Economic Inf Personal tnftuences Role of En "epreneurial Culture in ED) ee ; ee ee 1 cn eae een cea rel cu enews een wh crm etter tse sph! sein neers ont of eee ee crore ol rv xan onan hy cm peri eer cr hi oh ot The institutions that conduct EDP include Entrepreneurship Development Insitute of India (EDI), Ahmedabad, Maharashtra 24 Center for Entrepreneurship Development (MCED) (having regional Segment of the population, ers/ tral areas generally lags behind in taking auvontege ot era Barticulary nthe ndusty tec oe these opportunities. Therefore th an there is need 16 provide sk evelopment and entrepreneurship development eben es oa People in order to mainstream them inthe oogelng sent Sconomic growth The basic aim of ED is to increase the supply of entreprencurs so ‘that new ventures or business units are created, which in turn would generate more employment and enhance economic development. ED ‘Focuses on the individual who wants to start and expand a busis offices at Mumbai and seven other cites in Maharashtra, National Institute for Micro, Small and Medium Enterprises (NI- MSME)Hyderabad, (formerly called as NISIET, National Institute {orEntrepreneurship and Small Business Development (NIESBUD), Noida Indian Institute of Entrepreneurship (UE), Guwahati and 20 Need of Entrepreneurship Development: ‘The basic purpose of ED isto generate employment and accelerate the pace of economic and social development. The need for ED is explained as follows: 1. Establishing Business Units: ED programmes are undertaken to encourage individuals to set up business units #0 as t0 ‘generate employment and speed up the process of economic and social development. Entrepreneurship training and development is one ofthe key ‘elements for development of micro and small enterprises (MSEs), particularly, the first generation entrepreneurs. To undertake this task on regular basis, the Government of India ‘as setup three national-ievel Entrepreneurship Development lrsttutes (EDIs) which inelude: the National Institute for Micro, yy, Stall and Medium Enterprises (NI-MSME), Hyderabad: theSet iy Rak nations of Entreprencurship Development 3 unit, Therefore, ED concentrates more on the growth potential and innovation in business units, Generally, people equate entrepreneurship development with self- employment. It is to be noted that some self-employed individuals are indeed entrepreneurs, but most of the self-employed persons are not entrepreneurs. ED focuses not only on self-employment but also on growth and innovation of business units. Some of the self- employed people innovate and expand their businesses. They continue to operate in informal sector with little growth potential. In India, various institutions are undertaking ED programmes. The institutions that conduct EDP include Entrepreneurship Development Institute of India (EDIT), Ahmedabad, Maharashtra Center for Entrepreneurship Development (MCED) (having regional offices at Mumbai and seven other cities in Maharashtra), National Institute for Micro, Small and Medium Enterprises (NI- MSME)Hyderabad, (formerly called as NISIET, National Institute for Entrepreneurship and Small Business Development (NIESBUD), Noida, Indian Institute of Entrepreneurship (IIE), Guwahati, and so on. Need of Entrepreneurship Developmen eit prencurship Development: ‘The basic purpose of ED is to generate employment and accelerate the pace of economic and social development. The need for ED is explained as follows: 1. Establishing Business Units: ED programmes are undertaken to encourage individuals to set up business units so as to generate employment and speed up the process of economic + and social development, Entrepreneurship training and development is one of the key elements for development of micro and small enterprises (MSEs), particularly, the first generation entrepreneurs. To undertake this task on regular basis, the Government of India has set up three national-level Entrepreneurship Development Institutes (EDIs) which include: the National Institute for Micro, Small and Medium Enterprises (NI-MSME), Hyderabad; theeee Business Planning and Entrepreneurial Management (BMS: SEM. Ny Indian Institute of Entrepreneurship (IIE), Guwahati and th National Institute for Entrepreneurship and Small Busine, Development (NIESBUD), Noida. Also, the State Governments have set up ED institutions encourage and motivate individuals and groups to set wy business units, Employment: Entrepreneurship facilitates employmey generation. Due to entrepreneurship, there is generation of set employment. Apart from self employment, the entrepreneuy generate direct and indirect employment: * The direct employment in the business units managed by entrepreneurs. ‘* The indirect employment in the supporting units tht provide inputs and services to the enterprises or thit depend on the enterprise for the inputs and services. Economic Development: Entrepreneurship activity contributs to the economic development of a nation. Due entrepreneurship, new and innovative materials, producs technologies, processes are developed. This increases Production and distribution of goods and services, resultingia growth and development of the nation, Developed countries like Japan, USA, Germany, etc,, owe thei economic development to the contribution of thet entrepreneurs. Without the innovative role of entrepreneus economic development of a nation would get hampered, Self-Reliance: India faces the problem of trade deficit (impots are more than exports). For instance, India’s trade deficit in 2015 16 was US $ 130 billion (Imports US § 396 billion and expos’ US$ 266 billion). Due to trade deficit, India faces the probles of current account deficit. To overcome the problem of trade deficit and consequent! current account deficit, Government of India and the Sta Governments need to develop the spirit of entrepreneurshipFoundations of Entrepreneurship Development 5 specially among the youth. Entrepreneurs must be encouraged to develop import substitutes so as to reduce imports. Self- reliance will enable the nation to be less dependent on foreign nations, thus saving the outflow of valuable foreign exchange. Social Development: Entrepreneurs play an important role in social development of a nation. Professional and successful entrepreneurs recognize and respond to social development needs of the society. The entrepreneurs contribute funds towards social development activities like health, education, and community development activities. They also generate new and innovative ideas to enhance social development in the society. Standard of Living: Entrepreneurs generate employment. Employment increases income level of the employed people. Increase in income leads to higher purchasing power, which leads to increase in consumption of goods and services. The increase in consumption results in higher standard of living of the people. Also, entrepreneurs provide innovative and improved quality of goods and services, which facilitates higher standard of living of the people. Regional Development: The entrepreneurs set up industries * not only in urban areas, but also in backwards areas. Due to government incentives such as cash subsidy, tax holiday, duty concessions, etc,, entrepreneurs are induced to set up industries in backward areas. As a result of such initiative on the part of entrepreneurs, the backward areas get developed not only economically but also socially. Revenue to the Government: The entrepreneurs provide revenue to the government, They provide revenue by way of direct and indirect taxes, The direct revenue comes in form of personal income tax, and corporate tax paid by entrepreneurs. The indirect revenue comes in the form of excise duty, custom duty, services tax, etc., paid by the entrepreneurs Note: The above topic overlaps - Importance of the Growth of Entrepreneurship explained later in this chapter.6 Business Planning w Entrepreneurial Management (BMS: SEMI) Anentrepreneur is a person who develops a new idea and takes the isk of setting up an enterprise to produce a product/service whieh satisfies customer needs. All entrepreneurs are business persons, but not all business persons are entrepreneurs. An entrepreneur isa business person who always finds ways to improve performance and grow/expand the enterprise. However, a mere business person may only continue to run his/her business in the same manner without any improved changes. Your neighbourhood grocery store owner that hardly makes any innovative changes is an example gf business person but not an entrepreneur. An entrepreneur is a business person who innovates or makes changes for growth and expansion, An entrepreneur acts as a catalyst of growth and development in today’s modern world. {tis to be noted that there can be broadly two types of entrepreneurs: © Economic entrepreneur who is driven by profit objective. Social entrepreneur who operates with the objective of social welfare. n 1725, Richand Cantillon, a noted economist, developed one the early theories on entrepreneurship and is regarded as the founder of the term ‘entrepreneur’. He viewed entrepreneur as avrisk take: He observed that merchants, farmers and others buy at a certait price and sell at an uncertain price, thereby, operating at a risk. Definitions of Entrepreneur: Webster's Dictionary defines the term entrepreneur as ~ @ perset who organ: and manages a business undertaking, assuming the risk for the sake of profit.” Peter F. Drucker states that an entrepreneur is the one who alway* searches for change, responds to it and exploits it as an opportuni He further states that innovation is the specific tool of entrepremst the means by which he exploits change as an opportunity for? different business or service.Foundations of Entrepreneurship Development a The New Encyclopedia Britannica describes an entrepreneur as an individual who bears the risk of operating a business in the face of Uncertainty about future conditions. Joseph A. Schumpeter states that entrepreneur is a person who introduces innovative changes in an enterprise. HB, Pickle & R.L. Abrahamson (1990) define an entrepreneur: “An entrepreneur is one who organizes and manages a business undertaking, assuming the risk, for the sake of profit. The entrepreneur evaluates perceived opportunities and strives to make the decisions that will enable the firm to realize sustained growth.” Robert C. Ronstadt (1984) defined “Entrepreneurship is the dynamic process of creating incremental wealth. The wealth is created by individuals who assume the major risks in terms of equity, time and career commitment to provide value for some product or service, The product or service may or may not be new or unique but value must somehow be infused by the entrepreneur by receiving and allocating the necessary skills and resources.” We define entrepreneur as a person who assumes risks and operates with innovative ideas to grow and expand his/her enterprise with the ultimate objective of earning higher profits. A successful entrepreneur needs to have an all round personality, which comprises of the following elements: 1. Innovator: In 1934, Joseph A. Schumpeter, the well known, expert on entrepreneurship has viewed entrepreneur as an innovator, According to Schumpeter, nobody is an entrepreneur all the time; one behaves as an entrepreneur only when carrying out innovative activities. According to Joseph A Schumpeter, innovation can take place in the following five forms: ‘© The introduction of new product in the marketPlanning and Entrepreneurial Management (BMS: SEM-In * The development of new production technology. © The entry ina new market * The development of new source of raw material, * Thecreation of new organisation structure in any industry, Decisi Making Skills: To be successful a person should have the ability to take and implement decisions quickly, but not hastily. An entrepreneur is required to take minor or major decisions. Therefore, a businessman should know that the result of a decision can be positive or negative, but the outcome of not taking decision is always negative. A successful businessman is one who takesa right decision at the right time and implements it efficiently and effectively. Open-Mindedness: It means a free an accepting one’. same. id frank approach in S errors and then making efforts to rectify the A successful entrepreneur is open to constructive criticisms. A successful entrepreneur is willing to learn from his past experience and mistakes and moulds himself for better future, Locus of Control: In 1960s, Julian Rotter developed the concept of Locus of Control. Itis an attribute that indicates the sense of control that a person has over life. Its an important aspect of Personality. The locus of control can be views ved from two angles ‘* Internal Locus of Control, where that his behaviour is efforts, an individual believes guided by personal decisions and External Locus of Control, where an individual believes that his behaviour is influenced by fate or other external factors.— Foundations of Entrepreneurship Development ‘The positive answers to that you are more geared toward: may inhibit entrepreneurship drive: FOR REFERENCE ‘The positive answers to the following questions will indicate that you possess the internal control of being an entrepreneur: Do you know that if you decide to do something, you will do it and nothing can stop you? Even though it is scary to try something new, are you the one who tries it? When you do a good job, you get good satisfaction in doing 50? Ifyou want something, do you ask fort rather than wait for someone to notice you and just give it to you? Even though people tell you “it cannot be done’ do you find it out yourself? the following questions will indicate is external control, which Do you often feel ‘that’s the way things are and there's nothing I can do about it? When things go right and are terrific for you, do you think, it’s mostly luck? Do you think you should go into business or do something because everything you read these days is urging you in that direction? Your friends and family members tell you that its foolish. of you to want a career? Have you listened to them and stayed at home all these years? Do you think its important for everyone to like you?vw Business Plan nig and Entrepreneurial Management (BMS: SEM- tp Organizer: An entrepreneur requires highest level of organizin, abilities. The entrepreneurship activity requires a proper bleng of physical, capital and manpower resources. Right amount of resources, both in terms of quality and quantity needs to be organized so as to achieve higher level of returns. Personality: Successful entrepreneurs have pleasin, Personality. Entrepreneurs with good personality create a good impression on others and can mould others behaviour, Personality is the combination of three main elements: ‘* Physical qualities - good health and physique. * Mental qualities - 1Q and EQ. * Social qualities ~ the ability to get along with others. 4 person having physical and mental stamina can cope up with hard work. At times, businessman may have to work 24 hours a day. This does not mean that businessman needs to be workaholics. They should learn to delegate routine and repetitive work to their subordinates. It is said that Good Thoughts generate Good Feelings, Good Feelings develop Positive Attitude (tendency to behave), Positive Attitude leads to Action, Repetitive Action results in Habit, Total of all Habits reflects the Personality, and Personality creates Destiny. Entrepreneurs need to get good thoughts about people and business practices, which may generate good feelings and develop positive attitude, which in turn will ead to action, and several good actions will determine the personality of the entrepreneur. Risk Taker: Entrepreneurship activity is undertaken to assume risks and rewards. Any innovative activity is always subject to risks and uncertainties. If the innovative activity is successful, the entrepreneur will reap rewards, otherwise, the entrepreneur has to assume risks of failure. Therefore, an entrepreneur needs guts toassume risks, and he gets glory when there is success. It is to be noted that entrepreneurs take moderate risks, a3 compared to gamblers who take extreme risks, .Foundations of Entrepreneurship Development "1 a 10. u. 12. 2B. Technical Knowledge: It im : Itimplies knowledge about the product Process or bechnolog ded in rtandGtecarieIncietion, an entrepreneur should be well versed with legal, accountiny finan afd administrative muers relatingte Puitiels? Patience: It means steadiness, endurance and perseverance in the performance of a task. A good amount of patience is necessary in any type of occupation. Patience does not mean just waiting or tendency to stop working or delaying decisions. Patience means doing the work and then waiting for the result In other words, a businessman should not wait for actions but can certainly wait for result of his efforts. Desire to Achieve Goals: A successful entrepreneur is a person who sets challenging but realistic goals. To him problems and prospects are the two sides of the same coin. He has a strong Fesire to locate an opportunity ina problem and a determination to solve it. He always lists out priority of objectives, and make every possible to achieve them. Human Relations: An entrepreneur comes in contact with employees, investors, customers and other social groups Business ig a social activity and its success depends on maintaining good relations with employees, customers, Dieditors and community. An entrepreneur who understands the psychology of people has good prospects in business Communication Skills: It means with others. An entrepreneur w/ with employees and outsiders is more s than others. the ability to share information ‘ho communicates effectively successful in business Leadership: An entrepreneur needs to have good leadership ckills.5 Leadership is an act of influencing people to work willingly towards group objectives. A good leader needs to ine ad the feelings and emotions of his people anc accordingly guide and lead them. Nowadays, leaders need to adopt situational leadership style. Depending upon the situation, the leadership style needs to be changed. Situational leadership style is the combination of three a2 4 Busines Planing end Entrepreneurial Management BMS; Sey cy main leadership styles ~ autocratic leadership, cons Kadestip and pertcipativeleadership, tye Forinstance Re cco ed taney efor theleadertoconsultthe subordinate gaat a ToS lees eye eae toy mee eee ay cee oo Mine tetera ee ee eater aol th cade 9 eiportart dectlongy aa situation; the leader may adopt consultative ey & inion pu, ext Geis copes] othe per pena weasel eats ety a Deere eater rape caer onl Guice nace eenlenenaice eee ooaeaesu ee teceeoeanr cummed ofan enueprenet ite ‘© Ability to learn from Past Experience Initiative ‘© Discipline (application and dedication) ‘s Self-confidence/ Efficacy * Flexibility Role Model to Subordinates ‘© Opportunity Seeker ‘¢ Systematic Planner ¢ Time Management ¢ Perseverance Desire for High Achievement eS a ee ountations of Entrepreneurship Development B 's Optimistic and not Pessimistic ‘e_ Desire for Status in Society ‘an Entrepreneur and Qualities of an herefore they are explained under one Characteristics of irdo overlap and (ote: Enfreprenet topic) cearepreneus perform anumber af functions which facitate Th ring of business enterprises. The functions or the smooth iby an entrepreneur restated as follows for Business Activities: Entepreneur needs to bea Fletastoprepareshor term and longterm plans. Heenan tne hat analyse te interal and external Forth Par Aralyois of internal environment would reveal sara weaknesses ofthe organisation. The analsis of ‘Meal envionment involves: 1, Planning: good planner. ‘¢ Analysis of manpower. ‘« _ Analysis of physical resources such as machines. ‘¢ Analysis of financial resources. Analysis of external environment would reveal opportunities and threats facing the organisation. The analysis of external environment involves: ‘© Analysis of competition, ‘* Analysis of government policies. ‘© Analysis of customers’ preferences, 2 IEE: Rint.14 Business Planning and Entrepreneurial Management (Bis, « nizing Resources: The entrepreneur makes pe come Remsen Sept spt carbs iredlyalviied in WS OU eM arran Theresa cial resources - to meet working capital and, eds The nancial resouress canberaied various soures~ owned funds and borrowed funy%@h + Physica resoures suchas machines, materials ang ashatareequred forthe smooth ow of products at other activities ‘© Human resources the most important of all the managers and non-managers- that are required ge decisions and undertake business operations, ™=Kt The enlrepreneur should organize the resources in pla andeystematic manner taking into consideration the oj rtarges tobe achieved ina given period oftime, Right ones of resources, both in terms of quality and quantity needs ort ‘organized so as to achieve the organizational objectives, 3. Decision Making : The entrepreneur needs to make various ‘dcssions. For this purpose, he needs to have good dedien, Raking skills. The need for decision-making arises from te fact that there are several problems to be solved, afi jectves Je entrepreneur should follow a systematic procedure in decision-making which involves: * _lentificaton of problem or opportunity. + Generate alternative solutions, ‘Analyse the alternative solutions. * Selection of the best alternative, Implementation of the alternative Review the performance, Foundati 4 5 nsof Entrepreneurship Development ge enema motivator. The ¢r ee avth as monetary and non-monetary rep: beer proces ee eee ni peepee eos Soe ee x salaries es include payment of proper ‘and other financial incentives. Joseph A. Schumpeter, states that innovation can take place in the following five forms: ‘¢ The introduction of anew product in the market. ‘© The installation of a new technology. © Theentry in anew market into which the specific product hhas not been previously marketed, ‘The discovery of a new source of raw material * The carrying out of the new form of organization in any industry. Risks Bearing: The entre eam profit, However, ‘subjctto risk. The ris »preneur ventures in the business to. Profitis uncertain as business is always Ks can be broadly divided into two groups * _Insurable risks, which include lo 88 due to fire, theft, flood, ‘earthquake, civil riots and such other risks,16 Business Planning and Entrepreneurial Management (BMS: SEM-11) '* Non-insurable risks, which include loss due to changes in i fashion and technology; loss due to competition, bad debis, and so on, ‘The entrepreneur can insure the insurable risks, but he cannot insure the non-insurable risks, and therefore, he has to bear the rnon-insurable risks. 7 Research & Development: Entrepreneur undertakes R&D, R & D is required for product development. Professional entrepreneurs focus on R&D to modify the existing products, ‘or to develop new products. R&D helps toimprove the quality of products and services. It helps to reduce the costs of production. Entrepreneurs must allocate sufficient funds to ‘conduct R&D activities, Without R&D, itis difficult to compete ‘effectively in the market 8. Market Development: Entrepreneurs undertake market development activities. Professional entrepreneurs aim at | increasing market share. Therefore, they undertake market development activities by introducing: ‘© Existing products in new markets, and/or | © Introducing new products in new markets. | Tointroduce products in new markets, the entrepreneur has to undertake marketing activities such as: © Market Research # Publicity * Advertising ‘4 Sales Promotion. «Trade Fairs Participation ete 9, Financial Management: Entrepreneurs need to manage the financial aspects of the business. Financial management involves: [Moin tune Ps v7 nmr at Tal HS aources. He must plan for retain ans om th 8s anacer ee on cee! must also manage workin; tne of yrganisation. cer barca i ere is great or sea teu New ee Cee ag Sree ane a ser een ee ero Recruitment and selection. ‘Training and development. fe Performance appraisal Promotions, and transfers, etc: isa distinct activity relating © production "mn rewards and to assume distribution of goods and services to ea ‘fake Itcan be said that entrepreneurship is what the modern world ‘lebout. Without entrepreneurship, modern world would nothave ‘witnessed inventions and innovations. The entrepreneur acts as a Catalyst of growth and development in today’s modern world. Entrepreneurship management isa process of planning, organizing, directing, and controlling, performed to determine and accomplish ‘objectives in business enterprises. Entrepreneurship Robert Hisrich states ‘Entrepreneurship is the process of creating something new and assuming the risks and rewards’ ‘Arthur Cole states “Entrepreneurship is the purposeful activity of ‘an individual or a group of associated individuals, undertaken to initiate, maintain and aggrandize profit by production and distribution of economic goods and services.” \ es eey 7. eee 19 if Business Planning and Entrepreneurial Management (8MS: SEM) above definitions bri ns bring out the nature and characteristics entrepreneurship: a ee ae en es en ree ee and controlling. " aa = | According to foeph Schumpeter enteprencushipls concerned ‘* Development of new technology. ‘# Introduction of new product. © Creation of new form of organisation structure, |e Development of new source of raw materials ) Entry innew market. 2. Purposeful Activity: Entrepreneurship is a purposeful activity. Emphasis is placed on results rather than mere activities, The results may be in the form of: ‘© Reduction in wastages. ‘* Optimum use of resources, '* Motivated and dedicated workforce. ‘© Increase in efficiency. “The main purpose of entrepreneurship activity is toaggrandize (increase) profits. Therefore, entrepreneurs place emphasis on 3 cost-effective activities. The entrepreneurs undertake cost- benefit analysis of each and every activity. The analysis is made not only from short-term point of view, but also from long term point of view’ depending upon the nature of activity entrepreneurship activity Individual or Group Activity: The by a group of individuals. can be undertaken by an individual or ound of ntepreexi DSP in case of small size projects, ithe activity can be undertaken rhe case of comple ad BE tt ce tty the acy YP ae ship activity is future niente Activity: EO olan and think ahead Te oriented. The entrePre ee alysis. Therefore, cone OF at ere ude Oe al eran and where there is limited bby an individual. rojets, and where z undertaken by prec to anal ron thers rast feting tne plans and tration of ergarisaton. alysis of internal environment (manaBercrt The analysts of machines/technology, nature of policies, Tete) reveals strengths and weaknesses. stemal environment analysis (such a5 governmen otitors’ strategies, consumer preferences) ities and threats. trepreneurship activity involves Innovation and Cv The most success entrepreneurs immo the innvators are on he constant ook Out ee methngiflerent that would give them forsomethng ne age, According to Joseph Schumpeter, & scien an eniepreneut only when carrying out Fiovatve ates « Thee policies, com indicates opportuni novation and Creativity: En “The innovative activities may involve development of anew product in the market, development of new and innovative Echemes to promote the product, development of new techniques for production and distribution, ete. 6. Proactiveness: Entrepreneurship requires proactiveness. An entrepreneur is the one who takes proactive decisions. Unlike traditional managers, who take reactive decisions, an eneeprenen takes proactive decision, and other follow the entrepreneur, Proactiveness gives first mover advantage or ‘competitive edge in the market. feoe 20 Business Planing and Entrepreneurial Management (BMS: SEMI) | 7. Exploits Change into an Opportunity: An entrepreneuralways | looks for a change. If there is a potential for a change, he responds to it. He exploits the change as an opportunity for, different business. Seeking change and converting into an opportunity is the hallmark of entrepreneurship. 8, Risks and Rewards: Entrepreneurship activity is undertaken toassume risks and rewards. Any innovative activity isl subject to risks and uncertainties. Ifthe innovative activity is successful, the entrepreneur will reap rewards, otherwise, the ‘entrepreneur has to assume risks of failure. Therefore, an )) _entrepreneurneeds guts to assume risks, and he gets glory when bk there is success. It is to be noted that entrepreneurs take ‘moderate risks, as compared to gamblers who take extreme risks. Organizing Abilities: An entrepreneur requires of organizing abilities. The entrepreneurship activity requires 2 proper blend of physical, capital and manpower resources. Right amount of resources, both in terms of quality and quantity ‘needs to be organized so as to achieve higher level of returns. M0. Social and Economic Development: Entrepreneurship activity facilitates social and economic development. Due to ‘entrepreneurship, the production of better quality goods and, services take place, which in turn facilities economic growth of the nation. Also entrepreneurs play an important role in socal development by supporting social development activities ike health, education, community development, etc. Entrepreneurship plays an important role in the economic and soci development of a nation. Due to economic and social development, “entrepreneurs create economic and social wealth. The importance ‘and significance of entrepreneurship is explained as follows: pounasionsof Entrepreneurship L Development Entrepreneurship activity contributes evelopment EconamicDevelop evelopment of # nation. Due to toe ‘cw and innovative materials, products, {SaapreneurshP, entrepreneur cenees are developed. This increases strut and services resulting it cee oe end istration of goods rodetr development ote ration. ropa countries tke japan USA, Germany tc. owe ther Developed ene mcnt othe. contribution of their economic dee eout te innovative role of entrepreneur, entreprene ment ofa nation would get hampered ij Development: Entrepreneurs play an important role Socal DevelaPmint of a nation. Professional and successful social deveopricygnize and respond to socal development reeds ofthe society. ars contribute funds towards socal development Ince a heath, education, and community development actives y also generate new and innovative ideas to efnce socal development in the society ‘Theentreprene Regional Development: The entrepreneurs set up industries rot only in urban areas, but also in backwards areas. Due to government incentives such as cash subsidy, tax holiday, cluty ESncessions, etc, entrepreneurs are induced toset up industries in backward areas. As a result of such initiative on the part of entrepreneurs, the backward areas get developed not only economically but also socially. (Capital Formation: Entrepreneurs facilitate capital formation in the country. The entrepreneurs provide employment to people. The employees save a part of their income. The entrepreneurs also save a part of their profits. These savings lead to investment. Investment in turn facilitates capital formation, ie, production of capital goods, which can be used {for further production of consumer goods and services. Employment: Entrepreneurship fac gerraton. Duco enreprenrsip there generation of elt employment. Apart from self employment he entreprenet severe dret and indirect employment TePreneursBusiness Planning and Entrepreneurial Management (BMS: SEM-II}) ‘¢ The direct employment in the business units managed by entrepreneurs, ‘¢ The indirect employment in the supporting units that provide inputs and services to the enterprises or that depend on the enterprise for the inputs and services, Foreign Exchange: Entrepreneurs generate foreign exchange bby way of export of goods and services. The entrepreneurs operate not only in domestic market but also in overseas markets, In India, about 1/3rd of the total exports come from, the exports of MSE (micro and small enterprises) items. A. number of MSE items are exported, which include ~ gems and, ieee, rendymade garment, Hpht engineering goods, chemicals ete. Reduction in Income Inequalities: The entrepreneurs are responsible for reduction of income inequalities in the country. Since the entrepreneurs provide employment to the people, the income level of those employed increases, which in turn reduces, income inequalities, Also, the ownership of small enterprises, is in the hands of several small businessmen, and therefore, the income inequalities get reduced. Revenue to the Government: The entrepreneurs provide revenue to the government. They provide revenue by way of direct and indirect taxes. The direct revenue comes in form of personal income tax, and corporate tax paid by entrepreneurs, ‘The indirect revenue comes in the form of excise duty, custom, duty, services tax, etc, paid by the entrepreneurs, Facilitates Competition: Entrepreneurship facilitates competition inthe business world, Entrepreneurs take proactive decisions. The proactive decisions lead to reactive decisions on the part of competitors in the industry. When competition becomes stiff, the entrepreneurs further come up with innovative ideas in the areas of production as well as marketing, resulting in further filip to competition. Consumer Welfare: Entrepreneurship activity facilitates consumer welfare. Due to innovative ideas, consumers can enjoy new and better types of goods and services. Also due to -_a—X—"—eeesestsesee Feundationsof Entrepreneurship Development 2 employment, purchasing power of the people increases, resulting in more demand for new and better type of goods. ‘Therefore, the standard of living of the society improves. 11. Infrastructure Development: Entrepreneurs contribute towards infrastructure development. Infrastructure development is vital for the economic growth of a nation. Entrepreneurs may undertake small infrastructure projects such as small power plants on their own. However, in the case of large infrastructure projects, entrepreneurs may enter into Public-Private Partnership (PPP) or may form a consortium. Under PF, the nastructre prjt sch conection of Hater ingation projects power projects, etc, the private ete kin collaboration with public or government cere, “The management of the projec cn be Jointly sarethten by te private and public partis 12. Standard of Living: Entrepreneurs generate employment. Employment increases income level of the employed people. Increase in income leads to higher purchasing power, which leads to increase in consumption of goods and services. The increase in consumption results in higher standard of living of the people. Also, entrepreneurs provide innovative and ‘improved quality of goods and services, which facilitates higher standard of living of the people. ‘The development of the terms ‘entrepreneur’ and ‘entrepreneurship’ have evolved over the years as follows: Earliest Period ‘The word entrepreneur is derived from French language, which ‘means ‘go-between’. The earliest ceinition of an entrepreneur as 2 go-between was connected with Marco Polo, the merchant- venture. Asa go-btween, Marco Polo would obtain loan oF ‘capital to conduct trace. The capital provider was a passive risk bearer, the merchant-adventurer played active role in trading,24 Business Planning and Entrepreneurial Management (8M: = bearingall the phy My were divided wit 25% for the n ical and emotional sks, After the sale, th the capitalist taking most of them, ar aL erchant-adventurer. . aa about Middle Ages (A76%=1450°AD): Ini Ags te term enepenea edo dea ease — incharge th pots id otastume isk erly eet te government funded projects. A typical entrepreneur iat works like cathedrals, castles, abbeys, forts, etc. ma 17 Century: ‘The GOnneeton Of Fisk with entrepreneurship emerged in the ‘government contracts to perform a service or to supply certain go Sram sear ae ae ocr 18 Century: In@QSARIChArA\Cantillbn, a noted economist, developed one of the early theories on entrepreneurship and is regarded asthe founder of the term ‘entrepreneur’. He viewed entrepreneur asi He observed that merchants, farmers and others buy at a certain Price and sell at an uncertain price, thereby, operating ata rsk, In the 188 , the entrepreneur or the risk taker was distinguished from the capitalistOrleaBitalPFOWI@GETIn the 182 century, especially, afterindustrialxevolution/@£1760, a numberof inventions took place. The inventors did not have enough funds to carry out their experiments, and therefore, they borrowed from’ ‘thers, For instance, one ofthe renowned inventors, Thomas Edison raised funds from private sources to experiment in the field of electricity 19% Century: In theaSWWEAHEry, entrepreneurs were considered as leaders ot ‘managers of their organisations. Typically, an entrepreneur used {0 + as to exploit sions of Entrepreneurship Development enterprise for personal gains. He paid price ed oe production, rent forthe land est for the capital wative ideas and Founda ize and ol organi ares ad tools used fr Pro ; Jv and inter san ase to the services of worke eet fe contributed his own initiative, inno employed. He cont Organisation. He assumed risks (if the costs en 29 Centry nthe 20" Century, Frinton, n 1904 Aeshology, new sources ver Drucker called entrepreneur as sckerofchange, $0 In964 Peet i fo an epportunity for diferent type of he cha Gonna conatdered enzepreneurs 2s entrepreneur was considered as an innovator. Joseph Schumpeter considered entrepreneur pect of new products, new production ‘of material, etc business. In 1 ‘wealth creators. Century: 1 century, entrepreneursarelooked upon as facilitators of aa end cal development. Successfl and professional ono ot only contribute to economic development, bat aoe coca development. Entepreneus are also considered aoe anager In 2008 the word has witnessed severe financial SsEslucto lle SubPrime Criss ofUSA. Therefore, the need of the fouristofind ou innovative solutions to overcome the geosinancial pct novative entrepreneurs can pay a lead role indittasing the inant ci facing the world today [INNOVATION THEORY OF ENTREPRENEURSHIP Joseph Schumpeter’s Innovation Theory of entrepreneurship. advocates that innovation in business is the major reason for increased investments and for business cycle fluctuations Joseph A. Schumpeter believed that an entrepreneur can earn profits by introducing successful innovations. ° :| Foundations of Entrepreneurship Development 7 The second category of innovation includes all such activities which Jincrease the demand for a product such as: |(@)_ The introduction of a new product |(b) The introduction of new design of an existing product. (0). Entry in the new market (a) Innovative ways of sales promotion. (©) Innovative ways of distribution. Effect of Imitating on Profit pb ee Generally, the profits earned on account of innovation are for certain duration as long as the entrepreneur enjoys exclusive marketing rights (EMR) for patented products. Once the EMR expire, competitors imitate the innovation. As long as the entrepreneur enjoyed EMR, he had the monopoly position in the market, as innovation was his exclusive right, and therefore, he may be earning “higher profits. But after the expiry of EMR, with the competitors imitating the innovation, the profits started disappearing. _Anentrepreneurcan earn higher profits for a longer duration, if the “entrepreneur gets EMR for a longer duration in respect of patented product. The duration of EMR depends upon the nature of innovation. An innovative product is patented to discourage others to imitate it. “Itis to be noted that overa period of time, the supply of production factors such as raw material) remaining the same, the factor prices tend to rise as a result of which the cost of production also increases. On the other hand, when firms increase the supply of finished _ product, the price of the product may fall. Thus, the cost per unit of “output may increase, and the revenue per unit of sales may decrease. “Insuch a scenario, the excess of normal profits will disappear in the long run.RAGS cm Busines Plain and Enrol Manegomen (ssp 1 achievement (N-Ach) refers to an individual's deg, seuss Snag mastering, of skills, contro, or standards. The term (N-Ach) was frst used by Henry Murray associated with a range of actions, These include intense repeated efforts to accomplish something dificult. A person ye witha purpose towards a high and distant goal. The concept yt Ach was subsequently popularized by the Psychologist Da, McClelland. Need for Achievement is related to the difficulty of tasks Peg choose to undertake. Those with low N-Ach may choose very tasks, in order to minimise risk of failure, Those with high No tend to choose moderately difficult tasks, feeling that they challenging, but within reach. People high in N-Ach are characterised by a tendency to s challenges and a high degree of independence. Their most stim reward is the recognition of their achievements 28 Sources of high N-Ach include: 1. Parents who encouraged independence in childhood Praise and rewards for success Association of achievement with positive feelings Association of achievement with one’s own competence a effort, not luck A desire to be effective or challenged 5 6. _Intrapersonal Strength 7. Desirability 8 Feasibility 9. Goal Setting AbilitiesFoundations of Entrepreneurship Development 29 N-Achand Entrepreneurship: David McClelland, in his book The Achieving Society propounded ‘theory based on his research that entrepreneurship ultimately depends on motivation. It is the need for achievement (N-Ach), the sense of doing and getting things done, that promote entrepreneurship. David McClelland states that there is a relationship between interest in profit and the need for achievement. Persons with high need for achievement (N. Acti) are less influenced by profit or monetary rewards as compared to persons with lower need for achievement. For persons with N. Ach, profit is merely a measure of success and competency and not an ultimate goal. Characteristics of Entrepreneurs: Sei eeeee ee ee Setting specific, measurable, and achievable goals is the main characteristic of entrepreneurs. McClelland contrasted achievement- motivated people with gamblers, and dispelled a common pre- conception that ‘achievement-motivated’ people are big risk takers. On the contrary, achievement-motivated individuals set goals which they can influence with their effort and ability, and as such the goal is considered to be achievable. The goal-driven approach is common among all successful business people and entrepreneurs. ‘The individual with high levels of need achievement is a potential entrepreneur. The specific characteristics of successful entrepreneurs can be summarized as follows: 1. They set moderate realistic and attainable goals for them. 2. They take calculated risks. 3. They prefer situations wherein they can take personal responsibility for solving problems. 4. They need concrete feedback on how well they are doing, Feedback enables measurement of success. The feedback must be reliable, quantifiable and factual.Business Panning and Enteprenerial Meneganen (OMS: Egy, Achievement is more important than material or finan reward. : © Financial reward is regarded as a measurement of success an end in itself. f f 7. Achieving the goal gives greater personal satisfaction th receiving praise or recognition. ji 8. _Achievement-motivated people constantly seek improvemery: and ways of doing things better. 9. Achievement-motivated people will logically favour tasks aj, responsibilities that naturally satisfy their needs, ie, oft, flexibility and opportunity to set and achieve goals. 10. Entrepreneurs or high achievers prefer congenial economi: social and political environment for their growth and development. In 1966, Harvey Leibenstein popularized the concept of X-efficieny (also called as x-inefficiency) in the article ‘Allocative Efficiency ws X- Efficiency’ in American Economic Review. X-efficienc) describes a company's inability to get the maximum output for is inputs due to a lack of competitive pressure. X-efficiency theory states that when a company is not competitive its workers don’t work efficiently because the workers know tha! being more efficient would not make any difference. This mei the x-efficiency of the workers declines, The term ‘X-efficiency’ refers to the degree of inefficiency in the vs of resources in an organisation. X- Efficiency (inefficiency) aris® because some or all resources are used in inefficient manner ot som of the resources are not used at all. A major element of “x-efficien¢) is motivation or rather the lack of motivation. For example, let’s say two Companies A and B command over 5" of the market share in a particular industry. A third Company, 3!Foundations of Entrepreneurship Development 31 Cis a very small company in the same industry is not competitive and it performs very poorly in terms of market share and profits. Despite the fact that the industry market is competitive, Company C isn’t much of a competitor and its employees know about it. Therefore, workers at Company C may not work at the highest level of efficiency, because it won't make any difference to the company in the industry. Similarly, let's assume that Company A is the only manufacturer in the industry, which means itenjoys monopoly. This means Company A does not face competition at all. Its workers know that their company will not face any competition in the market, and therefore, they may not work hard to their highest level of efficiency. In other words, the workers may become less productive, and their efficiency declines. This theory assumes that if acompany does not face competition at all or ifa company is not competitive at all, then in sucha situation, its workers will not work hard as they know that working hard does not make any difference at the market place, and therefore, their efficiency declines. The concept of x-efficiency conflicts with neoclassical economics because it suggests that companies don’t maximize utility. In other words, companies don’t make the most efficient use of resources. Roles of an Entrepreneur: Leibenstein states two roles of an entrepreneur: © Entrepreneur as an Input Provider, in order to improve the efficiency of the firm. © Entrepreneur as a Gap Filler, ic., like an arbitrageur who buys from one market at a lower price and sells in another market at a higher price, This theory states that entrepreneur has to act as an input provider and as gap filler if there are imperfections in markets. For using, entrepreneurial skills, the entrepreneur gets profits and a number of other advantages.cna Taam minau emer ei ar Tc 52 Business Planing an Entrepreneurial Management (4; sy, According to Leibenstein, there are two types of entrepreneun” 1. Routine entrepreneurship ~ deals with normal busy, functions ike planning, organising, directing and coordina the business activities. 2. Innovative entrepreneurship - wherein an entrepreneura innovative approach in making the enterprise successful EB E FH. Knight in his book ‘Risk, Uncertainty and Profit’ rey entrepreneur as a recipient of pure profit. According to Knightp Profit is the reward for risk and uncertainty. : Knight identifies uncertainty with a situation where probabil of alternate outcomes cannot be easily determined (either by apt" reasoning or by statistical inference). Knight states that ‘newnes, can create uncertainty. Newness may be offering a new produté the market (existing or new), existing product to a new market steating a new organisation structure in the industry. ' Newness can create uncertainty over the value of a new prods and placesa greater strain on the resources necessary for success exploitation, Important Aspects of Theory of Profit: — ee ot Theory of Profit: Some important features of this theory are as follow: 1. Risk creates Profit: According to this theory, an entreprest earns profits because he undertakes risks, Profit is the rev! for assuming risks, 2. Different Degrees of Risks : The degree of risk varies? different industries. Some industries, there is lower risk, some industries there is greater risk, Entrepreneurs unde different degrees of risk according to their abilities 3. Profit is Uncertain: There is uncertainty in the rewards of” entrepreneur. According to this theory, the greater the risk, the® seaint ESSE ESSE oe Foundations of Entrepreneurship Development 33 isa greater chance of higher loss or there isa greater chance of higher profits. This means profit is uncertain. Everett Hagen developed the Theory of Social Change. According to Hagen, changes in personality (creative personality) of an entrepreneur facilitate economic growth. Hagen considers the withdrawal of status as the trigger for changes in personality formation. Status withdrawal occurs when members of a social group feel that their values or purposes of life are not respected by the social groups, which they respect. Hagan states 4 types of events that can produce status withdrawal: ‘¢ Displacement of a traditional elite group from its previous status by another by the use of force. © Denigration of valued symbols through someattitude changes of the superior group. * Inconsistency of status symbols with a changing distribution of economic power. * Non-acceptance of expected status on migration to a new society. Withdrawal of Status and Personality Types: ——ttawal of Status and Personality Types: Hagen postulates that withdrawal of status would lead to four Possible reactions and create four different personality types: (@) Retreatist: He continues to work in society but remains indifferent to his work or status. (©) Ritualist: He adopts defensive behaviour and acts in a way Which is accepted and approved by his society. However, he does not expect any improvement in his status or has no hopes, improving his position. oe—o”~”—aekkkhaFhFkefeFfFfé™tsf 4 find tiesto create new norms in the society individual and is likely tobe es © enti sneur, He adopts innovat Soon = Etomite tet fe camped waare ew yn onmanty staat te gr ee a ‘of people ina society or community. Socio-cultural factors influence the growth and developm entrepreneurship. The socio-cultural setting in which people factors influence entrepreneurial behaviour, which in contributes to the growth and development ofthe entrep ‘The main components of socio-cultural influences are: 1. Community Attitude towards Risks: Persons who are communities where people are willing to accept risk challenge are more suited for entrepreneurs. However cultures where people are averse to risk and do not attach mi {importance to hard work and persistence are not conducives entrepreneurship. For instance, in Indian society ‘i Indian society, the Parsis, Jains, Guja Pus Rajsthanis,and some other communities wl 2.27 risk in business, and therefore, persons from vnunities accept the challenge of entrepreneurshi _ Busines Panning amd Entrepreneril Managment (MS: SEM sine Planning eer (0) Reformist: He revolts and tries to bring it ys of wl Fo 1 tive approach to achieve a indations of Entrepreneurship Development 6 However, in some communities, people are mainly engaged in jobs and pressurize their children to find secure jobs, which {demotivates them to take up entrepreneurship. Caste System: Certain cultu a influence the actions ofits individuals. For instance, Ind follows ihe-caste system, especially among the Hindus. The Hindu population is divided into four castes: =— (@)_ Brahmins (priests for rituals) (&)_Kshatriyas (warriors) (©) Vaishyas (traders) ee (@) Shudras (artisans) ‘Thus, the Vaishyas traditionally performed the business activities. However, over the years, there is slight change, as people from other castes also enter into business or entrepreneurial activities. Family Background: The family background also plays an important role in entrepreneurship /Pevons who are born it families with business background are more Mii ake up entrepreneurship rather than oping for jobs: A good mumbee of people belonging to the working class does not take up entrepreneurship but in fact take up jobs on account of fanly influence However, there are cases of people from non-business ‘community enter into entrepreneurship on account of family support, especially, whose parents are rich and have access to political power. Education: Education can play an important role in influencing the learners to take up entrepreneurship. For instance, business schools in India, especially, the IMs motivate o encourage the students to take up entrepreneurial ventures rather than opting. for jobs. Therefore, of late, a good number of students from ‘business schools take up entrepreneurial ventures.36 Business Planning and Entrepreneurial Management (BMS; s EM Attitude of the Society: Some societies have positive atti, ' towards entrepreneurship. Societies that encourage innovatig in business activities encourage its members to take y, entrepreneurship. However some societies may be rigid’ nature, and may not encourage the spirit of innovation ang entrepreneurship. Therefore, persons from such societies ma not take up entrepreneurship. People from such societies ma continue to perform the occupations of their ancestors sucha farming, teaching, working in factories or offices, etc. Role Models: A society that appreciates and respect entrepreneurs as role models for future generations woul! encourage large number of entrepreneurs in diverse fiede Nowadays, some of the leading entrepreneurs such as M Narayana Murthy, Mr, Azim Premji, Mr. Ratan Tata, and othes are considered as role models. These leading personalities Provide lot of assistance to youngsters to set up entrepreneurial ventures. The growth of entrepreneurship is influenced by political factor: The political environment consists of government agencies, Parties, and pressure groups that influence and control the politcal of individuals (including entrepreneurs) activities and organisations. ‘Some of the political factors that influence entrepreneurship areas follows: © Stable political conditions where government policies do change frequently encourage business activities, entrepreneurs expect to make profits from new ventures. Government support to entrepreneurial development throug facilities and incentives encourages entrepreneurship. Lower corporate tx rates, lower indirect taxes, tax hola for certain years, elc., encourage entrepreneurs to set up units.‘oundations of Entrepreneurship Development 37 The availability of infrastructure and utilities such as good roads, power, communication facilities, and lack of corruption and bureaucratic delays in obtaining such utilities encourage entrepreneurship. Economic freedom in the form of favourable legislation with fewer orno obstacles to start and operate businesses encourages entrepreneurship. While most business firms accept labour and environmental laws, some countries have retrograde laws that make compliance very difficult and time consuming. Such legal hurdles discourage entrepreneurship. Economic environment exercises the most direct and immediate influence on entrepreneurship. The economic factors that affect the growth of entrepreneurship are the following: 1. Me Capital : Entrepreneurship activity gets a boost with the easy availability of funds for investment. Availability of capital enables the entrepreneur to bring together the factors of productions - land, labour, machines, and materials, Labour : Availability of right type of employees influences the growth and development of entrepreneurship, Itis the quality of people that greatly contributes to the development of entrepreneurship, Most developing countries have the quantity of labour force, but the quality is lacking, The quality of labour force can be improved through training and motivation, Raw Material tis one of the basic ingredients required for Production. Shortage of raw material can adversely affect entrepreneurial growth and development. Without adequate Supply of raw materials no industry can function properly and emergence of entrepreneurship to is adversely affected.oN 8 Banos Pin a Entreproewil Manager ays 4. Market : Markets play an important role in the ga entrepreneurship. There must be far competition se place, Competitors must be discouraged by Gov me authorities to create entry barriers to new entreprene’ _ predatory pricing tactics should be discouraged sy yy entrepreneurs can succeed in a competitive environmen Entrepreneurs must be good at marketing. Various techni of promotion mix need to be adopted to create and im demand. The various techniques of promotion inc publicity, advertising, sales promotion, salesmanship, et 5. Infrastructure: Entrepreneurs require good infrastruc facilites such as power, transportation, communications other infrastructural support. Industrial countries provide gy infrastructural support, which in tur facilitates growth a development of entrepreneurs, 6. Economic Conditions : The economic conditions prevailing the market has impact on entrepreneurs, When there is recessa in the market, new entrepreneurs are reluctant to enter th market for the fear of losses. Personal factors greatly influence entrepreneurship. A succes entrepreneur needs to have entrepreneurial qualities an ‘characteristics. The entrepreneurial qualities include: © Innovator © Risk Taker © Desire to Achieve Goals © Personality © Communication Skills © Internal Locus of Control