Maharaja Surajmal Institute

(Affiliated to GGSIPU, Delhi)

Course: Bachelor of Commerce {B. Com (H)}

Subject Module

On

Entrepreneurship Development BCOM 303

Semester V (Credit: 4)

Module Contributor(s):

Dr. Sarita S Rana

Assistant Professor,BCOM

July 2021

*The content in this module is for Educational purpose only

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 ENTREPRENEURSHIP DEVELOPMENT

(BCOM 303)

MODULE OBJECTIVES: This module consists of four units related to Entrepreneurship Development.
Every unit is divided into sections and sub sections.The course aims at giving insights into the Management of
Small Business based on 3S Model: Stimulate, Sustain and Support so that a spirit of Entrepreneurship can be
inculcated among the student participants.

UNIT I

In this unit you will be acquainted with different concepts associated Entrepreneur & Entrepreneurial
development, Factors influencing entrepreneurship: Individual factors; Environmental factors; Socio-
cultural factors; Entrepreneurial Support systems; Entrepreneurial motivation. Types of entrepreneurs;
Entrepreneur and Professional manager; and Entrepreneur theories & Women Entrepreneur

UNIT II

This unit will make you enable to acquire the skill of construction and use of Opportunity analysis,
analysis of environment, legal steps to establish venture and venture set up, documentation required
and forms of ownership.

UNIT III

This unit will empower you to understand the need and process of understanding Entrepreneurial
behaviour and Entrepreneurial Development Programmes (EDPs), Need and objectives of EDP; Small
Entrepreneurs: Government Policy for Small Scale Industries (SSIs). Institutional Support Systems for
small entrepreneurs-Role of DIC; SFCs; Commercial Banks; SIDBI; Entrepreneurship Development
Institutes (EDIs); Small Industries Development Corporation (SIDC); SISI; NSIC; NISBUD; State
Financial Corporation SIC etc

UNIT IV

You will be recognize the various new trends in understanding Role of Entrepreneur, GDP- Economy,
Balanced regional development, Employment opportunity, Complimenting and supplementing
economic growth, Export promotion & Import substitution and Foreign exchange earning

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 CONTENTS

Unit Unit Name Page Number

No.

I Introduction-Concept of Entrepreneurship 4-25

II Promotion of Venture 26-61

III Entrepreneurial Behavior & 42-85

EDP

IV Role of Entrepreneur 86-115

Answer key MCQ (PROGRESS CHECK) 116

References and Further Readings 117

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 UNIT I

ENTREPRENEUR AND ENTREPRENEURSHIP

Learning Objective of this unit

After the completion of this unit, the students will be able to:

1. Have the ability to discern distinct entrepreneurial traits

2. Role of the entrepreneur in India and around the globe;
3. Forces that are driving the growth of entrepreneurship
4. Benefits and drawbacks of entrepreneurship; mistakes of entrepreneurship
5. How to avoid them; entrepreneurial failure

EVOLUTION OF THE CONCEPT OF ENTREPRENEUR

The word ‘entrepreneur’ is derived from the French word entreprendre. It means ‘to undertake’.
Thus, entrepreneur is the person who undertakes the risk of new enterprise. Its evolution is as
follows.

EARLY PERIOD: The earliest definition of the entrepreneur as a go-between is Marco Polo. He tried to
establish trade route to the far East. He used to sign a contract with a venture capitalist to sell his
goods. The capitalist was the risk bearer. The merchant adventurer took the role of trading. After
his successful selling of goods and completing his trips, the profits were shared by the capitalist and
the merchant.

MIDDLE AGES: The term entrepreneur was referred to a person who was managing large projects.
He was not taking any risk but was managing the projects using the resources provided. An
example is the cleric who is in charge of great architectural works such as castles, public buildings,
cathedrals etc.

17th CENTURY: An entrepreneur was a person who entered into a contractual arrangementwith the
Govt. to perform a service or to supply some goods. The profit was taken (or loss was borne) by the
entrepreneur.

18th CENTURY: It was Richard Cantillon, French Economist, who applied the term entrepreneur to
business for the first time. He is regarded by some as the founder of the term. He defined an
entrepreneur as a person who buys factor services at certain prices with a view to sell them at
uncertain prices in the future

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19th CENTURY: The entrepreneurs were not distinguished from managers. They were viewed
mostly from the economic perspective. He takes risk, contributes his own initiative and skills. He
plans, organizes and leads his enterprise.

20th CENTURY: During the early 20th century Dewing equated the entrepreneur with business
promoter and viewed the promoter as one who transformed ideas into a profitable business. It was
Joseph Schumpeter who described an entrepreneur as an innovator. According to him an
entrepreneur is an innovator who develops untried technology.

21th CENTURY: Research Scientists live De Bone pointed out that it is not alwaysimportant that
an individual comes up with an entirely new idea to be called an entrepreneur, but if he is adding
incremental value to the current product or service, he can rightly be called an entrepreneur.

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MEANING AND DEFINITION OF ENTREPRENEUR

An entrepreneur is ordinarily called a businessman. He is a person who combines capital

and labour for the purpose of production. He organizes and manages a business unit assuming the
risk for profit. He is the artist of the business world.
In the words of J.B. Say, “An entrepreneur is one who brings together the factors of
production and combines them into a product”. He made a clear distinction between a capitalist and
an entrepreneur. Capitalist is only a financier. Entrepreneur is the coordinator and organizer of a
business enterprise. Joseph A Schumpeter defines an entrepreneur as “ one who innovates, raises
money, assembles inputs and sets the organization going with the ability to identify them and
opportunities, which others are not able to fulfil such economic opportunities”. He further said, “An
entrepreneur is an innovator playing the role of a dynamic businessman adding material growth to
economic development”.

CHARACTERISTICS OF AN ENTREPRENEUR

An entrepreneur is a highly achievement oriented, enthusiastic and energetic individual. He

is a business leader. He has the following characteristic:

1) An entrepreneur brings about change in the society. He is a catalyst of change.

2) Entrepreneur is action-oriented, highly motivated individual who takes risk to achieve goals.
3) Entrepreneur accepts responsibilities with enthusiasm and endurance.
4) Entrepreneur is thinker and doer, planner and worker.
5) Entrepreneur can foresee the future, seize market with a salesman’s persuasiveness, manipulate
funds with financial talent and smell error, frauds and deficiencies with an auditor’s precisions.
6) Entrepreneur undertakes venture not for his personal gain alone but for the benefit of
consumers, government and the society as well.
7) Entrepreneur builds new enterprises. He possesses intense level of determination and a desire
to overcome hurdles and solves the problem and completes the job.
8) Entrepreneur finds the resources required to exploit opportunities.
9) Entrepreneur does extraordinary things as a function of vision, hard work, and passion. He
challenges assumptions and breaks rules.
10) Although many people come up with great business ideas, most of them never act on their
ideas.

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DEFINITION OF ENTREPRENEURSHIP

In the words of Stevenson and others, “Entrepreneurship is the process of creating value by
bringing together a unique package of resources to exploit an opportunity.” According to A.H.
Cole, “Entrepreneurship is the purposeful activities of an individual or a group of associated
individuals undertaken to initiate, maintain or organize a profit oriented business unit for the
production or distribution of economic goods and services”.

All activities undertaken by an entrepreneur to bring a business unit into existence are
collectively known as entrepreneurship. It is the process of changing ideas into commercial
opportunities and creating values. In short, entrepreneurship is the process of creating a business
enterprise.

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 NATURE AND CHARACTERISTICS OF ENTREPRENEURSHIP

Features of entrepreneurship are summarized as follows:

1) It is a function of innovation.
2) It is a function of leadership.
3) It is an organization building function.
4) It is a function of high achievement.
5) It involves creation and operation of an enterprise.
6) It is concerned with unique combinations of resources that make existing methods or
products obsolete.
7) It is concerned with employing, managing, and developing the factors of production.
8) It is a process of creating value for customers by exploiting untapped opportunities.
9) It is a strong and positive orientation towards growth in sales, income, assets, and
employment.

INNOVATION AND ENTREPRENEURSHIP

Innovation is one of the underlying dimensions of entrepreneurship. It is a key function in

the entrepreneurial process. Without innovation, an entrepreneur cannot survive in the modern
competitive business world. Entrepreneurship is a creative and innovative response to the
environment and an ability to recognize, initiate and exploit an economic opportunity. An
entrepreneur is an innovator who introduces who introduces something new in an economy.

As per the Schumpeter’s view, a person becomes an entrepreneur only when he or

she is engaged in innovation .further, innovation is equal to competitive advantage. The
entrepreneurs today realize the need for innovation. Innovation adds value to the product. It is only
through innovation, the organizations can survive the increasing competition in the market place.

RISKS INVOLVED WITH ENTREPRENEURSHIP

Entrepreneurship involves the following types of risks.

1) FINANCIAL RISK: The entrepreneurship has to invest money in the enterprise on the
expectation of getting in return sufficient profits along with the investment. He may get attractive
income or he may get only limited income. Sometimes he may incur losses.
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 2) PERSONAL RISK: Starting a new venture uses much of the entrepreneur’s energy and
time .He or she has to sacrifice the pleasures attached to family and social life.
3) CARRIER RISK: This risk may be caused by a number of reasons such as leaving a
successful career to start a new business or the potential of failure causing damage to professional
reputation

4) PSYCHOLOGICAL RISK: Psychological risk is the mental agonies an entrepreneur

bears while organizing and running a business venturesome entrepreneurs who have suffered
financial catastrophes have been unable to bounce back.

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BARRIERS TO ENTREPRENEURSHIP
Entrepreneurial development is very slow in under developed and developing countries. This is
due to the presence of several factors. Gunnar Myrdal pointed out that Asian societies lack
entrepreneurship not because they lack money or raw material but because of their attitudes. These
barriers to entrepreneurship are classified into three as follows:

A. ENVIRONMENTAL BARRIERS
Following are the important environmental barriers to entrepreneurship:

1) Non-Availability of Raw Material: - Non-availability of raw materials especially during peak

season is one of the obstacles inhibiting entrepreneurship. This leads to competition for raw
material.
2) Lack of Skilled Labour: - This is the most important resource in any organization.
Unfortunately, desired manpower may not be available in an organization. This is either due to the
lack of skilled labour or due to lack of committed or loyal employees in the organization.
3) Lack of Good Machinery: - Good machines are required for the production of goods, because
of rapid technological developments, machines become obsolete very soon. Small entrepreneurs
find it difficult to get large amount of cash for installing modern machinery.
4) Lack of Infrastructure: - Lack of infrastructure facilities is a major barrier to the growth of
entrepreneurship particularly in under developed and developing economies. The infrastructural
facilities include land and building, adequate and cheap power, proper transportation, water and
drainage facilities etc.
5) Lack of Fund: - There are various methods by which an entrepreneur arranges for funds, e.g.,
own savings, borrowings from friends and relatives, banks and other financial institutions. Many
people do not enter into entrepreneurial activities because of lack of funds.
6) Other Environmental Barriers: - Lack of business education, Lack of motivation from
government, corruption in administration, high cost of production etc. are the other environmental
barriers that inhibit the growth of entrepreneurship in underdeveloped countries.

B PERSONAL BARRIERS
Personal barrier are those barriers that are caused by emotional blocks of an individual. Some
of the personal barriers may be outlined as below:

Unwillingness to Invest Money: - Even though people have money, still they do not come in
entrepreneurship. They are not willing to take the risk of investing money in business.

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Lack of Confidence: - Many people thing that they lack what it takes to become an entrepreneur.
They feel that they could not master all the skills. Thus most people are reluctant to become
entrepreneurs.

Lack of Motivation: - When an individual starts a new venture, he is filled with

enthusiasm and drive to achieve success. But when he faces the challenges of real business or bears
loss, or his ideas don’t work, he loses interest or motivation.

Lack of Patience: - The desire to achieve success in the first attempt or to become rich very soon
is the prime motivating factor of modern youth. When such dreams do not come true , they lose
interest. This gradually drives to fail in business.

Inability to Dream: - Entrepreneurs, who are short on vision or become satisfied with what they
achieve, sometimes lose interest in further expansion/growth of business.

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C SOCIAL BARRIERS

The social attitude inhibits many people even from thinking of starting a business. The
important social barriers are as follows.

1) Low Status: - The society things that entrepreneurs are the people who exploit the
society. Thus the attitude of the society towards entrepreneurs is not positive.
2) Custom and Tradition of People: - Most people want a real job. Even parents who are
entrepreneurs wouldn’t like their children to be entrepreneurs. Thus lack of support from society
and family hinder the growth of entrepreneurs.

FACTORS AFFECTING ENTREPRENEURIAL GROWTH

There are large number of varied factors which contribute to the growth of entrepreneurship. These
factors can be broadly classified into five.

 PSYCHOLOGICAL FACTORS: - Inspiration for achievement prepares an entrepreneur to

set higher goals and achieve them. The important psychological factors influencing
entrepreneurial growth may be outlined as below:

(A) Need for Achievement: - Need for achievement means the drive to achieve a goal. People
having need for achievement will be so much self – confident that they do not believe in mere
luck. If an individual has need for achievement, he will become a successful entrepreneur.

(B) Personal Motives: - These have been found to be one of the crucial factors responsible for
entrepreneurship amongst individuals. Bill Gates dreamt that one day he would become the richest
person. His dream became a reality later.

(C) Recognition: - Many people become successful entrepreneurs just for getting recognition
from others.

(D) Need of Authority: - ‘Need of authority’ will inspire men to work. When they become
entrepreneurs, they can exercise authority over managers, employees etc.

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 CULTURAL FACTORS: - Culture consists of (1) Tangible man – made objects like furniture,
buildings etc.., (2). Intangible concepts like Laws, morals, knowledge etc.., (3) Values and
behaviour acceptable within the society. The important cultural factors influencing
entrepreneurial growth are briefly explained as follows:

(A) Culture: - Culture is closely related with accepted values and human behaviour. For e.g.
some societies have customs of polygamy and some have not.

(B) Religious Belief: - According to Max Weber, entrepreneurism is a function of religious belief
and the impact of religion shapes the entrepreneurial culture. He emphasized that the
entrepreneurial energies are exogenous supplied by means of religious belief.

(C) Minority Groups: - Hoselitz explained that the supply of entrepreneurship is governed by
cultural factors, and culturally minority groups are the spark plugs of entrepreneurial and
economic development. Minority groups like the Jews and Greeks in Medieval Europe, the
Lebanese in West Africa, the Indians in East Africa has important roles in promoting economic
development

(D) Spirit of Capitalism: - It guides the entrepreneur to engage in activities that can bring more
and more profits. The profit motive character coupled with the attitude towards acquisition of
money urges the individual to start new venture.

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 SOCIAL FACTORS: - What mould a man into an entrepreneur is the sociological and
environmental factors during childhood, and at the school, personal experience in adult life at
the college and job environments, the mobility, occupation and support from parents. The
social factors include:
(A) Legitimacy of Entrepreneurship: - System of norms and values within a socio – cultural
setting is responsible for the emergence of entrepreneurship. The degree of approval or
disapproval granted to entrepreneurial behaviour will influence its emergence and its
characteristics if it does emerge.
(B) Social Marginality: - Individuals or groups on the perimeter of a given social system or
between two social systems provide the personnel to assume the entrepreneurial roles. Social
marginality is likely to promote entrepreneurship are largely determined by two factors, namely
the legitimacy of entrepreneurship and social mobility.
(C) Family, Role Models and Association with Similar Type of Individuals: - If an individual
has a supportive family, he or she is more likely to become an entrepreneur. Similarly, if an
individual has role models who have been successful in entrepreneurship, certainly, he may be
motivated to start ventures. If a person is in association with entrepreneurs, this may add to his or
her desire of setting up a new venture. Reliance, Tata, Birla etc. are the industries depend upon
family based inheritance. Roberts (1991) has developed the idea of the ‘entrepreneurial heritage ‘
to describe the importance of the family background for the entrepreneur. This heritage includes
factors such as the father’s occupation, the family work ethic and religion, family size and the first
born son, growing up experience and so on.
Caste System: - Certain religions and caste encourage the growth of entrepreneurial talent. Some
religious communities like the parsees, marwaris and sindhees seem to have an affinity for
entrepreneurial activity. The caste system in Hindu society has promoted to the growth of business
and professional skills.
Occupation :- Those born in rich families with silver spoons in their mouth have not only an
advantage of having financial resources for carrying out business but also learn the business skill
by continuous interaction and contacts with parents, customers, employees and visitors in family
shops, offices and homes.
Education and Technical Qualifications: - Education is the best means of developing man’s
resourcefulness which encompasses different dimensions of entrepreneurship. It may be expected
that the high level of education may enable the entrepreneurs to exercise their entrepreneurial
talent more efficiently and effectively.
Social Status: - Every human being aspires for a high social status and once he achieves a
reasonable level, his aspirations and desires for its start getting multiplied. People work hard to
maintain their status as it also contributes to their entrepreneurial growth.

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Social Responsibility: - It is the obligation to the society in which the business enterprise
operates. An entrepreneur generates employment for others besides helping himself.

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 ECONOMIC FACTORS: - Economic factors also influence the growth of entrepreneurship.
The important economic factors are:
(A) Infrastructural Facilities: - Entrepreneurship development requires certain basic
infrastructure like power, transportation, communication, technical information etc. These provide
external economies and improve the efficiency of investments by entrepreneurs. These
infrastructural facilities are scarce in less developed countries. The entrepreneurs themselves have
to procure these facilities at their own cost. They have to obtain these facilities at higher costs.
This will greatly discourage the entrepreneurship development. In advanced countries, those who
are desirous of starting an enterprise will find no difficulty in procuring the infrastructural
facilities at reasonable costs.
(B) Financial Resources: - Finance is the life blood of business activity. Capital is required to
obtain materials, machinery, equipment, etc. and to undertake innovation. Capital is regarded as
lubricant to the process of production. The lack of financial resources discourages the youth and
potential entrepreneurs to start new ventures. Hence, the need for fixed and working capital should
be adequately met if new entrepreneurs are to come forward and grow.
(C) Availability of Material and Know – How: - Entrepreneurship is encouraged only if there is
an adequate supply of materials and know-how. Easy availability of materials attracts more
individuals towards entrepreneurship. Technical know-how is essential for innovation. With
technical knowledge, men discover more and sophisticated techniques of production.
(D) Labour Conditions: - The quality rather than quantity of labour is another factor which
influences the emergence and growth of entrepreneurship. The availability of cheep labour
positively affects entrepreneurship. Labour problem can be solved not by capital intensive
technologies but by increasing their mobility, by offering them facilities, incentives and
concessions in every remote corner of the country.

(E) Market: - The size and composition of market influence entrepreneurship in their own ways.
Practically, monopoly in a particular product in a market becomes more influential for
entrepreneurship than a competitive market.
(F) Support System: - Ability, initiative and support systems include financial and commercial
institutions, research, training, consultancy services, ancillary industry etc.
(G) Government Policy: - The socio- political and economic policies of the government inhibit or
foster entrepreneurial growth. Land and factory sheds at concessional rates, adequate sources of
power, supply of materials and other physical facilities should be provided by the government to
facilitate the setting up of new enterprises. The government has a dominant role to play in the
industrial development of backward regions with a view to attain a balanced regional
development.

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 PERSONALITY FACTORS: - The supply of entrepreneurship in a society is largely
influenced by the presence of individuals with the initiativeness, foresightedness and organizing
and managerial competence. The following personality factors contribute to the entrepreneurial
development:
(A). Personality: - The entrepreneurial personality comprises of the person, his skills, styles and
motives. Impressive personality and individual skill help to develop entrepreneurship. These
qualities are required for entrepreneurs because they have to work with officers, managers,
engineers, labourers, customers, investors, govt. officers, ministers etc.
(B). Independence:-Another personality factors which influences entrepreneurship is
independence. An entrepreneur works out plans on his own, searches and explores resources and
experiences and uses inner urge to make the enterprise a success instead of waiting for
suggestions or directions from others.
(C). Compulsion: - Certain compelling reasons also force the people to become entrepreneurs.
These include: (a) unemployment or dissatisfaction with existing job or occupation, (b) to use
technical or professional knowledge and skills, (c) to put the idle funds to use. A large number of
technically qualified people after gaining initial experience and confidence and not being satisfied
by their growth in the profession have a compulsive reason to try entrepreneurship.

QUALITIES OF A SUCCESSFUL ENTREPRENEUR

In order to organize and run it successfully, the entrepreneur must possess some qualities and traits.
They are as following:
1) Willingness to Make Sacrifices and Assume Risks: - A new venture is full of
difficulties and unanticipated problems. In such an inhospitable environment entrepreneur has to be
prepared to sacrifice his time, energy and resources in order to carry out the venture and make it
success.
2) Hard Work: - Willingness to work hard distinguishes a successful entrepreneur from an
unsuccessful one. For example, Assim Premji (chairman of Wipro) works in his office fourteen
hours every day. He is a successful entrepreneur. He is one of the richest persons in India.
3) Optimism: - Successful entrepreneurs are not worried by the present problems that they
face. They are optimistic about the future. This enhances their confidence and drives them towards
success. Some of the world’s greatest entrepreneurs failed before they finally succeeded.

4) Self Confidence: - This is the greatest asset of a successful entrepreneur. He must have
the confidence to make choices alone and bounce back when he fails.
5) Leadership: - Successful entrepreneur generally has strong leadership qualities. He
should be a good judge of human nature and a good leader. He must be able to select, train and
develop persons who can properly manage and control the labour force. McClelland identified two

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main characteristics in an entrepreneur- (1) Doing things in a new and better manner. (2) Decision
making under uncertainty.

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NEED FOR ACHIEVEMENT (ACHIEVEMENT MOTIVATION)

It is the psychological need to achieve. It provides drive to the entrepreneur to set up a new
venture, to achieve targets, to sense problems and opportunity, to take much risk so as to run the
business successfully. It is nothing but a person’s desire either for excellence or to succeed in
competitive situation. Thus achievement motivation means a drive to overcome challenges in
reaching higher goals. It is a strong desire to achieve a higher goal and make dreams come true. In
short it is the strong desire to win.

TYPES OF ENTREPRENEURS
Entrepreneurs may be classified in a number of ways.
A. ON THE BASIS OF TYPE OF BUSINESS.
Entrepreneurs are classified into different types. They are
1) Business Entrepreneur: He is an individual who discovers an idea to start a business
and then builds a business to give birth to his idea.
2).Trading Entrepreneur: He is an entrepreneur who undertakes trading activity i.e;
buying and selling manufactured goods.
3) Industrial Entrepreneur: He is an entrepreneur who undertakes manufacturing
activities.
4) Corporate Entrepreneur: He is a person who demonstrates his innovative skill in
organizing and managing a corporate undertaking.
5) Agricultural Entrepreneur: They are entrepreneurs who undertake agricultural
activities such as raising and marketing of crops, fertilizers and other imputs of agriculture. They
are called agripreneurs.

B. ON THE BASIS OF USE OF TECHNOLOGY: Entrepreneurs are of the following types.

1) Technical Entrepreneur: They are extremely task oriented. They are of craftsman type.
They develop new and improved quality goods because of their craftmanship. They concentrate
more on production than on marketing.

2) Non-Technical Entrepreneur: These entrepreneurs are not concerned with the technical
aspects of the product. They develop marketing techniques and distribution strategies to promote
their business. Thus they concentrate more on marketing aspects.
3) Professional Entrepreneur: He is an entrepreneur who starts a business unit but does
not carry on the business for long period.

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C. ON THE BASIS OF MOTIVATION:
Entrepreneurs are of the following types:
1) Pure Entrepreneur: They believe in their own performance while undertaking business
activities. They undertake business ventures for their personal satisfaction, status and ego. They are
guided by the motive of profit. For example, Dhirubhai Ambani of Reliance Group.
2) Induced Entrepreneur: He is induced to take up an entrepreneurial activity with a view to avail
some benefits from the government. These benefits are in the form of assistance, incentives,
subsidies, concessions and infrastructures.
3) Motivated Entrepreneur: These entrepreneurs are motivated by the desire to make use of their
technical and professional expertise and skills. They are motivated by the desire for self-fulfillment.
4) Spontaneous Entrepreneur: They are motivated by their desire for self-employment and to
achieve or prove their excellence in job performance. They are natural entrepreneurs.

D. ON THE BASIS OF STAGES OF DEVELOPMENT: They may be classified into;

1) First Generation Entrepreneur: He is one who starts an industrial unit by means of his own
innovative ideas and skills. He is essentially an innovator. He is also called new entrepreneur.
2) Modern Entrepreneur: He is an entrepreneur who undertakes those ventures which suit the
modern marketing needs.
3) Classical Entrepreneur: He is one who develops a self supporting venture for the satisfaction of
customers’ needs. He is a stereo type or traditional entrepreneur.

E. CLASSIFICATION ON THE BASIS OF ENTREPRENEURIAL ACTIVITY: They are

classified as follows:
1) Novice: A novice is someone who has started his/her first entrepreneurial venture.
2) Serial Entrepreneur: A serial entrepreneur is someone who is devoted to one venture at
a time but ultimately starts many. He repeatedly starts businesses and grows them to a sustainable
size and then sells them off.
3) Portfolio Entrepreneurs: A portfolio entrepreneur starts and runs a number of
businesses at the same time. It may be a strategy of spreading risk or it may be that the entrepreneur
is simultaneously excited by a variety of opportunities.

F. CLASSIFICATION BY CLARENCE DANHOF: Clarence Danhof, On the basis of American

agriculture, classified entrepreneurs in the following categories:
1) Innovative Entrepreneurs: They are generally aggressive on experimentation and
cleverly put attractive possibilities into practice. An innovative entrepreneur, introduces new goods,
inaugurates new methods of production, discovers new markets and reorganizes the enterprise.

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Innovative entrepreneurs bring about a transformation in lifestyle and are always interested in
introducing innovations.
2) Adoptive Or Imitative Entrepreneurs: Imitative entrepreneurs do not innovate the
changes themselves, they only imitate techniques and technology innovated by others. They copy
and learn from the innovating entrepreneurs. While innovating entrepreneurs are creative, imitative
entrepreneurs are adoptive.
3) Fabian Entrepreneurs: These entrepreneurs are traditionally bounded. They would be
cautious. They neither introduce new changes nor adopt new methods innovated by others
entrepreneurs. They are shy and lazy. They try to follow the footsteps of their predecessors. They
follow old customs, traditions, sentiments etc. They take up new projects only when it is necessary
to do so.
4) Drone Entrepreneurs: Drone entrepreneurs are those who refuse to adopt and use
opportunities to make changes in production. They would not change the method of production
already introduced. They follow the traditional method of production. They may even suffer losses
but they are not ready to make changes in their existing production methods.
There is another classification of entrepreneurs. According to this, entrepreneurs may be
broadly classified into commercial entrepreneurs and social entrepreneurs.

Commercial Entrepreneurs: They are those entrepreneurs who start business enterprises for their
personal gain. They undertake business ventures for the purpose of generating sales and profits.
Most of the entrepreneurs belong to this category.

Social Entrepreneurs: They are those who identify, evaluate and exploit opportunities that create
social values and not personal wealth. Social values refer to the basic long standing needs of
society. They focus on the disadvantaged sections of the society. They play the role of change
agents in the society. In short, social entrepreneurs are those who start ventures not for making
profits but for providing social welfare.

COPRENEURS
Copreneurs are entrepreneurial couples who work together as co-owners of their business.
They are creating a division of labour that is based on expertise as opposed to gender studies show
that companies co-owned by spouses represent one of the fastest growing business sectors. Marcia
Sherrill with her husband William Kleinberg (USA) runs Kleinberg Sherrills, a leather goods and
accessories business. She says, “There is nothing more exciting than nurturing a business and
watching it grow with someone you love.”

INTRAPRENEURS
The term intrapreneur was coined in USA in the late seventies. Many senior executives of
big companies in America left their jobs and started small business of their own. They left the
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organisation because they did not get any opportunity to apply their own ideas and innovative
ability. These entrepreneurs become successful in their own ventures. Some of them caused a threat
to the corporations they left. This type if entrepreneurs have come to be called Intrapreneurs. They
believe strongly in their own talents. They have desire to create something of their own. They want
responsibility and have a strong drive for individual expression and more freedom in their present
organisational structure. When this freedom is not forthcoming, they become less productive or
even leave the organisation to achieve self actualisation elsewhere.

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ULTRAPRENEURS
Now-a-days, new products and services are conceived, create, tested, produced and
marketed very quickly and with great speed. Therefore, today’s entrepreneur needs to have a
different mindset about establishing and operating a business. This mindset is called
ULTRAPRENEURING. An entrepreneur with this mind set is known as Ultrapreneur. The
concept of Ultrapreneuring is to identify a business opportunity, determine its viability and form a
company. It requires assembling a super competent management team, who then develop, produce
and markets the product or service in the shortest optimum time period. They create business and
then sell out, merge or combine.

FUNCTIONS OF AN ENTREPRENEUR

Entrepreneur is a lead player in the drama of business. According to Kilbt, an entrepreneur has to
perform four groups of functions:

EXCHANGE RELATIONSHIP:
1) Perceiving market opportunities
2) Gaining command over scare resources.
3) Purchasing inputs.
4) Marketing of the products and responding to competition.

POLITICAL ADMINISTRATION:
1) Dealing with public bureaucracy (concession, licences and taxes)
2) Managing the human relation within the firm.
3) Managing customer and supplier relations.

MANAGEMENT CONTROL:
1) Managing finance.
2) Managing production.

TECHNOLOGY:
1) Acquiring and overseeing assembly of the factory.
2) Industrial engineering.
3) Upgrading process and product quality.
4) Introducing new products.

According to Arther H. Cole, an entrepreneur performs the following functions:

1) Determining the objectives of the enterprise and revising the objectives in the light of
changed circumstances.

23
2) Developing an organization including efficient relations with subordinates and all
employees.
3) Securing adequate finance
4) Developing a market for the products and devising new products to meet customers
demand.
5) Maintaining good relations with public authorities and with society.

24
ENTREPRENNEURIAL COMPETENCIES
Competency is a characteristic of a person, which results in effective and/or superior performance
in a job. It is a combination of knowledge, skills and appropriate motives or traits that an individual
must possess to perform a given task.

MEANING OF ENTREPRENEURIAL COMPETENCIES

It is defined as characteristics such as generic and special knowledge, motives, traits, self- image,
social roles and skills which result in birth of a venture, its survival and/ or growth. In short, the
competencies required by an entrepreneur for starting a business venture and carrying it on
successfully are known as entrepreneurial competencies.

TYPES OF ENTREPRENEURIAL COMPETENCIES

It may be classified into two types:

A) PERSONAL ENTREPRENEURIAL COMPETENCIES: These are required to perform the

tasks effectively and efficiently. This includes the following:

 Initiative: It is an inner urge in an individual to do or initiate something.

 Ability to See and Act on Opportunities: Entrepreneurs look for opportunities and take
action on such opportunities.
 Persistence: It means the capacity or skill to take repeated and different actions to
overcome obstacles.
 Information Seeking: A successful entrepreneur always keeps his eyes and ear open. He
should accept new ideas which can help him in realizing his goals. He is ready to consult
experts for getting their expert advice.
 Concern for High Quality of Work: Entrepreneurial persons act to do things that meet or
beat existing standards of excellence.
 Commitment to Work: Successful entrepreneurs are prepared to make all sacrifices for
completing the commitments they have made.
 Commitment to Efficiency: Entrepreneurial persons have to look and find ways for or find
ways to do things faster or with fewer resources or at a lower cost. They should try new
methods aimed at making work easier, simpler, better and economical.
 Systematic Planning: Entrepreneurial persons should be able to develop and use the logical
step by step plans to reach goals.
 Problem Solving: Entrepreneurial persons are supposed to possess the skill of identifying
new and potentially unique ideas to reach goals. They should generate new ideas or
innovative solutions to solve problems.

25
 Persuasion: Entrepreneurs should have the ability to successfully persue others to perform
the activities effectively and efficiently.
 Use of Influence Strategies: Entrepreneurs should have the competence of using a variety
of strategies to influence others. Such entrepreneurs can develop business contacts and use
influential people to accomplish his/her own objectives.

26
B) VENTURE INITIATION AND SUCCESS COMPETENCIES:
An entrepreneur must also posses the competencies required for launching the enterprise and for its
survival and growth. These competencies may be further divided into two categories of
competencies:

1. ENTERPRISE LAUNCHES COMPETENCIES: These include the following:

 Competency to understand the nature of business.
 Competency to comply with Government regulations.
 Competency to deal with the business.
 Competency to finance the business.
 Competency to locate the business.
 Competency to plan the marketing strategy.
 Competency to choose the type of ownership.
 Competency to obtain technical assistance.
 Competency to develop a business plan.
 Competency to determine the potential as an entrepreneur.

2. ENTERPRISE MANAGEMENT COMPETENCIES: These include the following:

 Competency to protect the business.
 Competency to manage customer credit and collection.
 Competency to manage the finances.
 Competency to manage the business records.
 Competency to manage sales efforts.
 Competency to promote the products and services of the business.
 Competency to manage human resources.
 Competency to manage the business.

WOMEN ENTREPRENEURS
Women constitute about 50% of the world population. In traditional societies, they are
confined to performing household activities. Hence women are generally called home makers. But
today, in modern society, they have moved out of the house and are taking part in all areas of life.
Today, the entrepreneurial world is open to the womenfolk. Thailand tops the list with 18.5% of
women as entrepreneurs followed by India with 14.1% women entrepreneurs. Japan has the lowest
rate of women entrepreneurs with just 0.6% women as entrepreneurs.

27
THE CONCEPT OF WOMEN ENTREPRENUERSHIP

According to the general concept, women entrepreneur may be defined as a women or a

group of women who initiate, organize and operate a business enterprise. The Government of India
has defined a women entrepreneurship as “an enterprise owned and controlled by a women having
a minimum financial interest of 51% of the capital and giving at least 51% of the employment
generated in the enterprise to women”. Kerala Government defined women industrial units as units
owned/ organized by women and engages in small scale and cottage industries with not less than
80% of the total workers as women. With effect from 6th Feb. 1992, the definition of ‘Women
Entrepreneurs’ Enterprises is as follows: “A small scale industrial units/industrially related services
or business enterprise managed by one or more women entrepreneurs in proprietary concerns in
which she/they will individually or jointly have share capital of not less than 51% as partners/
shareholders / directors of private limited company, members of co-operative society”.

REASONS FOR THE SLOW GROWTH OF WOMEN ENTREPRENEURSHIP IN KERALA

In spite of the initiatives taken by the government, the growth of women entrepreneurship is
very slow in the state. The reasons are outlined as below:

Unfavourable family background.

Lack of business education.
Dual role of women.
Lack of aptitudes and training.
Absence of individualistic spirit.
Lack of freedom to choose a job according to ability, influence of sex, custom etc.
Inadequate infrastructure facilities.
Shortage of capital and technical knowhow.
Lack of adequate transport and communication facilities.
Shortage of power.
Lack of security.
Absence of ideal market conditions.
Corruption in administration.
PROBLEMS OF WOMEN ENTREPRENEURS
The basic problem of a woman entrepreneur is that she is a woman. Women entrepreneurs
face two sets of problems specific to women entrepreneurs. These are summarized as follows.
1) Shortage of Finance: Women and small entrepreneurs always suffer from inadequate
fixed and working capital. Owing to lack of confidence in women’s ability, male members in the
family do not like to risk their capital in ventures run by women. Banks have also taken negative
attitude while lending to women entrepreneurs. Thus women entrepreneurs rely often on personal
saving and loans from family and friends.
28
 2) Shortage of Raw Material: Women entrepreneurs find it difficult to procure material
and other necessary inputs. The prices of many raw materials are quite high.

3) Inadequate Marketing Facilities: Most of the women entrepreneurs depend on

intermediaries for marketing their products. It is very difficult for the women entrepreneurs to
explore the market and to make their product popular. For women, market is a ‘chakravyuh’.

4) Keen Competition: Women entrepreneurs face tough competition from male

entrepreneurs and also from organized industries. They cannot afford to spend large sums of
advertisement.

5) High Cost of Production: High prices of material, low productivity. Under utilisation of
capacity etc. account for high cost of production. The government assistance and subsidies would
not be sufficient for the survival.

6) Family Responsibilities: Management of family may be more complicated than the

management of the business. Hence she cannot put her full involvement in the business
.Occupational backgrounds of the family and education level of husband has a direct impact on the
development of women entrepreneurship.

7) Low Mobility: One of the biggest handicaps for women entrepreneur is her inability to
travel from one place to another for business purposes. A single women asking for room is looked
upon with suspicion. Sometimes licensing authorities, labour officials and sales tax officials may
harass them.

8) Lack of Education: About 60% of women are still illiterate in India. There exists a
belief that investing in woman’s education is a liability, not an asset. Lack of knowledge and
experience creates further problems in the setting up and operation of business.

9) Low Capacity to Bear Risks: Women lead a protected life dominated by the family
members. She is not economically independent. She may not have confidence to bear the risk
alone. If she cannot bear risks, she can never be an entrepreneur.

10) Social Attitudes: Women do not get equal treatment in a male dominated society.
Wherever she goes, she faces discrimination. The male ego stands in the way of success of women
entrepreneurs. Thus, the rigid social attitudes prevent a woman from becoming a successful
entrepreneur.

11) Low Need for Achievement: Generally, a woman will not have strong need for
achievement. Every women suffers from the painful feeling that she is forced to depend on others
in her life. Her pre-conceived notions about her role in life inhibit achievement and independence.
12) Lack of Training: A women entrepreneur from middle class starts her first
29
entrepreneurial venture in her late thirties or early forties due to her commitments towards children.
Her biggest problem is the lack of sufficient business training.

13) Lack of Information: Women entrepreneurs sometimes are not aware of technological
developments and other information on subsidies and concessions available to them. They may not
know how to get loans, industrial estates, raw materials etc.

30
REMEDIES TO SOLVE THE PROBLEMS OF WOMEN ENTREPRENEURS

The following measures may be taken to solve the problems faced by women entrepreneurs
in India:

1) In banks and public financial institutions, special cells may be opened for providing easy
finance to women entrepreneurs. Finance may be provided at concessional rates of interest.
2) Women entrepreneurs’ should be encouraged and assisted to set up co-operatives with a
view to eliminate middlemen.
3) Scarce and imported raw materials may be made available to women entrepreneurs on
priority basis.
4) Steps may be taken to make family members aware of the potential of girls and their due
role in society.
5) Honest and sincere attempts should be undertaken by the government and social
organizations to increase literacy among females.
6) In rural areas self employment opportunities should be developed for helping women.

7) Marketing facilities for the purpose of buying and selling of both raw and finished goods
should be provided in easy reach.
8) Facilities for training and development must be made available to women entrepreneurs.
Family members do not like women to go to distant place for training. Therefore mobile training
centres should be arranged. Additional facilities like stipend, good hygienic chreches, transport
facilities etc., should be offered to attract more women to training centres.

31
MEASURES TAKEN FOR THE DEVELOPMENT OF WOMEN
Women empowerment should be one of the primary goals of a society. Women should be given
equality, right of decision-making and entitlements in terms of dignity. They should attain
economic independence. The most important step to achieve women empowerment is to create
awareness among women themselves. Development of women can be achieved through health,
education and economic independence. Realizing the importance of women entrepreneurs, Govt. of
India has taken a number of measures to assist them. Some of the important measures are outlined
as follows:
1) TRYSEM: Training of Rural Youth For Self Employment was launched on 15th August
1979 which is still continuing. The objective of TRYSEM is to provide technical skills to rural
youth between 18 and 35 years of age from families below the poverty line to enable them to take
up self employment in agriculture and allied activities, industries, services and business activities.
This is a sub scheme of IRDP. Training given through ITIs, Polytechnics, Krishi Vigyan Kendra,
Nehru Yuva Kendras etc has helped many rural women set up their own micro entreprises with
IRDP assistance.

2) BANKS: Banks particularly commercial banks have formulated several schemes to

benefit women entrepreneurs. These includes Rural Entrepreneurship Development Programmes
and other Training programmes, promotion of rural non-farm enterprise, women ventures etc.
NABARD: NABARD as an apex institution guides and assists commercial banks in paying special
attention to women beneficiaries while financing

32
PROGRESS CHECK

Question No: 1

Which of the following shows the process of creating something new?

a) Business model

b) Modeling

c) Creative flexibility

d) Innovation

Question No: 2

Which one of the following gives suggestions for new product and also help to market new

products?

a) Existing products and services

b) Federal government

c) Distribution Channels

d) Consumers

Question No: 3

Which of the following is used by entrepreneurs to acquire experience in an international

market before making a major commitment?

a) Merger

b) Minority Interest

c) Joint venture

d) Majority interest

Question No:4

GATT is established in 1947, under:

a) German leadership

b) U.S. leadership

c) French leadership
33
d) U.K. leadership

Question No: 5

The entrepreneur was distinguished from capital provider in:

a) Middle ages

b) 17th century

c) 18th century

d) 19th and 20th century

Question No: 6

A person who managed large project was termed as the entrepreneur in the .

a) Earliest period

b) Middle ages

c) 17th century

d) 19th and 20th century

Question No: 7

What is the process by which individuals pursue opportunities without regard to resources

they currently control?

a) Startup management

b) Entrepreneurship

c) Financial analysis

d) Feasibility planning

Question No: 8

Having less than 50 percent of equity share in an international venture is called:

a) Joint Venture

b) Majority interest

c) Minority interest

d) Exporting
34
Question No: 9

Having more than 50% ownership position that provides the entrepreneur with managerial

control is called:

a) Joint venture

b) Majority interest

c) Horizontal merger

c) Diversified activity merger

QUESTION BANK

1. “Entrepreneurs are made or born.” Give your views.

2. Explain the role of culture in development of entrepreneurship.

3. Explain various sources of finance for entrepreneurs in India?

4. Explain the concept, meaning and definition of entrepreneur and entrepreneurship.

5. Explain the Concept of intrapreneur.

6. Explain the Characteristics and qualities of entrepreneurs.

7. Write a note on Women entrepreneurs.

8. Explain the factors influencing entrepreneurial development

35
 UNIT II

PROMOTION OF VENTURE

Learning Objective of this unit

After the completion of this unit, the students will be able to:

1. Overview of business and opportunity analysis

2. Forms of ownership
3. Understanding capital requirements; identifying the sources of finance
4. Process of creating and growing high potential ventures-knowledge of legal requirements and steps
for venture set up
5. PESTEL Analysis

THE MICRO, SMALL AND MEDIUM ENTERPRISES (MSME) DEVELOPMENT ACT, 2006

Under this act, the central Government shall set up, for the purpose of the act, a Boardknown
as the National Board For Micro, Small and Medium Enterprises.

CLASSIFICATION OF ENTERPRISES (NEW DEFINITIONS)

1. In Case of Manufacturing Enterprise:

(a) A micro enterprise is one in which the investment in plant and machinery does not
exceed Rs.25 Lakhs.

(b) A small enterprise one in which the investment in plant and machinery is more than
Rs.25 Lakhs but does not exceed Rs. 5 crores.

(c) A medium enterprise is one in which the investment in plant and machinery is more
than Rs. 5 crores but does not exceed Rs. 10 crores.

2. In Case of Service Enterprise:

(a) A micro enterprise is one in which the investment in plant and machinery does not
exceed Rs. 10 lakhs.

(b) A small enterprise one in which the investment in plant and machinery is more than Rs.
36
 10 lakhs but does not exceed Rs. 2 crores.

(c) A medium enterprise is which the investment in plant and machinery is more than Rs. 2
crores but does not exceed Rs. 5 crores.

ANCILLARY UNITS
These units provide inputs to other industries. These are engaged in the manufacture of parts,
components, light engineering products like cycles, sewing machines diesels engines, machine
tools, electrical application. The investment in plant and machinery should not exceed Rs. 5 crores.

EXPORT ORIENTED UNIT

Export oriented units are those SSI units which export at least 30% of its annual production by the
end of the 3th year of commencement of production.

CHARACTERISTICS OF MSMEs

The important characteristics of MSMEs are summarized as follows:

 They are generally organized and run by individual entrepreneurs.

 They require less capital.
 They are fundamentally labour-intensive units facilitating greater utilization of man
power.
 They involve the use of simple technology, intensive utilization of individual skill
leading to professional specialization.
 They cater the individual tastes and fashions and render personalized service to
consumers.
 They are highly localized industries. Using local resources MSMEs are decentralized
and dispersed to rural areas.
 They are eligible for govt. assistance and patronage and for concessional finance by
banks, financial institutions etc.
 They are flexible to a large extent. They are more susceptible to change and highly
reactive and receptive to socio-economic conditions.
 They are free from red-tapism and bureaucratic handicaps.
 Compared to large units, a MSME has a lesser gestation period. ie, the period after
which the on investment starts.
37
OBJECTIVES OF MSMEs

The primary objectives of MSME are to play a complementary role in the socio-economic set
up of a country. The other objectives are as follows:

1) To provide increased employment opportunities.

2) To provide production of large variety of goods especially consumer goods through labour-
intensive methods.

3) To bring backward areas too in the mainstream of national development.

4) To improve the level of living of people in the country.

5) To create a climate for the development of self-employed experts, professionals and small
entrepreneurs.

6) To ensure more equitable distribution of national income.

7) To ensure balanced regional development as regards industries.

ADVANTAGE OF MSMEs

1) They are relatively more environmental friendly.

2) They are generally based on local resources.

3) They provide ample opportunities for creativity and experimentation.

4) They facilitate equitable distribution of income and wealth.

5) MSME enjoys the government support and patronage.

6) These helps in the balanced regional development.

7) It is possible to make necessary changes as and when required.

8) These help in reducing prices.

9) There is a close and direct personal contact with the customer and employees.

10) They create more employment opportunities. They are labour intensive. They offer ample
scope for self employment.

38
 11) They require only less capital. It is a boon to a country like India where capital is deficient.

DISADVANTAGES OF MSMEs

 MSMEs suffer from lack of funds. They are financially weak.

 They suffer from lack of managerial and other skills. They cannot employ highly paid
officials.

 MSMEs always face tough competition from large businesses.

 They are not well equipped to make advantage of the latest technology and modern
methods.

 There is only a little scope for division of labour and specialization.

 MSMEs cannot afford to spend large sums of money on research and experiments

 They cannot survive in times of adversity.

 They cannot secure cheap credit.

ROLE/ IMPORTANCE OF MSMEs IN DEVELOPING COUNTRIES

Large Employment Opportunities: MSMEs are generally labour-intensive. For every Rs.
1 lakh of fixed investment, MSME sector provides employment for 26 persons as against 4
persons in the large scale sector. Thus in a country like India where capital is scarce and
labour is abundant, MSMEs are especially important

1) Economical Use of Capital: MSMEs need relatively small amount of capital. Hence it is
suitable to a country like India where capital is deficient.
2) Balanced Regional Development: Generally small enterprises are located in village and
small towns. Therefore it is possible to have a balanced regional growth of industries.
India is aland of villages.
3) Equitable Distribution of Income And Wealth: It removes the drawbacks of capitalism,
abnormal profiteering, concentration of wealth and economic power in the hands of few
etc.
4) Higher Standard of Living: MSMEs bring higher national income, higher purchasing
power of people in rural and semi-urban areas.
5) Mobilization of Locals Resources: The spreading of industries even in small towns and
villages would encourage the habit of thrift and investment among the people of rural
39
 areas.
6) Simple Technology: New but simple techniques of production can be adopted more easily
by MSMEs without much investment.
7) Less Dependence on Foreign Capital: MSMEs use relatively low proportion of imported
equipment and materials. The machinery needed for these industries can be manufactured
within the country.
8) Promotion of Self Employment: MSMEs foster individual skill and initiative and
promote self-employment particularly among the educated and professional class.
9) Promotion of Exports: With the establishment of a large number of modern MSMEs in
the post independence period, the contribution of the small scale sector in the export
earnings has increased much.
10) Protection of Environment: MSMEs help to protect the environment by reducing the
problem of pollution.
11) Shorter Gestation Period: In these enterprises the time-lag between the execution of
the investment project and the start of flow of consumable goods is relatively short.
12) Facilitate Development of Large Scale Enterprises: MSMEs support the development
of large enterprises by meeting their requirements of inputs of raw materials,
intermediate
.

40
PROBLEMS OF MSMEs
Some of the more important problems faced by MSMEs are as follows:
1) LACK OF MANAGERING EXPERIENCE: They may not be having specialised
knowledge in the different fields of management. At the time of initiating the project, they are not
in a position to anticipate correctly their financial requirements and the size of market for their
products.
2) INADEQUATE FINANCE: Generally MSMEs are not in a position to arrange full
finance from their own sources. They obtain finance from unorganized finance sector at higher rate
of interest.
3) LACK OF PROPER MACHINARY AND EQUIPMENT: Many MSMEs use
inefficient and outdated machinery and equipment. This affects the quality of production.
4) LACK OF TECHNICAL KNOW-HOW: Do not have the knowledge about different
alternative technologies and processes available for manufacturing their products to improve the
quality of products and reduce costs.
5) RUN ON TRADITIONAL LINES: They have not yet adopted modern methods and
techniques of production. They have not taken adequate interest in research and development
efforts. Hence they cannot be run efficiently.
6) IRREGULAR SUPPLY OF RAW MATERIALS: The majority of MSMEs depends
on local sources for their raw material requirements. Small entrepreneurs are forced to pay high
prices for materials because they purchase materials in small quantity.
7) PROBLEM OF MARKETING: The brand name of the products of MSMEs is acute
due to tough competition from large industries. It cannot afford to costly advertisement and
network of distribution system. There are delays in the payment of bills by large purchasers
resulting in inadequate working capital.
8) PERSONNEL PROBLEMS: It is difficult for them to get qualified persons to run the
business. They cannot provide much training facilities to employees.
9) LACK OF CLEAR-CUT POLICY OF THE GOVT: The Govt. may take decisions
relating to MSMEs on the basis of political consideration rather than on economic consideration.
10) BOGUS UNITS: The government should look into this aspect seriously, break the
strong hold of such vested-interested and promote only genuine entrepreneurship in the country.
11) OTHER PROBLEMS: Like inefficient management, non-availability of cheap power,
burden of local taxes etc.

41
STEPS FOR STARTING SSIs/MSMEs
As soon as a person decides to become an entrepreneur and to start a MSME, he is required
to take a number of steps and formalities one after the other. They are as follows:
1) Scanning of Business Environment: it is essential on the part of the entrepreneur to
study and understand the prevailing business environment. Entrepreneur should scan the business
opportunities and threats in the new environment. To study the administrative framework,
procedure, rules and regulations and other formalities implemented by the government. The
potential entrepreneur must assess his own deficiencies, which he can compensate through training.
2) Selection of the Product: The very success of one’s venture will depend on the
rationality of his decision in this regard. The economic viability of the product can be ascertained
by considering certain demand aspects such as volume of demand in the domestic market, volume
of demand in the export market, volume of potential demand, a degree of substitution of an existing
product etc. The prospective entrepreneur has to identify the product based on market research or
market survey.
3) Selection of Form of Ownership: He has to select sole proprietorship or family
ownership or partnership or private limited company as the form of the ownership.
Selection of Location and Site: Location is selected after considering certain factors such as
nearness to market, sources of material and labour, modern infrastructure facilities etc. The
entrepreneur has to choose a suitable plot for the factory. He may purchase land directly or choose
from an industrial area developed by State Development Corporations like SIDCO, or Directorate
of Industries. In order to stimulate industrial growth, the government of Kerala is providing
infrastructural assistance by way of
(1). Developing areas.
(2). Development Plots.
(3).Industrial estates, and
(4). Mini industrial units.
4) Designing Capital Structure: Apart from the own capital, he may secure finance from
friends and relatives, term loans from banks and financial institutions.
5) Acquiring Manufacturing Know-How or Technology: Many institutions of
government, research laboratories, research and development divisions of big industries and certain
consultancy agencies provide the manufacturing know-how.
6) Preparation of Project Report: The report usually covers important items like sources
of finance, availability of machinery and technical know-how, sources of raw material and labour,
market potential and overall profitability.
 Registration as a Small Scale Industry: Registration with Department of industries and
Commerce is only optional. There is no statutory obligation, but small scale industries can

42
 avail various facilities, incentives and concessions offered by the state as well as central
government onlyif they registered as SSI. The registration would be done in two stages.

 Provisional Registration: It will be valid for one year with possible three extensions of six
months each. It helps entrepreneur to take necessary steps to bring the units into existence. The
provisional registration may enable the party to:

(1) Apply to NSIC/SIDO and other institutions for procuring machines on H.P basis.
(2) Apply for power connection.
(3) Apply to local Bodies for permission to construct the shed to establish a unit.
(4) Apply for financial assistance to SFC/Banks or other financial institutions on the basis of
project report.
(5) Obtain sales tax, excise registration etc whenever required.
(6) Apply for a shed in an industrial estate/ development site in an industrial area/ material for
construction of shed as the case may be.
7) Obtaining Statutory Licence: Any person should obtain the following licences and
certificates before starting the venture:
(A) Licence from Local Bodies For
(1) Construction of the building.
(2) Installation of plant and machinery.
(B) Licence from the Directorate of Factories and Boilers For:
(1) Approval of factory building.
(2) Registration under section 6, 7 and 85 of the Factory Act.
8) No Objection Certificate from State Pollution Control Board. Apply for Power Connection:
There are 2 categories of power, the Low Tension (LT) and High Tension (HT). A consumer can
avail LT only if the connected load is 75 HP and below. If connected load is between 75 HP and
130 HP, the consumer has the option to avail either LT supply or HT supply.

9) Arrangement of Finance: Entrepreneur needs to acquire assists of 2 kinds namely Fixed assets
and current assets. Long term finance is needed to acquire fixed assets like land, building, plant and
machinery and for security deposits. Short term funds are required for acquiring current assets.
Current assets are essential for the day to day working of the industry. Long term funds includes
owner’s capital, subsidy from central/ state govt., personal borrowings from friends and relatives
and long term loans from financial institution like KFC and KSIDC.

10) Registration under the Sales Tax Act: Business enterprises are subject to three important
taxes- Income Tax, Excise Duty and Sale Tax. Income tax is levied on income as defined under the
IT Act of 1961. It is revenue of Central Government. Excise duty is a tax levied by the central
Government. It is the duty levied on the cost of goods manufactured within a country. Sales tax is
43
levied whenever goods are purchased from within the state. When goods are purchased from
outside the state, Central Sales Tax is levied. Application for registration should mention all places
of business dealer including the godown in which the goods are stored. The following papers are to
be submitted for registration.

1) Application for registration in Form 1 duly signed.

2) Counterfoil of challan for Rs. 100 towards registration fees.
3) Return of Estimated Annual Turnover in Form No. 10.

On the basis of declaration of the anticipated turn over and nature of turnover, registering authority
may demand security, which is normally ½ times of the anticipated tax due.

11) Installation of Machinery: Machinery should preferably be installed as per the plant layout.

12) Recruitment of Manpower: The number and type of workers is to be decided. After this, the
required workers should be recruited.

13) Procurement of Raw Material: The raw materials may be procured indigenously or may have
to be imported by the entrepreneur. The next step is to start production, which is taken up in two
stages- Trial production and Commercial production having successfully test marketed the product,
commercial marketing can be undertaken.

14) Application for Permanent Registration: For this, application form has to be made to the GM
of DIC through IEO/ Taluk Industries Officer. The GM should inform the entrepreneur of the date
and time of inspection of the unit. On being satisfied a registration certificate may be issued by the
Directorate of Industries within one month of the receipt of the application. The period of the
certificate whether provisional or permanent will be for a period of 2 years. Renewal certificate
would be affected by the GM (DIC) within a period of 3 months from the date of expiry of
certificate.

44
GOVT. REGULATORY FRAMEWORK FOR MSMEs

The govt. has two roles to play regulatory role and protective role. Govt. regulates as well as
protects small business. It plays the regulatory role by imposing certain restriction and formalities
on small business. It provides assistance and support to small business.

MEASURES TAKEN BY THE GOVERNMENT FOR THE PROMOTION OF MSMEs

Some of the measures taken by the government are as follows:

ADMINISTRATIVE FRAMEWORK: Administrative mechanism for SSI is being looked

after by the Department of Small Scale Industries, Agro and Rural Industries within the
Ministry of Industry. With the Department there is Small Industries Development Organization
(SIDO) headed by a department commissioner. SIDO has 27 small industries service institutes,
31 branch institutes, 37 extension centres, 18 field testing centres, four production centres and
two footwear training centres. To provide different services and support to village and small
entrepreneurs under a single roof, 422 Districts Industries Centres (DIC) have been set up to
cover 431 districts out of the total of 436 districts of the country. National Institute of Small
Industries Extension Training (NISIET) conduct research and training programmes and
provides consultancy services. National Small Industries Corporation (NSIC) deals with
marketing including Government purchases and supplying machinery on hire purchase.

POLICY INSTRUMENTS: Policy instruments adopted by the government to encourage the

growth of SSI comprise: (1) Financial incentives. (2) Fiscal incentives. (3) General incentives.
(4) Special incentives in backward areas, and (5) Reservation of items for SSI.

(1) Financial Incentives: SIDBI provides direct assistance, among others for specialized
marketing agencies, industrial estates, acquisition of machinery/ equipment, both
indigenous and imported, seed capital scheme and National Equity Fund Scheme, bills re-
discounting and direct discounting scheme. State and Local Government provides financial
subsidies like interest rate and capital subsidies, and water and electricity subsidies and
subsidies for the acquisition of land.
(2) Fiscal Incentives: These comprise investments allowance, tax holidays, additional
depreciation for new plant and machinery and state and local Governments provide
exemption from electricity tariffs.
3) General Incentives: These include, among other things, reservation of items for exclusive
purchases from SSI, price preference over medium and large units in public sector
purchases and scheme for Self- Employment to Educated Unemployed Youths (SEEUY).
(4) Special Incentives in Backward Areas: Some of the schemes which are operational are
concessional finance scheme, transport subsidy scheme, intrest subsidy scheme and income
45
 tax incentives, etc.

RESERVATION OF ITEMS: As per the policy certain items have been exclusively
reserved for manufacturing in the MSME sector. The objective is to protect MSMEs
engaged in the manufacturing of such items from the competition of medium and large-
scale units.
STATUTORY BOARDS: Govt. has setup six exclusive boards, namely, (1) Khadi and
Village Industries Board. (2) Handloom Board (3) Handicrafts Board (4) Coir Board (5)
Seri Culture Board, and (6) Small Scale Industries Board.

ESTABLISHMENT OF INDUSTRIAL ESTATES: Industrial estate is place where the

required facilities and factory accommodation are provided by the government to the
entrepreneurs to establish their industries there.

SETTING UP OF NATIONAL MANUFACTURING COMPETITIVENESS

COUNCIL(NMCC): The NMCC suggest a three-pole structure, “one of the effective
measures for accelerating manufacturing growth in this segment lies in promoting growth
poles or industrial clusters, referred to in the PURA(Provision of Urban Amenities in Rural
Areas) context, in the 05-06 union budget speech. The growth poles can cover all three
elements of the cluster approach-industrial clusters, artisan clusters and agro-based
clusters,” The NMCC also suggests that the time is right for exploring mechanisms of how
Indian MSMEs could tie up with MSMEs in developing countries for technology as well as
trade.

PENALITIES FOR DELAYED PAYMENTS TO MSMEs: The Govt. has enacted the
interest on delayed Payments Act for the benefit of MSMEs. The Act prescribes that the
customers of MSMEs should make the payments within 120 days of accepting the goods.
Delays beyond this would attract interest at 11/2 times the prime lending rate of the SBI.

PRIME MINISTER’S ROZGAR YOJNA (PMRY): It was launched on 2nd October

1993, with the objective of creating one million jobs in 5 years by giving loans for the
creation of tiny and micro enterprise.

INDUSTRIAL CLUSTER DEVELOPMENT: An industrial cluster can be defined as a

sectorial and geographical concentration of enterprises, especially Micro, Small and
Medium Enterprises (MSMEs), which have common opportunities and face similar threats.

ASSISTANCE FOR MSME EXPORTS: Following are the assistance to MSME exports:

(a) MSMEs are helped in participating in trade exhibitions. The Govt. would meet the expenses
in this regard on space rent, handling and clearing charges, insurance and shipment charges

46
 etc.
(b) MSMEs are given triple weightage for being recognized as Export Houses, Trading Houses,
Star Trading Houses and Super Star Trading Houses.
(c) Capital Goods Zero Duty Scheme is extended to MSMERs without any conditions.
(d) Marketing Development Assistance is given to MSMEs to facilitate market research,
publicity etc.

OTHER SCHEMES: Important schemes are briefly discussed as below.

(a) Integrated Infrastructural Development Scheme: Under this scheme the Central Govt. would
contribute Rs 5 crore in the ratio of 2:3 for the development of industrial infrastructure in rural
and backwards areas. The objective of the scheme is to promote the location of MSMEs in rural
and backward areas and facilitate linkage between agriculture and industry.
(b) Marketing Development Assistance Scheme: MDA is a new scheme launched in August
2001. This scheme provides following five types of assistance:

1) Assistance to individuals for participating in overseas trade fairs and exhibitions.

2) Assistance to individuals to go on overseas study tours or as a member of a trade
delegation going abroad.
3) Assistance for production of publicity material for overseas publicity.
4) Assistance to small industry association to conduct sector- specific market studies
abroad, and
5) Assistance to SSI Associations to initiate/contest anti-dumping cases.

(c) Trade Related Entrepreneurship Assistance And Development For Women: TREAD is a
scheme for giving trade-related assistance to women entrepreneurs in the form of Loans, grants,
trade-related training and information, counseling and extension services

INDUSTRIAL ESTATES

It is defined as a method of “Organizing, housing and servicing industry, a planned clustering of

industrial enterprises offering standard factory buildings erected in advance of demandand a variety
of services and facilities to the occupants.” In short, industrial estate is place wherethe required
facilities and factory accommodation are provided by the government to the entrepreneurs to
establish their industries there. The first and foremost industrial estate was established at Rajkot in
Gujarat in 1955.

47
FEATURES OF INDUSTRIAL ESTATES
The following are the important features of industrial estates:
 It is a tract of land subdivided and developed into factory plots or sheds.
 It is a planned clustering of industrial units.
 It may be developed in urban, semi-urban or rural areas.
 It may be large, medium or small.
 It may be set up by the Government, or by co-operatives or even by private agencies.

ADVANTAGE OF INDUSTRIAL ESTATES

1) Economies of Scale: It arises because all the industrial units enjoy common infrastructural
facilities like water, roads, etc. As the size of the industrial units increases, the costs of estate
development and administration per unit of each facility decrease.
2) External Economies: Several industrial units are clustered together in an industrial estate. This
enable them to enjoy the benefits of agglomeration and external economies like improved transport
facilities, availability of trained labour, repair facilities, power and water etc.
3) Low Investment: Even a small entrepreneur can acquire an industrial plot or shed on rent or hire
purchase basis.
4) Less Risks: Since all units enjoy common facilities and low capital investment, risks are
relatively low. Mutual Co-Operation: All industrial units located in an industrial estate face
common problemsand seek to achieve common objectives.
5) Balanced Regional Development: It is possible to secure a balanced regional development by
developing industrial estates in industrially backward areas.
6) Saving Of Time and Effort: An individual entrepreneur is relieved of trouble of searching for
suitable space.
7) Entrepreneurial Development: Industrial estates reduce risks and increase profitability
throughinternal and external economies

48
INCENTIVES AND SUBSIDIES
In India Entrepreneurs are offered a number of incentives because they fulfil two main objectives of
economic development. Firstly, they facilitate decentralization of industries. They assist in the
dispersal of industries over the entire geographical area of the country. Secondly, they facilitate the
transformation of a traditional technique into modern technique characterized by improved skills,
high production and higher standard of living.

INCENTIVES

It is the financial and promotional assistance provided by the government to the industries for
boosting up industrial development in all regions particularly in backward areas. Incentives include
concession, subsidies and bounties. ‘Subsidy’ denotes a single lump-sum which is given by a
government to an entrepreneur to cover the cost. It is granted to an industry which is considered
essential in the national interest. The term Bounty denotes bonus or financial aid which is given by
a government to an industry to help it compete with other units in home market or in a foreign
market. Bounty offers benefits on a particular industry; while a subsidy is given in the interest of
the nation. The object of incentives is to motivate an entrepreneur to start new ventures in the larger
interest of the nation and the society.

ADVANTAGES OF INCENTIVES AND SUBSIDIES

They offer following advantages:
 They act as a motivational force which makes the potential entrepreneur to enter into
business activities.
 They encourage the entrepreneur to start industries in the backward areas.
 They help the government to get a balanced regional development.
 They help to develop new enterprises which lead to economic development.

NEED FOR INCENTIVES AND SUBSIDIES

The need for incentives and subsidies arises for the following reasons:
1) To Remove Regional Disparities in Development: Industries may be concentrated and
overcrowded in some regions, in order to correct this regional balance, incentives are provided to
entrepreneurs. They will start new ventures in such backward areas. Thus the backward areas
become developed and regional imbalances are corrected.

2) To Provide Competitive Strength, Survival and Growth: several other incentives are
provided for the survival and growth of industries. For example, reservation of products, price
49
preference etc. will improve the competitive strength. Other concessions like concessional finance,
tax relief etc., contribute their survival and growth.

3) To Generate More Employment and Remove Unemployment: Market adjustments

and external economies play a significant role in the economic development of a country. Subsidies
cause movement of entrepreneurs from developed areas to developing or backward areas. In short,
incentives and subsidies serve as a catalyst to start a dynamic process of development.

4) To Promote Entrepreneurship: Industrial estates, availability of power, concessional

finance, capital investment subsidy, transport subsidy etc, are few examples of subsidies which are
aimed at encouraging entrepreneurs to take up new ventures.

PROBLEMS RELATING TO SUBSIDIES

Some problems may arise in devising and implementing a subsidy system. They are as follows.

 A subsidy may remain unutilized.

 If the administration is inefficient or corrupt, subsidy will not produce the desired results.
 It is very difficult to measure the impact of subsidies.
 Subsidies may lead to inefficiency in the long run.
 Subsidies once introduced are difficult to withdraw.
 The administrative procedure must be effective.
 The cost of administering a subsidy should be considered.
 The subsidy scheme should be communicated to prospective beneficiaries.
 The quantum of subsidy should be adequate to produce the desired results.
 The target groups to whom the subsidy is to benefit should be clearly determined.

SMALL INDUSTRIAL DEVELOPMENT ORGANISATION (SIDO)

50
The SIDO was formed under the Ministry of Industry. It is a policy making, co-ordinating and
monitoring agency for the development of small scale industries. It maintains a close liaison with
the government, financial institutions and other agencies which are involved in the promotion and
development of small scale units. It provides a comprehensive range of consultancy services and
technical, managerial, economic and marketing assistance to the small scale units. It has
launched various technology support programmes for the benefit of small scale industries in the
country through a number of steps. The steps include establishment of (a) process-cum-product
development centres, (b) tool rooms and training centres. (c) specialized institutes and (d) regional
testing centres with its field testing stations.

FUNCTIONS OF SIDO
The main functions are co-ordination, industrial development and industrial extension service, other
functions are summarized as follows:
1) To estimate the requirements of raw material for the small scale sector and to arrange their
supply.
2) To collect data on consumer items which are imported and encourage the setting up of
new units by giving them co-ordinated assistance
3) To prepare project reports and other technical literature for prospective entrepreneurs.
4) To secure reservation of certain products for the SSIs.

NATIONAL SMALL INDUSTRIES CORPORATION (NSIC)

It was set up in 1995 to provide machinery to small scale units on hire purchase basis andto assist
these units in obtaining orders from government departments and officies. Its head office isat Delhi.
It has four regional offices at Delhi, Mumbai, Chennai and Calcutta. It has eleven branch offices
also.

FUNCTIONS OF NATIONAL SMALL INDUSTRIES CORPORATION

Its functions are as follows:
1) To develop small scale units as ancillary units to large scale industries
2) To impart training to industrial workers.
3) To market the product of SSIs at home and abroad.
4) To help the small scale industries in procurement of scarce and imported raw material.

51
 5) To obtain orders for SSI units from government department and offices.
6) To provide machinery to SSI units on hire purchase basis.
7) To construct Industrial Estate and establish and run proto-type production-cum-training
centres.

NATIONAL ALLIANCE OF YOUNG ENTREPRENEURS (NAYE)

It is a national level apex organization of young entrepreneurs. It assists in promoting new enterprises through
first generation entrepreneurs. NAYE sponsored an Entrepreneur Development Scheme with Bank of India in
August 1972 on pilot basis. The scheme is known as BINEDS. It is operative in the states of Punjab, Rajasthan,
Himachal Pradesh and Union Territories of Chandigarhand Delhi. NAYE has entered into similar arrangement
with Dena Bank, Central Bank Of India and Union Bank of India .NAYE strives hard for upliftment of young
entrepreneurs especially women. It holds workshops, conferences, training programmes etc. to create
awareness.

TECHNICAL CONSULTANCY ORGANISATION (TCOs)

It was established in different parts of the country to provide consultancy services to small and
medium enterprise at reasonable costs. The TCO was established in Kerala( KITCO) in June
1972.Functions and activities of TCOs include:
(a) Industrial potential surveys.
(b) Preparation of profits and feasibility studies.
(c) Evaluation of project.
(d) Conduct of EDPs.
(e) Assisting in the modernization, technical upgradation and rehabilitation programmes etc.
(f) Undertaking market research and surveys for specific products.
(h) Offering merchant banking services.

52
SMALL INDUSTRIES SERVICE INSTITUTES (SISIs)
Small Industries Service Institutes have been established in each state in 1956 as agencies of
SIDO. The objective is to develop small scale industries. The functions performed may be
summarized as follows:

1) It promotes entrepreneurship and development of SSIs in rural and other underdeveloped areas.
2) It supplies market information in selected cases and undertakes market distribution surveys for
industrial enterprises.
3) It conducts various programmes for workers in other organizations as well as in small industry in
certain trades.
4) It assesses the capacities of small units for imported/controlled materials.
5) It provides technical guidance on the efficient use of wastages and scraps.
6) It prepares designs and drawing for production equipment and accessories.
7) It ensures that small industry development in India is being done in right lines.
8) It provides workshop common facilities to industrialists at reasonable charges.
9) It conducts detailed plant studies to locate production and other problems. It initiates and co-
ordinates modernization of selected industries.
10) The institute assists in rehabilitation of sick units.
11) It helps to develop ancillary industries. It registers SSI units with NSIC to supply their products
to government.
12) The institute conducts modernization studies for technology upgradation.
13) It undertakes quality control, energy conservation and pollution control, specialized training
programmes on export marketing.
14) The institutes also conduct surveys and studies for identification of industries having scope of
promotion and development.
15) It advises the Govt. of India and state government on policy matters relating to small industry
development.

KHADI AND VILLAGE INDUSTRIES COMMISSION

KVIC makes finance available to the implementing agencies in the form of capital expenditure
loans. It also extends assistance for setting up of retail sales outlets and also for strengthening of the
capital base of the registered institutions and cooperatives. It also assists individual artisans besides
formulating liberal pattern of assistance for identified hill, border and weaker sections. The loans
for Khadi are interest free, while those for village industries have an interest at the rate of 4% per
annum.
53
FUNCTIONS OF KVIC

(1) To train the artisans.

(2) To assist village industries in procuring raw materials.
(3) To assist and support through marketing of finished products of village industries.
(4) To provide equipment and machinery to producers on concessional terms.
(5) To undertake R and D programmes for improved implements for silk reeling, more
efficient extraction of oil in power ghanis, manufacture of panel boards from banana stems
and improved ‘charka’ and looms.

SCIENCE AND TECHNOLOGY ENTREPRENEUR PARKS (STEP)

STEP is an area where applied research on high tech projects is conducted with thecollaboration of
multinational companies, universities, technological and research institutes. In 1972 a conventional
‘Techno Park’ was set up by the Birla Institute of Scientific Research.

54
 SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI)

SIDBI was set up on April 2, 1990 as a wholly owned subsidiary of IDBI. It is operating through its
Head Office at Lucknow and a network of 5 Regional Offices and 25 Branch Offices in all the
states. It is an apex institution for promotion, financing and development of industries in small
scale sector and co-ordination of functions of other institutions engaged in similar activities.

FUNCTIONS OF SIDBI
1) Taking steps for technological upgradation and modernization of existing units.
2) Providing services like factoring, leasing etc. to industrial concerns in the small scale sector.
3) Extending financial support to National Small Industries Corporation for providing leasing hire-
purchase and marketing support to SSI units.
4) Expanding the channels for marketing the products of SSI sector in domestic and international
markets.
5) Promoting employment oriented industries especially in semi-urban areas to create more
employment opportunities and thereby checking migration of people to urban areas.
6) Refinancing of loans and advances extended by the primary lending institutions to industrial
concerns in the small scale sector and also providing resource support to them.
It also offers bills discounting and rediscounting facilities. It also has a few schemes of direct
assistance.

THE NATIONAL INSTITUTE FOR ENTREPRENEURSHIP AND SMALL BUSINESS

DEVELOPMENT (NIESBUD)

It is an apex body established in 1983 by the ministry of Industries, Government of India, for coordinating,
training and overseeing the activities of various institutions/agencies engaged in entrepreneurship development,
particularly in the area of small industry and small business. The Institute which is registered as a society under
Government of India Societies Act started functioning from 6th July, 1983.The policy, direction and guidance to
the institute is provided by its governing council whose chairman is the minister of SSI. It has an executive
committee

55
OBJECTIVES OF NIESBUD
The objectives of the institute include the following:

 To evolve standardized materials and processes for selection, training, support and
sustenance of entrepreneurs, potential and existing.
 To share internationally, its experience and expertise in entrepreneurship development.
 To train the trainers, promoters and consultants in various areas of entrepreneurship
development.
 .

FUNCTIONS OF NIESBUD

(a) Evolving effective training strategies and methodology.

(b) Standardizing model syllabi for training various target groups.
(c) Formulating scientific selection procedures.
(d) Developing training aids, manuals and tools.
(e) Facilitating and supporting central/state/other agencies in organizing entrepreneurship
development programmes.
(f) Conducting training programmes for promoters, trainers and entrepreneurs.

COMMERCIAL BANKS
It plays an important role in the growth and development of economy in general and enterprise
sector in particular. Commercial Bank in India comprises the State Bank of India (SBI) and its
subsidiaries, nationalized Banks, foreign banks and other scheduled commercial banks, regional
rural banks and non-scheduled commercial banks. The period for which loan is granted varies from 7
to 10 years. These loans are repayable in half yearly or yearly installments. Most commercial banks
have got specialized units in their administrative structure to take care of the financial needs of the
small scale industrial units. The fixed capital needs or the long and medium term needs of the small
scale industrial units are presently being taken care by the banks under their integrated scheme of
credit for the small entrepreneurs. The rate of interest charged normally from the small scale
industrial units is between 12% and 15% against 18% from the large scale units.

BRIDGE CAPITAL/FINANCE
Bridge capital is the advance given to cover the finance requirement during the time lag between the
sanctioning and disbursement of term loan by financial institutions. It is an assistance given for a
short period to help borrower for overcoming the delay in disbursement of a sanctioned term loan or
in getting the proceeds of a public issue. It is provided by commercial bank.
56
KERALA INDUSTRIAL AND TECHNICAL CONSULTANCY ORGANISATION
LIMITED (KITCO)

KITCO was set up in 1972 by IDBI in association with other national and state level financial
institutions. KITCO is a public sector consultancy organization. It was established by IDBI in
association with the Govt. Kerala, other national and state level financial institutions and banks. It
has been established with the objective of meeting the technical consultancy needs of the
entrepreneurs in the small, medium and large scale industrial sectors.

FUNCTIONS AND SERVICES

The functions of KITCO may be summarized as follows:
1) Selection of staff and executives.
2) Entrepreneurial guidance and development.
3) Appraisal of industrial projects on behalf of banks and other financial institutions.
4) Consultation services in sectors like health and tourism industry.
5) Identification of project ideas and project reports, follow-up with banks and financial
institutions.
6) Studies relating to modernization, expansion and diversification of industrial enterprise.
7) Diagnostic studies for revival of sick units.
8) Economic surveys to evaluate impact of developmental schemes.
9) Executive development programme.
10) Project monitoring for large units.
11) Market surveys for specific products and services.

57
 PROGRESS CHECK

Question No: 10 –

Which one of the following is the process of entrepreneurs developing new products that

over time make current products obsolete?

a) New business model

b) Anatomization

c) None of the given options

d) Creative destruction

Question No: 11

Which of the following factors is the most important in forcing U.S companies to focus on

new product development and increased productivity?

a) Entrepreneurship

b) Hyper competition

c) Governmental laws

d) Organizational culture

Question No: 12

Which of the following is alternatively called corporate venturing?

a) Entrepreneurship

b) Intrapreneurship

c) Act of stating a new venture

d) Offering new products by an existing company

Question No: 13

Individuals influencing an entrepreneur’s career choice and style are known as which of the
58
following?

a) Moral-support network

b) Role model

c) Professional support network

d) Support system

Question No: 14

The activity which occurs when the new venture is started is called:

a) Motivation

b) Business skills

c) Departure point

d) Goal orientation

Question No: 15

The level at which an individual is viewed by society is called:

a) Financial status

b) Qualification

c) Social status

d) Achievement

Question No: 16

Which one of the following is an important source of idea generation due to their familiarity

with the needs of market?

a) Existing products and services

b) Distribution channels

c) Federal government
59
d) Consumers

Question No: 17

Members of distribution channels are excellent sources for new ideas because:

a) They earn a handsome profit from new business

b) They are familiar with the needs of the market

c) They do not bother if entrepreneur bears a loss

d) They have well-developed sales force

60
QUESTION BANK.

9. Explain the role of Entrepreneurial Development Programme (EDP) to manage the

problems faced by entrepreneurs.

10. Explain the development of women entrepreneurs with reference to Self Help Groups

11. Give the case studies on takeover, mergers and acquisitions in India.

12. Write a note on sources and methods of Idea Generation

13. Explain the factors influencing project plan.

14. Explain the aspects and methods of Project Appraisal.

15. Write a note on Technological feasibility.

16. Explain the meaning, definition and evolution of Small and Medium Enterprises.

17. Explain the role and importance of Small and Medium Enterprises.

18. Explain the policies governing SMEs.

19. Explain the organizational structure of SMEs.

20. Explain SME funding i.e. sources of finance for SMEs

21. Describe the role of SIDBI in the development of SMEs.

22. Explain the Problems and prospects of SMEs

61
 UNIT III

ENTREPRENURIAL BEHAVIOUR & EDPs

Learning Objective of this unit

After the completion of this unit, the students will be able to:
1. Understand Entrepreneurial behavior, values and its attitude
2. Psychological theories and social responsibility
3. EDP

CONCEPT AND NATURE OF VALUES FOR ENTREPRENEUR

Meaning of Value:

Human values have been employed in so distinctively different ways in human discourse. It is often
said that a person has a value or an object has a value. These two usages have been explicitly
recognised by writers in various disciplines such as Charles Mortris in Philosophy, Brevster Smith in
Psychology and Roibin Williams in Sociology.

Value is “a concept explicit of implicit, distinctive of an individual or characteristics of a group

of those desirable traits which influence the selection from available modes and ends of action.”

According to Rokeach, “Value is an enduring belief, a specific mode of conduct or an end state of
existence, along a continuum of relative importance.”

Nature of Values:

(1) Values are not feelings, but they are concepts.

(2) Values are express feelings but they are more than feelings.

(3) Values exist in the mind, and, are independent of Public affirmation.

(4) Values are absolute but they are dimensional. That is, values are a criteria for judging
the degree of goodness of badness, Tightness or wrongness. Values are concepts
heavily weighted with emotions and influence the child’s selection from variable
modes, means and ends of action

62
Concept and Nature of Attitude

An attitude is a positive, negative, or mixed evaluation of an object that is expressed at

some level of intensity. Our attitude can vary in strength along both positive affect, and
with negative affect, with ambivalence or with apathy and indifference. It usually
implies feelings that are either positive or negative. Social psychologists use the term
attitude differently. Gordon Allport formulated the following definition: “An altitude is
a mental and neural stale of readiness, organized through experience, exerting a
directive or dynamic influence upon the individual’s response to ill objects and
situations with which it is related.”

Nature of Attitude:

(1) Attitude are a complex combination of things we tend to call personality,

beliefs, values, behaviors, and motivations.

(2) An attitude exists in every person’s mind. It helps to define our identity,
guide our actions, and influence how we judge people.

(3) Although the feeling and belief components of attitude are internal to a
person, we can view a person’s attitude from his or her resulting behavior.

(4) Attitude helps us define how we see situations, as well as define how we
behave toward the situation or object.

(5) Attitude provides us with internal cognitions or beliefs and thoughts about
people and objects.

(6) Attitude cause us to behave in a particular way toward an object or person

63
Characteristics of attitudes:

Attitude can be characterized by:

(1) Affective Cognitive consistency: The degree of consistency between the

affective and cognitive components influences the attitude—behavior
relationship. That is, the greater the consistency between cognition and
evaluation, the greater the strength of the attitude-behavior relation.

(2) Strength: Attitudes based on direct experience with the object may be
held with greater certainty. Certainty is also influenced by whether affect
or cognition was involved in the creation of the attitude. Attitudes formed
based on affect are more certain than attitudes based on cognition.

(3) Valence: It refers to the degree or grade of likeliness or unlikeliness

toward the entity/incident. If a person is fairly unconcerned toward an
object then his attitude has low valence.

(4) Direct Experience: An attitude is a summary of a person’s past

experience; thus, an attitude is grounded in direct experience predicts
future behavior more accurately. Moreover, direct experience makes more
information available about the object itself.

(5) Multiplicity: It refers to the amount of features creating the attitude. For
example, one may show interest in becoming a doctor, but another not
only shows interest, but also works hard, is sincere, and serious.

(6) Relation to Needs: Attitudes vary in relative to requirements they serve.

Attitudes of an individual toward the pictures serve only entertainment
needs, but attitudes of an employee toward task may serve strong needs
for security, achievement, recognition, and satisfaction.

64
Essential Attitudes of Successful Entrepreneurs

Attitude is an important trait needed for an entrepreneurial career. Entrepreneurs need to

have positive attitudes. Some of the essential attitudes required of the entrepreneurs are
as follows:

(1) Attitude towards Imagination. Entrepreneurs are visionaries as they visualize

opportunities in the environment. They also imagine the ways by which they ca
solve the problems faced by the people. They are quick to analyze the facts,
perceive a given situation and identify the strengths and weaknesses of the situation,
find opportunities for innovation, growth and development. They integrate intuition
with imagination to make a new meaning, a new product or anew service.

(2) Attitude towards Risk. Entrepreneurs are inclined to take calculated risks to
introduce something new and earn higher profits. But they are not gamblers.

(3) Attitude towards Initiative. Entrepreneurs have a tendency to false initiative and
not remain just onlookers. The are basically leaders and not followers. They
endeavor to convert their dreams into reality.

(4) Attitude for looking new opportunities. Entrepreneurs are always been to locate
new opportunities and start new ventures to make use of the opportunities.

(5) Attitude towards changes. Entrepreneurs have a positive attitude towards change.
They love change as change is the law of life. The accept challenges thrown open
by the changes in the environment.

(6) Attitude towards freedom of expression and action. Entrepreneurs have a

tendency to enjoy freedom of expression and action. They do not feel happy getting
instructions from others. This tendency very often results in their giving up a jobs or
employment and trying their own ventures. Since they value independence and
ownership, they like to think on their own and act accordingly.

(7) Attitude towards performance (successful completion of targets). Entrepreneurs

value performance, that too an outstanding performance. Successful completion of
the task is an indicator of their performance-whether they are performing well or
not. They have a tendency to complete task against odds. This gives them immense
satisfaction after the performance of the task.

(8) Attitude towards personal capacity. Entrepreneurs tend to believe in their

capacity to influence the environment. They have a tendency to change it rater than
leave everything to luck or to forces beyond their control. This naturally emerges
out of their value for work, which makes them believe that anything and everything

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 can be achieved through their own efforts. They think that in any given situation
they can change and influence the environment.

(9) Attitude towards Building Relations or Networking. Entrepreneurs often lack

various resources required to complete a venture or project. If they have networking
with the suppliers of various resources such as capital, machinery, materials, etc.
many of their difficulties are solved. Thus, entrepreneurs should have positive
attitude towards networking or building relations with the suppliers of various
resources.

(10) Attitude toward customers. Entrepreneurs have respect for their customers and so
they put the customers first. They accord top priority to customer satisfaction, and
maintain an expert saesforce that is given the responsibility of building customer
trust. The success of a business rests to a great extent on the ability of the
entrepreneur to listen to the customer to find out quickly what the customer wants.
This feedback is of immense importance as it helps the entrepreneur in bringing
about changes in the contents, quality and delivery of the product

Concept and Nature of Motivation

Meaning of Motivation:

Motivation refers to a process that causes, controls, and sustains certain behavior. For
instance, if an individual has not eaten, s/he feels hungry, and as a response s/he eats
and fulfills her/his feeling of hunger.

Motivation initiates, guides and maintains goal-oriented behavior. Motivation causes us

to act, whether it is getting a glass of water to reduce thirst or reading a book to gain
knowledge.

It involves the biological, emotional, social and cognitive forces that activate behavior.
In everyday usage, the term motivation is frequently used to describe why a person
does something. For example, you might say that a student is so motivated to pass in an
examination that she spends every night studying.

Nature of Motivation:

(1) It is and internal force:

The degree of motivation cannot be measured in quantitative terms. It can only be

observed through actions and performance of employees. Motivation is an internal
force or feeling of a person.

(2) Effect of environmental factors:

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Internal organization factors play important role in motivating the employees, pallor
working conditions, labor management conflict, autocratic style of management may
affect individual’s initiative to work, however, able or willing he is to perform the task.
Conversely, a clean and a quiet environment, healthy and cordial relationships
encourage workers to contribute to organizational output.

(3) It is and angling process:

The process of motivation; observing human needs, behavior and action is continuously
followed by managers. Since human needs are multiple and importance of needs keeps
changing, managers constantly watch their needs- behaviour-action.

(4) It is a pervasive function:

Motivation is required at all levels o management. Both managers and non- managers
need to be motivated to accomplish the organization goals and though them their
personal goals.

(5) It is a complicated process:

Since understanding human needs is a difficult task, motivation is a complicated or

complex task.

(6) Skilled mangers:

Managers have to be skilled in motivation their employees. Unless they understand

human needs, right motivators cannot be adopted. Of all the skills that managers must
have, the skill of motivating employees was greatly emphasized upon in a study
conducted on motivation.

(1) Positive and negative motivation:

The term motivation morally means rewarding a person for contributing to

organizational output. Negative motivation, that is, punishments and penalties, though
not often used, can also be effective in influencing the human behavior.

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Significance of Motivation

Rensis Likert has called motivation as the ‘core of management’. Motivation is an

important function which every manager performs for actuating the people to work for
the accomplishment of objectives of the organization. Issuance of well-conceived
instructions and orders does not mean that they will be followed. A manager has to
make appropriate use of various techniques of motivation to enthuse the employees to
follow them. Effective motivation succeeds not only in having an order accepted but
also in gaining a determination to see that it is executed efficiently and effectively.

Motivation is an effective instrument in the hands of manager for inspiring the

workforce and creating a confidence in it. by motivating the workforce, management
creates ‘well to work’ which is necessary for the achievement of pull weight
effectively, to give their loyalty to the group, to carry out properly the purpose of the
organization. The following results may be expected if the employees are properly
motivated:

(i) The workforce will be better satisfied if management provides them with
opportunities to fulfil their physiological and psychological needs. The workers will
cooperate voluntarily with the management and will contribute their maximum towards
the goals of the enterprise.

(ii) Workers will tend to be as efficient as possible by improving upon their skills
and knowledge so that they are able to contribute to the progress of the organization.
This will also result in increased productivity.

(iii) The rates of labour turnover and absenteeism among the workers will be low.

(iv) There will be good human relations in the organization as friction among the
workers themselves and between the workers ant the management will decrease.

(v) The number of complaints and grievances will come down. Accident rate will
also be low.

(vi) There will be increase in the quantity and quality of products. Wastage and scrap
will be less. Better quality of products will also increase the public image of the
business

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Maslow’s Need Hierarchy Model

A.H. Maslow developed a conceptual framework for understanding human motivation

which has been widely acclaimed. He defined a person’s effectiveness as a function of
matching man’s opportunity with the appropriate position of hierarchy of needs. process
of motivation beings with an assumption that behavior, at least in part, is directed
towards the achievement of satisfaction of needs. Maslow proposed that human

needs can be arranged in a particular order from the lower to the higher. The need
hierarchy is as follows:

(1) Basic Physiological Needs: The needs that are taken as the starting point
for motivation theory are the so-called physiological needs. These needs
relate to the survival and maintenance of human life. They include such
things as food, clothing, shelter, air, water and other necessities of life.

(2) Safety and Security Needs: After satisfying the physiological needs,
people want the assurance of maintaining a given economic level. The
want job security, personal bodily security, security of sources of income,
provision for old age, insurance against risks, etc.

(3) Social Needs: Man is social being. He is, therefore interested in

conversation, sociability, exchange of feelings and grievances,
companionship, recognition, belongingness, etc.

(4) Esteem and Status needs: These needs embrace such things as self-
confidence, independence, achievement, competence, knowledge, and
success. They are also known an egoistic needs. They are concerned with
prestige and status of the individual.

(5) Self-fulfillment Needs: The final step under the need priority model is
the need for self-fulfillment or the need to fulfil what a person considers
to be his mission in life. It involves realizing one’s potentialities for
continued self-development and for being creative in the broadest sense of
the word. After his other needs are fulfilled, a man has the desire for
personal achievement. He wants to do something which is challenging
and since this challenge gives him enough dash and initiative to work, it is
beneficial to him in particular and to the society in and initiative to work,
it is beneficial to him in particular and to the society in general. The sense
of achievement gives him psychological satisfaction.

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Mcclelland’s Psycho Theory

(i) Need for Power -The need for power is expressed as a desired to influence
others. In relation to Maslow’s hierarchy, power would fall somewhere
between the needs for esteem and self-actualization. People with a need for
power tend to exhibit behaviors such as out-spoken, forceful, willing to
engage in confrontation, and a tendency to stand by their original position.
They often are persuasive speakers and demand a great deal from others.
Management often attracts people with a need for power because of the many
opportunities it offers to exercise and increase power. Managers who are
motivated by the need for power are not necessarily “power hungry” in the
sense in which the expression is often used.

(ii) Need for Achievement - The need for achievement would fall between the
needs for esteem and self-actualization given by Maslow. This need is
satisfied not by the manifestations of success, which confer status, but with
the process of carrying work to its successful completion Individuals with a
high need for achievement generally will take moderate risks, like situations
in which they can take personal responsibility for finding solutions to
problem, and want concrete feedback on their performance. As McClelland
points out. “No matter how high a person’s need to achieve may be, he cannot
succeed if he has no opportunities, if the organization keeps him away from
taking initiative, or does not reward him if he does.” Thus, if management
wishes to motivate individuals operating on the achievement level, it should
assign them tasks that involve a moderate degree of risk of failure, delegate to
them enough authority, allow them to take initiative in completing their tasks,
and give them periodic, specific feedback on their performance.

(iii) Need for Affiliation- McClelland’s affinitive motive is similar to Maslow’s

social need. The person is concerned with forming friendly relations with
others, desire for companionship, and desire to help others. People dominated
by the affinitive need would be attracted to jobs that allow considerable social
interactions. Managers of such individuals should create a climate that does
not constrain interpersonal relations. A manager could also facilitate their
need satisfaction by spending more time with such individuals and
periodically bringing them together as a group.

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 McClelland’s theory and research have significant implications for managers. If the
motives of employees can be accurately measured, management can improve the
selection and placement processes. For example, an employee with a high need for
achievement may be placed in a position that would enable him to achieve. This would
result in higher performance. Need for achievement is the most crucial to a nation’s
economic progress as it contributes to entrepreneurial success.

Entrepreneurial Competencies

A competence may be defined as underlying characteristics of a person which results in

effective and/or superior performance in a job. A job competence is an underlying
characteristics of a person in that it may be motive, traits, skills, aspect of one’s self-
image or a body of knowledge which one uses.

Thus, success of an entrepreneur is governed by entrepreneurial competencies. If he has

all these competencies, he can be expected to achieve his entrepreneurial goals.
Elements of entrepreneurial competencies as follows:

(1) Body of Knowledge (2) Set of Skills

(3) Cluster of Appropriate Motives/Traits.

(1) Body of Knowledge: Innovation is possible only through knowledge. The inventor or
originator of the idea that led to the knowledge or vision, of some thing new; the artist
of creative Endeavour. Inventors include those who identify new technological
processes, new forms of plant life and new designs. Thus, inventions deal with new
processes, or new technical knowledge. In a simple way, knowledge means collections
of information and retention of facts that an individual stores in some parts of his
brain.

Creative process provides imaginative people, geminate ideas, nurture them and develop
them successfully. This type of idea has a value. However, it must be proven useful or
be marketable and to achieve either status or achievement, must be developed. But
innovation is the development process which translates an idea into an application. It
requires persistence in analytically working out the details of product design or service,
to develop marketing, obtain finances and plan operations.

(2) Set of Skills: Skill is the ability to demonstrate a system and sequence of behavior that
are functionally related to attaining a performance or goal. An entrepreneur is required
to have certain skills and these skills also constitute his leadership qualities. These
skills are as follows.

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 (a) Anticipatory Skills–Foresight into a constantly changing environment;

(b)Visioning Skills–The use of persuation and example to induce a group to act in

accordance with the leader’s purposes or the shared purposes of a larger group;

(c)Value Congruence Skills–The need to be in touch with employee’s economic,

safety, psychological, spiritual, sexual, aesthetic and physical needs in order to
engage people on the basis of shared motives, values and goals;

(d) Empowerment Skills–The willingness to share power and to do so

effectively; and

(e) Self understanding Skills–Introspective or self underskills as well as

framework within which leaders understand both their own needs and goals and
those of their employees.

In practice, an entrepreneur who pursues the idea, planning its application, acquiring
resources and establishing its market through persistence, planning, organizing and
leadership needs above skills. With the help of these skills, entrepreneur is expected to
perform well in his entrepreneurial behavior.

Cluster of Motives and Traits: Motives deal with recurrent concern for a goal, state or
condition appearing in fantasy, which drives, directs and selects behavior of the
individual. Actually motive represents thought related to a particular goal, state.
McClellend opined that “need achievement” is social motive to excel that tends to
characterize successful entrepreneurs especially when reinforced by cultural factors.
According to Paul Wilken “entrepreneurship becomes the link between need
achievement and economic growth. Thus, need for achievement is guiding force behind
entrepreneurial activities. It is the desire to do well and it motivates the people to
undertake innovative activities.

The trait may be defined as a dispositional or characteristic way in which the person
responds to an equivalent set of stimuli. These responses represent intelligence,
charisma decisiveness, enthusiasm, strength, bravery, integrity and self-confidence.
Thus, traits are an individual’s personal characteristics. Traits are contents of leadership
qualities. So an effective leader is one who possesses intelligence, alertness to the needs
of others, understanding of the task, good communication skills, initiative and
persistence in dealing with the problems. It is important to note that personal elements
that govern the leadership ability are intelligence, self-confidence, the drive to accept
responsibility, good communication skills and education

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In this way, entrepreneur is required to have certain traits. These traits are necessary for
leadership qualities expected from an entrepreneur. An entrepreneur should be (i)
adaptable to situations, (ii) alert to social environment,

(iii) ambitious and achievement oriented, (iv) assertive, (v) cooperative. (vi) decisive,
(vii) dependable, (viii) dominant (desire to influence others), (ix) energetic (high activity
level); persistent, (x) self-confident, (xi) tolerant of stress and (xii) willing to assume
responsibility.

Thus, for achieving success in his entrepreneurial behavior, entrepreneur is required to

have entrepreneurial competencies and these are consist of a set of knowledge, skills,
motives and traits.

Types of Entrepreneurial Competency:

The competencies may be classified into following categories:

(1) Personal entrepreneurial competencies.

(2) Venture initiation and success competencies:

(a) Enterprise launching competencies.

(b) Enterprise management competencies.

(1) Personal Entrepreneurial competencies:

It is the personal characteristics of an individual who possess to perform the task

effectively and efficiently. Personal entrepreneurial competencies include the following:

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(a) Initiative: The entrepreneur should be able to take actions that go beyond his job
requirements and to act faster. He is always ahead of others and able to become a leader
in the field of business. He Does things before being asked or compelled by the situation
and acts to extend the business into new areas, products or services.

(b) Sees and acts on opportunities: An entrepreneur always looks for and takes
action on opportunities. He Sees and acts on new business opportunities and Seizes
unusual opportunities to obtain financing, equipment, land, work space or assistance.

(c) Persistence: An entrepreneur is able to make repeated efforts or to take different

actions to overcome an obstacle that get in the way of reaching goals. An entrepreneur
takes repeated or different actions to overcome an obstacle and Takes action in the face
of a significant obstacle.

(d) Information Seeking: An entrepreneur is able to take action on how to seek

information to help achieve business objectives or clarify business problems. They do
personal research on how to provide a product or service. They seek information or ask
questions to clarify what is wanted or needed. They personally undertake research and
use contacts or information networks to obtain useful information.

(e) Concern for High Quality of Work: An entrepreneur acts to do things that meet
certain standards of excellence that gives him greater satisfaction. An entrepreneur states
a desire to produce or sell a top or better quality product or service. They compare own
work or own company’s work favourably to that of others.

(f) Commitment to Work Contract: An entrepreneur places the highest priority on

getting a job completed. They make a personal sacrifice or take extraordinary effort to
complete a job. They accept full responsibility for problems in completing a job for
others and express concern for satisfying the customer.

(g) Efficiency Orientation: A successful entrepreneur always finds ways to do things

faster or with fewer resources or at a lower cost. They look for or finds ways to do
things faster or at less cost. An entrepreneur uses information or business tools to
improve efficiency. He expresses concern about costs vs. benefits of some improvement,
change, or course of action.

(h) Systematic Planning: An entrepreneur develops and uses logical, step-by- step
plans to reach goals. They plan by breaking a large task into subtask and develop plans,
then anticipate obstacles and evaluate alternatives. They take a logical and systematic
approach to activitie

(i) Problem Solving: Entrepreneurs identify new and potentially unique ideas to
achieve his goals. They generate new ideas or innovative solutions to solve problems
and they take alternative strategies to solve the problems.

(j) Self-Confidence: Entrepreneur with this competency will have a strong belief in
self and own abilities. They express confidence in their own ability to complete a task or
meet a challenge. They stick to their own judgment while taking decision.
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(k) Assertiveness: An entrepreneur confronts problems and issues with others
directly. Entrepreneur with this competency vindicate the claim to asset their own rights
on others. They demand recognition and disciplines those failing to perform as expected.
They asset own competence, reliability or other personal or company’s qualities. They
also assert strong confidence in own company’s or organization’s products or service.

(l) Persuasion: Entrepreneurs with this competency successfully pursue others to

perform the activities effectively and efficiently. An entrepreneur can persuade or
influence others for mobilizing resources, obtaining inputs, organizing productions and
selling his products or services.

(m) Use of Influence Strategies: An entrepreneur is able to make use of influential

people to reach his business goals. Entrepreneurs with this competency influence the
environment (Individuals/Institution) for mobilizing resources organizing production
and selling goods and services to develop business contacts.

(n) Monitoring: Entrepreneurs with this competency normally monitor or surprise all
the activities of the concern to ensure that the work is completed by maintaining good
quality.

(o) Concern for Employee Welfare: Entrepreneurs with this competency take action
to improve the welfare of employees and take positive action in response of employee’s
personal concerns.

(2) Venture Initiation and success Competencies

SOCIAL RESPONSIBILITY OF ENTREPRENEUR

The entrepreneur is the pivot of development,” this statement attract our attention
towards the importance of entrepreneurs in economic development. Economic
development of a country takes place when output increases as a result
of entrepreneurial activity. The entrepreneur is the central figure in the process of
development. The economic development of a country to a large extent depends on
human resources. But the human resources alone can not bring economic development
and for solving this purpose, there must be dynamic entrepreneurs. A country maybe
rich in natural resources but if it lacks in dynamic entrepreneurs then, it may not be able
to utilise the resources and it may lag in economic development. Entrepreneurs are
action oriented, highly motivated
individuals who take risks to achieve goals. An entrepreneur is one who looks for
opportunities, identifies and seizes them mainly for profit. Entrepreneurs seizing
opportunities set up business undertaking and industries,
economic thereby make transformation.

Entrepreneurs perform vital functions in economic development. They have been

referred to as the human agents needed to mobilise capital, to exploit natural resources,

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to create markets and to carry on trade. It has been well said that entrepreneurial
inputs spells the difference between prosperity and poverty among nations.

MEANING AND DEFINITIONS OF SOCIAL RESPONSIBILITY

Business ventures are a unit of society in which they operate. These enterprises depend
on society for the needed resources like men, material, capital and also for selling their
products. In fact, business depends on the society for its existence, growth and
promotion. Hence entrepreneurs have a definite social role and responsibility towards
the society. Social responsibility denotes the responsibility of the business towards
various sections of the society.
Businessmen must consider wider public interest while taking business decisions. A few
scholars have defined ‘social responsibility’ in the following way :
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.”
In the words of Adolph Berle, “Social responsibility is the business’s responsiveness to
public consensus, i.e., the obligation of the business to meet those demands and
aspirations of the society about which there ispublic consensus. ” H.R. Bowen defines as
“Social responsibility is the obligation to pursue those policies, to make those decisions
or to follow those lines of action tv hich are desirable in terms of objectives and values
of our society

ENTREPRENEURSHIP DEVELOPMENT PROGRAMMES

It is true that a person must have certain entrepreneurial attributes and need not
necessarily belong to a particular caste, community or a group to become an
entrepreneur. But mere personality traits of an individual would not be sufficient
condition for him/her becoming an entrepreneur. Other social, cultural and economic
factors as well as support-system also influence, to a considerable extent, the promotion
and development of entrepreneurship. However, it has been found that the
entrepreneurial attributes of an individual can be improved, to a certain extent, through
stimulation and training, provided he or she has latent potential for entrepreneurship.
The entrepreneurial potential of an individual thus developed can lead to the promotion
of an enterprise with the help of counselling, infrastructural support and financial
assistance from institutional sources. And in this way, the constraints in development of
entrepreneurship due to unfavourable personality traits, social conditioning, cultural
ethos and economic factors, could be reduced to a great extent.

The present lesson describes the concept of entrepreneurship development, the main
objectives of Entrepreneurship Development Programme (EDP), need for training and
development, phases of EDPs and organisational efforts for EDPs in India.

The Concept of Entrepreneurial Development

Development of entrepreneurship incorporates four basic issues viz (i) the availability of
material resources (ii) the selection of real entrepreneurs, (iii) the formation of industrial
units, and (iv) policy formulation far the development of the region. All these issues are
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closely inter-related. Given the resources and the entrepreneurs expected to exploit them,
the focal issue that remains is, that of the type of the industrial unit, particularly because
it affects the proper utilisation of raw material and the marketing of the product. An
interaction of the first two variables, and the ground work created by the third one
depends an the specific policies which constantly supervise the direction of the process

of economic development of the region. Development of an entrepreneur means

inculcating entrepreneurial traits into a person, imparting the required knowledge,
developing the technical, financial, marketing and managerial skills, and building the
entrepreneurial attitude. The process of entrepreneurial development involves equipping
a person with the information used far enterprise building and sharpening his
entrepreneurial skills.

Entrepreneurial development programme (EDP) may be defined as “a programme

designed to help an individual in strengthening his entrepreneurial motive and in
acquiring skills and capabilities necessary for playing his entrepreneurial role
effectively. It is necessary to promote this understanding of motives and their impact on
entrepreneurial values and behavior for this purpose.

An EDP is based on the belief that individuals can be developed, their outlook can be
changed and their ideas can be converted into action through an organized and
systematic programme. EDP is not merely a training programme. It is process of (a)
enhancing the motivation, knowledge and skills of the potential entrepreneurs, (b)
arousing and reforming the entrepreneurial behaviour in their day-to-day activities, (c)
assisting them develop their own ventures or enterprise as a sequel to entrepreneurial
action.

Need for Training and Development

The urge to achieve is one of the most significant variables associated with economic
development. People with high need for achievement tend to be more successful
entrepreneurs as compared to people with low achievement. The Kakinada Experiment
revealed that entrepreneurship can be developed through training and is not necessarily a
hereditary quality. The man behind a project rather than physical and financial facilities
is the key to entrepreneurial success. The significance of personality lies in the fact that
it is the entrepreneur who has to start and run the enterprise and overcome obstacles in
the process of building up and growth of enterprise. The objective of entrepreneurial
training is to develop motivation and competence necessary for successful launching,
management and growth of the enterprise. Entrepreneurial development is relatively a
recent phenomenon as-compared, to executive development.

The objectives of an entrepreneurial development programme (EDP) may be divided

into two categories : short-term objectives, and long-term objectives.

Short-term Objectives : Short-term objectives imply the objectives which are to be

achieved immediately after the completion of the programme. Preparing a personality
for the entrepreneurial venture, making him competent to scan the environment and
situation within the existing regulatory framework are the short term objectives. In brief,

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short term objective is to help a participant in the fixation of his/her goal of life as
entrepreneurisation.

Long-term Objective : In the long run, an entrepreneurial development programme

seeks to equip the participants with all the skills required for the establishment and
smooth running of business ventures.

Thus, the objectives of an entrepreneurial development programme are as follows:

(i) to enlarge the supply of entrepreneurs for rapid industrial development;

(ii) to develop small and medium enterprises sector which is necessary for employment
generation and wider dispersal of industrial ownership;

(iii) to industrialise rural and backward regions;

(iv) to provide gainful self-employment to educated young men and women;

(v) to diversify the sources of entrepreneurship, and;

(vi) to improve the performance of small scale industries by developing managerial

skills among small entrepreneurs.

Phases of Entrepreneurial Development Programme

An entrepreneurial development programme consists of three broad phases:

1. Pre-training Phase

2. Training Phase

3. Post-training Phase

1. Initial Phase : This phase includes the activities and the preparations required to
launch the training programme. The main activities of this phase are:

(a) Arrangement of Infrastructure for training

(b) Preparation of training syllabus and application form

(c) Tie up of guest faculty

(d) Designing tools and techniques for selecting the trainees

(e) Formation of selection committee

(f) Publicity campaign for the programme

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Thus, initial stage involves the identification and selection of potential entrepreneurs and
providing initial motivation to them.

2. Training Phase : In this phase the training programme is implemented to develop

motivation and skills among the participants. The objective of this phase is to bring
desirable changes in the behaviour of the trainees. The trainers have to judge how much,
and how far the trainees have moved in their entrepreneurial pursuits. A trainer should
see the following changes in the behaviour of participants.

(a) Is there any change in his entrepreneurial outlook, role and skill ?

(b) Is he motivated to plunge for entrepreneurial venture and risk that is expected of an
entrepreneur?

(c) What kind of entrepreneurial behaviour does the trainee lack?

(d) Does he possess the knowledge of technology, resources and other related
entrepreneurial knowledge?

(e) Is he skilful in choosing the right project, mobilising the right resources at the right
time?

3. Post-Training or Follow-up Phase : Under this phase it is assessed that how far the
objectives of the programme have been achieved. Monitorin and follow up reveals
drawbacks in the earlier phases and suggests guidelines, for framing the future policy. In
this phase infrastructural support, counseling and assistance in establishing new
enterprise and in developing the existing units can also be reviewed.

Selection of Potential Entrepreneurs

The first step in the EDP is the proper identification and selection of potential
entrepreneurs. Selection and training of an unsuitable person to go into independent
business is a national waste as well as harmful to the person concerned. His failure in
business would result in loss of prestige, or social standing and a setback in life.

A) Identifying Entrepreneurial Traits

Every participant must have a minimum level of eligibility for developing into an
entrepreneur. Entrepreneurial traits include socio-personal and human resources
characteristics.

(i) Caste and family background

(ii) Age and Education

(iii) Size and type of family

(iv) Social participation

(v) Achievement-motivation

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(vi) Risk taking willingness

(vii) Personal efficacy

B) Identification of Enterprise

Once an entrepreneur having necessary socio-personal and human resource

characteristics is identified, it is necessary to identify a suitable enterprise or project for
him. The enterprise must be matched with the potential entrepreneur. All the background
information like his skills, experience in the field, the physical resources available,
family occupation, etc. should be taken into consideration.

Contents of Training Programme

(1) Technical Knowledge and Skills : The entrepreneur has to be wellconversant with
the process of manufacture and trading for which a practical training based on sound
theory is essential.

(2) Achievement Motivation Training (AMT) : The purpose of AMT is to develop

the need to achieve, risk taking, initiative and other such behavioural or psychological
traits. A motivation development programme creates selfawareness and self-confidence
among the participants and enables them to think positively and realistically.

(3) Support Systems and Procedures : Training needs to include information about
support systems. The participants have to be exposed to agencies like the local banks
and other financial institutions, industrial services corporations and other institutions
dealing with supply of raw materials, equipment, etc. The session on support systems
needs to also include the procedures for approaching them, applying and obtaining
assistance from them and availing of the services provided by them. A linkage between
the training institute and the support system agencies can be established by participation
of these agencies in sponsoring and financing the EDP.

(4) Market Survey : The participants should be given opportunity to actually conduct
market surveys for their chosen projects. This would help expose the candidate to the
marketing avenues available and could be followed by sessions on methods of dealing in
the markets.

(5) Managerial Skill : Once a participant is able to start the enterprise, he requires
managerial skills. A list of the agencies along with details of the formalities to be
completed, specimen forms to be filled in would greatly facilitate the entrepreneurs.

(6) Project Preparation : A lot of time needs to be devoted to the actual preparation of
projects. Their active involvement in this task would provide them necessary,
understanding and also ensure their personal commitment.

Support Systems

After equipping himself with the requisite skills, the new entrepreneur is now ready to
set up his enterprise. In order to launch his new venture, he requires assistance and
support of many agencies. These are the support systems which form a large and an

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important part of the EDP. The strength and coordination of the support system form the
backbone of an EDP. Credit, service and implementing institutions, form the three major
support systems.

In order to accelerate growth of entrepreneurship, it is absolutely necessary to develop

various support systems at least in the initial stages of growth. Such support systems
have to function till such time a critical number of entrepreneurs are developed in the
society, so that entrepreneurship does not remain an isolated, individual-dominated
phenomenon. Only systematic and organised nurturing of entrepreneurship would
ultimately generate. pressures in the existing socioeconomic and political institutions,
cultural attitudes, practices and values towards modernization.

Monitoring and Follow Up

For the success of any entrepreneurial development continuous monitoring and follow
up is essential. It is only through proper monitoring that defects and problem can be
identified and removed. Care is required so that the monitoring procedure is not too
bureaucratic where rules become inhibitive rather than promotive. Monitoring should
provide continuous guidance to ensure better results.

The Target Group

The EDPs may be organised for anyone of the following target groups:

(1) Technical and other Qualified Persons : This group consists of persons who have
pursued technical and allied courses of study. For instance, degree/ diploma holders in
science, engineering and technology are an important group in India. The government
and Semi-Government agencies/institutions operate special entrepreneurial development
programmes and schemes of assistance for this group. The training programme for such
people may be designed to enable and assist them in setting up their own manufacturing
units.

(2) Ex-Servicemen : Persons who have retired from the army, navy and airforce
constitute an important group for entrepreneurial training. These persons have acquired
many useful skills and experience during their service period. They tend to be highly
disciplined, hardworking, enterprising and innovative. Therefore they can become
successful entrepreneurs after proper entrepreneurial training. The Government of India
provides special facilities and preference in order to rehabilitate them. Many ex-
servicemen are successfully operating their own manufacturing, training and service
enterprises in the country.

(3) Business Executives : Some business executives want to start their own independent
enterprises after getting sufficient business experience. Some of them have certain
innovative ideas which they are not able to try in their existing firms due to lack of
sufficient autonomy or authority. Some among them are not satisfied with their present
economic and social status. After entrepreneurial training senior business executives can
become successful entrepreneurs. They already possess knowledge of management. .

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(4) Women Entrepreneurs : Women are entering the world of business in increasing
numbers, especially traditional food processing industries like spices, agarbati, papad,
sauces, etc? Several government and non government organisations e.g. FICCI Ladies
Organisation, etc. are therefore, organizing entrepreneural training programmes for
women.

(5) S.C. and S. T. Entrepreneurs : Government of India is committed to the upliftment

of scheduled castes (S.C.) and scheduled Tribes (S.T.) Therefore, specified percentages
of jobs have been reserved for these castes. But all persons from these groups can not be
offered employment. Therefore, providing self-employment is useful for their economic
and social development. Government agencies give preference to S.C. and S.T.
entrepreneurs in providing finance and other necessary facilities.

(6) Special Agencies and Schemes : The Government of India has established
specialised agencies for training entrepreneurs. Special schemes have also been launched
to train, develop and assist entrepreneurs. Some of the special agencies and schemes for
entrepreneurial development are given below. These programmes should be conducted
in places where necessary infrastructure for training is available and proximity of the
support agencies is assured. This would underline the need for proper selection of the
trainees.

Entrepreneurship Development Programme Organisations

There are several organisations engaged in conducting entrepreneurship development

programmes in India. The lead in the matter was given by Small Industries Development
Organisation through its Small Industries Service Centres.

In the area of creating the institutional infrastructure for entrepreneurship development,

the first step of India financial institutions including IFCI was the establishment of
Entrepreneurship Development Institute of India (EDII)

in March, 1983, at Ahmedabad as a resource organisation at the national level. The

Central Government also established in the same year the National Institute for
Entrepreneurship and Small Business Development (NIESBUD) at New Delhi, with the
objective of co-ordinating activities related to entrepreneurship and small business
development. Both these organisations are working hand in hand for giving a fillip to the
entrepreneurship development movement.

In addition, institutions established by the government are: Rural Entrepreneurship

Development Institute (RED) at Ranchi in 1983, Rural Management and Management
centres (RMEDC) at Maharastra and Trainingcum Development centres (RDCS) aim
increasing interaction between entrepreneurs and enterprise.

This apart, a host of management institutions various universities have included

entrepreneurship development in their Curriculum. Other organisations that have-been
actively conducting entrepreneurship development programmes are State Bank of India;
financial institutions such as IDBI; Entrepreneurial Motivation Training Centre in

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Northern-Eastern Region; Xavier Centre for Entrepreneurship Development,
Ahmedabad; state financial corporations; the Centre for entrepreneurship Development,
Hubli; Small

Industries Extension Training Institute, Hyderabad; National Science and Technology

Entrepreneurship Development Board etc. For institutionalising the entrepreneurship
development activities at the state level, Institutes of Entrepreneurship Development
(IEDs) in Uttar Pradesh, Bihar and Orissa have already come into existence with the
support of India’s financial institutions, concerned State Governments and banks, and
are carrying on their activities on a full-fledged basis. During the period under review, a
Centre for Entrepreneurship Development (CED) was registered in Madhya Pradesh on
17th November, 1988, taken up later by IFCI

The National Institute for Entrepreneurship and Small Business

Development (NIESBUD)

The Delhi-based National Institute for Entrepreneurship and Small Business

Development (NIESBUD), established by the Government of India, is an apex body for
coordinating and overseeing the activities of various institutions and agencies engaged
in entrepreneurship development particularly in the l area of small industry and small
business. The Institute, registered as a Society under Government of India Societies Act
XXI of 1860, started functioning from 6 July, 1983.

Over the years, the Institute stands devoted to evolving model syllabi for training
various target groups-by effective training strategies, methodology, manuals and tools;
facilitating and supporting Central/State governments and other agencies in benefit and
accelerating entrepreneurship development; conducting programmes for motivators,
trainers and entrepreneurs which are commonly not undertaken by other agencies.
Above all organising those that help in developing entrepreneurial culture is worth
appreciation in society. The Institute is also the secretariat of the National
Entrepreneurship Development Board (NEDB), the apex body which determines policy
for entrepreneurship development in the country. The Institute, therefore, performs the
task of processing the recommendations made by the Board.

Objectives

The main objectives of the NIESBUD are :

— To accelerate the process of entrepreneurship development ensuring its

impact throughout the country and among all segments of the society.

— To help/support institutions/agencies in carrying out activities relating

to entrepreneurship development with greater success.

— To evolve standardised process of selection, training support and,

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sustenance to potential entrepreneurs enabling them to set up and run

their enterprise successfully.

— To provide vital information support to trainers, promoters and

entrepreneurs by organising documentation and research work relevant

to entrepreneurship development.

— To provide functional forums for interaction and exchange of experiences

helpful for Policy formulation and modification at various levels.

Institutes for Entrepreneurship Development

As part of ‘a strategy of giving special attention to entrepreneurship development needs

of the more backward states, IDBI had announced the proposal to set up Institutes for
Entrepreneurship Development (IEDs) in association with other financial institutions
and banks and the State Governments. IEDs set up in Uttar Pradesh, Bihar and Orissa
have become operational and the proposed lED in Madhya Pradesh has already been
registered.

PROGRESS CHECK

Question No: 18

Which one of the following is the most important characteristic of a successful business

website?

a) Innovation

b) Speed

c) Graphics

d) Products

Question No: 19

Which one of the following is the next stage to the Concept Stage of Product Planning
and

Development Process?

a) Idea Stage

b) Product Planning Stage

c) Product Development Stage

d) Test Marketing Stage

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Question No: 20

SBA stands for:

a) Small business accountants

b) Small business administration

c) Small business adequacy

d) Small business advisors

Question No: 21

Why should an entrepreneur do a feasibility study for starting a new venture

a) To identify possible sources of funds

b) To see if there are possible barriers to success

c) To estimate the expected sales

d) To explore potential customers

Question No: 22

Information regarding all of the following is related to operations, EXCEPT:

a) Location

b) Promotion

c) Raw materials

d) Labor skills

Question No:23

A performance and credit rating scheme has been launched by the MSME Ministry to
assess

creditworthiness and capabilities of industries in the sector. What is it called?

(a) Performance and Credit Rating Scheme

(b) Zero Defect Zero Effect Certification

(c) Performance and Economy Rating Scheme

(d) None of the above

Question No: 24

A Micro Enterprise is an enterprise where investment in plant and machinery does not
exceed

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(According to MSMED Act, 2006):

(a) Rs. 15 Lakh

(b) Rs. 20 Lakh

(c) Rs. 25 Lakh

(d) Rs. 30 Lakh

Question No: 25

EDP (Entrepreneurship Development Programmes) is required to help:

(a) Existing entrepreneurs

(b) First generation entrepreneurs

(c) Future generations entrepreneurs

(d) None of the above

QUESTION BANK

Entrepreneurship Question Bank

23.What is innovation? Why is it important in entrepreneurship? Describe a few ways to

promote innovations in an organization.

24.. Define the different techniques of project identification?

25.. What do you mean by business risk? Explain its causes?

26. What is meant by Sole Proprietorship? Explain its characteristics?

27. Explain the Role of Central Government and State Government in Promoting

Entrepreneurship

28. What is the financial planning? Explain its objectives?

29. What is working capital? Why is it important for any enterprise?

30. Explain Social view of business idea.

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 UNIT IV

ROLES OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT

Learning Objective of this unit:

This unit will clarify students concepts on :

1. Role of Entrepreneur, GDP- Economy, Balanced regional development, Employment

opportunity, Complimenting and supplementing economic growth,

2. Export promotion & Import substitution

3. Foreign exchange earning

ROLE OF ENTREPRENEUR

Every new business that locates in a less developed area will create both direct and
indirect jobs, helping lift regional economies in many different ways. The combined
spending by all the new employees of the new businesses and the supporting jobs in
other businesses adds to the local and regional economic output. Both central and state
governments promote this kind of regional development by providing registered MSME
businesses various benefits and concessions.

Wealth Creation and Sharing: By establishing the business entity, entrepreneurs

invest their own resources and attract capital (in the form of debt, equity, etc.) from
investors, lenders and the public. This mobilizes public wealth and allows people to
benefit from the success of entrepreneurs and growing businesses. This kind of pooled
capital that results in wealth creation and distribution is one of the basic imperatives and
goals of economic development.

Create Jobs: Entrepreneurs are by nature and definition job creators, as opposed to job
seekers. The simple translation is that when you become an entrepreneur, there is one
less job seeker in the economy, and then you provide employment for multiple other job
seekers. This kind of job creation by new and existing businesses is again is one of the
basic goals of economic development. This is why the Govt. of India has launched
initiatives such as StartupIndia to promote and support new startups, and also others like
the Make in India initiative to attract foreign companies and their FDI into the Indian
economy. All this in turn creates a lot of job opportunities, and is helping in augmenting
our standards to a global level.

Balanced Regional Development: Entrepreneurs setting up new businesses and

industrial units help with regional development by locating in less developed and
backward areas. The growth of industries and business in these areas leads to
infrastructure improvements like better roads and rail links, airports, stable electricity
and water supply, schools, hospitals, shopping malls and other public and private
services that would not otherwise be available.
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 GDP and Per Capita Income: India’s MSME sector, comprised of 36 million units that
provide employment for more than 80 million people, now accounts for over 37% of the
country’s GDP. Each new addition to these 36 million units makes use of even more
resources like land, labor and capital to develop products and services that add to the
national income, national product and per capita income of the country. This growth in
GDP and per capita income is again one of the essential goals of economic
development.

Standard of Living: Increase in the standard of living of people in a community is yet

another key goal of economic development. Entrepreneurs again play a key role in
increasing the standard of living in a community. They do this not just by creating jobs,
but also by developing and adopting innovations that lead to improvements in the
quality of life of their employees, customers, and other stakeholders in the community.
For example, automation that reduces production costs and enables faster production
will make a business unit more productive, while also providing its customers with the
same goods at lower prices

Exports: Any growing business will eventually want to get started with exports to expand
their business to foreign markets. This is an important ingredient of economic
development since it provides access to bigger markets, and leads to currency inflows
and access to the latest cutting-edge technologies and processes being used in more
developed foreign markets. Another key benefit is that this expansion that leads to more
stable business revenue during economic downturns in the local economy

Community Development: Economic development doesn’t always translate into

community development. Community development requires infrastructure for education
and training, healthcare, and other public services. For example, you need highly
educated and skilled workers in a community to attract new businesses. If there are
educational institutions, technical training schools and internship opportunities, that will
help build the pool of educated and skilled workers.

A good example of how this kind of community development can be promoted is Azim
Hashim Premji, Chairman of Wipro Limited, who donated Rs. 27,514 crores for
promoting education through the Azim Premji Foundation. This foundation works with
more than 350,000 schools in eight states across India.

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Generation of Employment Opportunities

Entrepreneur plays a significant role in generation of employment opportunities. As we

all know, entrepreneurship is a purposeful activity indulged in initiating, promoting and
maintaining economic activities for production and distribution of goods and
commodities, the person behind these economic activities is, therefore, a critical factor
as well as an integral component of socio-economic transformation. The development
strategy of our country confronts two important problems-unemployment and poverty of
the masses. These problems can be effectively minimized by activating the latent human
potentials through entrepreneurship. This leads to the creation of self-employment
avenues for large number of people.

For reduction of unemployment, entrepreneurship in small and tiny sector industries,

both in manufacturing and service sectors, is imperatively needed. Thus, the role of
entrepreneur and its significance in generation of employment opportunities can be
depicted under the following heads.

So, there is a very important role for entrepreneurs to spark economic development by
starting new businesses, creating jobs, and contributing to improvement in various key
goals such as GDP, exports, standard of living, skills development and community
development.

Establishing tiny, micro and small scale enterprises: Role of entrepreneur in

establishment the above types of enterprises is perceived as a powerful medium to
address several socio-economic issues and the chief among them is generation of
employment opportunities for millions. In a developing economy like India, where
population pressure is quite high and job employment is limited, the role of entrepreneur
is very much significant. Entrepreneurial development gives rise to economic
independence through self-employment. Creation of tiny, micro and small enterprises by
the entrepreneurs can lead to creation of both self- employment and wage- employment
opportunities, thereby solving the problem of unemployment in the economy.

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Giving emphasis upon village and cottage industries: Up liftment of economically
backward sections of the society can be possible if self- employment opportunities can
be provided at the grass root level. To enable these people in backward regions of the
state to set up village and cottage industries, government has implemented several
antipoverty programmes like PMRY, TRYSEM, SGSY, REGP etc, and the importance
of entrepreneurs in cottage and village industries sector has been clearly acknowledged
by Mahatma Gandhi by his policy priorities in village upliftment including khadi and
village industries in his famous constructive programme in 1922. Prior to independence,
cottage industries and handicraft production located in rural areas had occupied a
distinct place in Indian economy because of their high potential in employment
generation and income creation especially in rural and backward areas. As such,
entrepreneur can play a significant role in setting up and reviving the cottage and village
industries, thereby creating employment opportunities to a large number of people living
in rural and backward pockets of the country.

Utilising the surplus labour force in industrial activities: India is a primary producing
country. This characteristics feature is further accentuated by seasonality feature of the
agriculture. Therefore, for a large part of the year, people remain, more unemployed.
Disguised unemployment is a chronic phenomenon in agriculture where in more people
work in a field than actually required. So the surplus labour force is transferred and
utilized by the entrepreneur in non-farm sector activities like small tiny, cottage and
village industries which are labour intensive in nature.

Growing unemployment especially among qualified or educated youths is great

challenge in many economies. If such persons become entrepreneur and form new
enterprises, they will not only create jobs for themselves but also provide direct
employment to many more individuals, Current interest in small enterprises in most of
the courtiers especially in developing ones, originates largely form the widespread
concern over unemployment

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 An entrepreneur creates lot of employment opportunities for different sections of
society. By generating opportunities, the entrepreneur adds to the economic growth.
Setting up a new venture leads to creation of new opportunism for labour, supplier of
inputs, supplier of industrial equipments, marketing traders etc. All these sectors are
benefited by the setting up of new enterprises of the expansion/diversification of existing
ones. Employment opportunities are created by the entry of new units in the economy.
When the existing units increase their production capacity, more employment
opportunities are created.

A new industrial unit will require raw materials, power, water, banking and
communication facilities, plant and machinery, furniture and fixtures etc. The providers
of all these goods and facilities will get work from the new unit. The suppliers of all the
goods and services will certainly gain from this demand. These input and services will
be required on a regular basis on permanent demand is created for these things.

The goods and services produced by the entrepreneurs will be sold in the market. This
would require the services of traders. The increase in trading activity will further require
the services of transport, warehousing, insure, advertising, communication etc. The
resultant effect would be creation of more job opportunities in the economy.

Social Stability

Establishment of large enterprises leads to concentration of economic power in a few

hands in the society. Such concentration has its own evils in the form of monopolies and
monopolistic exploitation of the consumers and the society as a whole. Hence
developing a large number of small entrepreneurs would help in even distribution of
economic power, ultimately bringing about social stability. Entrepreneurs bring social
stability also by generating self-employment and facilitating development of rural and
backward areas.

Social stability comes along with prosperity in the society. Entrepreneurs help the
society in attaining social stability in the following ways:

(i) Entrepreneurs create both direct and indirect employment for the society. They
generate self employment by setting up their units and have a respectable social life.
Those who have the talent and knowledge can start their own units. There are many
government and non-government agencies which helping selling up new units. Besides
self employment, these units create millions of jobs in the country. Employment
provides respectable life to people in the society. When people have opportunities for
work, they will certainly channels their energies into productive activities.

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(ii) Enraptures set up industries which remove scarcity of essential commodities. They
also introduce new products as per the requirements of the society. This helps in
improving the standard of living of the people.

(iii) Entrepreneurs are units. Besides self employment, these units create millions of jobs
in the country. Employment provides respectable life to people in the society. When
people have opportunities for work, they will certainly channels their energies into
productive activities.

(iv) They set up industries which remove scarcity of essential commodities. They also
introduce new products as per the requirements of the society. This helps in
improving the standard of living of the people.
(v) Entrepreneurs are conscious of their social responsibilities. Many entrepreneurs
try to help the society by creating infrastructural facilities for the society, providing
medical and educational faculties, controlling pollution etc.

(vi) Entrepreneurs start and run productive ventures. They create wealth for the
nation and help in increasing the national income. Ultimately, per capital income of
the people goes up leading to rise in their standard of living.

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BALANCED REGIONAL DEVELOPMENT

Meaning of Balanced Regional Development:

Balanced regional development is an important condition for the harmonious and

smooth development of a country. It does not imply equal development of all regions of
a country. Rather it indicates utilisation of development potential of all areas as per its
capacity so that the benefit of overall economic growth is shared by the inhabitants of all
the different regions of a country.

Thus the regional balance implies uniform distribution pattern of the planned investment
among different regions of a country. Alternatively, regional balance demands
distribution of investment in such a way so that the regional rates of growth in different
parts of the country be equally attained, eliminating the regional disparities prevailing in
the country.

Considerations for Balanced Regional Development:

(1) Economic Considerations: Balanced regional development is advocated mostly

for the following three economic considerations:

Utilisation of local resources: Balanced regional development paves the way for
optimum utilisation of resources available in different regions of the country. Over
concentration of industrial activity into certain centres leads to wastage of local
resources like raw materials, fuels, labour, skills, etc. for their non utilisation.

Expansion of employment opportunities: Employment opportunities in a country will

be expanded uniformly at a satisfactory rate under balanced regional development
opportunities in different industries over different parts of the country.

Utilisation of Infra-structural Facilities: Balanced regional development paves the

way for total utilisation of various infra-structural facilities like means of transport and
communications, power resources, irrigation facilities, educational and health facilities
developed in all the different regions of the country

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(2) Non-Economic Considerations: The following are the two non-economic
considerations of balanced regional development:

Socio-Political Arguments: Balanced regional development can remove those socio-

political problems related to health, housing, law and order, cultural decadence etc.
arising out of concentration of industries at a few points. Moreover, it can avoid the
necessity of large scale emigration of labour to distant industrial centres through
regional dispersion of industrial activity.

Besides, balanced regional development can pave the way for an egalitarian society
having negligible differentials in per capita incomes and other parameters existing
between classes and regions.

Strategic Considerations: Balanced regional development favours regional dispersion

of industrial activities under strategic considerations, i.e., under considerations of
national defence and industrial security. Now-a-days, concentration of industries at a
few points is risky as it becomes easy targets of attack and bombardment during wars.

Need for Balanced Regional Development

The basic policy followed by the Indian Government since independence in regard to
location of industries is the achievement of balanced regional growth of the country.
Balanced regional development has been a vital part of India economic planning.
Different way have been followed to achieve balanced industrial policy statements made
by the Government form time to time have also emphasized the need of balanced
regional development.

The objective of Government policy on location is balanced regional development

through decentralization of industries. It is felt that balanced regional development will
lead to the achievement of the following benefits:

(i) Reduction of regional disparities in the distribution of income and wealth.

(ii) Removal of poverty in backward areas and increase in the standard of

living of the people.

(iii) Provision of employment opportunities on an equitable basis.

(iv) Optimum utilization of national resources.

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 (v) Control over the problems of slums, overcrowding, congestion of traffic,
etc.

Another important justification of Government’s regulation of industrial location is to

prohibit setting up chemical and other industries carrying hazards to human life near the
populated areas so that the tragedies of the kind of Bhopal Gas Case (1984) do not occur
again.

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SUPPLEMENTING AND COMPLEMENTING ECONOMIC GROWTH

Schumpeter postulates that the rate of economic progress of a country depends largely
upon its rate of innovation, which in turn, depends upon the entrepreneurial talents.
According to Schumpeter, technological development cannot alone bring about
economic growth unless they are put to practical use by the entrepreneurs. Similarly,
Peter Drucker has also emphasized that this is the age of entrepreneurial society.
Economic development and growth of a country depends to a great extent upon effective
entrepreneurship. In his opinion, 92 entrepreneur plays a crucial role for the creation of
new small enterprises that energize the economic structure. Through constant creativity,
new businessmen/entrepreneurs assure a strong economy and rising national income.

Thus, the role of entrepreneur is important, as it is not only complements but also
supplements the economic growth of the Country.

Mobilization of Capital: Entrepreneur’s efforts to mobilize the capital results in

motivating the investors to divert their ideal savings in the industrial enterprises.
Investment of public saving in industrial sector helps the country to use financial
resources for productive purposes. The growth rate of capital formation will be
increased which is highly essential for rapid economic development of a country. It is in
the sense that entrepreneurs grenade capital at a rapid rate and capital formation
increases which is vital for the industrial development.

Generation of Employment: Entrepreneurs become self-employed and self- sufficient.

They do not depend on the government jobs or private jobs and directly employ
themselves by starting their own enterprises. In fact, they also privet jobs to many
unemployed by setting up large and small scale industrial. Thus, entrepreneurs play an
important role to reduce the unemployment problem in the country and pave the way for
economic development.

Backward and Forward Linkages: It is the entrepreneur who initiatives change and
this to maximize his profits by innovations. Setting up of an enterprise in accordance
with the changing technology has several backward and forward linkages. For example,
the establishment of a textile unit generates several ancillary units and expands demand
for cotton, chemicals, dyes, etc.

Others:

(i) Balanced regional development.

(ii) Improvement of per capita income.

(iii) Improvement of Standard of living.

(iv) Import substitution and export promotion.

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ROLE OF AN ENTREPRENEUR IN EXPORT PROMOTION AND IMPORT
SUBSTITUTION:

An entrepreneur has a similar, but not identical, role under both import substitution and
export promotion models of economic development. Import substitution is based on the
idea that a country can stimulate its own economic growth (particularly in the earliest
stages of its development) by creating its own domestic industries to replace foreign
imports. Entrepreneurs would be needed in an import substitution model, not so much to
come up with brand-new ideas as to come up with new ways to execute known ideas.
Their primary role would be to find a way to make products that are cheaper to produce
or more attractive to local populations than the foreign imports. It is notable that most
import substitution models rely on tariffs to restrict imports, which would perform part
of the entrepreneurs' task for them. Furthermore, import substitution is sometimes
(though not always) a state-led project, which would also diminish the need for private
entrepreneurs. Economists also theorize that import substitution slows technological
progress by removing opportunities for the "cross-fertilization" of ideas that comes from
trade. This means that an import substitution model may result in fewer entrepreneurs
with valuable ideas over time.

In an export promotion model, entrepreneurs would be needed to come up with ideas for
products and services that would be attractive to the rest of the world, either based on
their price of production or their novelty, quality, or other unique characteristics. This is
the scenario that generally creates the type of entrepreneur that is popular in the public
imagination, like Bill Gates. Furthermore, economists theorize that export promotion
and free trade promote faster technological progress. Export promotion models,
therefore, do not just depend on entrepreneurs—they also produce them.

Export Processing Zones

Export Processing Zones (EPZs) can be summarized as a unit bearing clusters of

specially designed zones of aggressive economic activity for the promotion of export.
The main concept of Export Processing Zones was conceived in the early 1970s to
promote the growth of the sickening export business of India. Further, the meaning of
Export Processing Zones (EPZs) can be broadly defined as an area enjoying special
government of India support with respect to fiscal incentives, tax rebates and other
exclusive benefits for the growth of export.

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Objectives of setting up of EPZs:

(1) Encourage and generate the economic development.

(2) Encourage Foreign Direct Investments (FDI).

(3) To channel the sources of foreign exchange within the system in a phased
manner.

(4) Foster the establishment and development of industrial enterprises within

the said zones.

(5) Encourage and generate wider economic activities by encouraging foreign

investments for the development of the zones.

(6) To channel the foreign exchange earnings for the further development of
these zones and explore new areas for the development of Indian exports.

(7) Encourage establishment and development of Indian industries and

business enterprises and facilitate with proper infrastructure Generate
employment opportunity.

(8) Upgrade labor and management skills.

(9) Acquire advanced technology for increased productivity.

(10) Ensure world class quality of products.

Special Economic Zones

Special Economic Zones Act, 2005, was passed by Parliament in May, 2005 and
received Presidential assent on the 23rd of June, 2005. The act envisages that the SEZs
would attract a large flow of foreign and domestic investment in infrastructure and
productive capacity leading to generation of additional economic activity and creation of
employment opportunities.

Salient Features:

(1) A SEZ is a designated duty free enclave to be treated as foreign territory

for the purpose of trade operations and duties and tariffs.

(2) A SEZ does not require a license for imports. Other notable features are as
follows:

(3) The units must become net foreign exchange earners within 3 years.

(4) SEZ are allowed manufacturing, trading and service activities.

(5) Full freedom for subcontracting.

108
(6) The domestic sales from the SEZ are subject to full custom duties and
import policy is in force, when they sell their produce to domestic
markets.

(7) There was no routine examination by the custom authorities.

(8) The corporation in SEZs will not have to pay any income tax on their
profits for the first five years and only 50% of the tax for 2 more years
thereafter.

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Export Promotion Policies in India

A number of institutions have been set up by the government of India to promote

exports. The export and import functions are looked after by the Ministry of Commerce.
The Government formulates the export-import policies and programmes that give
direction to the exports.

Exim policies aim at export assistance such as export credit, cash assistance, import
replenishment, licensing, free trade zones, development of ports, quality control and pre-
shipment inspection, and guidance to Indian entrepreneurs to set up ventures abroad.

International Presence: The Director of Exhibitions makes arrangements for

participation in international exhibitions, holds Indian exhibitions abroad, runs show
rooms in foreign countries and, sets up Trade centres outside India.

Export Promotion Council: The Director of Commercial Intelligence is concerned

with commercial publicity through various media, monthly publications, directories of
foreign importers of Indian products, country-wise.

There are 22 export promotion councils for different products, offering services of
export promotion such as price, quality, packing, marketing, transport etc. They conduct
market surveys, publish reports on foreign trade, administer various export promotion
schemes, develop trade contacts, quality control, joint participation in trade fairs and
exhibitions.

Setting up of Commodity boards to promote exports: Commodity Boards are set up

to help export of the traditional items. There are seven Commodity Boards apart from
All India Handloom and Handicraft Board under the Commerce ministry. They advise
the government on its policies, signing trade agreements, fixing quota, etc.

Trade reps: There are Trade Representatives abroad who conduct market surveys,
furnish information on exports-imports, settle trade disputes and pass on information
about the rules and regulations for imports.

Indian Institute of Foreign Trade: The Indian Institute of Foreign Trade (IIFT) was
set up by the Government in co-operation with trade, industry, universities, educational
and research institutions. It is an autonomous body, set up to train people in international
trade, conduct research, survey and organize training programmes.

Participation: To promote, organize and participate in the international trade fairs,

Government set up Trade Fair Authority of India in 1977. It sets up showrooms and
shops in India and abroad. It assists in development of new items for diversification and
expansion of India’s exports. They publish journals namely, Journal of Industry &
Trade, Udyog Vyapar Patrika, Indian Export Service Bulletin and Economic and
Commercial news.

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Trade development Authority: In addition to the above, we have Trade Development
Authority to collect information, conduct research and render export finance and help in
securing and implementing export orders.

Financing for export: The Export Credit Guarantee Corporation (ECGC) covers both
commercial and political risks on export credit transactions. Its head office is in Mumbai
and branches are in Delhi, Calcutta and Chennai. In 1982, the Government set up EXIM
Bank with head office in Mumbai, branch offices in other major cities in India and
abroad.

EXIM Bank finances exports and imports of machinery, finances joint ventures,
provides loan, undertakes merchant banking functions such as underwriting stocks,
shares and bonds or debentures, develops and finance export oriented industries,
undertakes techno marketing studies and, promotes international trade.

Advisory Councils: Some of the State Governments have set up specialized Export
Trade Corporations which undertake export promotion. They are established in Andhra
Pradesh, Bihar, Karnataka, Uttar Pradesh, Madhya Pradesh, Himachal Pradesh. There
are also Advisory Councils like Board of Trade, Export- Import Advisory Council, etc.

Technical assistance and Training: The Small Industries Development Organization

(SIDO) with 26 small industries service institutions, provide techno- managerial
assistance like motivating entrepreneurs to export, provide information on export-import
and offer consultancy services with respect to export procedure, documentation and
export incentives.

An entrepreneur has a similar, but not identical, role under both import substitution and
export promotion models of economic development. Import substitution is based on the
idea that a country can stimulate its own economic growth (particularly in the earliest
stages of its development) by creating its own domestic industries to replace foreign
imports. Entrepreneurs would be needed in an import substitution model, not so much to
come up with brand-new ideas as to come up with new ways to execute known ideas.

1. Market Development Assistance Scheme

Description: Entrepreneurs get funding for participating in trade fairs. It assists

exporters for export promotion activities.

Nature of assistance: The scheme offers funding up to 90 per cent in respect of to and
fro air fare for the participation by MSME entrepreneurs in overseas fairs/trade

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delegations. The scheme also provides funding for producing publicity material (up to
25 per cent of costs) sector specific studies (up to Rs 2 lakh) and for contesting anti-
dumping cases (50 per cent up to Rs 1 lakh).

2. Export Oriented Unit (EOU) Scheme

Description: EOU Scheme provides an internationally competitive duty-free

environment coupled with better infrastructural facilities for export production.

Nature of assistance: The units are allowed to import or procure locally without the
payment of duty all types of goods including capital goods, raw materials, components,
packing materials, consumables, spares and various other specified categories of
equipment.

3. Market Access Initiative (MAI) Scheme

Description: MAI Scheme is an Export Promotion Scheme, envisaged to act as a

catalyst to promote India’s exports on a sustained basis.

Nature of assistance: The scheme is formulated on focus product ocus country

approach to evolve specific market and specific product. These activities are eligible for
financial assistance - marketing projects abroad, capacity building, support for statutory
compliances, studies, project development, etc.

4. Software Technology Park (STP) Scheme

Description: STP Scheme is a 100 per cent export-oriented scheme for undertaking
software development for export using.

Nature of assistance: The approvals are given under single window clearance
mechanism. All imports of hardware and software in STP units are completely duty free,
and import of second-hand capital goods and re-export of capital goods are also
permitted.

From where to apply: FIEO, Export Promotion Council and Ministry of Commerce

5. Services Exports from India Scheme (SEIS)

Description: The SEIS has been introduced to increase exports of notified services.

Nature of assistance: The rewards under SEIS shall be admissible for exports
made/services rendered on or after the date of notification of this policy. The duty credit
scrips shall be granted as rewards under SEIS. The duty credit scrips and goods
imported/domestically procured against them shall be freely transferable.

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6. The Merchandise Exports from India Scheme (MEIS)

Description: The MEIS has been introduced for the export of specific goods to
specified markets.

Nature of assistance: Rewards for the export of notified goods to notified markets

7. Export Promotional Capital Goods (EPCG) Scheme

Description: The objective of the EPCG Scheme is to facilitate import of capital goods
for producing quality goods and services to enhance India’s export competitiveness.

Nature of assistance: EPCG Scheme allows import of capital goods for preproduction,
production and post-production at zero customs duty

In an export promotion model, entrepreneurs would be needed to come up with ideas for
products and services that would be attractive to the rest of the world, either based on
their price of production or their novelty, quality, or other unique characteristics. This is
the scenario that generally creates the type of entrepreneur that is popular in the public
imagination, like Bill Gates. Furthermore, economists theorize that export promotion
and free trade promote faster technological progress. Export promotion models,
therefore, do not just depend on entrepreneurs—they also produce them

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Import Substitution

Import substitution is an aggressive economic policy employed by emerging economies to

promote domestic production and self-sufficiency in many sectors. It is also seen as a means
to reduce dependency on developed nations. IS seeks to provide added protection to
domestic industries via tariffs, import quotas, government loans at subsidised rates of
interest. This encourages people to start new production units. The boost to domestic
manufacturing sector leads to employment opportunities being created and considerably
lowers the demand for foreign exchange. The economies adopt this policy to protect its
budding industry from international competition that has easily attained economies of scale
due to large-scale production.

Import substitution gained widespread prominence and adopted by many countries after
World War II to bolster domestic industry and growth. This was also done to reduce
dependence on other countries. India too had resorted to import substitution which was later
reversed during 1991 currency crisis. Indian industry could not be expanded to its full
potential due to severe lack of sophisticated basic infrastructure.

Import substitution although can prove beneficial for certain sectors of economy for some
specific phases in economic conditions but if the policy is stretched over the entire
industrial sector as a long term policy can eventually lead to less competitive production
which will gradually start to decline. Thus the output will also dip and so will the job
creation avenues as the incentive to produce more will fade due to absence of global
competition. It is thus, different from the theory of comparative advantage in which
countries engage in production of specialised goods and then enter global markets to
bravely fight international competition.

The phenomenon has again gained limelight due to ‘Make in India’ campaign being
promoted by the Government of India. The idea is to make India a favoured investment
destination and attain a considerable level of output from 16% to 25% by 2022. It has been
cautioned that India’s ‘Make in India’ campaign should not be seen as the strategy for
import substitution as that will lead to reduction in domestic competition, production
inefficient and thereby leading increase in commodity prices. Such increased prices shrink
demand for products. Thus, over protectionism can lead to dynamic inefficiency as
domestic players replace foreign producers. This often leads to poor allocation of resources
as there is no incentive for domestic producers for innovation. There is a fine line between
the two phenomena and the government has to carefully walk the talk.

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PROGRESS CHECK

Question No: 26

A corporate manager who starts a new initiative for their company which entails setting up
a new distinct business unit and board of directors can be regarded as?

(a) Ecopreneur

(b) Technopreneur

(c) Intrapreneur

(d) Social Entrepreneur

Question No: 27

A women entrepreneur is supposed to have a minimum financial interest in share capital of

entrepreneur’s enterprise:

(a) 35 per cent

(b) 51 per cent

(c) 25 per cent

(d) None of the above

Question No: 28

Family business always interested to handover the change of his business to:

(a) Indian Administration Officers

(b) Professional Managers

(c) Next generation

(d) None of the above

Question No: 29

A corporate manager who starts a new initiative for their company which entails setting up
a new distinct business unit and board of directors can be regarded as?

(a) Ecopreneur

(b) Technopreneur

(c) Intrapreneur

(d) Social Entrepreneur

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Question No: 30

Venture capital is concerned with:

(a) New project having potential for higher profit

(b) New project of high technology

(c) New project having high risk

(d) All the above.

QUESTION BANK

31. Examine critically the government policies and programs to foster the growth of

Entrepreneurship. What changes should be made in them?

32. How can a business determine the right price of the product, in this essence explain all
the Determinants of pricing a product for a small organization.

33. Why is regional development necessary?

34. What are the factors affecting regional balance?

35. What do you mean by Import substitution?

36. Explain how we can promote export substitution?

37. Define forex earnings for entrepreneurs.

Answer Key: 1(d), 2(c), 3(b), 4(b), 5(c), 7(b), 8(c), 9(b), 10(d), 11(b), 12(b), 13(b), 14(c),
15(c), 16(b), 17(b),

18(b), 19(c), 20(b), 21(b), 22(c), 23(a), 24(c), 25(b), 26(c), 27(c), 28(c), 29(c), 30(a)

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ESSENTIAL AND ADDITIONAL READINGS:

1. Donald F. Kuratko, Entrepreneurship: Theory, Process and Practice, South Western

Publication.

2. Holt D. H., Entrepreneurship New Venture Creation, Pearson Education.

3. Nath Suryakant, Entrepreneurship Development and Small-Scale Industries, Neha

Publishers

& Distributors, Delhi.

4. Charantimath, Entrepreneurship Development and Small Business Enterprise Pearson

Education.

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