MBA IV ED UNIT II Entrepreneurial Characteristics — Attributes and characteristics of successful entrepreneurs — Attitudes - Motivation - Ethical issues ---Small business and corporate entrepreneurship- culture and competence — building entrepreneurial organization — entrepreneurial team - matching human resources needs - skill -- case study. MOTIVATION: ‘The term motivation has been derived from the word “ motive”. Motive may be defined as an inner state of our mind that moves or activates or energises and directs our behaviour towards our goals Motives are expressions of a person’s goals or needs. Motives or needs are ways of behaviour. It may be defined as, “ The process that motivates a person into action for the achievement of goals” “ Motivation refers to the way in which urges, drives, desires, striving, aspirations or needs direct, control or explain the behaviour of human beings.” — Dalton E. Mc Farland MOTIVATION THEORIES: The importance of motivation to human lives can be judged from the number of theories that have been propounded to explain people’s behaviour. Prominent among them which are relevant to entrepreneurship are @ — Maslow’s Need Hierarchy Gi) McClelland’s Acquired Needs Theory. A. _Maslow’s Need Hierarchy Theory: Maslow’s theory is based on human needs, Human needs have been classified into a sequential priority from the lower to the higher. According to him, all human needs can be classified into five need-clusters. @ Physiological Needs Gi) Safety and Security Needs Gi) Social Needs Gv) Esteem and Status Needs (W) —Self-Actualisation Needs 1. Physiological Needs These needs are basic to human life and include food, clothing, shelter, air, water and other necessities of life. They exert tremendous influence on human behaviour. Entrepreneurs also need to meet their physiological needs for survival. He is motivated to work in the enterprise to have economic rewards to meet his basic needs 2. Safety and Security needs After satisfying the physiological needs, the next set of needs required are called the safety and security needs. These needs comprise such needsas security and protection from physical dangers. Meeting these needs requires more money and hence, the entrepreneur is prompted to work more in his/ her enterprise. Like physiological needs, these become inactive once they are satisfied 3. Social Needs: Man is a social animal, These needs belong to his sense of belonging to the society. He wants to be accepted by others and recognized as one among them. The entrepreneur in motivated to interact with fellow entrepreneurs and employees and other people of society. 4, Esteem Needs These needs refer to self-esteem and self-respect. They include si ch needs which inculcate self-confidence achievement and competence 5. Self- Actualisation: The final step under the need hierarchy is self-actualisation. This refers to self-fulfillment. An entrepreneur may become self-actualised by becoming a successful entrepreneur In Maslow’s theory, needs are arranged in the lowest to the highest hierarchy. The second does not dominate unless the first need is reasonably satisfied. The third does not dominate until the first two have been reasonably satisfied. This process goes on till the last need. This is because man is never satisfied. If one need is satisfied, another need arises. Once a need is satisfied, it ceases to be amotivating factor According to David McClelland, a person acquires three types of needs from his existence These three needs are, 1 Need for Affiliation: The need to establish and retain friendly relationship with others Need for Power This is one’s desire to dominate over others by using physical 3 Need for Achievement: This refers to a person's desire to accomplish something with one’s own efforts McClelland also suggests that these three need as may act simultaneously on a person. But in the case of an entrepreneur, the need for achievement is found to be dominating. They have the following characteristics, @ They set moderate, realistic and attainable goals for themselves (i) Prefer situations in which they can find solutions for resolving personal responsibility. Gi) They need concrete feedback on how well they are doing Gv) They have need for achievements () They look for challenging tasks.MOTIVATING FACTORS: R.A Sharma classified motivating factors as follows, 1. Internal Factors These include the following (@ Desire to do something new (®) Educational background © Occupational background or experience 2 External Factors: (@ — Government assistance and support. (®) Availability of labour and raw material (C) Encouragement from big business houses (@ Promising demand for the product. BEVVN Murthy classified the motivating factors under the following heads, (1) Ambitious factors (2) Compelling factors (3) Facilitating factors S.S. Khanka found the following factors to prompt entrepreneurs Factors No. of entrepreneurs Intrinsic to Entrepreneurs: a Enterprising attitude 704) b. Training/ Education in such production 366) c. Previous experience in same or related line 1224) Factors extrinsic to entrepreneurs: a Shortage of demand for product 1020) b. Govt. & Institutional assistance 9(18) ©. Advice of business friends 48) d. Profit eamed by friend in similar concerns 2) €. Contact with others 2) £ _Unsound units available at cheap price 1Q)The above table shows that one’s previous experience gained in the same and/ or related line has been the most motivating factor for new entrepreneurs to plunge into entrepreneurship. The nnd important factor that brought people to start industry is heavy demand for the particular product, Many individuals are also attracted by extrinsic factors also, like Govt. and institutional assistance sed From the above it can be seen that entrepreneurs are motivated to go into entrepreneurship due to the following four factors, 1, Possession of technical knowledge or manufacturing experience in the same or related fields ‘There was heavy demand for the particular product. There was govt. and institutional assistance available They have enterprising attitudes. Awe ENTREPRENEURIAL COMPETENCE) TRAITS: In simple terms, competence is a characteristics that leads to superior performance in a job. It includes knowledge, skills and motives Knowledge: Knowledge means collection and retention of information in one’s mind. It is necessary for performing a task but it is not sufficient to complete it. People having merely Jmowledge of something may not be able to perform skillfully. That means something else other than knowledge is also required to translated it into action and performan Skill: Skill is the ability to do something in such a way that it is evident and visible that something has been done or completed. It is an ability to do something. Both knowledge and skill are required to perform something well Motive: Motive is an urge to achieve one’s goal. It is “Achievement Motivation”. It directs a person to do better and better. In order to perform a job or task effectively, a person or entrepreneur needs to posses a set of knowledge, skills and motives to do it. Major entrepreneurial competence: Prof, David McClelland of Development Institute of India, has said that entrepreneurial competence results in superior performance. And the following qualities lead to superior performance and competence, Initiative: The entrepreneur has to initiative all business enterprises. Looking for opportunities. He looks for opportunities and strikes the iron while it is hhot. And does not allow opportunities to go waste 3. Persistence: The entrepreneur must try repeatedly and never give up. For him, the motto try, try try again, Should be the rule 4. Information Seeker: Effective entrepreneurs keep on seeking information and are happy to leam new things that will help them in their enterprise5. Quality conscious: He has a strong urge to excel. He believes in quality the first time and every time. 6. Committed to work: Sacrifices everything to complete the work. Efficiency seeker: Makes all effort to get the task completed at the minimum cost and proper time. 8. Proper planning: No job or task can be done effectively without proper planning ‘The effective entrepreneur plans things in details before setting into action. 9. Problem solver: An effective entrepreneur is a problem solver. He leaves no stone ‘untumed to find the correct solution to all problems 10. Self confidence: He is a strong believer in his own strengths and abilities. 11, Assertive He is good in asserting his needs for the good on his organization. 12. Persuasive: He is able to persuade others to do what is required. 13, Efficient Monitor: He is capable of monitoring and guiding He can keep things under control 14, Employees’ well wisher: No organization can be successful without a satisfied workforce. The workforce will be satisfied only if the superior has their best interest, in his heart 15. Effective Strategist: Introduces the most useful and progressive strategies to achieve organizational goals Development of Competenc 1. Competence recognition: The first step involved in acquiring competence is to understand whet competence is and what competence is required. 2. Self-Assessment. The second step is to assess whether one posses that not. 3. Competency application: Then the entrepreneur must practice those competencies on a continuous basis in various activities and situations. Practice makes aman perfect, 4, Feedback: Then one needs to make an introspection and assess whether one is doing rectly and if so, to sharpen the ability to do things in order to do them in a better mpeten: ‘Aftitudes are evaluation statements or judgements conceming objects, people or events They can be either favourable or unfavourable They reflects one’s opinion about something Components: 1. Cognition: the opinion or belief segment of an attitude 2. Affective: the emotional or feeling segment of an attitude 3. Behavioural: The intention of behaving in a certain manner Types of Attitudes: Job-related attitudes can be classified in the following manner,Job satisfaction: An individual who has a high level of job satisfaction is said to have a positive attitude towards his job Job involvement: It is the degree to which a person identifies himself with his job. His activity and participation indicates his involvement Organisational commitment: It is the state in which an employee identifies himself with a particular organization and its goal, and wishes to maintain membership in the organization FORMATION OF ATTITUDES Individual attitudes are formed from various sources. The most important attitudes are, 1 Direct experience: Employees form an attitude, positive or negative towards their jobs on the basis of their personal experiences on the job 2. Association: Association with persons or situations also develop job or personal attitudes 3. Family and peer groups: The attitudes of family members or peer groups also form and develop attitudes in a person in similar manner. 4 Cultural and religious groups: Being social animals, human beings belong to cultural groups and religious sects. These groups bear an important influence on the altitude of people 5. Economic and social status: People’s economic and social status influence the formation of their attitudes towards life and its livelihood. 6 Mass media: The presentation of news, situations or advertisements greatly affect and influence the attitudes of people ATTITUDINAL INFLUENCE ON HUMAN BEHAVIOUR: A direct relationship between attitudes and human behaviour is not acceptable to some extent as some specific attitudes always do not lead to any particular action or behaviour. ‘There exists two theories: (@) Cognitive Dissonance: (b) Self Perception Theory Cognitive Theory: This theory, propounded by Leon Festinger in the late 1950s, explains the linkage between attitudes and behaviour. Dissonance means inconsistency. Cognitive dissonance refers to any incompatibility or contradiction that a person might feel or perceive between two or more of his attitudes, or between his attitudes and behaviour. A person might be totally against capital punishment but he might be practicing it as a Headmaster in his school. In such a case he feels ahigh degree of dissonance. ‘The degree of influence a person has over the elements will have an influence on how they wall react to their dissonance. Thus the attitudes that people have do influence their behaviour by themoderation like importance of the attitude, specifty, accessibility and social and economic pressures also play a direct role Self Perception Theory: This theory directs the influence of behaviour on attitudes. Attitudes are used to understand the influence of a behaviour or action or event that has already occurred. ‘When a person is asked to give feedback on his previous job, he tends to review his experiences and reason out the reasons for his actions ‘When people are asked about their attitudes and they do not have strong convictions or feelings, self-perception theory says that they tend to imagine and create possible answers that might seem plausible SOCIAL RESPONSIBILITIES & BUSINESS ETHICS: Business needs on the society for the needed inputs such as men, material, money ,etc. They also depend on society for selling their products. Business depends upon society for existence, sustenance and encouragement. Business being so much dependent upon society, it also has certain responsibilities towards it. ‘A businessman should keep his social obligations in mind before thinking of any action. He has to take actions which protect and improve the welfare of society as a whole along with their own interests, Every action he takes will have an effect on society. So he has to be careful to take into consideration the requirements of the society also According to Koontz and O'Donnell, “ social responsibility is the personal obligation of every one, as he acts in his own interest, to assure that the rights and legitimate interests of all others are not infringed.” Adolf Berle says , “ social responsibility is the businessman's responsiveness to publ consensus, ie, the obligation of the business to meet those demands and aspirations of the society about which there is public consensus” ILE. Bowen defines it as,” the obligation to pursue those policies, to make those decisions or to follow those lines of action which are desirable in terms of objectives and values of our society” Today, the efficient use of resources to make profit is seen as the primary social responsibility of businessmen, Various corporations cary out a wide range of social activities which include programmes for education, public health, employee welfare, housing, urban renewal, environmental protection, resources conservation, day-care for working parents and little children, etc. This is because, 1. Changed public expectation of business — Society gives business its reason to exist and the permission to exist can be withdrawn any time that the society feels that the enterprise is not in its interest. Thus, if business wishes to exist in society, ithas to ensure its needs are protected,Society created better environment for business: The firm or company which is most responsive to the betterment and improvement of the community's quality of life will as aresult, have a better community in which to conduct business. 3. Availability of resources. Business has resources at its disposal. Therefore, it is in abetter position to work for the benefit of upliftment of society. 4. Accountability to the corporate internally: Business has responsibility towards the employees , the government, owners, consumers and other in the society. So businessmen are accountable to the entire society. They must employ, train, promote and provide fair wages to all employees. They must ensure a comfortable living for them. They have to abide by all legal aspects such as paying taxes honestly and ensuring that their employees also pay them. They are responsible towards the owners also, for ensuring regular returns and profit. Towards the customers they are responsible for providing the right quality of goods and services at the right time and cost BUSINESS ETHICS: Eaming of profits cannot be the objectives of a businessman as eating the objectives of living A truly successful business can be built up only if the objectives of service to the community is kept in view. Then profit will come automatically. Therefore business ethics are of great importance to an enterprise. Business ethics refer to the moral principles which are considered right by the society. They are the moral rules and guidelines that should guide the conduct of a business. They lay down the le what is good, and evil, right or wrong and just or norms of behaviour of business and di unjust Application of ethics to business: Every culture should have a business culture so that it can influence its employees to act in the same manner. A company’s culture is a blend of ideas, customers’ traditional practice, values and shared meanings The council of Fair Business Practices has given the following ethics to be followed by business: 2, 1. To charge only fair and reasonable price and to take every possible step to ensure that the prices that are being charged are brought to the notice of the customer. 2. To ensure that the agents or dealers do not charge prices higher than fixed. 3. In times of scarcity, not to withhold or suppress stocks of goods with a view to hoarding and profiteeringNot to produce or trade in spurious goods. Or of standards lower than the specifications Not to adulterated goods Not to publish misleading advertisements To invoice goods exported or imported at the correct prices To maintain accuracy in the measures and weights provided, Not to deal knowing in smuggled goods 10. Providing after-sales service where necessary or possible 11, Honouring the fundamental rights of the consumers 12, Discharging social responsibilities and the responsibility 13, Ensuring that the product warranty is offered in simple, unambiguous and concise language and highlights the rights of the consumers under it The Federation of Indian Chambers of Commerce and Industry has recently has recently issued “ Noms of Business Ethics”. The code says'- 1, Business must maintain the highest standards of behavior for the benefit of industry, employees, customers, shareholders and the society, 2. Goods and services must conform to the commitment promised to customers. Business must be realistic and treated with respect and faimess. 3. Customers must be given the best possible services and treated with respect and faimess. 4, Business must understand and respect the needs, concems and welfare of the community and society. It should use knowledge and experience for upgrading the quality of life. All business endeavours must combine the qualities of private excellence for public good. 5. The best way of promoting high standard of business pra through self-regulation This is mandatory for all business firms to follow. SMALL ENTERPRISES: Small-scale enterprises are found in all societies, along with large scale enterprises. Small scale entrepreneurship has been given an important place in the India planning since the beginning for both economic and ideological r3asons. Today India operates the largest and oldest programmes for the development of small-scale enterprises in any developing country. ‘The definition of small-scale industries varies from industry to industry. However, an overview can be stated as follows: Year Investment Criterion Employment Criterion SSI Unit Ancillary Unit Upto Fixed capitalinvestment | Sameas SSI Employment up to 50 workers1958 power. 1959 1960 1966 1980 1985 1991 1997 Upto Rs. 5 lakhs The value of machine was if using power or Sameas SI Unit Taken as the original price Paid irrespective of new or Old machinery Gross value of fixed asset Up to Rs. Slakhs Rs. 7.7 lakhs Rs. 10 lakhs Rs. 20 lakhs Rs. 35 lakhs Rs. 60 lakhs Rs. 3 crores Rs. lcrore Gross value of fixed assets up to Rs. 10 lakhs Rs. 10 lakhs Rs. 15 lakhs Rs. 25 lakhs Rs. 45 lakhs Rs. 75 lakhs Rs. 50 lakhs Rs. 50 lakhs ‘upto 100 if not using Employment up to 50 workers if using power or up to 100 if not using power. Employment criterion dropped TYPES of SMALL-SCALE INDUSTRIES: Small-scale industries can be classified into five main types as follows, 1.Manufacturing Industries: Industries producing complete articles for dire: ct consumption and also for processing industries. For example, tires are manufactured for direct consumption by users as well as for process parts by the automobile industries 2, Feeder Industries: These are industries that specialize in certain types of products and services like casting, ele o-plating, electrical repairs, mechanical repairs, travel agencies, etc.3. Ancillary to large industries: These are industries that produce spare parts and components and also render sei 50% of its manufactures to one or more industrial units. ce to large scale industries, An ancillary unit is one that sells not less than 4, Mining and Quarrying: These are industries that have lease for mining ores and minerals for certain periods of time @ Gmall-Scale Industried Modem small Cottage Village aallary scale Industries Industries Industnies Industnies 1 2. 3 4. ) [mall Scale Industri [Manufac. Indus] [Feeder Indus| Serving Indus] Ancillary] [Mining Indus| Characteristics: [L. | A small-scale unit is generally a one-man show. The activities are mainly carried out by one of the partners or directors. In practice, the others are simply sleeping partner 2. {The owner himself is also the manager. These units are managed in a personalized way. He takes effective participation in all business matters and decision making. B. |The small-scale unit has a lesser{|gestation period. ff. [The scope of small-scale units is generally localized and requirements usually cater to the regionall|demands.6. Small-scale units use indigenous resources like raw materials|] labour, etc. 6. [These are fairly labour intensive with comparatively smaller capital investment than large scale units (7. Small scale units are decentralized and dispersed to ruralljareas This promotes more balanced regional development. 8. Small-scale units are more susceptible to changes and highly reactive and receptive to socio-economic conditions in the region. OBJECTIVES: ‘The various objectives of developing small-scale industries are; [[. {To generate relatively low investments,. | To RENEE Roan NNUTERE fom the country To encourage the dispersal of industries all over the[ountry. _ To bring backward areas under the SIF] ~_|To promote balanced . [To ensure more [7. |To encourage effective B. |To improve the of all people of the country. Relationship between large-scale \d_ small scale indust The small and large scale industries are not opposed to each other. Both are required in the economy. In fact, one is often complementary or an ancillary to the other. . |Competitive; Small scale industries cannot compete with large scale industries in certain circumstances and in some products, Examples of such industries are bricks, tiles, steel, ete] B. Supplementary: Small industries can fill in the gap between large scale production and standard outputs caused by large scale units, A small toy factory can sustain and flourish side by side a large scale toy industry. The same goes for ice cream industries.B. Complementary: Small industries are also been complementary to their counterpart large industries. Many small scale industries produce parts and small units for the large industries, such spare parts for the automobile industries. ff. |Initiative: Attracted by the large profits eamed by large scale units, small seale units also go in for production of the same items. If they succeed, they grow to become large units themselves. ~ Servicing: Small units many a time install servicing and repairing units for the large units. These agencies often earn high profitable margins|] PROBLEMS OF SMALL SCALE INDUSTRIES: cl [Problem of raw material: A major problem faced by small scale industries is the procurement of raw material. Sometimes they face absolute and at other times, that of poor quality. Since the emergence of many small scale industries, the problem of raw material has become quite acute. The small units that use find even greater hurdles owing to Many suppliers of raw material put forth conditions before selling their raw material to small units, These ¢ for them, The Govt. makes provisions for making raw material available to small scale units. Even so, because they have no separate liaison personnel, they find things difficult. Often they have to purchase raw material from the open market at very high rates. B. Problems of Finance: The problem of finance in small scale industries is mainly due to s as a whole and also due to P They find it difficult to obtain financial assistance from financial institutions. They often have to However, after the nationalization of banks in 1969, the credit situation has improved and institutional eredit to small units has increased. B. [Problem of Marketing: One of the main problems faced by the small scale units is in the field of marketing. These units often do not have any specialized agency for marketing their products. Thus their products fare comparatively unfavourably with the products of large scale units. To help the small units out, the Govt. of India has reserved certain items for small seale sector. The Fair Authority of India and the State Trading Corporation help the small scale industries in obtaining the Government orders andlocating foreign markets. Ancillary units also face many types of problems. 4. Problem of Under-Utilisation of Capacity: According to a study in 1972, the percentage utilization of capacity was only 47 in mechanical engineering small scale industries, 50 in electrical equipment, 58 in automobile industries, 55 in leather industries and only 29 in plastic industries. On an average only about 50 — 40 per cent utilization of[apacity was attained. Small scale industries are weak in finance and have to manage as best they can, Other Problems: Small scale industries face many other problems such as te. These make it difficult for small scale industrialists to promote effective entrepreneurship. Matching Human Resources & Skills: “A happy worker is a more productive worker.” — Adam Smith. This was said many many years ago. It holds good even for today. With the increase in competition, and ever changing environmental conditions, organizations have become very conscious of effective utilization of man power. Information technology has brought about significant changes in our day to day lives. Indians have made great strides in information technology. Man has tumed loss making units into profitable ones. Man has, in fact, made many strides in the field of excellence. Every organization has to select and hire people who can improve its position and work efficiently. The organization has to ensure that the people acquire requiredKnowledge and skills. Employees also have to be motivated to contribute their best for managing the organization successfully. Need/ ortance of man: me 1. It is the men who do the planning, organizing, directing co-ordinating and controlling. 2. The objectives for which the company is established are attained economically and effectively. 3. If men are managed properly, they try to maintain a positive outlook and work for the company with great enthusiasm. 4, An individual’s knowledge, skill, creative abilities, talents, ete., can be extracted and utilized properly. . The value, attitude, culture and beliefs of each individual can be known. . The objectives of the society can be duly considered and served. . Ithelps in the creation and development of human relations. . It leads to job satisfaction. . The productivity, excellence, innovativeness, profitability, etc., can be increased. 10. The Right person for the Right job can be secured. 11.The employees’ leanings, likes and dislikes become known and these attributes can be used to attain the company’s goals. 12. Labour tumover can be reduced drastically. 13. The drawbacks of each and every employee can be analysed. 14 It helps in releasing stress, strain and tension. 15.Since it is the men who make use of all the other resources required for production, proper handling and motivation of men can make great contribution in the achievement of company goals. 16.It eliminates wastes or improper utilization of resourees. 17.Ithelps to co-ordinate individual and company goals. 18.It helps in identifying adequate and equitable wages, incentives, employees benefits and social security and measures for challenging work, prestige, recognition, security, status, ete Caran MOTIVATION: ‘There are two ways by which people can be motivated. 1. Positive motivation: People are said to be motivated positively when they are showed a reward and the way to attain that reward. Such a reward maybe financial or non-financial. Positive motivations create a positive atmosphere in the organization. .. Negative Motivation: By installing fear in the minds of people, one can get the desired work done. Here, the fear of consequences of doing something keeps the workers in the desired direction. It is an unfavourable attitude and hence, should be avoided. Forms of motivations: Monetary: 1. 2. 3. 4. 5. Pay in conformity with market trend. Skill-based reward system. Marit pay. Employee work option. Performance bonus/ incentives. Non-Monetary Motivations: 1. . Token — vacation trips, gift coupons, watches, ete. . Club membership AAU RWHR Awards — trophies, citations, certificates. . Salary break-up in accordance to employees’ choice. . Medical benefits. . Group life insurance. . Retirement benefits.