SMALL BUSINESS MANAGEMENT
LESSON 3
ENTREPRENEURIAL PROCESS AND STRUCTURE, BARRIERS TO ENTREPRENEURSHIP
Learning Outcome
Investigate the nature and concept of entrepreneurial enterprise
Entrepreneurial Process
Entrepreneurial Process is a leadership function which centres
round the dynamics of entrepreneurial growth and change. It is a
process comprising several distinct stages.
The first stage in the entrepreneurial process is some change in
the socio-economic environment leading to changes in the every
aspect of life in the country.
Interalia, the change creates needs for new goods and services.
The second stage is by starting a new venture.
The third process is intrapreneurship. It is the process of
extending the enterprises domain of competence by exploiting
new opportunities through new combinations of its available
resources.
The fourth process is to coordinating the varied activities to
achieve the entrepreneurial goal.
Entrepreneurial Structure
Structure represents the formal, official task relationships of
people in entrepreneurial activities. In other words, structure is
the logical culmination of authority and responsibility at different
levels. It implies a system.
In entrepreneurial activity, policies, programmes, practices and
measurement make possible for innovation and growth. They
create the proper attitudes and provide the proper tools.
Entrepreneurial Structural Relationship
Entrepreneurial activity confines to the tasks of planning,
directing, controlling, marketing, leading, motivating and
channelising the activities of individuals and the groups towards
entrepreneurial goal. The structure and relationships should be
such that they allow people to be entrepreneurial.
The main requirements of such a structure are as follows:
1. The new enterprise should he organized separately from the
existing.
2. There should be a special law for the new venture.
3. The new enterprise should be the specific responsibility of
entrepreneur/
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intrapreneur in top management.
4. The new innovative project requires different policies, rules
and evaluation criteria.
5. The entrepreneur is accountable for the success or failure of
the enterprise.
6. The returns on innovation are distinctively different from
existing business.
7. An. entrepreneurial project requires right relationship, right
rewards and right working culture.
A business that wants to be able to innovate wants to have a
chance to succeed and prosper in a time frame of rapid change,
has to build entrepreneurial management into its own system. It
has to adopt policies, principles and practices that create through
the entire organization the desire to innovate and the habits of
entrepreneurship and innovation.
To be a successful entrepreneur, the existing business, large or
small has to be managed as an entrepreneurial business. Entrepre-
neurial structure is thus the corner stone of success in business,
whether it is in production or marketing or service. The empirical
studies have shown that the solid structure determines, the
growth potential of entrepreneurial activities.
Barriers to Entrepreneurship
A large number of entrepreneurs particularly in the small
enterprises fall due to several problems and barriers.
1. Lack of a viable concept.
2. Lack of market knowledge
3. Lack of technical skills
4. Lack of seed capital
5. Lack of business know-how
6. Complacency - lack of motivation
7. Social stigma
8. Time presences and distractions
9. Legal constraints and regulations
10. Monopoly and protectionism
11. Inhibitions due to patents
Case Study
The Great Indian Dreamer
Many Indian businessmen have successfully replicated what has
been done elsewhere or moved beyond traditional areas, but
ITC’s Deveshwar alone has dared to dream of what never was.
(By- Swami Nathan S Anklesaria Aiyar).
One of my favourite posters says, “Some people see the world as
it is, and ask why. But I think of things that never were, and ask,
why not?”
Management gurus may wax eloquent over sticking to the knitting
and focusing on core competence. But the truly outstanding
businessmen are those that can think out of the box. These are
the great dreamers that produce great leaps forward.
How many top Indian businessmen qualify for the title of Great
Dreamer? Hardly any. Most are dynastic successors, following in
the footsteps of their fathers (Mukesh Ambani and Kumar, to
name only two). Some have indeed come up with new dreams,
but these are typically dreams about doing in India what has been
done elsewhere. Very rarely are they about things that never were.
Consider Ratan Tata, who has strong credentials. In the 1980s,
when most Indian businessmen, including JRD Tata, were still
focusing on manufacturing empires, Ratan saw the huge potential
of high technology. He suffered severe setbacks like the flopping
of ventures like Elxsi and Plantek abroad, but persisted. He
reaped his high-tech reward in the 1990s when Tata Consultancy
Service emerged as a global power.
His other big dream was to produce a made-in-India car. His first
attempts via the Tata Sierra and Tata Estate were disastrous.
Institutional investors feared that Ratan’s dream of making an
indigenous car would bankrupt India’s best truck company. Why
not stick to the knitting?
When the Indica was launched and initially flopped, there was a
chorus of “I told you so.” But Ratan fixed the problems of the
Indica and relaunched it. The new version proved a winner. It is
now set to capture global markets, through a marketing tie-up
with British Rover.
Ratan Tata certainly broke new ground in India, and in the Tata
group. But in effect he repeated in India what had been done
abroad. He did not invent software, he replicated in TCS what
had been done elsewhere. He justified Telco’s entry into cars by
saying that many companies the world over (like General Motors
and Toyota) made both cars and trucks. So, he was a Great
Replicator rather than a Great Dreamer.
Does Narayanmurthy of Infosys deserve the title of Great
Dreamer? Which other professional engineer in the 1980s could
have dreamed of overtaking the biggest captains of industry in
India? Indian engineers used to think of themselves as employees,
not as employers, let alone potential multinationals.
Narayanmurthy broke that mould.
Yet he did no more than replicate what thousands of software
professionals had already done abroad. In Silicon Valley and
elsewhere, software professionals had already done abroad. In
Silicon Valley and elsewhere, software professionals had set up
their own companies, often with the help of venture capital. To
do the same in India was far more daunting and challenging. The
controls were strangulating, venture capital was absent, and India
had a terrible global image, Narayanmurthy can justly claim fame
for providing that what was possible in Silicon Valley is also
possible in India. But that does not quite qualify as Great
Dreaming.
INDEED, some would say that Azim Premji was the greater
dreamer. Narayanmurthy was trained in software and continued in
the same field. But Premji came from a business family making
vegetable oil. He could have stuck to the knitting and become
India’s biggest edible oil producer. Instead, he diversified into
computer hardware and software. Premji is undoubtedly a Great
Diversifier, but that is not the same thing as a Great Dreamer.
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Pramod Bhasin of GE Capital also has good credentials. TO him
SMALL BUSINESS MANAGEMENT
goes the credit of first visualizing India as the business process
outsourcing (BPO) capital of the world. His vision is now driving
an entirely new service industry, and the mighty USA is worried
about losing millions of jobs to India.
But Bhasin too was a replicate. BPO first emerged in Ireland and
the Caribbean, and Bhasin’s key achievement was to see that this
could be done even better in India.
Who, then, can really claim to have dreamed of things that
never were and asked why not? I can think of only one
name; Yogi Deveshwar.
As Chairman of ITC, he could have continued producing
cigarettes, or building more ITC hostels. Instead, he has invented
the concept of the e-choupal, and aims to create the biggest
agricultural distribution system in India by linking farmers to
markets through the internet. The vision itself is breathtaking,
bridging the supposed digital divide in one great leap. The world
over, many governments have talked of using the internet as a
tool of grassroots empowerment, and some have done so
through large-scale public investment and subsidies (Digvijay
Singh’s Gyandoot project in Madhya Pradesh is good example).
But Deveshwar had the vision to see the e-choupal as a commer-
cial operation, and hence capable of replication throughout India
without political subsidies and intervention. Large farmers and
traditional middlemen (arhaitis) have been hired by ITC to help
run-e-choupals, harnessing their traditional knowledge.
ITC is creating several new e-choupals every day, and has already
established over 3,000 of them, connecting 18,000 villages.
Deveshwar wants to cover the whole of India, and in the process
make the e-choupal business bigger than even ITC’s cigarette
business,
That is something no other company or country has attempted.
Others in India (like Drishtee) have also tried to use the internet
for rural marketing, but these have been small –scale efforts.
None has attempted anything with the breadth and speed that
Deveshwar has displayed.
When he became head of ITC in the mid-1990s, I voiced fears
that he was an opportunist trying to use bogus patriotism to grab
power from the major shareholder, BAT. I was plain wrong, and
need to eat crow. Deveshwar gets my vote for the title of the
Great Indian Dreamer.
Enterprise makes the difference
• China’s reforms predated ours by fifteen years; but mainland
China had no strong private industrial enterprises like India’s.
• Major industries like steel, aluminium, cement, chemicals and
pharmaceuticals are still dominated by Indian companies.
• Indian companies with improved practices have ably
defended their turf.
Following India’s economic reforms, western businessmen used
to point out how basely India fared in FDI compared with china.
But maintained that they underestimated India. The two coun-
tries’ conditions differed markedly china’s reforms pre dated ours
by fifteen years; china’s reforms predated ours by fifteen years;
but mainland china has no strong private industrial enterprises
like India’s.
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 Foreign investors have had to compete against established Indian nies have set up outside India, and the Indian auto components
SMALL BUSINESS MANAGEMENT

business, with our entry barriers higher and business better or industry is beginning to be taken seriously as a possible world
entry barriers higher and business better originated. Trained, supplier.
experienced manager is a resource in which India scores over Today economists liken India to a further economic powerhouse.
china. So, china has giants like computer maker Legend, But But that will first need reform, stable policies and an end to
Indians are setting up operations in china I n fields like Parma, IT religious fanaticism. Much additionally depends on the success of
and automotives. Also, foreign firms have interred India post- Indian business groups in adopting the right strategies and
1991 in industries like cell phones or IT equipment. Their improving business processes to compete globally.
advertising levels are such as to make one wonder how Indian
Such groups still carry some past baggage. The license raj
owned firms can ever survive them.
encouraged arrogance towards stakeholders, and bureaucratic,
Yet, their share in the Indian economy is small. Major industries wasteful habits. Those must be jettisoned and companies must
like steel, aluminum, cement, chemicals and pharmaceuticals are learn to harness new-age technologies (like Internet), something is
still dominated by Indian companies. And, despite fears that which most Indian companies lag.
Indian concerns would be wiped out many have even survived
Where manufacturing process technology is not the key factor of
(and improved sales) in sectors like automotive and consumer
success, Indian companies have a natural advantage compared
electronics.
with foreign companies, especially the new entrants. If it is unable
Foreign concerns have succeeded in sectors giving them the to compete, it will have only itself to blame – leaving the field
advantage of scale. It equipment is one such. An added factor has open to the Chinese, who are fast learners.
been access to technology that Indian firms lacked, as in mobile
phones. Indian companies have thus had more success in Activity 1
technology- neutral areas, surmounting FDI. Mean while, foreign 1. Describe the role of entrepreneurs and their contribution
knowledge of the Indian market is inferior, as is the networking. towards Indian Economy.
But, now that interest rates are down, their only other advantage 2. Discuss the success stories of the following
is better management practices. • Bayer
Indian companies with improved practices have thus ably • Bombay Dyeing
defended their turf; they also often profit from lower capital costs
owing to older plant and equipment. What has distinguished • Camel
winners firm losers is a greater commitment to enterprise, and • Dabur
better business practices. • Godrej
The Tata oil Mills Company investment led many to write off the • Hero
conglomerate as having no appetite for competition. Analysts also • Kirloskar
gave Tata motors the thumbs- down when it launched India’s first
• Sumeet
indigenously designed car, the indicate But, very soon, Tata tea
tool over Tetley (UK) to become the world’s second largest tea
company. Tata steel too streamlined itself and became one of the Notes
world’s lowest cost steel producers. Even Tata Chemicals has
been turned around dramatically. Suddenly market analysts are
bending over backward to give high marks to Tata concerns.
The Aditya Birla group too has tremendous resilience. Following
the short listed advance of Indian cement companies like India
cements, and the foreign Lafarge, the group executed a coup by
acquiring L&T’s cement business to become India’s top cement
producer. Also, it has taken over the premium garments business
of Coats Viyella (UK) and acquired foreign controlled Indian
Aluminium despite Sterlite. It is making upstream acquisitions
abroad.
Such groups have built India’s Industrial foundations – pioneering
in steel, power, cement, chemicals, aluminium, automobiles and
IT. Creation of industrial assets apart, they harnessed new
technologies and built strong organizations and marketing
networks that spanned the country. And they built brand power.
The Tata Group’s senior managers believe they created Institu-
tionalized enterprise’.
Other groups like Bharat Forge, Dr Reddy’s, Hero Honda, L&T,
Ranbaxy, Reliance, and TVS also have a tradition of enterprise
and are entrenched in India’s marketplace. Many pharma compa-

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