Module 1: Entrepreneurship

introduction

->In a developing economy, entrepreneurial development is of immense importance.

->Two major problems faced by developing countries are UNEMPLOYMENT & UNDER
EMPLOYMENT.

->Entrepreneurship is an effective remedy for unemployment as well as underemployment.

->An Entrepreneur brings in overall changes through innovation with a view to attaining
social good.

Q. Who is an entrepreneur?

A.an entrepreneur is a person who organises and operates a business concern for the purpose
of making profit. He is a specially talented person having the qualities of skill, initiative and
insight of innovation to achieve high goals.

Definition of entrepreneur

According to Evans,”An entrepreneur is a person who initiates, organises, manages and

controls the affairs of a business unit that combines the factor of production to supply
goods and services whether the business pertains to agriculture,industry, trade or
profession”.

Entrepreneurship-Meaning and definition

According to Higgins,”Entrepreneurship is based on systematic and purposeful

innovation.It included not only the independent business man but also company
directors and managers who actually carry out innovative functions”

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Meaning: Entrepreneurships refers to the functions performed by entrepreneurs in

establishing an enterprise. Thus entrepreneurships is the act of being an entrepreneur.

Elements of Entrepreneurship(4)

I)Organising:Mobilization and effective utilization of resources to initiate, maintain or

enhance profit by the production or supply of goods and services.

2)Risk Bearing:Entrepreneurs should be more bold enough to assume risks

3)Vision: There should be a vision for relentless pursuit of excellence.

4)Innovation:Introduction of something new in the economy for eg:a new product or a new
method of production.

Characteristics of entrepreneurships

1)Economic activity: Modern economists considers entrepreneurship as an economic

activity as it involves creation and operation of an enterprise.

2)Innovative Activity:Innovation is the process of doing new things.Whenever a new idea

occurs, entrepreneurship is essential to convert the idea into practical application.

3)Creative and purposeful activity:Entrepreneurship is a creative and purposeful activity as

the process of entrepreneurship involves idea germination, preparation, incubation,
illumination and verification.

4)Organising Activity: Entrepreneurship is mainly a organising activity whereby the

entrepreneur brings together various factors of production and ensures the continuing
management.

5)Organising Activity: Entrepreneurship is a risk bearing activity in the sense that is it

includes the function undertaking risks and handle economic uncertainty.

Recap:Economic Activity, Innovative Activity, Creative and Purposeful activity, Organising

activity, Risk bearing activity.

difference between entrepreneur and entrepreneurship

Entrepreneur refers to | Entrepreneurship refers to

-Person | -The Process

-Visualiser | -Vision

-Creator | -Creation

-Innovator | -Innovation

-Initiator | -Initiative

difference between entrepreneur and manager

characteristics of an entrepreneur(10)

1) Hard Work: An entrepreneur’s tireless ,tedious and laborious work will enable him to
lead his business to success.

2) Desire for High Achievement; Achievement motivation enables him to overcome the
obstacles and anxieties to overcome, to encounter misfortunes, to devise remedial actions and
to run his business.
3)Optimism: Successful entrepreneurs are optimistic and think that situations will become
favourable to the business in the future.

4)Independence: A successful entrepreneur should have his own ways of performing things
and should be independent in matters regarding his business.

5)Foresight: An entrepreneur should have the ability to foresee the future changes in the
business environment.

6)Innovative Skill: An entrepreneur has to evaluate changes in the tastes and preferences of
customers,and must have the ability to change and create new opportunities according to that.

7)Mental Ability: An entrepreneur should possess intelligence and analytical mind to

evaluate the business situations for making innovations.

8)Ability to guard business secrets: Business secrecy is one of the fundamental aspects of a
successful business and an entrepreneur should be able to guard and not disclose vital
information relating to the business.

9)Decision making: For running a business a number of decisions have to be taken on

frequent occasions.

10)Ability to maintain human relations: An entrepreneur has to deal with a number of

persons like customers, suppliers, govt employees, officials etc and he should be tactful in
dealing with them.

Recap: Hard work, desire for high achievement, optimism, independence, foresight,
innovative skill, mental ability, ability to guard business secrets, decision making, ability to
maintain human relations.

Functions of an entrepreneur(3)

Functions of an entrepreneur are mainly classified into three:

1)Innovation:

->The commercialisation of an invention.

->Invention also means the process of finding new things.

->Innovation can be in the following forms, i.e. Introduction of a new product,introduction

of a new method of production, finding new markets for products, finding new and
cheaper resources for supply of raw materials.

2)Risk Bearing:

->Risk is inherent in every business.

-> It is the willingness to face the losses arising from uncertainties in the field of business
bravely.
->It is the most important function of an entrepreneur according to Richard Cantillon as the
success of an entrepreneur depends mainly on predicting the uncertainties and thereby
minimising losses.

3)Organising and Managing the enterprise:

->Organising means bringing together various factors of production.

-> One of the important functions as proper organisation will help in reduction of cost of
production and thereby achieve the organisational objective of profit maximisation.

Other functions of an entrepreneur(6)

1)Exploring market opportunities

2)Mobilization of production resources

3)Managing Finance

4)Managing Production Process

5)Dealing of governmental matter/matters related to the Government

6)Maintaining Management-Employee relations

Entrepreneurial traits(20)

1)Knowledge: The collection and retention of information. It is necessary for performing a

task,but it is not sufficient.

2)Skill: The ability to practice the knowledge. Knowledge can be acquired through
reading,but skill can be obtained only through practice.

3)Motive: Urge to achieve goals. The achievement of motivation directs a person to perform
his duties in a better manner.

4)Mental Ability(same point in Characteristics of an Entrepreneur)

5)Clear Objective: An entrepreneur should have clear objectives as to nature and scope of
his business and also about nature &demand of his product,competition in the market etc.

6)Guarding of Business Secrets(Same point in Characteristics of an Entrepreneur)

7)Capacity to interact with people/Ability to maintain human relations(Same point in

Characteristics of an Entrepreneur)

8)Effective Mobilization of resources: The success of an entrepreneur depends on his

ability to mobilise the scarce resources,to utilise them effectively and efficiently and thereby
reduce cost of production.
9)Effective Communication: An entrepreneur should be able to communicate his
ideas,messages and information effectively.

10)Technical Knowledge: Technical knowledge, as to the improvements and developments

in the field of production and distribution of goods and services, should be possessed by an
entrepreneur.

11)Risk bearing capacity(same point in Functions of an Entrepreneur)

SKILLS OF AN ENTREPRENEUR(10)

1.Conceptual:An entrepreneur has the ability to identify relationships quickly in the midst of
complex situations.

2. Technical: A good entrepreneur should have interest to explore new ideas, new
technologies and new method of production
3. Human Relation: An entrepreneur should maintain good relations with his customers
and the public.
4. Communication: Communication must be to the point, crisp and convincing.
5. Decision making: An entrepreneur should have the ability to arrive at suitable
decisions after careful analysis.
6. Managerial: An entrepreneur should have the skill to manage the men and factors of
production.
7. Time management: Self explanatory
8. Stress Management: Entrepreneur should be able to adopt various mechanisms to
control the level of stress he has to handle.
9. Personality and Individual Skill: Impressive personality and Individual skills help
develop entrepreneurship as they have to work with officers, engineers, labourers and
various other groups of people.
10. Pioneering: Entrepreneurs have the skill to explore into new oppportunities, as they
are always looking for new methods of production and new markets. BARRIERS TO
ENTREPRENEURSHIP(10)
1. Sudden Changes in Government Policy
2. Outbreak of war
3. Sudden Political Changes
4. Hostile Attitude of Government towards Industry
5. Redtapism and corruption amongst Government agencies
6. Ideological and social conflicts
7. Unreliable supply of power, materials, finance etc
8. Rise in cost of inputs
9. Time Pressure
10. Infavourable market Fluctuations

Motivation

->Motivation is the inner state of mind that causes an individual in such a way that can
ensure achievement of goals.
-> According to Dalton Farland,” Motivation refers to the way in which urges, drives,
desires, strivings,aspirations or needs direct, control, or explain the behaviour of human
beings”

Process of Motivation

i. Motive
ii. Behaviour
iii. Goal

Motivating Factors

Motivating factors are classified into two

i. Internal factors: Which include

–Educational background -Occupational Background or experience

ii. External factors: which include

–Govt assistance and support

-Availability of labour and raw materials

-Encouragement from big business concerns

–Promising demand for the product

ROLE & IMPORTANCE OF ENTREPRENEUR IN ECONOMIC

DEVELOPMENT(8)

1. Capital Formation: Entrepreneur mobilises the small and scattered savings from the
households and it leads to capital formation.
2. Generating employment opportunities: Entrepreneurs, by setting up new business
concerns can generate employment opportunities.
3. Balanced regional development: Setting up business concerns in rural or under
developed areas will help to achieve a balanced regional development in the nation.
4. Reduces concentration of economic power: Entrepreneurship ensures wider
distribution of economic power among the people.
5. Encourages the effective utilisation of capital and natural resources:
Entrepreneurs help in the effective utilisation of idle funds and also profitably utilise
the natural resources.
6. Promotes export trade: Entrepreneurs setting up their business as EOU’s(Export
Oriented Units) will help to increase the level of exports of the nation.
7. Promotes the equitable distribution of wealth, national income and political
power(similar to point no.4)
8. Stimulates economic development: Entrepreneurship induces backward and forward
linkages thus stimulates the economic development of the country.

FACTORS AFFECTING GROWTH OF ENTREPRENEURSHIP

It is classified into three major heads; i)Economic factors ii)Non-economic factors &
iii)Government factors.

i)Economic Factors:The economic factors are

a)Lack of adequate infrastructural facilities: Under developed countries lack infrastructural

facilities like transportation, communication, power etc.

b)Non-availability of capital: Huge amounts of capital is needed for conducting research and
development activities,which may not be available at all times.

c)Presence of High Risk:Risks in under developed nations include

-Lack of reliable information relating to market conditions

-Inefficiency to make correct estimates

-Lack of strong domestic market for the product.

-Seasonal Fluctuations

d)Non-availability of technical know-how and skills: A country having sufficient educational

facilities in Science and technology can create talented and successful entrepreneurs.

e)Non-availability of skilled labour: Less developed nations are labour rich nations due to
growing population,but economic and emotional factors hinder labour mobility,which is a
commmon problem for entrepreneurs in the form of non availability of skilled labour.

f) Lengthy and cumbersome procedure to start a business.

ii)Non Economic factors:They are classified into Social,Cultural and Psychological

a)Social Factors: Social factors are

–Rational Behaviour

-Legitimacy of Entrepreneurship

-Social Mobility

-Social marginality

-Security

b)Psychological factors: They are\

–Need achievement

-Withdrawal of status respect

-Cultural factors

-Personality factors

iii)Government Actions/Factors: Actions of the government can influence both economic

and non economic factors of entrepreneurship development like formulating industrial
policies, creating basic facilities,utilities and services, and also by proving encouraging
incentives and concessions to entrepreneurs.

Entrepreneurial growth in India

–Government of India is fully conscious of the significant role of entrepreneurship in

economic development.

-Various measures have been taken to promote growth of entrepreneurship,like setting

up of EDI’s(Entrepreneurship Development Institutes).

-Large number of incentives,concessions,grants and other benefits are offered to both

small scale and large scale entrepreneurs to promote entrepreneurial growth and thus
improve economic growth.

Module 2:Classification of Entrepreneurs

April 23, 2020 by paulgeorge777

classification of entrepreneurs

Entrepreneurs are mainly classified into four:

1.Innovative Entrepreneurs: An entrepreneur who introduces new goods. Rare nowadays in

developing countries.

2.Adoptive or Imitating Entrepreneurs: Adopting or imitating the successful inventions

made by entrepreneurs.

3.Fabian Entrepreneurs: They neither have the will to introduce new changes nor the desire
to adopt new methods. More shy and lazy and their dealings are determined by customs,
religions, traditions.

4.Drone Entrepreneurs: Follow traditional method of production and sticks to the existing
position even at the cost of losses.

Entrepreneurs have also been classified on the basis of:

a)Type of Business

b)Use of technology

c)Motivation

d)Growth

e)Stages of development

On the basis of type of business

1.Business Entrepreneur: Conceives an idea of a new product or service and starts a small
business to materialise his ideas

2. Trading Entrepreneur:Undertakes only trading acitivity

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3.Industrial Entrepreneur: Basically a manufacturer.

4. Corporate Entrepreneur: Individual who plans, develops and manages a corporate

enterprise like a company or a trust.

5.Agricultural Entrepreneur: Undertakes agricultural activities like raising and marketing

of crops.

6. Retail Entrepreneur: Promotes and operates a small business.

7.Service Entrepreneur: Person who initiates various kinds of services to earn income in the
form of fees, remuneration etc.

Recap: Business entrepreneur, Trading Entrepreneur, Industrial Entrepreneur,

Corporate Entrepreneur, Agricultural Entrepreneur, Retail Entrepreneur, Retail
Entrepreneur, Service Entrepreneur.

On the basis of use of technology

1. Technical Entrepreneur: Greatest strength is production and focusses more on

production than on marketing.

2.Non-Technical Entrepreneur: Not concerned with technical aspects,rather concentrates

on improving market strategies.

3. Professional Entrepreneur: Interested in establishing the business, but not interested in

managing or operating it.

4.High tech Entrepreneur: Concerned with the application of high technology.

5. Low tech Entrepreneur: Not concerned with the use of high technology,and operates
with low technology.

Recap: Technical Entrepreneur, Non-Technical Entrepreneur, Professional

Entrepreneur, High Tech Entrepreneur, Low Tech Entrepreneur

On the basis of motivation

1. Pure Entrepreneur: Motivated by psychological and economical rewards like personal

satisfaction or profit.

2.Induced Entrepreneur: Induced by various incentives, facilities, subsidies and

concessions provided by the govt.

3.Motivated Entrepreneur: Motivated by the chances for producing and marketing a new
product for the customers.

4. Spontaneous Entrepreneur: Starts the business with his natural talent, i.e. he is an inborn
entrepreneur.

On the basis of Growth

1. Growth Entrepreneur: Interested in taking up a high growth industrial activity.

2. Super growth Entrepreneur: Attempts to bring about super growth of performance in his
industrial activity.

on the basis of stages of development

1. First Generation Entrepreneurs: An innovator who starts an industrial unit by
combining different technologies to produce a marketable product of service.

2.Modern Entrepreneur: Who takes up those ventures suitable to the current market needs.

3.Classical Entrepreneur: Stereo-typed Entrepreneur whose main aim is to maximise profits

by satisfying consumer needs through the development of a self supporting service.

on the basis of scale of operations

1.Small-scale entrepreneur: One who carries out business or service activities, quite
successfully on a small scale basis.

2.Medium Scale Entrepreneur: Engaged in promoting business units which carry on

operations on a medium scale basis.

3. Large Scale Entrepreneur

Dimensions of entrepreneurship(6)

1.Strategic Orientation: An entrepreneur always promotes a company’s formulation of

strategy, and makes use of the opportunity regardless of the resources under control.

2.Commitment to Opportunity: An entrepreneur always creates the opportunity and grabs it

for business purpose,and he has to act in a very short time frame and chase an opportunity
quickly.

3.Commitment of resources: Multi staged commitment of an entrepreneur with a minimum

requirement of resources at each crucial stage or at any decision point.

4.Resource Control: An entrepreneur should be capable of utilising the resources effectively

and efficiently.

5.Management Structure: An entrepreneur should decide the management hierarchy and

the structure should be formulated in such a way that he should have direct contact with all
the main officers of the org.

6.Reward Philosophy: Everybody should be rewarded, as every business follows the

philosophy to focus on creating or gathering of values.

Recap: Strategic Orientation, Commitment to Opportunity, Commitment to Resources,

Resource Control, Management Structure, Reward Philosophy.

intrapreneurship

– Definition: ” A person within a large corporation who takes direct responsibility for
turning an idea into a profitable finished product through assertive risk taking and
innovation.
–Intrapreneurship means establishment and fostering of entrepreneurial activity in large
organizations either by improving the existing product or by branding new products.

Essential elements of intrapreneurship(4)

1.Right structural and strategic environment within the organization

2.Suitable work force for enterprising people should be built.

3.Employees should be encouraged to collaborate and network naturally.4. Successful

employees should be suitably rewarded ,while they should not be penalised for their
mistakes.

Technopreneurship

–Definition: “A technopreneur is an entrepreneur who is technology savvy, creative,

innovative and dynamic, dares to be different and takes the unexplored path, and is
very passionate about his work”

–Technopreneurs make the use of technology to come out with innovative products through a
process of commercialization.

Significance of technopreneurship (6)

1. It generates employment.

2. It makes the best use of local resources.

3.It decentralizes and diversifies business

4.It promotes technology.

5.It forms capital

6. It promotes entrepreneurial culture.

Cultural entrepreneurship

–Culture change agents and visionaries who organise cultural, financial, social and human
capital to generate revenue from a cultural activity.

–Cultural entrepreneurs strive to promote the preservation of culture while becoming

innovative.

international entrepreneurship

–Definition: “development of international new ventures or startups that from their

inception engage in international business,thus viewing their operation domain as
international from the initial stages of international operations”
Importance of International Entrepreneurship(10)

1.Lower Manufacturing Costs: If the manufacturing cost is high in the home country,the
same product can be produced in another country at a lower cost.

2.Increased Sales and Profit: When demand of a product decreases in local market, he can
sell his product in international market where life cycle of the product is in favourable
condition.

3. Cultivating the habit of Customer relation management: Internationalisation of

business will teach entrepreneurs how to cultivate the habit of customer relation management.

4. Utilisation Of talent and managerial competence: When businesses are not able to get
required talented work force in their country, they can get the activity outsourced to a foreign
country.

5. Opportunity for growth: International business is one of the primary platforms for
expansion and diversification of any business.

6. Advantages of Cheap Labour(Same as point no.1)

7. Expansion of domestic market: International business causes domestic market to expand

beyond national boundaries and market their products in international market.

8. Globalization Of Customers: When the customers in a country prefer purchasing a

foreign brand rather than an domestic products,companies have to go in for
internationalisation of business.

9.Globalization of Competitors: International business increase the opportunity for survival

and growth for entrepreneurs.

10. Improves the image of the company: International business improves the image of the
company in the domestic market and attracts more customers in domestic market and keeps
them loyal to the company.

Recap: Lower manufacturing cost, increased sales and profit, Cultivating the habit of
customer relationship management, Utilisation of talent and managerial competence,
Opportunity for growth, Advantages of Cheap labour, Expansion of Domestic market,
Globalization of customers, Globalization of Competitors, Improves image of the
company.

ecopreneurship

–The term coined to represent the process of principles of entrepreneurship being applied to
create businesses that solve environmental problems or operate sustainably.

– According to Schuyler,”Ecopreneurs are entrepreneurs whose business efforts are not

only driven by profits but also by a concern for the environment”

Importance Of Ecopreneurship(6)
1. Entrepreneurial activities give less focus on management systems or technical
procedures.

2. Gives more focus to personal initiative and skills of the entrepreneurial person or
team to realise the market success with environmental innovations.

3. Adopts highly environmentally responsible business practices.

4. Emphasizes social perspectives while considering an innovative solution through

commitment

5. Replaces conventional production methods, products, market structures with

superior environmental products and services.

6. Characterized by a high degree of creativity, collaboration and social orientation.

Social entrepreneurship

–Prof Muhammed Yunus: Social entrepreneurship is any creative and innovative solution
applied to social problems.

–Definition: Social Entrepreneurship stands for recognising a social problem and using
entrepreneurial principles, processes and operations for effecting a social change.

IMPORTANCE OF SOCIAL ENTREPRENEURSHIP

1. Social entrepreneurship focuses on environmental and social issues along with social
problems.

2. Plays the role of an agent for change in the society by adopting a mission to create
and sustain social values.

3.Process of continuous innovation , adaptation and learning.

4. Means acting boldly without being limited by resources at hand.

5.Its success is not measured in terms of profit but in the terms of social welfare.

women entrepreneurs

-Definition: According to Schumpeter,”Women Entrepreneurs are those who innovate,

initiate, or adopt a business activity.

Functions of Women Entrepreneurs(5)

1.Exploring the prospects of starting new enterprises.

2.Undertaking of risks and handling economic uncertainties involved in business.

3. Introduction of innovations or initiations of innovations

4.Coordination, administration and control

5. Supervision and providing leadership in all business aspects.

Outstanding Leadership qualities of women entrepreneurs(10)

1.Willingness to face challenges

2.Effort to achieve the objectives.

3.Aspiration to reach high levels.

4.Intelligence

5.Patience

6.Optimism

7.Skill in learning new things

8. Desire to acquire new knowledge and apply it.

9.merciful Approach

10.Power to resist criticism

PROBLEMS OF WOMEN ENTREPRENEURS(11)

1.Financial Constraints: Usually women don’t have property in their names and banks also
consider women as less credit worthy and discourage women borrowers.

2.Over dependence on intermediaries: Women entrepreneurs have to depend largely on

intermediaries for the distribution of their products and they find it difficult to capture market
and popularise their products.

3.Stiff Competition: Women entrepreneurs have to face stiff competition for their products
from the organised industries and male entrepreneurs.

4.Scarcity of Raw materials: Price of raw materials is very high and women entrepreneurs
get the raw materials at minimum discount.

5.High Cost of production: Government grants and subsidies help them to reduce costs but
these are only available at the initial stages.

6. Limited Mobility: Women mobility in India is highly limited, due to reasons like not
physically fit to travel a lot etc.

7.Family Ties: family responsibilities also hinder women entrepreneurship.

8. Lack Of Education: Due to lack of education, women are ignorant of business technology
and market.

9. Social Attitudes: Women have the potential but they lack adequate training and there is a
common belief that skill imparted to a girl is lost when she is married.

10. Male Dominated Society(Self explanatory)

11.Low need for achievement: In India, the common Indian woman is happy to bask in the
glory of their parents, husband, children etc.

Recap: Financial constraints, Over dependence on intermediaries, Stiff Competition,

Scarcity of raw materials, High cost of production, Limited Mobility, Family ties, Lack
of Education, Social attitudes, male dominated society, Low need for achievement.

solutions to the problems of women entrepreneurship(8)

1.Separate Finance division: Providing separate finance divisions for women to provide
financial at concessional rates to women entrepreneurs.

2.Supply of raw materials: Women entrepreneurs must be given the priority over other
entrepreneurs in supply of controlled and scarce raw materials.

3. Cooperative Women’s Marketing Societies: Starting of co-operative societies so that

they can collect the products manufactured by women entrepreneurs and sell them at
competitive prices by eliminating middle men.

4.Education and Social Change

5.Training: By giving proper training we can develop the inborn talents of women
entrepreneurs.

6.Family background: There should be a family background for the development of women
entrepreneurs.

7.Support from the elderly: Necessary steps should be taken to make the society aware of
the role of women in its economic and social development.

8. Support from the govt ; Both central and state governments should give priority to
women entrepreneurs starting new ventures.

Recap: Separate finance divisions, Supply of raw materials, Co-operative Women’s

Marketing societies, Education and social change, Training, Family Background,
Support from the society, Support from the government.

agripreneurship

–Agripreneurship or agribusiness includes all operations in the manufacture and distribution

of farm supplies.
IMPORTANCE OF AGRIPRENEURSHIP(9)

1.Employs entrepreneurial skills , models and innovative ideas to economically solve

problems in agriculture sector.

2.Increases the profitability of farming business.

3.Solves the challenges related to information dissemination, farm management, capital

availability, mechanization of farm and the agriculture supply chain.

4.Provides innovative solutions to some critical agricultural issues like crop productivity
and input cost for agriculture.

5. Solves the problem of wastage of crops caused by the lack of storage facilities , and
improper management of supply chain.

6. Use of digital technologies like Remote Sensing,Internet of Things(IoT), coupled with

data driven decision making and data analysis can improve farm productivity,
minimize farm wastage and increase farmer’s income.

7.Digital technologies together with data analytics in every stage of agri-production life
cycle make farm activity more insight driven, potentially more productive and efficient.

8.Helps achieve progress regarding food security, accessibility and affordability.

9. Generates employment opportunities and enables the use of local resources.

entrepreneurship in service sectors

-Service business are enterprises that are established and maintained for the purpose of
providing services to private or commercial customers.

Types of Service Sectors(8)

1.Professional Services(Physicians, dentists, architects)

2.Business Services(Financial planning, mailing services, consulting)

3.Counselling Services(Career planning, marriage, pastoral)

4.Transportation Services(Taxi cab, car rental)

5.Personal Services(Photography, Videography, health clubs)

6.Restaurants and Lodging(Dinners, hotels , cafes)

7.Social Services((Child day care, residential care)

8.Maintenance Services(Landscaping, plumbing and electrical, automobile)

IMPORTANCE OF ENTREPRENEURSHIP IN SERVICE SECTORS(6)

1. Many service enterprises can be launched with far less money than the amount of
capital needed to open a manufacturing, wholesale or retail business.

2.Many new service operators are able to begin at home ,thus avoiding the expense of
renting, buying or constructing business premises.

3.End of year earnings in the service sector compare favourably with the profit margins
enjoyed by most other types pf enterprises.

4.Being local they do not have to contend with national or international corporate
giants, interested in manufacturing, retail or wholesale business.

5. They do not have to make the same level of investment in raw materials, finished
goods, operations, or production management as firms engaged in business

6. Customer convenience next to quality of service rendered , is the most important

factor in securing and retaining new customers in service sector entrepreneurship.

new avenues: Dealership, networking and franchising

Dealership

–Dealership is a business established or operated under an authorization to sell or distribute

a company’s goods or services in a particular area.

–Definition: “An individual or a business concern , who is involved in the activities of

buying goods for their account and selling it off from their stock is known as a Dealer”

Importance Of Dealership(7)

1.Dealership tends to be local, and requires less capital

2.A dealer can focus his efforts on the management and success of one location.

3.A dealer works closely with the distributor and he has to nurture that relationship,
which is mutual

4. While a well run distributor selects an excellent dealer, he in turn commands strong
locations and provides good service to consumers and thereby contributes substantially
to the brand’s image

5.Dealers undertake the basic responsibility of risk sharing.

6.Dealership of branded products enables the dealer to enjoy national advertising

support, receive training and to take the advantage of incentive programmes.

7.Dealership acts as a feedback mechanism for the manufacturer, conveying insights

gained from direct dealing with the customers.
NETWORKING

-Definition: According to Lambert, “Entrepreneurial networks are organised systems of

relationships with customers , suppliers and other entrepreneurs, relatives, external
consultants and other agents or potential partners”.

Importance of Networking(7)

1.Ensures proper communication and helps to build strong relationships with highly
skilled entrepreneurs of different age groups, nationality and fields of interest.

2. Participating in networking activities will create referrals. An entrepreneur can build

a strong customer base.

3. Assists the entrepreneur in finding new opportunities for partnerships, joint

ventures, or new areas of expansion of business.

4. Attending business seminars and networking with business associates and peers will
regularly help the entrepreneur to keep himself up-to-date with target market
conditions and overall trends.

5.Along with increase in business, an entrepreneur can often give solutions to his own
business problems through networking.

6.Helps in expanding the frontier of knowledge of the entrepreneur. He can take

advantage of the previous experience of others and their points of view.

7. In the early phases of a new business, regular association with entrepreneurs who are
positive and optimistic will boost the confidence and morale of new ventures.

franchising

–Franchising is a system for selectively distributing goods or services through outlets owned
by a dealer.

-A franchise is a patent or trademark license that entitles the holder to market particular
products or services under a brand name as per pre-determined terms and conditions.

-According to David D Holt,“Franchising is a business system created by contract between

a parent company(franchisor)and the acquiring business owner(franchisee)giving the
acquiring owner the right to sell good or services, to use certain products, names, or brands,
or to manufacture certain brands.

Feature of Franchising(6)

1.Contract which the owner authorizes another party to use his brand, product,
business process and system in return for royalty, share of profit or commission.

2.Franchisee has to follow the policies regarding the mode of conduct of business as per
the agreement.
3. Franchiser provides the franchisee with continuous market support and technology
to undertake business as stated in the agreement.

4. Ownership cannot be transferred to the franchisee.

5.Franchisee is permitted to use the business know-how and brand name for a specific
period, as mentioned in the agreement.

6.It can be terminated before the expiry of the franchising period.

Advantages of Franchising(10)

1. It makes the task of getting business started easier since the franchise gets a business
format.

2.Less chance for failure, as it is already tested and found to work.

3.Well established franchisee has always the advantage of popularity and recognition.

4.Increases the purchasing power of the franchisee.

5.Gets the benefit of franchisor’s research and development in improving the product.

6.franchisee has the privileged rights to franchise within a given area.

7.Prospect of obtaining loan facilities is more.

8.Gets the right to use franchisor’s trademark under license.

9.Franchising expands the network of the franchisor and helps him to obtain extension
of capital.

10.Franchisor is provided with a regular feedback regarding the product, its popularity,
and the needs of the customers.

Disadvantages of Franchising(6)

1.No scope to make use of his creativity, as he has to work according to the given
format.

2.Number of restrictions regarding geographical locations, mode of operation,

marketing etc. are imposed.

3.A franchisee cannot sell the business to the highest bidder or leave it to a member of
his family without the permission of the franchisor.

4.Goodwill always remains the property of the franchisor in spite of the efforts of the
franchisee.
5.Franchisor generally reserves the option to buy back an outlet upon termination of
the contract. Consequently a franchisee always operates under the constant fear of non-
renewal of the franchisee agreement.

6.A franchisee enjoys the lack of freedom and creativity.

entrepreneurship in msme(micro, small medium enterprises)

-Play an important role in the economic development of a country.

-MSME sector is like a nursery for entrepreneurship

-Requires less capital and suitable for countries like India where resources are scarce and
population is large.

-Overall growth rate in this sector is much higher than other sectors.

Mainly classified into two: i)Manufacturing Enterprises ii)Service Enterprises

1.Manufacturing Enterprises: Enterprises which engage in manufacturing/production of

goods pertaining to any industry.

2.Service Enterprises: Enterprises engaged in providing/rendering services.

Manufacturing Enterprises have been classified into three on the basis of Investment in plant,
machinery and equipment(excld land and building)

a)Micro Manufacturing Enterprises: Investment in Plant &machinery does not exceed

Rs.25 Lakhs.

b)Small Manufacturing Enterprises: Investment in p&m is more than Rs.25 Lakhs but
does not exceed Rs.5 crores.

c)Medium Enterprises: More than Rs.5 crores but not exceeding Rs.10 crores.

Service Enterprises are classified into 3 on the basis of investment in equipment(excld Land
and Building)

a)Micro Enterprises: Does not exceed Rs.10 Lakhs

b)Small Enterprises: More than Rs.10 Lakhs but does not exceed Rs.2 Crores.

c)Medium Enterprises: More than Rs.2 crores but does not exceed Rs.5 crores.

New Classification

a)Micro Enterprise: Annual turnover does not exceed 5 crore

b)Small Enterprise: Annual turnover more than 5 crore but does not exceed 75 crore.
c)Medium Enterprise: Annual turnover is more than 75 crores but does not exceed 250
crores.

MSME Development Act,2006

–Introduced for the purpose of promoting , developing and enhancing the competitiveness of
MSME’s in India.

Importance

-MSME’s play a vital role in developing our economies.

-Give employment to a large number of in-skilled and semi-skilled people.

-There are about 2.6 crores enterprises in this sector and it is estimated that MSME sector
accounts for 45% of manufactured output and 8%of GDP)

Objectives

1. To promote develop and enhance competitiveness of micro, small and medium

enterprises.

2.To institute a statutory consultative mechanism at the national level with wide
representation of these enterprises.

3.To establish specific funds for promotion, development and enhancing

competitiveness of these enterprises.

4.To introduce progressive credit policies and practices and give preference in
government procurements. to their products and services .

5.Implement effective mechanisms for mitigating the problems of delayed payments of

these enterprises.

6.To simplify the process of closure of business for these enterprises.

Features/Advantages

1.Capital investment: Require only small investment of capital to set up.

2.Labour intensive: Do not require costly tools and equipment’s and require more labour.

3.Short Period: Require short period for their establishment.

4.Economic Stability: Helps maintain economic stability.

5.Use of Local resources: These enterprises help in better use of local resources and skills.

6.Reduction of Unemployment: MSME’s create job opportunities in rural areas.

7.Base for large units: MSME’s are the training ground for local entrepreneurs and may
grow into large sized enterprises.

8.Equitable Distribution: MSME’s help to bring about more equitable distribution of

income and wealth.

9.Self employment opportunities: MSME’s create more self employment opportunities with
comparatively less capital investment.

10.Mobilisation of resources: Help to mobilise the resources of capital and skills.

Recap: Small capital Investment, Labour intensive, Short period for establishment,
Economic stability, use of local resources, Reduction of unemployment, Base for large
units, Equitable distribution, Self employment opportunities, Mobilisation of resources.

role of msme’s

1. Nursery of Entrepreneurship: MSME’s provide ample opportunities for

entrepreneurship, and generate employment opportunities with low capital investments.

2.Mobilisation of Local Resources:Same as point no.10 in Advantages of MSME’s

3.Generation of Employment(self explanatory)

4.Self Employment: same as point no.9 in Advantages of MSME’s

5.Contribution to GDP: The GDP of a country increases when the production of goods and
services increases.

6.Low Cost of Production: MSME’s depend on local resources which are less expensive.

7.Lesser capital requirement

8.Equitable Distribution of Income(same as point no.8 in Advantages of MSME’s)

9.Variety of Products: MSME’s produce different type of goods and services and a with a
variety of goods, this sector is playing a dominant role in satisfying the needs of the
consumer.

10.Quick Return on Investment(RoI): The time lag between the execution of investment
project and the start of production is relatively short.

11.Savings in foreign exchange: MSME’s can contribute to the foreign exchange resources
of the country through increasing exports.

12. Meet the requirements of big industries: MSME’s supply necessary requirements for
big industries.

13.Balanced regional development: MSME’s help to remove regional disparities by

industrializing rural and backward areas.
14.Environment Friendly: MSME’s are eco friendly in nature.

15.Mobilization of entrepreneurial skills: MSME’s can effectively mobilize

entrepreneurial skills spread over small towns and villages.

Recap: Nursery of entrepreneurship, Mobilization of local resources, Generation of

employment, self employment, Contribution to GDP, Low cost of production , Less
capital requirement, Equitable Distribution of Income, Variety of Products, balanced
regional development, Quick ROI, Savings in foreign exchange, Meet the requirement
of big industries, Environment friendly, Mobilisation of Entrepreneurial skills.

PROBLEMS OF MSME’S

1.Lack of adequate finance

2.Scarcity of raw materials

3.Problem of marketing

4.Absence of skilled man power

5.Absence of Managerial skill

6.Absence of Technical know how

7.Poor project planning

8.Inadequate Infrastructure

9.Poor distribution

10.Absence of Proper Machinery and Equipment

STEPS IN SETTING UP OF MSME

1.Selecting the activity or service

2.Selection of Product

3.Conducting Market Survey

4.Selection of the form of ownership

5.Selection of Location

6.Selection of technology

7.Ascertainment of Inputs required

8.Preparation of project report

9.Arrangement of Finance

10. Registration.