SEMESTER-3

BUSINESS PLANNING &

ENTREPRENEURSHIP DEVEPLOMENT
 1. FOUNDATION OF
ENTREPRENEURSHIP DEVELOPMENT
FOUNDATION OF ENTRENEURSHIP DEVELOPMENT:-
*Concept and Need of Entrepreneurship
*Concept of Entrepreneur
*Characteristics and Qualities of Entrepreneur
*Function of Entrepreneur (for reference)
*Concept of Entrepreneurship
*Importance and Significance of Growth of
Entrepreneurship
*Evolution of Entrepreneurship (for reference)
THEORIES OF ENTREPRENEURSHIP:-
*Innovation Theory by Joseph Schumpeter
*Theory of High Achievement by David
McClelland
*X-Efficiency Theory by Harvey Leibenstein
*Theory of Profit by Frank knight
*Theory of Social Change by Everett Hagen
EXTERNAL INFLUENCE ON DEVELPOMENT
ENTREPRENEURHIP DEVELOPMENT:-
*Social-culture Influence
*Political Influence
*Economic Influence
*Personal Influence
*Role of Entrepreneurship Culture in ED
 CONCEPT AND NEED OF
ENTREPRENEURSHIP DEVELOPMENT
Entrepreneurship Development (ED) is a process of
developing and enhancing entrepreneurial knowledge
and skill through training and development programmes.
The basic aim of ED is to increase the supply of
entrepreneurs so that new ventures or business units are
created, which in turn would generate more employment
and enhance economic development. ED focuses on the
individual who wants to start and explain a business unit.
Therefore, ED concentrates more on the growth potential
and innovation in business unit.
 NEED OF ENTREPRENEURSHIP:-
The basic purpose of ED is to generate employment and
accelerate the pace of economic and social development.
The need of ED are a follows-

1.Establishing Business Units.

2.Employment.
3.Economic Development.
4.Self-Reliance.
5.Social development.
6.Standard of living.
7.Regional Development.
8.Revenue to the Government.
 CONCEPT OF ENTREPRENEURSHIP
An entrepreneur is a person who develops a new idea
and take the risk of setting up an enterprise to produce a
product/service which not all business person
entrepreneurs.
*DEFINITION OF ENTREPRENEUR:-
Webster’s Dictionary defines the term entrepreneur as “ a
person who organizes and manage a business
undertaking ,assuming, the risk for the sake of profit.”

We define that entrepreneur as a person who assume risk

and operates with innovative ideas to grow and expand
his/her enterprise with the ultimate objective of earning
higher profits.
 CHARACTERISTICS AND QUALITIES OF
ENTREPRENEUR
A Successful entrepreneur needs to have an all round personality; this are following
characteristics:-
1.Innovator.
2.Decision-Making Skills.
3.Open-Mindedness.
4.Locus of Control.
5.Organizers.
6.Personality.
7.Risk Taker.
8.Technical Knowledge.
9.Patience.
10.Desire to achieve goals.
11.Human Relations.
12.Communciation Skill.
13.Leadership.
 FUNCTIONS OF ENTREPRENEUR
The entrepreneur performs many functions which facilitates the
smooth functioning of business entreprise. Following are the some
functions.
1.Planning for business activities.
2.Organizing Resources.
3.Decision making.
4.Motivating employees.
5.Innovations.
6.Risk Bearing.
7.Research & Development.
8.Market Development.
9.Financial Management.
10.Management of Human Resources.
 CONCEPT OF ENTREPRENEURSHIP
Entrepreneurship management is a process of planning, organizing, directing,&
controlling, performed to determine and accomplish objective in business enterprise.
Robert Hisrich states “Entrepreneurship is a process of creating something new and
assuming the risk and rewards”

The above definition bring out the nature and characteristics of entrepreneurship:-
1.Process.
2.Purposeful Activity.
3.Individual or Group Activity.
4. Future Oriented Activity.
5.Innovation & Creativity.
6.Proactiveness.
7.Expolits change into an Opportunity.
8.Risks and Rewards.
9.Organizing abilities.
10.Social Economic Development.
 IMPORTANCE OF GROWTH OF
ENTREPRENEURSHIP
Entrepreneurship plays an important role in the economic and social
development of a nation. The importance/significance of entrepreneurship is
explained a follows:-
1.Economic development.
2.Social development.
3.Regional development.
4.Capital formation.
5.Employment.
6.Foreign Exchange.
7.Reducing in Income Inequalities.
8.Revenue to government.
9.Facilitates Competition.
10.Consumer Welfare.
11.Infrastructure Development
12.Standard of living.
 EVOLUTION OF ENTREPRENEURSHIP
The development of the “entrepreneur” and
“entrepreneurship” have evolved over the years as
follows:-
1.Earliest Period
2.Middle Ages(476-1450 AD)
3.17th Century
4.18th Century
5.19th Century
6.20th Century
7.21st Century
 INNOVATION THEORY OF
ENTREPRENEURSHIP
Joseph Schumpeter’s Innovation theory of entrepreneurship advocates that innovation in business is the major reason
for increase investments and for business cycle fluctuations.

According to Joseph, Innovation involves:-

*Development of new technology.
*Introduction in new product.
*Creation of new form of organization structure.
*Entry in new market.

FIRST CATEGORY OF INNOVATION INVOLVES:-

a.The introduction of a new technology or new method or production
b. The introduction of new machinery.
c. Introduction of new sources of raw material
d.Innovation schemes to motivate personnel of operations department

SECOND CATEGORY OF INNOVATION INVOLVES:-

a. The introduction of new product
b. The introduction of new design of an existing product.
c.Entry in new market
d.Innovation ways of sales promotion
e.Innovative way of distribution.
 THEORY OF HIGH ACHIVEMENT BY
DAVID MCCLELLAND
Need for achievement(N-Ach)refers to an individuals desire for significant accomplishment,mastering of skills,control,or
high standards.The term was first used by Henry Murray and associated with a range of actions.

People high in N-Ach are characterised by a tendency to seeking challenges and a high degree of independence.

SOURCE OF HIGH N-Ach INCLUDE:-

1.Parents who encourage independence in childhood
2.Praise and reward for success
3.Association of achievements with positive feelings
4.Association of achievements with ones own competence and effort, not luck
5.A desire to be effective or challenged
6.Intrapersonal strength
7.Desirablity
8.Feasilbility
9.Goal setting abilities

David McClelland state that there is relationship between interest in profit and the need for achievement: -

*Persons with high need for achievements are less influenced by profit or monetary rewards as compared to person
with lower need for achievement
*For person with N-Ach profit is merely a measure of success and competency and not an ultimate goal.
 CHARACTERISTICS OF
ENTREPRENEURSHIP
The individual with high level of need achievements is a potential entrepreneur. The
specific characteristics of successful entrepreneurs can be summarized as follows.
1.They set moderate realistic and attainable goals for them.
2.They take calculated risks.
3.They prefer situation wherein they can take personal responsibility for solving
problems.
4.They need concrete feedback on how well they are doing feedback enables
measurement of success.The feedback must be reliable ,quantifiable and factual.
5.Achievement is more important than material or finance reward
6.Financial reward is regarded as a measurement of success,no an end in itself.
7.Achieving the goals give the greater personal satisfaction that receiving the praise or
recognition
8.Achievement motivated people constantly seek improvements responsibilities that
naturally satisfy their needs.
10.Entrpreneurs or high achievers prefer congenial economic ,social,political
environment for their growth and development.
 X-EFFICIENCY THEORY
In 1966,Harvey Leibenstein popularized the concept of X-
efficiency in the article “Allocative Efficiency v/s X-
Efficiency”in American Economic review.X-efficiency
describes a company inability to get the maximum output
for inputs due to a lack of competitive pressure.

This theory assumes that if a companys does not face

competition at all,then in such a situation, its workers will
not work hard as they know that working hard does not
make any difference at market place ,and therefore,their
efficiency declines.
 ROLES OF AN ENTREPRENEUR
Leibenstein states two roles of an entrepreneur:-
1.Entrepreneur as an Input Provider,in order to improve
the efficiency of the firm
2.Entrepreneur as a Gap Filler,ie like an arbitrageur who
buy from one market at a lower price and sells in another
market at higher price.

According to Leibenstein,there are two types of

entrepreneurship:-
1.Routine Entrepreneurship
2.Innovative Entrepreneurship
 THEORY OF PROFIT
F.M.Knight in his book “Risk ,Uncertainty and Profit”
regards entrepreneur as a recipient of pure profit.
According to Knight pure profit is the reward for risk
and uncertainty.

Importance Aspects of Theory of Profit:-

1.Risk creates Profit
2.Different degree of risk
3.Profit is uncertain.
 THEORY OF SOCIAL CHANGE BY
EVERETT HAGEN
Everett Hagen develops the theory of social change. According to Hagen,change in
personality (creative personality) of an entrepreneur facilitates economic growth.
Hagen considers the withdrawal of status as the trigger for changes in personality
formation.Hagen states 4 types of events that can produce status withdrawal.
*Displacement of a traditional elite group from its previous by another by use of force.
*Denigration of valued symbols through some attitude changes of the superior group.
*Inconsistency of status symbols with a change distribution of economic power.
*Non-acceptance of expected status on migration to a new society.

WITHDRAWAL OF STATUS AND PERSONALITY TYPES:-

1.Retreatist
2.Ritualist
3.Reformist
4.Innovator
 SOCIO-CULTURE INFULENCES ON
ENTREPRENEURSHIP DEVELOPMENT
The socio-culture environment or influences consists of
culture, traditions, beliefs,values,preception,prefernce,and
behaviour of people in society or community.

THE MAIN COMPONENTS OF SOCIO-CULTURE ARE:-

1.Community Attitude towards Risks
2.Caste System
3.Family Background
4.Education
5.Attitude of the society
6.Role Models
 ECONOMIC INFLUENCES
Economic environment exercises the most direct
and immediate influences on entrepreneurship.The
factors that affect the growth of entrepreneurship
are:-
1.Capital
2.Labour
3.Raw Material
4.Market
5.Infrastructure
6.Economic Condition.
 PERSONAL INFLUENCES
Personal factors greatly influence entrepreneurship .A
successful entrepreneur needs to have entrepreneurial
qualities and characteristics.Some includes:-
1.Innovator
2.Risk Taker
3.Desire to achieve goals
4.Personality
5.Communication skills
6.Internal locus of control
7.Decision making skills
ROLE OF ENTREPRENEURIAL CULTURE
IN ED
An entrepreneurial culture is an environment where someone
is motivated to innovate, create and take risks.Some elements
of entrepreneurial culture that influences entrepreneurial
development are as follows:-
1.Ethical Behaviour
2.Productivity Culture
3.Communciation Culture
4.Recognition of rewards culture
5.Quality Culture
6.Coporate Citizenship
7.Concern for Environment
8.Concern for social development
 POLITICAL INFLUENCES
The political environment consists of government agencies, political parties, and
pressure group that influence and control the activities of individual and
organizations.
Some of the factors that influence the entrepreneurship are as follows:-
*Stable political condition where government policies do not change frequently
encourage business activities, as entrepreneur expect to make profit from new
venture.
*Government support to entrepreneurial development through facilities and
incentives encourage entrepreneurship.
*Lower corporate tax rates,lower indirect taxes, tax holiday for certain years etc.
encourage to set up new units.
*The avaiiability of infrastructure and utilities such as goods
roads,power,communication and bureaucratic delays in obtaining such utilities
encourage enterpreneurship.
*While most business firm accept labour and environmental laws,some countries have
retrograde laws that make compliance very difficult and time consuming.Such legal
hurdles discourage enterpreneurship.