars have advocated entrepreneurial security as an important facilitor of entrepreneurial behavior. While Schumpeter recognize the importance of such Legitimacy in the terms of appropriate social climate for entrepreneurship. they will not to be inclined to increase their insecurity by behaving entrepreneurially. scholars are not consensus on the amount of security that is needed. Security is also regarded as a significant factor for entrepreneurship development.

FACILITATING FACTORS BARRIERS 1 Technical knowledge Lack of Technical skills 2 Entrepreneurial training Lack of market knowledge 3 Market Contacts Lack of seed capital 4 Family business Lack of business knowledge 5 Availability of capital Social stigma 6 Successful role models Time presures Notes By: Guljinder Randhawa 19 . Bu creating basic facilities. through clearly expressed industrial policy. utilities and services and by providing incentives and concessions.Government Influence: the govt by its action or its failures to act does influence both the economic and non economic conditions for entrepreneurship. promote entrepreneurship in one way or other.• Need Achievement: • Withdrawal of status respect C. Any interested government in economic development can help. the govt can provide the prospective entrepreneur a facilitative socio economic setting.

7 Local manpower and bureaucratic constraints 8 Capable advisors and supporters Political Instability 9 supplier assistance Political instability 10 government and institutional support cooperative attitude of banks and institutions Legal Non other MOTIVATION Entrepreneurial behavior is the result of entrepreneurial motivation. Notes By: Guljinder Randhawa 20 . Motivation has been derived from the word ‘motive’ which implies the inner state of mind that activates provokes and direct our behavior toward the goal. Motivation refer to the inner urge that ignites and sustain behavior to satisfy need.

striving. On the other hand negative motivation arises from fear or failure or frustration. It is an inspirational process of steering an individual’s inner drive and action toward goals. Positive occurs when a person is inspired to act for earning some rewards and benefits.” Thus motivation may be defined as the process that motivate a person into action and induces him to follow the course of action till the goals are finally achieved. It causes a person to seek protection.According to McFarland “Motivation refer to the may in which urges. behavior and goal. desires. It causes a chain reaction. drives. Motivation can be both positive and negative. aspiration or needs direct control or explain the behavior of human being. Motivation includes motives. GOALS MOTIVES BEHAVIOUR MEANING OF MOTIVATION Motivation implies an inner state that cause a person to act toward the attainment of goals. FACTORS OF MOTIVATION Notes By: Guljinder Randhawa 21 .

• Family background. According to the stidy of P. The Internal factors constitute the personality of the entrepreneur and there by generate an inclination to adopt entrepreneurial activity. • Desire to branch out manufacturing. Among the internal motivation . The presence of internal factors is necessary condition for the entrepreneurial activity to take place. P.Several studies have been undertaken to identify the factor that motivate people to sart their enterprises. consultant in the related field.N. This experience was accumulated by the entrepreneurs either as a business executive in industrial concern or as a trader. External Factors • Assistance from government. utilization of excess money earned from contractual estate business. the desire to do something creative was important. • Availability of technology/ raw material • Other factors demand of a particular product. The presence of these factors is essential for the entrepreneurial activity to take place. started manufacturing to facilitate trading distribution system. • Assistance from financial institution. Internal Factors • Educational Background • Occupational Experience • Desire to work. 2. government policies and many other factors. 1.Sharma has identified nine motivating factors which are as under.N .Sharma revealed occupational experience as the most significant internal motivating factor. But the entrepreneurial idea cannot fructify or take real shape without a proper or conducive environment which provides support in terms of financial assistance. Technically and professionally qualified entrepreneur had establish an enterprises in the field of their specialization which amply proves that they Notes By: Guljinder Randhawa 22 . technology and raw material and infrastructural facilities.

success stories of first generation entreprenures. Among the external factors. Other factors includes availability of surplus funds. • Machinery on hire purchase.were prompted by their qualification or specialization to initiate industrial activity. Prof R.Sharma has classified the factors which prompted entrepreneurs A. • Financial assistance. • Encouragement from big business • Heavy demand • Profit margin. B. • Unsounded unit at a cheap prices Notes By: Guljinder Randhawa 23 . assistance from the financial and other governmental institutions was rated. the strongest motivator. Factors external to the entrepreneur • Accommodation in industrial estates. • Business experience in the same line.A. sick unit available at a cheap price. • Strong desire to do something independent in life • Technical knowledge and/ or manufacturing experience. • Attitude of the government to help new units. Factors internal to the entrepreneur. support of friends and relatives. • Financial assistance from non government sources.

To secure self employment/ independent living. To fulfill desire of self/wife/parents. Notes By: Guljinder Randhawa 24 . Provide employment to other. Raise the level of economic development.ENTREPRENEURIAL AMBITION Another study on entrepreneurial motivation by M Chandra sekhar and M Gandhara Rao have classified the factors behind entrepreneurial growth into 3 categories. And Ambition of Entrepreneur is one of them Main Ambitions of Entrepreneur are • • • • • • • • • • To make money: to earn as much profit they can. Make use of idle time. To continue family business. To gain social prestige. Making of decent living. Self employment of children.

52 persons from business and industrial community from the Kakinada town were selected. McClelland conducted Kakinada experiment in Kakinada town of Andhra Pradesh.e watched those who have performed well and try to emulate them.ACHIEVEMENT MOTIVATION THEORY According to McClelland. The experiment was design to stimulate the imagination and encourage introspection into personal motivation and community goals. b) The participation sought model of achievement i. Overall better results can be definitely be achieved by making people achievement oriented. He believed that achievement motivation was lower among the underdeveloped countries as compare to developed nations. executives generally have a higher need for the achievement than the men in other profession. He considers the need for the achievement to be most critical to a nation’s economic development. According to McClelland achievement motivation can be developed through training and experience. Notes By: Guljinder Randhawa 25 . Ambition is a level of motives and nourishes achievement motivation. The achievement development programme consisted of the following steps: a) The individual strived to attain concrete and frequent feedback. Hyderabad. They participated in an orientation programme conducted by the Small Industry Extension Training Institute (SIETI).

d) The trainees were asked to control day dreaming by thinking and taking to themselves in a positive term. An entrepreneur is expected to undertaken the following steps in his pursuit of setting up an enterprise 1)Searching for prospective business ideas or opportunities.  Are moderate risk taker. Notes By: Guljinder Randhawa 26 . He argue that people with high need for achievement possess the following attributes:  Prefer personal responsibility for decision. after making appraisal of the resources at his command. 2)Processing of these ideas and selecting the best idea.c) The participants imagined themselves in need of success and challenge. After establishing an enterprises an entrepreneur is required to look after the operation of this enterprises over a period of time. It was observed that they performed better than those who did not attend the programme. 3)Collecting the required resources and setting up the enterprises.  Possess interest in concrete knowledge of the result of decisions. McClelland concluded that the participant displayed the more active business behavior and worked for the longer hours. perceives a business opportunity for producing and marketing a product or services. After 2 years the trainees were observed. McClelland explain that the people with low achievement motivation are prepared to work hard for money or other such incentives but the people with higher achievement motivation work for status. ESTABLISHMENT OF ENTREPRENEURIAL SYSTEMS An entrepreneur. They set carefully planned and realistic goals.

an assessment can be made about the Demand – Supply position of different products. can be obtained with the help of market surveys. Business idea may come to his mind at his own or he may depend on various sources like success stories of other entrepreneurs. The promoter is required to employ his imagination and foresight in preparing list of business ideas. from. advertising agencies and commercial consultant may be considered while anticipating demand for the product. visit to trade fair. Based on the information collected. where they will buy. study of project reports assistance from governmental agencies. The idea must be viable and should ensure adequate return on investment. about various products. producing import substitute product. at what prices they will buy etc is collected.Expert advice of salesmen. where they will buy. Sometime useful business ideas can be discovered by keeping in touch with the developments taking place in developed countries. The business idea may originate from the following sources: • Market Observation: relevant knowledge. Notes By: Guljinder Randhawa 27 . dealer. changes in technology etc. excess demand for any product. Thus a product can be devised in such a manner so that it fits exactly into the requirement of the prospective buyer. Idea should be sound and practicable may relate to starting a new business or takeover of an existing enterprise.1) Searching for prospective business ideas or opportunities: Promotional activities commence with search for prospective business idea and opportunities. • Assessing the market trends in terms of demand. in order to successful he must acquire whatever best that is available from anywhere. fashion. disliking. • Keeping Track of the development: A prospective entrepreneur must keep his eyes and ear open. liking. Through surveys detailed information regarding taste. new products. He should keep in touch with whatever is happening around especially concerning business idea. when they will buy. • Consumer Survey: the success or failure of any venture depends upon prospective consumers.

both government and private provide profiles of various project and industries. • Product are to be used by the parent company for the assembly of final product • Product whose imports are discouraged by the government. • Technical Feasibility: it is ascertained as to what extent it is possible to technically produce the product. • Establishing personal contact with the dealer. This investigation includes projections about the probable idea about the demand. managerial and market requirement of various projects 2) Processing of these ideas and selecting the best idea: under this head detailed investigation of the potential idea is carried on. Notes By: Guljinder Randhawa 28 . • Scrutinizing Project Profiles: Various agencies. • Promoting new ideas for increasing sales. This investigation can cover technical and commercial facilities. Technical feasibility cover detail study with regard to the availability of the requisite technology and other input requirement • Commercial Feasibility: detailed study is carried on to know about the profitability of different ideas. • Product where entrepreneur possesses marketing or manufacturing experience. financial. Through these profiles an entrepreneur can assess the technical. cost of production.• Providing plate form for the meeting of large number of buyers. sales volume. conceived through the idea. breakeven point and profitability expected under different business proposition. • Product where profitability is more. The idea selection for the product may be influenced by the following consideration: • Demand supply gap or the extent up to which demand exceeds supply. • Assessing the attitude of competitor in a particular product • Comparing the quality and prices of competing products.

• The requisition of efficient technology. Entrepreneur as a decision maker is required to perform the following function: • The determination of objective of the enterprise. recording and analyzing of market information. • The maintenance of good relations with public authorities and with society at large.• Product which have got more export potential. demands more attention of entrepreneur. All the above stated function is important but the function regarding finance. Notes By: Guljinder Randhawa 29 . • The development of organization. manpower and marketing. • Secure adequate financial resources. He is required to develop a sound and efficient system of collecting. • Product enjoying various types of concession in the shape of subsidies and incentives 3) Collecting the required resources and setting up the enterprises: an entrepreneur in order to be successful is required to remain in touch with what is happening around. • The development of the market for the product and devising of a new product. This system ensures availability of a right information at a right time to a right person.

The role of small scale industries is one of the important features of the planned economic development of India. In terms of employment this sector is next to agriculture. as an effective tool in subserving the national objective of growth with justices. availability of wide variety of abundant natural resources. In India this sector has been assigned with significant role in the industrialization and economic development of the country. India. Over a year small sector has acquired greater importance in Indian economy. ever growing size of market and shortage of capital. DEFINITION OF SMALL SCALE UNIT:Notes By: Guljinder Randhawa 30 . it is only the small sector which is best suited under these conditions. Indian economy is characterized by the huge size of population. wherein on one hand there is the acute problem of unemployment and on the other hand scarcity of capital.SMALL SCALE BUSINESS INTRODUCTION:Small sector occupies an important position in the industrial structure of our country. In a country like.

The area of operation of SSI generally localized catering to the local or regional demand. Gestation period: Gestation period is that period after which teething problem are over and return on investment starts. • Investment and employment. • Mgt and control in SSI unit is normally labour intensive. 2) QUALITATIVE ASPECTS: These can be • Ownership of small business is in hand of individual or a few individual. it is forced to confirm its activity to the local level. Area of operation. Notes By: Guljinder Randhawa 31 . sole B. • Employment generation. policy aims and administrative set up. The overall resources at the disposal of a SSI are limited and as result of this. • Small scale business is normally carried on in a limited or local area CHARACTERISTICS OR FEATURES OF SMALL SCALE INDUSTRIES A.The definition of small scale sector unit can be categorized in different ways depending on the country’s pattern and stage of development. D. • Volume and/or values of sales. • Volume and/or value of production. There can be 2 basis for defining small business and these are: 1) SCALE OF BUSINESS: The size or scale of business can be measured in various ways of like: • Investment on plant and machinery. Ownership: Ownership of SSI is with one individual in proprietorship or it can be with a few individual in partnership. Management and control: SSI is normally a one man show and even in case of partnership the activities are mainly carried out by the active partner and the rest are generally sleeping partners C.

H .economic development of India depends upon the development of the SSI.E. Use of local resources G . H. Supporting large scale industries. Flexibility: SSI as compare to LSI are more change susceptible and highly reactive and responsive to social economic condition. A . Mobilization of entrepreneurial skills E . Equitable spread of income and wealth. Generation of employment opportunities. Conservation of foreign exchange. The development of the more SSI unit in rural or backwards state promotes balanced regional development. Resources: SSI uses local resources and as such can be located anywhere subjected to availability of resources G. Balanced regional development C . J. D . K. ADVANTAGES OR IMPORTANCE OF SMALL SCALE UNITS: SSI play a very important role in economic development of our country. This sector is contributing a lot towards the different sectors of the country. I. Technology: SSI are fairly labour intensive with comparatively smaller capital investment than the large unit. 32 Notes By: Guljinder Randhawa . Regional dispersal of industries. Optimum use of capital. Mobilization of capital. Dispersal of unit. F. Contribution towards national economy. Self employment. The soico. L. They are flexible to adopt new changes. SSI use local resources and can disperse over a wide territory. B . F .

Number of units. Contribution of exports Notes By: Guljinder Randhawa 33 . Investment D. Output E. B.ROLE OF SSI A. Employment generation C.

Better industrial relations PROBLEMS OF SMALL SCALE SECTOR: A) Marketing problem of small business • Poor product quality • Scale of production • Poor sales promotion • Lack ok knowledge of marketing • Lack of marketing opportunities • Absence of suitable marketing channel B) Production problem of small scale industries • Maintenance of delivery schedules • Shortage of raw material • Ignorance of scientific methods of production • Under utilization of production capacity • Import restriction • Gestation period • Diversification of the products • Qualtuy control • Product cost • Electricity C) Problem related to finance • Requireemnt of capital and vredit • Problem of procuring working • Inappropriate financial structure • Hurdles in getting loans sanctioned • Pattern of repayment of loans • Structure of interest rates Notes By: Guljinder Randhawa 34 . Mobilization of capital H. Equitable distribution of income. Regional dispersal of industries I.F. G.

numerous decisions have to be taken. A potential entrepreneur has to pass through various stages for his setting up his small scale units and these are as under: Notes By: Guljinder Randhawa 35 . An entrepreneur must correctly perceive the nature and intensity of problem o be faced and implement appropriate plans.• Wrong financial planning • Improper utilization of funds D) Problem of human resources • Non availability of skilled manpower • Labour problem E) Other • • • • • • • • • Problem Technological changes Land and building Infrastructural facilities Faculty planning License system Managerial inadequacies Analysis of business environment Machinery and other equipment Lack of technological upgradation STEPS FOR STARTING A SMALL INDUSTRY Setting up of business enterprises is a very challenging and rewarding task. Several problems are involved in task. In order to succeed in this task. Right from the conception of the business idea up to the start of production .

Experience and motivation. owner. lesser legal formalities. social political. skill. This is a way they are generating their self employment and also employment to other. An innovative entrepreneur having urge to do something new. Any country where level of development has not been upto the desired extent is not fit for innovative entrepreneur . In case he possess the right type of knowledge. an entrepreneur would select the product based on his own knowledge. design 36 Notes By: Guljinder Randhawa . An enterprise has to remain in touch with the business environment for the sake of its existence. B .A . C. Various economic. technological and psychological factors effect the emergence and growth of entrepreneurship. He has to identify both short term and long term potentials or prospects of the product. success and future. lower investment etc which may tempt an individual to become independent and set up his own enterprises. After setting up his own business he is a manager. Decision to be self employed: An educated person has to decide between 2 options either to work for others as an employee or to work for himself as entrepreneur. There may be certain other contributory factors like facilities and incentives provided by the government. controller of all the affairs of his enterprises. skill. An entrepreneur should understand the behavior of the key environmental factors that are going to affect the present and future operation in the enterprise. Identification of opportunities: A small scale enterprises originate and operate within the business environment. Lack of adequate and appropriate training facilities and less emphasis on R&D. experience and aptitude that the best option for him is setup his own enterprises. Selection of the product: An entrepreneur has to identify or select the product based on marketing research. The interaction between an enterprise and environment help in the understanding of the business which facilitate taking of various strategic and operational decision helping in the growth and success of venture. the imitative nature of the entrepreneurs is mainly the result of inherent deficiencies in an underdeveloped economy.

D . Selection of ownership Form: the form of ownership for small scale unit can be sole proprietorship. banking. An entrepreneur before deciding about the product should find the answers for the following important questions. • Who will buy the product? • When they will buy? • How much they will buy? • From where they will buy? • What are their expectation from our product? • Who are our competitors and how they are performing? • How to advertise and sell? Economic viability of the product can be ascertained by considering the following aspects •Assessing the existing demand in the domestic and exort market. • Nearness to market and sources of raw material.the product himself and create the new market for his product whereas imitative entrepreneur may improve upon an existing product implies taking steps for improving usefulness of the product or affecting saving in cost. The role proprietorship and family ownership are difficult to differentiated as these 2 categories are practically family concerns by the virtue of ownership and management. • Availability of governmental incentives. •Expected demand from big unit of ancillary product Small scale entrepreneur in our country produce as many as 7500 items ranging from ordinary to highly sophisticated products. In his pursuit of the good location an entrepreneur should carefully study the following factors: • Location is in home land. Notes By: Guljinder Randhawa 37 . Location of the unit: Decision about the location of the unit is very important and can have bearing on the working or the future of the enterprise. partnership family ownership and private limited company. •Assessing the potential demand. water. •Availability of substitutes in the market and their performance. • Availability of labour and other infrastructural facilities like transportation. E .

how: there are certain projects where in sophisticated manufacturing know – how is required. research laboratories. • Organizational constraints. In case of the ancillary unit this know – how can be provided by the major unit for which it is working. • Pollution level in the area. Many institutions of the government. • Limited saving. • Borrowing from the friends and relatives. H . An entrepreneur is to properly assess his financial requirement and take necessary steps for raising the requisite financial resources. • Loan from the commercial banks for the working capital. F . An entrepreneur can depend on various sources for financing his enterprises and these are: • Own funds. • Term loans from the financial institution and state Finance Corporation. Acquiring manufacturing know. Suppliers of plant and machinery can impart the necessary expertise through training.• Existence of culture of quality industrial production. research and development division of the giant industries and certain consultancy agencies provide the manufacturing know – how. • More vulnerability to business environmental pressure • Insufficient collateral to comply with the term and conditions of lending institution. There are many hurdles in financing small scale units and risk involved is more because of the following factors • Limited managerial expertise. Preparation of Project Reports Notes By: Guljinder Randhawa 38 . Designing financing scheme: After deciding about the location the next important consideration is financing. G .

capacity of a plant. A project report contain the information starting from very general issues to detailed examination of specific issue relating to entrepreneur’s qualification. The project report appraisal by the financial institute cover the following. 1. 2. market demand sources of supply of raw material. particular of his unit. marketing and selling arrangement. This reports helps entrepreneur to have disciplined thinking and advanced planning.GUIDELINES FOR PROJECT REPORT Project reports is a proposal for creation of productive capacities for manufacturing goods or providing services. Project report is written statement of what an entrepreneur proposes to take up. Preparation of the project report clarifies to the entrepreneur various processes which is necessary for setting up and managing a new business venture. The information contained in the project report about the promoters themselves reveal their managerial and entrepreneurial capabilities. cost and profitability of the project. Every small unit come into existence for promotion of certain socio – economic benefits like providing employment opportunities. It is not mearly a document covering precise details in respect of financial and economic viability rather it is a projection of performance based on certain assumption. reducing Notes By: Guljinder Randhawa 39 . means of financing.

Project report of small scale enterprises is not so sophisticated as in the case of project report of a large units. 5. The project reports contain the information about technical feasibility of the product. Project report also shoe the repayment capacity. length of working capital cycle should be estimated. Finicial institution are equally concerned with the financial viability of the project. margin of working capital. Notes By: Guljinder Randhawa 40 . plant and machinery. 3. Mr. General Information: Consist of Bio data of promoter. if the response to the above queries is positive in the project report the project is considered feasible. breakeven point. Various queries or aspect scanned under this head are technical viability. 3.economic benefits. alternative technologies available etc. Project Description: Consist of location of industry. 5.regional imbalance etc. Market potential: Consist of demand and supply positions 4. Assessment of working capital: Consist of its sources of supply. The project report contain the information about the market potential of the product and projection of short and long term demand of the proposed product. water and electricity supply etc. Capital cost and source of finance: Consist of components of capital like land and capital. The project report should highlight the financial viability. physical infrastructure. industry profile. financial institutions finace only those unit which are more important in terms of socio. Vinod Gupta in his study on ‘ formulation of a project report’ divides the process of project development into 9 stages: 1. supply of raw material and labour. 4. constitution and organistion covering and product details 2. Project report of one small unit is different from other small unit’s project report.

• Apply to SSIS for procuring machinery on hire purchases basis. Registration: The next step is to get the unit registered with the department of industries on provisional basis. 7. Project implementation: the time table for implementation of the project delay resulting in cost over run should be avoided. Other – Financial Aspects: Consist of judging profitability of the project a projected profit and loss account indicating sale revenue. municipal or other local authorities fpr permission to construct the shed for establishing the unit. cost of production.6. • Apply for corporation . 8. allied cost and profit should be prepared. Economic and social valuable: various socio economic benefits expected from the project should be included in the project report. Delay in project can affected financial availability of the project. Notes By: Guljinder Randhawa 41 . • Apply for power connection. • Apply for telephone connection. • Obtain sales tax. excise registration etc. The provisional registration can be issued to the entrepreneur to: • Apply for shed in industrial estate. • Import license for capital good/ raw material. 9.