B.Com.(Prog.

) Semester-V Commerce

Skill Enhancement Course (SEC)

ENTREPRENEURSHIP DEVELOPMENT
Unit : I-V

SCHOOL OF OPEN LEARNING

University of Delhi

Department of Commerce
 CONTENT

UNIT I: INTRODUCTION
Lesson 1 Entrepreneurship and Society
Lesson 2 Entrepreneurship Development and Globalization

UNIT II: INDIVIDUAL AND ENTREPRENEURSHIP

Lesson 1 Entrepreneurial Competencies
Lesson 2 Entrepreneurship and Support System

UNIT III: ENTREPRENEURIAL PROCESS

UNIT IV: ENTREPRENEURIAL ECO-SYSTEM

UNIT V: MANAGERIAL ASPECTS OF BUSINESS

Lesson 1 Financial Aspect of Business
Lesson 2 Human Resource Management Aspect of Business
Lesson 3 Marketing Aspect of Business

Editor Conten Written & Revised by

Dr. Sneh Chawla Ms. Ne a Goyal
Dr. Rutika Saini

SCHOOL OF OPEN LEARNING

University of Delhi
5, Cavalry Lane, Delhi-110007
 UNIT I
LESSON 1
ENTREPRENEURSHIP AND SOCIETY
Written by : Dr. Navneet Gera
Revised by : Neha Goyal
Structure
1.1 Learning Objectives
1.2 Introduction
1.3 Concept of Entrepreneurship
1.3.1 Features and characteristics of Entrepreneurs
1.3.2 Functions and need of Entrepreneurship
1.3.3 Advantages and Disadvantages of Entrepreneurship
1.4 Entrepreneurship and Society
1.4.1 Relevance of Entrepreneurship in Indian Society
1.4.2 Entrepreneurship as a creative response to society’s problem
1.5 Entrepreneurship and Intrapreneurship
1.6 Summary
1.7 Glossary
1.8 Answers to In-text questions
1.9 Self-Assessment Questions
1.10 References
1.11 Suggested Readings

1.1 Learning Objectives

After studying this lesson,student should be able to:
 Define entrepreneurship and discuss its historical background
 Explain how entrepreneurship helps in solving the societal problems of Indian
society
 Explain the functions and responsibilities of an entrepreneur in real life business
 Apply the entrepreneurship concept in case of early stage startup with the help of
knowledge gained by lesson.
1.2 Introduction
In recent years , with the emergence of technological innovations, it is significant to
determine in changing environment that how to perceive various problems and managed
to identify business opportunities with innovative ideas.It is possible in the hands of

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business owner that would become an entrepreneur.And an entrepreneur is a person who
set up business dealing with financial risks to gain profits.
In this chapter we will learn the concept of entrepreneurship,its function , need ,
advantages and disadvantages. This chapter also discuss about entrepreneurship and
society, also explains the role of entrepreneurs in solving the societal problems of the
society. This chapter provide insight about intrapreneurship and entrepreneurship along
with its similarities and differences.
After go through this chapter thoroughly student will be able to connect this topics with
real life businesses.
1.3 Concept of Entrepreneurship
The word "entrepreneur" is derived from the French Verb "entrepredre". In the 16th
century, a first reference to the word "entrepreneur" was made in military expeditions.
The French who organised the military expeditions were known as entrepreneurs.
Therefore, "to organise" or "to undertake" is the then established meaning of
entrepreneurship. Then the construction people, architects and builders were referred as
entrepreneurs. Economists and business management consultants used the term
"entrepreneur" as a factor of production which was distinctly differentiated from all other
labour categories. Thus, "entrepreneur" represented an "owner and organiser" of the
business. In recent literature on economics and management, the term "entrepreneur"
represents an owner of the small-scale business.

Various studies and researches described the entrepreneur as a person with organisational
capacity, distinct values, attitude, aptitude, skills, belief and qualities. He is a creative,
imaginative and innovative person. He bears calculated risk. He is a decision-maker and a
goal-setter. He is committed and a hard-working person. He is a best time manager with
excellent team building and problem solving abilities. He is an achiever with a clear
perception who can identify opportunities. Thus, many descriptions and expressions are
associated with entrepreneurial personality. Another important attribute is the profit
orientation of the entrepreneurial activity.
On the basis of all the definitions given by various economists and management experts
as well as with the help of the descriptions of the term "entrepreneur", let us prepare the
working definition of an entrepreneur. It will facilitate us to know the functions of an
entrepreneur. It will give us guidelines for entrepreneurial development.

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DEFINITIONS OF ENTREPRENEUR
“An entrepreneur is one who creates a new business in the face of risk and uncertainty for
achieving profit and growth opportunities and assembles the necessary resources to
capitalize on those opportunities”.
"An entrepreneur is a person who combines various factors of production, processes the
raw material, converts the raw material into a finished product and creates utility in the
product and sells the product in the market in order to earn profit".
Entrepreneur as a Risk – Bearer
Richard Cantillon, an Irish man living in France, was the first who introduced the term
'entrepreneur' and his unique risk-bearing function in economics in the early 18th century.
He defined entrepreneur as an agent who buys factors of production at certain prices in
order to combine them into a product with a view to selling it at uncertain prices in future.
He illustrated a farmer who pays out contractual incomes which are certain to the
landlords and labourers and sells at prices that are 'uncertain'. He further states that so do
merchants also who make certain payments in expectation of uncertain receipts. Thus,
they too are 'risk-bearing' agents of production.Entrepreneur is described to be a
specialised group of persons who bear uncertainty. Uncertainty is defined as a risk which
cannot be insured against and is incalculable. The entrepreneur, is the economic
functionary who undertakes such responsibility of uncertainty which by its very nature
cannot be insured, nor capitalised nor salaried too.
Entrepreneur as an Organiser
Jean-Baptiste Say, an aristocratic industrialist with his unpleasant practical experiences
developed the concept of entrepreneur a little further which survived for almost two
centuries. 'His definition associates entrepreneur with the functions of coordination,
organisation and supervision. According to him, an entrepreneur is one who combines the
land of one, the labour of another and the capital of yet another, and, thus, produces a
product. By selling the product in the market, he pays interest on capital, rent on land and
wages to labourers and what remains is his/her profit. Thus, Say has made a clear
distinction between the role of the capitalist as a financer and the entrepreneur as an
organizer. He further elaborates that in the course of undertaking a number of complex
operations like obstacles to be surmounted, anxieties to be suppressed, misfortunes to be
repaired and expedients to be devised, three more implicit factors are deemed to be
essential. These are:
1. Moral qualities for work judgement, perseverance and a knowledge about the
business world.
2. Command over sufficient capital, and
3. Uncertainty of profits.
Entrepreneur as an Innovator
Joseph A. Schumpeter, for the first time in 1934, assigned a crucial role of 'innovation' to
the entrepreneur in his magnum opus 'Theory of Economic Development'. Schumpeter
considered economic development as a discrete dynamic change brought by entrepreneur

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by instituting new combinations of production, i.e., innovations. The introduction of new
combination of factors of production, according to him, may occur in anyone of the
following five forms:
1. The introduction of a new product in the market.
2. The instituting of a new production technology which is not yet tested by
experience in the branch of manufacture concerned.
3. The opening of a new market into which the specific product has not previously
entered.
4. The discovery of a new source of supply of raw material.
5. The carrying out of the new form of organisation of any industry by creating of a
monopoly position or the breaking up of it.
Schumpeter also made a distinction between an inventor and an innovator. An inventor is
one who discovers new methods and new materials. And, an innovator utilizes inventions
and discoveries in order to make new combinations.
In sum, the concept of the entrepreneur is intimately associated with the three elements-
risk-bearing, organising and innovating. Thus, an entrepreneur can be defined as a person
who tries to create something new, organises production and undertakes risks and handles
economic uncertainty involved in enterprise.
DEFINITIONS OF ENTREPRENEURSHIP
Entrepreneurship was defined in earlier days with respect to profit theories. Some
important definitions are discussed below
1. F.A.Walker defines "Profit" as a "rent for ability of entrepreneurs. Like land factor
of production, entrepreneurs differ in their abilities. Accordingly, there are marginal
and supra-marginal entrepreneurs with respect to their efficiency. Marginal
entrepreneurs earn only normal profits, which is a reward for their marginal ability.
More efficient entrepreneurs are considered as supra-marginal. They earn super-
normal profit as a reward for their organisational talent and business efficiency".
2. Prof. Taussing considers profit as a wage of the entrepreneur for his mental and
directing abilities.
3. StingIer, Champion and Edgework advocated that profit is the reward determined
by the marginal productivity of the entrepreneur.
4. J.8. Mill, Marshall and Hawley define "profit' as a compensation payable to the
entrepreneur for his risk bearing function.
5. Knight defines 'profit' as a reward for the uncertainty bearing capacity of the
Entrepreneur. Risk bearing function is acknowledged by Knight. According to this
definition, risk and uncertainty are classified as insurable and non-insurable risks.
Every entrepreneur has to bear certain risks in the business. Some risks like fire,
theft and accidents and natural calamities like flood, earthquake, etc. are predictable
and can be anticipated. The entrepreneur can frame policy to meet the challenges of
such types of risks. These are insurable risks. Profit does not arise out of insurable

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 risks. But there are some non-insurable risks like changes in the demand,
government policy, technological changes, trade cycle, competition, etc. These risks
are unpredictable and cannot be anticipated. Entrepreneurial skill lies in bearing and
handling these risks. Profit is a reward for bearing non-insurable risks.
6. Joseph Schumpeter defined "profit" as a reward for introducing innovations. An
entrepreneur is an innovative and creative person who introduces innovations in the
business. Innovation means commercial application of the inventions and scientific
discoveries. Innovations are of two types:
a. Innovations related to production
b. Innovations related to marketing
The production function represents the relationship between the input and the
output. If an entrepreneur introduces innovations related to inputs like new sources,
types and substitutes for raw materials, new packaging styles, new machinery,
technological changes, fuel, management techniques, enriched labour qualities, etc-.
it is an innovation related to the production function. It may be a cost-effective
change but ultimately all innovations result in developing a competitive edge.
The market function is represented by the interaction between the demand and the
supply forces. Market function innovations are the result of the changes in
assumptions of the demand and / or supply forces. Changes in the customer needs,
preferences, fashions, demand pattern, government policy, foreign trade, taxation
policy, number of substitutes, prices of the substitutes, advertisement and marketing
policy are some of the innovations related to the market function. An innovative
entrepreneur becomes a market leader and in order to sustain his position as a
market leader, he has to introduce innovations continuously. Profit is a reward for
innovative entrepreneurs. When a given innovation is copied or adopted by other
entrepreneurs, profit disappears. To regain his position, the entrepreneur has to
introduce another innovation. This expands the scope for product improvement and
research and development strategy.
7. Peter Drucker has supported the views expressed by Schumpeter. According to
Drucker, innovation is an important tool of an entrepreneur. He can perceive new
opportunities, can convert the opportunities in attractive projects and become the
market leader.
All these definitions describe various qualities of an entrepreneur and profit as the aim of
the entrepreneurial efforts.
1.3.1 Features and Characteristics of Entrepreneur :
Features of Entrepreneur
1. Entrepreneur plays a distinct role in entrepreneurial activity. He invests his
valuable, scarce financial resources and organizes the production function.
2. He takes the decisions about:
a. What to produce: product selection.
b. How to produce: technology.

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 c. Where to produce: location.
d. When to produce: Duration, time planning.
e. For whom to produce: target consumers/market.
f. At what price to sale: price determination.
g. How much profit to earn: profit margin.
h. What to do with the profit: profit sharing/reinvestment.
i. No other factor of production participates in the decision-making process. It is
the domain of the entrepreneur.
3. Entrepreneurship is a need-based function.
4. As a logical outcome, the product or service offered by an entrepreneur possesses
utility. It is the want satisfying capacity of the product.
5. Production is not for self - consumption but is offered for sale in the market.
6. Entrepreneurship is a profit-oriented activity and is a commercial proposition. An
entrepreneur aims at profit.
7. An entrepreneur possesses distinct qualities like risk-bearing, goal-setting,decision
making, information seeking, problem solving, time planning andmaintaining good
interpersonal relations in addition to the other set of specialcharacteristics like
innovative ness, creativity, communication skills, high levelof confidence,
perception, team building, trustworthiness, hard work,consistency and analytical
strengths. These qualities, skills, aptitude, visionand capabilities differentiate the
entrepreneur from the owners of other factors of production as well as the
managers.
8. The entrepreneur is the owner of the venture. He has employment generation
capacity.
9. He is a creator of wealth.
CHARACTERISTICS OF AN ENTREPRENEUR
If we go through the business history of India, we come across the names of persons who
have emerged as successful entrepreneurs. For example, Tata, Birla, Ambani, Modi,
Dalmia, Kirlosker and others are well-known names of successful entrepreneurs in the
country who started their business enterprises with small size and made good fortunes.
Success or otherwise of a small enterprise is, to a great extent, attributed to the success or
otherwise of the entrepreneur himself/herself. Then, the question is: What makes the
entrepreneurs successful? Whether they had anything common in their personal
characteristics? The scanning of their personal characteristics shows that there are certain
characteristics of entrepreneurs which are found usually prominent in them.
1. Hard Work:
Willingness to work hard distinguishes a successful entrepreneur from unsuccessful one.
The entrepreneur with his tedious, sweat-filled hours and perseverance revive their
business even from on verge of failure. In nutshell, most of the successful entrepreneurs

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work hard endlessly, especially in the beginning and the same becomes their whole life.
2. Desire for High Achievement
The entrepreneurs have a strong desire to achieve high goals in business. This high
achievement motive strengthened them to surmount the obstacles, suppress anxieties,
repair misfortunes and devise expedients and only set up and run a successful business.
3. Highly Optimistic:
The successful entrepreneurs are not disturbed by the present problems faced- by them.
They are optimistic for future that the situations will become favourable to business in
future. Thus, they can run their enterprises successfully in future.
4. Independence:
One of the common characteristics of the successful entrepreneurs has been that they do
not like to be guided by others and to follow their routine. They resist to be pigeonholded.
They liked to be independent in the matters of their business.
5. Foresight:
The entrepreneurs have a good foresight to know about future business environment. In
other words, they well visualise the likely changes to take place in market, consumer
attitude, technological developments, etc. and take timely actions
6. Good Organiser:
Different resources required for production are divorced from each other. It is the ability
of the entrepreneurs that brings together all resources required for starting up an
enterprise and then to produce goods.
7. Innovative
Production is meant to meet the customers' requirement the changing taste of customers
from time to time, the entrepreneurs initiate innovative activities to produce goods to
satisfy the customers' changing the products. The research institutes/ centres established
by Tata, Birla, Kirloskar are examples of the innovative activities taken by the successful
entrepreneurs in our country.
1.3.2 Need and Functionsofentrepreneurship
To capitalize on new opportunities, to create wealth and new jobs. The economics of
many developing countries are in sate of transition as they strive to shift from a
subsistence oriented and heavily regulated environment to an outward looking, market
driven economy. This transition can be greatly assisted by the emergence of a large
number of small - scale and rural enterprises in all spheres of economic activity, which, in
turn, requires the development of entrepreneurial skills. Despite the importance of
entrepreneurship for economic and social development there is as yet scant research into
or systematic observation of the processes through which entrepreneurship emerges and
sustains itself

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FUNCTIONS OF AN ENTREPRENEUR
Some of the major functions of an entrepreneur are:
i) Identifying entrepreneurial opportunity – There are many opportunities in the
world of business. These are based on human needs like food, fashion, education,
etc., which are constantly changing. These opportunities are not realised by
common man, but an entrepreneur senses the opportunities faster than others do. An
entrepreneur therefore, has to keep his eyes and ears open and require imagination,
creativity and innovativeness.
ii) Turning ideas into action – An entrepreneur should be capable of turning his ideas
into reality. He collects information regarding the ideas, products, practices to suit
the demand in the market. Further steps are taken to achieve the goals in the light of
the information collected.
iii) Feasibility study – The entrepreneur conducts studies to assess the market
feasibility of the proposed product or services. He anticipates problems and assesses
quantity, quality, cost and sources of inputs required to run the enterprise. Such a
blue print of all the activities is termed as a ‘business plan’ or a ‘project report’.
iv) Resourcing – The entrepreneur needs various resources in terms of money,
machine, material, and men to running the enterprise successfully. An essential
function of an entrepreneur is to ensure the availability of all these resources.
v) Setting up of the Enterprise – For setting up an enterprise the entrepreneur may
need to fulfil some legal formalities. He also tries to find out a suitable location,
design the premises, install machinery and do many other things.
vi) Managing the enterprise – One of the important function of an entrepreneur is to
run the enterprise. He has to manage men, material, finance and orgainse production
of goods and services. He has to market each product and service, after ensuring
appropriate returns (profits) of the investment. Only a properly managed
organisation yields desired results.
vii) Growth and Development – Once the enterprise achieves its desired results, the
entrepreneur has to explore another higher goal for its proper growth and
development. The entrepreneur is not satisfied only with achieving a set goal but
constantly strives for achieving excellence
QUALITIES OF AN ENTREPRENEUR
Entrepreneurial personality is distinct from the personality of a common man. An
entrepreneur possesses special qualities, values, skills, attitudes, aptitudes, capacities,
capabilities and motivation. By learning these skills and inculcating the qualities, it is
possible to transform the common man's personality into an entrepreneurial personality.
Systematic motivation and training accelerates the process of transformation. A trainer-
motivator plays an important role in equipping people to learn these qualities and skills..-
1 Confidence
An entrepreneur is a confident person. Confidence develops an edge over the competitors.
Confidence is always impressive and wins others. Entrepreneurial personality demands a

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high level of confidence.
Confident personality projects:
 Confident Appearance
 Confident Body Language
 Confident Communication
 Confident Work Style
 Confident Relationships
2 Clear Perception
Perception plays a very important role in our life. Perception has 'a make or a break'
capacity. The making is associated with "Positive Perception". The breaking is associated
with "Negative Perception."An entrepreneur cannot achieve a desired goal with a set
perception. He has to develop his perceptions about people (consumers), events, objects,
relationships, etc.There are a number of products and services which are the outcome of
tile strong developed perceptions of the entrepreneurs. For example, mobile phones,
transistor radios, audio-visual cassettes and CDs, computers, etc. are the perceptions of
the changing technology. In such cases, the needs of the different customer groups are
perceived by the entrepreneurs and products are designed with the new techniques and
technologies. Perceptions have helped the entrepreneurs to offer convenience to the
buyers. Perception helps the entrepreneur in decision - making, goal-setting, team-
building and conflict management. Perception leads to creativity, imagination and
innovativeness and gives a competitive edge to the entrepreneur.
3 Risk Bearing Ability
In a business, no other factor of production, except the entrepreneur, bears risk. When the
behavioural pattern of a large number of people is studied, some people are identified as
zero risk takers. They do not take any risk and are afraid of taking challenges. They select
easily attainable goals. Some people are hundred per cent risk-takers. They are excited by
the challenges and risks involved. They are neither bothered about the methods nor about
the attainment of the goals. They are charged only by the risk. But an entrepreneur is not
a zero risk-taker. He is not interested in an activity or work which anybody can do easily.
He is not hundred per cent risk-taker also. He cannot afford the luxury of not reaching the
goals because his investment is at stake.
An entrepreneur is careful and cautious while selecting his goals. He will examine his
strengths and weaknesses. He will assess the available resources, and will decide the
strategy. He will consider alternative courses of action and will identify people and
institutions for support.
An entrepreneur takes not only a risk but shoulders the responsibility of the outcome of
his decisions. He takes the credit for his success and also is prepared to face the failures.
If successful, he strengthens himself to achieve a higher degree of success. If he fails, he
examines the causes of his failure and tries hard to overcome the problem. He does not
leave anything to chance, fate or any situation beyond his control. Therefore, he takes a
moderate and calculated risk.

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4 Team-building Capacity
Team -building capacity is a key for entrepreneurial success. An entrepreneur requires a
variety of services and help from a large number of people and institutions including
suppliers of raw materials, machinery, workers, utilities like electricity, fuel, water
supply, transportation, financial organisations, government personnel, marketing people,
advertisers and finally the consumers. All these people and institutions participating
directly or indirectly in different capacities in the entrepreneurial venture facilitate the
entrepreneur to achieve his ultimate goal, "Success in Business". Therefore, an
entrepreneur has to exhibit an excellent team-building ability. Developing the team spirit
and team-building ability is a difficult but not an impossible task. A systematic use of
certain techniques will equip you with a team-building ability
5 Time Consciousness and Time Planning
Time planning is achievement planning; An entrepreneur is a time conscious person.
Time is a valuable resource. How do you experience time and how do you use it depends
upon what do you expect from it. It is important to remember that time cannot be created
nor destroyed but time has to be managed effectively.Time is an important resource in a
competitive environment. Time planning is achievement planning. For an entrepreneur
goals or targets are always with reference to time. Time scheduling, time monitoring and
time management is an important entrepreneurial skill."On-time Performance" is a key
word for success.
6 Interpersonal Relations
An entrepreneur has to make special efforts for developing harmonious and cordial
relationships with others. The success of an entrepreneurial venture depends upon
effective team -building which needs developing interpersonal relations
competencies.While developing harmonious relationships with others, one must develop
an approach to know his/her personality type, your expectations from him/her, his/her
expectations from you and the ultimate goal you want to achieve with that relationship.
7 Communication Skills
Communication is a distinctive skill of an entrepreneur. Effective communication is
necessary for achieving positive relationship. Verbal communication is the
communication through words. Non-Verbal communication is the communication with
gestures, expressions or body language.
The following are the important aspects of communication:
1. Speech-language, words, voice, tone, accent, speed
2. Facial expressions and gestures
3. Body language
4. Positive strokes
5. Confidence
6. Attentiveness
7. Praise for others

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Communication is expressing ideas, giving instructions, sharing thoughts, imparting
knowledge and exchanging information. The goal of communication is to create and
enhance understanding. While communicating, the first step is to know which language is
comfortably followed by the other person. In the Indian environment, usually you should
be able to speak at least your regional language. Voice and tone are effective instruments
of communication. It is observed that successful professionals and entrepreneurs make
special efforts to groom their voice. Tone is the texture of the voice. Tone communicates
your affiliation with the other person. It communicates your feelings. It is essential to
cultivate a proper tone culture. Accent make one's speech attractive. Without accent your
speech becomes monotonous. Accent is the ups and downs of the words or the stress on
words. It indicates the importance of the words and the meanings you communicate. One
should be able to understand the grasping power of the other person and accordingly
adjust the speed of speech. Facial expressions, gestures and body language constitute the
non-verbal communication. Often you communicate more in a non-verbal manner than a
verbal one. Facial expressions, gestures and body language have occupied a significant
place in non-verbal communication. Movements, postures, use of hands, legs, fingers,
eyebrows, sitting position, eye movements, hand shake, position of neck, way of standing
and walking represent body language. It is always said that "Words may lie but body
seldom does". Communicating with body language is an art.
8 Positive Attitude
Attitude is one's way of thinking and feeling, how you see people and events and how
you interpret them. It is your mental make-up.An entrepreneur comes across turbulent
situations. How he responds in such situations makes him a winner or a loser. Positive
attitude makes him win.
Positive Attitude implies
Positive Believing

Positive Thinking

Positive Action

Positive Results

Development of Positive Attitude:

1. Concentrate on your strengths
2. Sharpen your skills, talents, resources
3. Collect and rehearse happy experiences in your life
4. Identify the strengths of others
5. Know their happy experiences

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6. Value and enjoy your work
7. Dream a little, plan a lot, work hard
8. Develop the habit of giving positive strokes to others with words, gestures and
actions;
9. Have positive interactions with others
10. Remember, any failure is not the end of the world. You can start again.
9 Leadership
An entrepreneur is the leader of his group of workers, managers, suppliers, financiers,
advertisers, marketing personnel, vendors, government personnel, consultants and
consumers. He is the true representative of his entrepreneurial venture.As a leader
entrepreneur possesses the qualities like vision, dynamism, straight forwardness, -
transparency, inspiration, achievement motivation, discipline, trustworthiness, futuristic
perspectives, convincing power, communicative abilities, sense of responsibility,
perseverance, persistence and hard work. He is a role model in himself.The overall
function of leadership is to lead effectively and efficiently in different ways with different
kinds of groups under a variety of situations.
10 Innovativeness, Creativity, and Imagination
Innovativeness, creativity and imagination are considered as the basic ingredients of an
entrepreneurial personality.Innovation is the introduction of a new concept, a new way of
doing things or a new approach. With reference to enterprise, innovation can be in terms
of new technology, new technique of production, new sources and types of raw material,
novel machinery, new labour saving devices, new packaging techniques and packaging
materials, new way of advertising, product development, new application of the existing
product and even developing a new market. The history of entrepreneurial development
itself is a reflection of the innovativeness of the entrepreneurs, As a management
principle, it is always said that, "Do something with the help of which you can surpass
and surprise the competitor but do not get surpassed and surprised by the competitor,"
Innovation and innovativeness surpasses and surprises the competitor. An innovative
entrepreneur becomes a market leader. His market share and profitability increases till the
competitors catch that innovation and imitate it by bringing out "me-too" products in the
market. Until then, the entrepreneur enjoys a "surplus profit". Once the innovation
becomes common, surplus profit and market leadership disappears. The innovative
entrepreneur has to hit the market with another innovation to retain his market leadership
and high profit margin.Creativity is another significant attribute of an entrepreneurial
personality. It is a quality which need not be acquired because everyone possesses it.
11 Goal-Setting
A goal is a base building block of entrepreneurial career. It is described in many ways.
"Goal is a dream with a deadline""Goal is how you see yourself.""Goal is what you want
to be and how you want to get there". "Goal is an end towards which you direct some
specific efforts".Often, the goal is confused with an objective or a mission. Objectives are
the tactics planned and steps to be taken to achieve goals. Goals are specific, measurable,
accomplishments to be achieved in a given time frame. Missions are the statements of

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general intent.
1.3.3 Advantages and Disadvantages of Entrepreneurship
The pros and cons to be an entrepreneur are described below:
Pros:
1. Freedom/ Autonomy: One of the best advantages of being an entrepreneur is the
complete liberty to do anything.An entrepreneur moves from top to bottom itself as
there is no bosses for reporting and no managers who are reviewing the work.
2. Flexibility : Flexibility is another important benefit to an entrepreneur by which
he/she can work they want , when .where and how they want. There is no fixed
norms, regulations and rules for an entrepreneur in the business for working.This
can improve mental and physical well-being.
3. Control : An entrepreneur is having influence over the activities and directions of
the company and this is one of the most exciting parts of being an entrepreneur.
4. Full reward: In an entrepreneurship journey, an entrepreneur is the one who can
enjoy the success of a business completely without any interventions.He/she can
enjoy the profit and even can re-invest it into the business for further growth.
5. Economic development: A successful venture provides a lot of scope to maximize
the profit by over efforts only.There are various opportunities identified by an
entrepreneur and able to convert them into competitive advantage.Such advantages
plays an important role in the economic development of the society.
6. New experiences : Entrepreneurship provides new experiences and threats &
challenges which develop problem solving and decision making abilities for further
growth of the business.
Cons of entrepreneurship:
1. Financial instability : For running a startup ,there are huge amount of money
outflow is required in the initial stage of entrepreneur and it is difficult and biggest
challenge for an entrepreneur for financial stability.
2. Huge competition : For an entrepreneur, it is quite different to compete with well-
established companies due to lack of experience, knowledge, skills , resources and
customer support.
3. Failure-risk: Sometimes a startup journey may be very challenging and there are
uncertainity /risk that the business strategy may not work properly lead to losses or
wind up of the business.
4. Burden of responsibilities : An entrepreneur has to look after various issues of
business like legal issues, manpower, finance, sales, strategies, challenges, profit
and many other things.This situation arises burden of responsibilities on
entrepreneur.
5. Uncertain income : Entrepreneurship doesnot ensure a fixed and certain income in
the business.As business is associated with uncertainties so there is no guarantee of
fixed income in the early stage of a venture.

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6 Need to devote more time: As an entrepreneur, there is strict need to invest bulk of
time in the business without any fixed working hours.
Case study:
Adani Group was founded by Gautam Adani. He was born in 1962 in Ahmedabad,
Gujarat in a Jain family. Gautam Adani moved to Mumbai, Maharashtra at a young age
of 18. In the beginning of his career, he worked at Mahindra Brothers as a diamond
sorter. After spending two years working as a diamond sorter he set up his own diamond
brokerage business based in Mumbai.
In his first year of business at a diamond brokerage, he had scored a profit of 10,00,000
lakh rupees which was a big amount in the 80’s. Later, he started commodities trading
and began to purchase PVC for his elder brother’s plastic factory.
In 1988, he established Adani Enterprises. It traded in power and agriculture
commodities. In 1990, Adani Group partnered with American multinational, Cargill, to
export salt from Gujarat. After a while, the company exited and the partnership broke
which left 5,000 acres of land for Adani group, which is now the largest multiproduct
special economic zone of India. In 1991, government policies changed which encouraged
business, that led to a boom in Adani group and huge profits were made.
The government of Gujarat in 1993 decided to lend Mundra Port (a sea port located in
Gujarat) to private companies. In 1995, this contract was given to Adani group. The port
has grown substantially from 1995 and now it can handle nearly 8 crore tons of cargo per
year and that makes it the largest private sector port in India. After the port became
active, Adani expected that there would be a need of power in future. Assuming the need,
it started importing coal. This was the initiation to enter into the power and energy sector.
Gautam Adani then founded Adani Power Ltd., which is now India’s largest private
thermal power company with a capacity of 4620 MW. Adani group is now estimated to
have 40 billion USD as total assets with 60,500 employees, and according to Forbes
2014, Gautam Adani is 11th richest person in India.
Source: www.entrepreneurindia.co
IN TEXT QUESTIONS
1 Joseph Schumpeter defined "profit" as a ………………………….. for introducing
innovations .
2 ……………………………………… leads to creativity, imagination and
innovativeness and gives a competitive edge to the entrepreneur.
3 Entrepreneurial personality demands a high level of ………………………………..
4 ………………………….. are specific, measurable, accomplishments to be
achieved in a given time frame.
5 …………………………… is the communication with gestures, expressions or
body language.

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1.4 Entrepreneurship and Society
An entrepreneur will combine the various factors in a creative and innovative way in
order to generate value to customers and society for the creation of wealth. Society means
an aggregate of people living together in a community or works together in the
company.This statements represents that there is a direct relationship between these two
terms.An entrepreneur accelerates the economic growth of a society.It is about to creation
of wealth for the society and on a national level for the government in the form of tax
which is then redistributed in the society.Society provides mentorship for young
entrepreneurs.These have provide a source of mentorship for the entrepreneur and those
who have successfully managed their ventures can provide guidance and support to the
newly startup based entrepreneurs.Society involves in establishing policies that regulate
the business operation of entrepreneurs.The government being part of the society is
responsible for formulation of policies that fosers entrepreneurship.And if the
government policies are not favourable for the business ventures then entrepreneurship
would not gain prosperity.
1.4.1 Relevance of Entrepreneurship in Indian Society
Entrepreneurship means creative and beyond thinking which focus on mainly finding
solutions to various practical,financial and social problems. So entrepreneurship helps the
society in dealing with various business related issues with different business
strategies.The relevance of entrepreneurship for the Indian society are:
1. Innovation : As entrepreneurs can not work in impractical environment so
innovativeness is must for the success of the businesses and the creation of products
and services should be based on innovation that solve problems in innovative
ways.The products and services designed should be functional, cost-effective and
viable. An entrepreneur need to introduce products that are genuinely appealing and
provide solutions based on real world so that their innovative ideas get considered
with more attention.For Example, Induckt Global working as a ecosystem builder
and provides hand holding for startups under one umbrella.
2. Creating and sharing wealth : Entrepreneurs establishes the ventures by investing
their own money and the money of the public,Such mobilization of public money
generates good return which is shared by the society.This kind of pooled capital
which results in wealth creation and sharing with the public has important role in
achieving the goals of economic development.
3. Generation of employment opportunities : Entrepreneurs establishes ventures and
in return generates multiple jobs for job seekers.This is the true statement about
entrepreneur that an entrepreneur sacrifices one job and creates bulk of jobs for
multiple other jon seekers.That is why Government of India has launched various
schemes for the promotion of this step by startup India programmes,make in India
inititaive to attract foreign companies and their FDI into the indian economy.
4. Balanced regional development : Entrepreneurs helps the Indian society by
maintaining balance in regional development.The establishment of business
ventures,industries and companies in those areas which ar not developed and need
infrasructural improvements like roads, airports, stable electricity connections and

15
 water supply, schools, hospitals and other private and public service sources be
available.
5. GDP and per capita income: The MSME sector of India has around 36 million
units provides employment opportunities to more than 80 million persons which is
around 37% of the country’s GDP. Each new introduction of units results in nore
GDP and per capita income as efficient utilisation of land ,labour and capital to
develop innovative products and services.The growth in GDP and per capita income
results in economic development of the society.
1.4.2 Entrepreneurship as a creative response to society’s problem
Today the landscape of socual problems is rapidly changing.That dramatic changes in the
social problems will not be driven by traditional approach.For a creative response to
social problems requires an entrepreneurial approach that is not restricted to traditional
definition of entrepreneur.
There are five characteristics that explains why an entrepreneurial mindset is best to solve
social problems:
1 Entrepreneurial thinking challenges tradition : The successful entrepreneur is those
who are open-minded and approach problems and challenges with fresh ideas and
techniques. Entrepreneurs leverage research and data driven analysis to focus on
factors and variables to deal with the existing and new social problem’s
solutions.Their ability to deal with the problems and challenges is based on new
way of thinking.
2 Entrepreneurial thinking combines creativity with market itelligence:
Entrepreneurial thinking embodies creativity which means imagination about the
possibility but the most important character of an entrepreneur is to balance creative
solution with comprehensive market intelligence. Knowledge of the problems and
their contributing variables empowers an entrepreneurs to blend different concepts
with different contexts and design a unique or differentiated strategy.
3 Entrepreneurial thinking practices humility : Humility is the core element of
entrepreneurial thinking .An entrepreneur with this characteristics challenge their
own established tendencies and recognize their potential for further development
and improvement.A successful entrepreneur strives for perfection, obsses over
learning and recognize that they can always do better.
4 Entrepreneurial thinking embraces risk and failure : Embracing the possibility of
failure prepare an entrepreneur financially, psychologically and socially if the ideas
of business doesnot work out.To live a creative life, we must lose our fear of being
wrong.When an entrepreneur embrace failure, it will prepare to take risks
confidently.It will empowered to think bigger, learn faster and take action to
become creative entrepreneur.
5 Entreprenneurial thinking is big: Entrepreneur need a vision for the future and
forming a vision for future demands is think big.Thinking big means to bring a
spark into entrepreneurial venture and provide leadership needed to achieve
results.Thinking big gives energy in setting a goal that commands thoughts,

16
 liberates energy and inspires the hopes.Big thinking leads to innovations means to
arrive at a solutiom from different level of thinking with fresh insights.

Activity:
Search on internet two or three small enterprises which are based on social
entrepreneurship and write the role of social entrepreneur in solving various societal
problems.

IN TEXT QUESTIONS
1. Entrepreneurial thinking embodies ………………………. which means
imagination about the possibility.
2. ….……………………. means to bring a spark into entrepreneurial venture and
provide leadership needed to achieve results.
3. ….………………………….. is the core element of entrepreneurial thinking.
4. The growth in GDP and per capita income results in …………………………….. of
the society.
5. Society provides mentorship for …………………………. entrepreneurs.
1.5 Intrapreneurship and Entrepreneurship
DEFINITION of 'Intrapreneurship'
Acting like an entrepreneur within a larger organization. The term is derived from a
combination of "intra" or internal, and "entrepreneurship." Intraprenuers are usually
highly self-motivated, proactive and action-oriented people who are comfortable with
taking the initiative, even within the boundaries of an organization, in pursuit of an
innovative product or service.
Entrepreneurship and Intrapreneurship
The concept of entrepreneurship is seen as the process of uncovering and developing an
opportunity to create value through innovation and seizing that opportunity without
regard to either resources (human and capital) or the location of the entrepreneur – in a
new or existing company (Churchill, 1992).Intrapreneurship represent the initiation and
implementation of innovative systems and practices within an organization, by some of
its staff under the supervision of a manager who takes the role of an intrapreneur, in order
to improve the economical performance of the organization, by using a part of its
resources, namely those that previously have not been used in an appropriate manner.
Intrapreneurship improves the economical and financial performance of the company, by
applying a more efficient use of the resources and by using a suitable motivational system
for its employees (Istocescu, 2003).
Similarities and differences between entrepreneurship and intrapreneurship
Unlike the entrepreneur, the intrapreneur acts within an existing organization. The

17
intrapreneur is the revolutionary inside the organization, who fights for change and
renewal from within the system. This may give rise to conflicts within the organization,
so respect is the necessary key in order to channel these conflicts and transform them into
positive aspects for the organization. Even though intrapreneurs benefit from using the
resources of the organization for the implementation of the emerging opportunities, there
are several motives why innovation is more difficult to implement in an existing
organization, such as (Malek &Ilbach, 2004):
In order to give an answer to this question an analysis of the advantages and
disadvantages of both concepts is required. The table below helps someone decide what
type of business best suits him after confronting him with the advantages and
disadvantages that await him.
Table : Entrepreneurship and intrapreneurship: advantages and disadvantages
ENTREPRENEURSHIP
Advantages Disadvantages
 You are your own boss -  Money pressure – giving up on the
independency security of a regular paycheck
 The income increases
 Less benefits as the business is new
 You have the chance to be original
 Long working hours
 You have part of excitement and
 Mistakes are magnified
adventure
 All decisions must be made alone
 There are a lot of possibilities
 Salary potential – you decide upon
your own salary
INTRAPRENEURSHIP

Advantages Disadvantages
 Ability to stay in a friendly, well  Reward may not be up to expectation
knownenvironment  Innovation may not be appreciated
 Practicing your skills within an accordingly
organization – lower risk  You can be innovative but to a certain
 Using companies resources, good limit – you are not your own boss
name, knowledge
 Access to customers, infrastructure

After seeing the pros and the cons of each concept we think that it is useful to see also
the similarities and differences between these two concepts.

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Table 2: Entrepreneurship and intrapreneurship: similarities and differences

S.NO Similarities Differences

1 Both involve opportunity In start-up entrepreneurship, the
recognition and definition. entrepreneur takes the risk whereas in
intrapreneurship the company takes the
risk other than Career related risk.
2 Both require a unique business In a start-up the entrepreneur is subject or
concept that takes the form of a more susceptible to outside influences; in
product, process or service. intrapreneurship the organization is more
insulated from outside forces or influence.
3 Both are driven by an individual The business is owned by an individual in
champion who works with a team entreprenueuship whereas in
to bring the concept to fruition. intrapreneurship it is owned by company
having control over intellectual property
etc.
4 Both require that the entrepreneur The rewards are unlimited in case of
be able to balance vision with entrepreneurship whereas it is limited
managerial skill, passion with under intrapreneurship.
pragmatism, and proactiveness
with patience.
5 Both involve concepts that are The entrepreneur may or may not success
most vulnerable in the formative whereas under intrapreneur the
stage, and that require adaptation organisationhas more flexibility for
over time. management errors.
6 Both require harvesting Strategies.

IN-TEXT QUESTIONS
1. …………………………… areusually highly self-motivated, proactive and action-
oriented people who are comfortable with taking the initiative, even within the
boundaries of an organization, in pursuit of an innovative product or service.
2. Intrapreneurship improves the ………………………….. and
……………………………. performance of the company, by applying a more
efficient use of the resources and by using a suitable motivational system for its
employees.
3. The rewards are unlimited in case of …………………………………….. whereas it
is limited under ……………………………………….
4. in Intrapreneurship the organization is more…………………………………. from
outside forces or influence.

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1.6 Summary
Entrepreneurship deals in determining the uncertainties connected with the business and
opportunities provides multiple benefits to businesses.This chapter explains the features ,
functions and need of the entrepreneurship in venture along with the advantages &
disadvantages of entrepreneurship which helps in understanding the basic role of
entrepreneur in any startup.There is strong linkage between entrepreneurship and society
as entrepreneur contributes in solving the societal problems.This lesson also explain the
various other terms of entrepreneurship like intrapreneurship.
1.7 Glossary
Entrepreneurship : A person who identifies opportunities and dealing with
uncertainties making adjustment of risk called entrepreneur
and his/her action or activities are called entrepreneurship.
Mentorship : It is a relationship between two persons in which the
individual with more experience, knowledge and
connections ia able to pass what they have learned to other
persons.
Humility : Freedom from arrogance or quality of being humble.
Perception : The way you think about someone or something or the
ability to understand the presented information.
Autonomy : The ability to make your own decision about what to do
rather than being influenced by someone about what to do.
1.8 Answers to In-text questions
1. Reward 8. Humility
2. Perception 9. Economic Development
3. Confidence 10. Young
4. Goals 11. Intrapreneurs
5. Non-verbal communication 12. Economical and financial
6. Creativity 13. Entrepreneurship and Intrapreneurship
7. Thinking Big 14. Insulated
1.9 Self-Assessment Questions:
1. Explain the importance of entrepreneurship in a developing country.
2. Write a brief note on entrepreneurship and intrapreneurship.
3. What are the key qualities of a successful entrepreneur in any venture?
4. Critically evaluate the contribution of entrepreneurship in society.

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1.10 References
 https://egyankosh.com
 www.taxman.com
 www.smallbusiness.chron.com
 www.theintactone.com
1.11 Suggested Readings:
 Ldrich, H. E. ( 1999). Organizations evolving. London: Sage
 Drucker, P. (1985). Innovations and entrepreneurship: Practice and principles. NY:
Harper & Row.
 Alvarez, S. A., & Bussenitz, L. W. (2001).The entrepreneurship of resource-based
theory .Journal of management , 27(6), 755-775.
 www.mbaknol.com

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 LESSON 2
ENTREPRENEURSHIP DEVELOPMENT AND GLOBALIZATION
Written by : Dr. Navneet Gera
Revised by : Neha Goyal
Structure
2.1 Learning Objectives
2.2 Introduction
2.3 Entrepreneurship Development in India
2.4 Dimensions of Entrepreneurship
2.4.1 Intrapreneurship
2.4.2 Social entrepreneurship
2.5 Entrepreneurship and Globalization
2.5.1 Entrepreneurship and new challenges of Globalization
2.5.2 Role of Entrepreneurship in economic development
2.5.3 Advantages and Disadvantages of Globalization
2.6 Summary
2.7 Glossary
2.8 Answers to In-text questions
2.9 Self-Assessment Questions
2.10 References
2.11 Suggested Readings

2.1 Learning Objectives

After studying this lesson, student would be able to:
 discuss about the entrepreneurship and its significance in economic development of
the society.
 explain the need of social entrepreneurship.
 define the term intrapreneurship
 identify the important dimensions of entrepreneurship
 explain the entrepreneurship at Inidan and global context.
2.2 Introduction
In the previous unit, you have learnt about the concept of entrepreneurship, its features,
needs, functions and advanatges & disadvanatges.You have also learnt about
entrepreneurship, society and the relevance of entrepreneurship in solving the societal

22
problems.You have developed an understanding about the term intrapreneurship and
entrepreneurship which is very essential knowledge for running a startup.
In this unit, you will learn about the various dimesnsions of entrepreneurship especially
intrepreneurship and social entrepreneurship. This unit also provide insight on the role of
entrepreneurship in economic development of the society.In this unit you will also learn
about the relationship between globalizationa dn entrepreneurship.
After go through this unit thoroughly, you would be able to apply such knowledge in the
real life business and understand the role of entrepreneur at indian and global context.
2.3 Entrepreneurship Development In India
Historical Background
Entrepreneurship in Pre-British India
During the pre-British period, India was constituted mainly by villages. There were cities,
which were the capitals of the princely states. Villages were self-sufficient. The village
population used to satisfy their daily requirements and needs within the village. The
village economy was constituted by farmers, artisans, craftsmen, balutedars and members
of the gram panchayat. The artisans, craftsmen and balutedars used to produce various
products and provide necessary services. They represented the entrepreneurial culture and
possessed the characteristics of an entrepreneur. There was the barter economy, in which
commodities were exchanged for commodities. Certain products like spices, needles, and
salt were brought from outside by the village traders. Farmers produced the foodgrains.
Members of the gram panchayat established law, peace and order. Thus, the village
people were completely dependent upon each other. They represented well knit,
harmonious relationships.
Indian handicrafts, marble carvings, wooden articles, woollens garments, Jewellery and
textiles attracted the world market. Particularly, the Indian 'Mulmul', a type of Muslim
cloth was world famous. Village craftsmen and artisans received special patronage from
the Indian kings and princes. Indian spices, jute, jute goods, minerals, raw cotton and
handicrafts were exported all over the world. There was prosperity. Indian culture was an
entrepreneurial culture. There was "value for Labour." India was described as the "land of
gold". But Indian economy received a tremendous setback during the British rule.
Decline of Entrepreneurship During the British Period
During the British rule, Indian village economy received a big jolt from the competition
by the British industries. Mechanisation in the British industries initiated the
industrialisation process in Britain. On one hand, British industries, particularly, the
textile industry required raw material which was supplied by the Indian agriculture On
the other hand, British industries were in need of a ready market for their machine-made
goods. Raw materials were exported from India and the imported machine made British
goods flooded Indian markets. As these goods were cheap, compared to the handmade
goods, they received a huge response from the common man. The Indian market was
flooded with the British goods. This caused a complete destruction of Indian handicrafts
and village industries. Princely states were merged in the British empire. This adversely
affected the Indian artisans and craftsmen as they lost the valuable patronage of the

23
Indian Kings and the Princes.
The British introduced a new system of education. The value of labour was completely
lost. People took pride in serving in the administrative services of the British Offices.
Blue-collar jobs were substituted by the white-collar jobs. Unfortunately, entrepreneurial
culture" was submerged. The British period witnessed the emergence of the employment-
oriented mentality among the Indian artisans and craftsmen. They became 'servants'.
Risk-bearing ability and confidence were substituted by complete obedience to the British
administration. Creativity and innovativeness were substituted by submissiveness and a
blind imitation of the British. Once a 'land of gold', Indian economy was completely
paralysed. At the time of Independence, India was described as an underdeveloped
country.
Entrepreneurship Development in Independent India
When India got Independence, Indian economy had all the characteristics of an
underdeveloped country. Agriculture was the main economic activity. Ninety percent of
the population was employed in agricultural activities. Agricultural production was
undertaken mainly for self-consumption. But the techniques of cultivation were primitive.
The share of the agricultural produce on the Gross National Product (GNP) was
negligible. Industrial sectors were completely underdeveloped. There was an acute
shortage of capital, skilled workers, infrastructure facilities and industrious attitude was
totally absent. Technique of production was labour-intensive and foreign trade suffered
from a serious balance of payments. Exports were constituted of agriculture products,
particularly raw cotton, spices, jute, indigo etc. Imports were composed of scare raw
materials, machinery and equipment, food grains etc. Foreign exchange earning was
meagre as compared to the foreign exchange expenditure. Infrastructure facilities like
electricity, irrigation, transportation, postal services, telecommunications, godown
facilities, research institution and laboratories were not available. The educational system
was faulty and was not designed as per the requirements of the economy. The rate of
growth and volume of population was very high. The problem of unemployment was
severe. Particularly, in the agricultural sector, there was disguised unemployment. The
productivity in the agricultural and industrial sectors was at a very low level. Markets
were underdeveloped and entrepreneurial culture was absent. Considering the dismal
picture of the economy, the government of the newly Independent India had a gigantic
task before it-the task of rehabilitation and reconstruction of the economy of the country.
In the Indian context, strict hierarchy within organizations must give way to an open and
transparent work environment where new, radical ideas are welcome – and, most
importantly, where failure is not punished. The fear of failure and retribution are major
impediments to innovative thinking and risk-taking. Top management must show its
commitment to entrepreneurial behaviour within the organization. A good way to exhibit
this is by making a failed project not an end in itself but something that holds valuable
lessons for the future; or by recognizing individuals for the calculated risks they took and
not just for the successes they achieved.
When entrepreneurship education started in the 1980s, it was focused on self-
employment. Today, it must live up to the national agenda of employment generation
rather than individual wealth creation. The top business schools are preparing students for

24
entrepreneurship, and a new breed of young entrepreneurs are setting up their own
ventures. Some are offering students “deferred placements” so that they can come back to
the institute after a couple of years if their venture fails. We now need to replicate these
successful entrepreneurship education models across the rest of the country.
Equally crucially, perceptions about entrepreneurship need to change. Indian society must
overcome its deep-rooted tendency to value the status quo over risk-taking behaviour and
see entrepreneurship as merely the pursuit of materialism. Many of these perceptions
have changed since the 1990s, when entrepreneurs in the field of information technology
emerged as role models for the middle class. This set of entrepreneurs came from middle-
income families who used their knowledge and skills (rather than family wealth and
political connections) to turn a company around. Today, several young people in India are
starting their own ventures after university or leaving their comfortable, well-paying jobs
to follow their dreams.
Make in India – Roadmap to Entrepreneurship Development
Four Pillars of Make in India
New Processes: ‘Make in India’ recognizes ‘ease of doing business’ as the single most
important factor to promote entrepreneurship. A number of initiatives have already been
undertaken to ease business environment. The aim is to de-license and de-regulate the
industry during the entire life cycle of a business.
New Infrastructure: Availability of modern and facilitating infrastructure is a very
important requirement for the growth of industry. Government intends to develop
industrial corridors and smart cities to provide infrastructure based on state-of-the-art
technology with modern high-speed communication and integrated logistic arrangements.
Existing infrastructure to be strengthened through upgradation of infrastructure in
industrial clusters.
New Sectors: ‘Make in India’ has identified 25 sectors in manufacturing, infrastructure
and service activities and detailed information is being shared through interactive web-
portal and professionally developed brochures.
New Mindset: Industry is accustomed to see Government as a regulator. ‘Make in India’
intends to change this by bringing a paradigm shift in how Government interacts with
industry. The Government will partner with industry in the economic development of the
country. Our approach will be that of a facilitator and not that of a regulator.
Progressive plans and entrepreneurship
Besides the measures outlined above which will directly act as a boost to the
entrepreneurship ecosystem, various other plans and policies which the government have
worked on are sure to incentivize entrepreneurship too, albeit indirectly. Take for
example the ‘Make in India’ campaign which has been garnering widespread publicity
ever since its launch. Launched amidst much fanfare, this campaign which aims to
change the notion that it’s difficult to business in India, will in two ways also act as a
boon to entrepreneurs. Firstly, the success of the campaign lies on the premise that
bureaucratic processes and red-tape will be cut down and it will be easier for international
firms to do business in India. This means that dealing with authorities and regulations
will become easier for home-grown entrepreneurs too, implying they’ll be more likely to

25
join in to make in India. The second way in which this campaign holds bright prospects
for entrepreneurship is that it will lead to a rise in the number of start-ups which have
products/services built around the manufacturing industry (which the campaign primarily
targets).For instance, a HR start-up which comes up with a service to handle labour for
manufacturing firms, or a logistics start-up which helps in distribution of finished goods.
Another ambitious campaign started by the Modi government is ‘Digital India’. One of
the core components of this campaign is to maximize digital literacy by 2019. This
dedicated thrust provided to digital literacy means that startups in the digital space stand
to benefit massively. May they be online-education start-ups or e-commerce firms or
mobile apps, all of them will pick a chunk of the multi-billion dollar digital consumer
market which will eventually evolve. Other core aims of the campaign include setting up
a nation-wide digital infrastructure and delivering services digitally. These aims will give
an opportunity to the tech talent that our country boasts of to unleash their latent
entrepreneurial skill-set and provide solutions to connect rural areas under high-speed
internet networks and provide support services to the government’s vision of delivering
services electronically. Clear Tax, which helps citizens file tax returns online, is one such
start-up providing an ancillary service that has become the first India-focused startup to
make it to Y Combinator, arguably the world’s most prestigious accelerator.
The switchover to the goods and services tax (GST), scheduled for 1st April. 2016, seeks
to streamline and modernise a thoroughly fragmented indirect tax system riddled with
multiplicity of rates levied by states. This will be done by the government levying a
unified tax that will subsume a large number of central and state taxes on the supply of
goods and services. This is indeed a giant step in the direction of making it easier to run
businesses in India. With less complexities of the tax structure to worry about, this move
decreases the entry barrier for start-ups. Also, such a move means less legal/financial
hassles as well as lesser risks of corruption/bribery – leading to a more entrepreneurship
conducive environment for those starting-up their own companies. Scaling up a company
to expand to multiple cities & states will also consequently become easier.
Under the Modi-government, well-defined progressive steps have been taken and the
global sentiment of the Indian economy is at an all-time high. If this support continues,
and the above plans & policies are implemented successfully, there will be no stopping
for the country’s economic growth. And with India poised as one of the world’s leading
consumer country, it is only natural that new-age enterprises will have to spring up to
meet the rising demand.
Make in India initiatives for entrepreneurship development
 Foster innovation- It aims to support new ideas.
 Protect intellectual property- It aims to safeguard the creations of mind.
 Best in class manufacturing infrastructure- It also aims to create state of the art
facilities for manufacturing goods.
 Process of applying for Industrial License & Industrial Entrepreneur Memorandum
made online on 24×7 basis through eBiz portal.
 Validity of Industrial license extended to three years.

26
 Plan for integrating the Services of all Central Govt. Departments & Ministries with
the eBiz – a single window IT platform.
 Process of obtaining environmental clearances made online.
 All returns should be filed on-line through a unified form.
 India’s manufacturing infrastructure and capacity for innovation is poised for
phenomenal growth: new smart cities and industrial clusters, being developed in
identified industrial corridors having connectivity, new youth-focused programs and
institutions dedicated to developing specialized skills.
 A new ‘National Industrial Corridor Development Authority’ is being created to
coordinate, integrate, monitor and supervise development of all Industrial Corridors.
 Work on 5 smart cities in progress as a part of the Delhi-Mumbai Industrial
Corridor: Dholera, Shendra-Bidkin, Greater Noida , Ujjain and Gurgaon.
 Approval accorded to 17 National Investment and Manufacturing zones.
India seems to be doing better than it was a couple of years ago. The Modi Govt has been
launching one initiative after another, supporting the country's business and economy.
While some initiatives struggle to make much of an impact, most are working wonders
for India.The 'Make in India' program, for example, promotes India as a manufacturing
hub for the world. The Modi Government is marketing this campaign globally and the
impact is evident.
Case Study:
Retail entrepreneurship development in India: A case study of big bazaar
The Indian retail industry has strong linkages with the economic growth and development
of the economy. India is one of the largest emerging markets. It is one of the largest
economicsin the world in terms of purchasing power. Retailing in India is at an emerging
stage of its evolution. Organized retailing has become more popular in big cities in India
and most of the metropolitan cities and other big cities are flooded by modern organized
retail stores. Many semi-rural areas have also witnessed entry of such organized retail
outlets. Indian retail industry is currently estimated at US$ 490 billion. India’s retail
market is expected to touch a whopping Rs 47 trillion (US$ 782.23 billion) by 2016-
17, expanding at a compounded annual growth rate (CAGR) of 15 percent, according to a
study by a leading industrial body. The total organized retail supply in 2013 stood at
approximately 4.7 million square feet (sq.ft), witnessing a strong year-on-year (y-o-y)
growth of about 78 percent over the total mass supply of 2.5 million sq.ft in 2012. The
foreign direct investment (FDI) inflows in single-brand retail trading during the period
April 2000-January 2014 stood at US$ 98.66 million. Retailing as a whole contributes
almost 14-15% of India’s GDP and employs almost 8% of India’s
employable population.
Big Bazaar is credited with bringing organized mega retailing to India. The project was
conceived as a uniquely Indian hypermarket in a format that combined the look, touch
and feel of Indian bazaars with the comfort, convenience and quality that modern
retailing brings. Launched in August 2001, Big Bazaar has now become the iconic
destination of modern retailing for all sections of Indian consumers. There are more than

27
hundred Big Bazaar stores in big cities as well as smaller towns like Sangli, Durgapur,
Panipat, Palakkad, Ambala, Meerut, Kolhapur and Haldia. Attracting over 100 million
customers every year, it has democratized shopping in India and become synonymous
with great promotions that offer quality products at affordable prices. This typical Big
Bazaar store offers over 1,60,000 products across categories like apparel, general.
Source:https://www.bimkadapa.in/qp/17E00303
Source:https://www.bimkadapa.in/qp/17E00303-Entrepreneurship%20
Entrepreneurship%20 Development.
pdf
IN TEXT QUESTIONS
1. …………………………….. recognizes ‘ease of doing business’ as the single most
important factor to promote entrepreneurship.
2. The core component of ……………………….campaign is to maximize digital
literacy in the country.
3. The success of the Make In campaign lies on the premise that
……………………………….. and ……………………………..will be cut down
and it will be easier for international firms to do business in India.
4. GST stands for…………………………………………..
5. Government will partner with industry in the economic develo
development
pment of the country
as a ………………………………………… and not as a regulator.
2.4 Dimensions of Entrepreneurship
Entrepreneurship is the process of setting up a new venture and develop it further t
achieve maximum profit.To achieve the goals of such ventures , a variety of elements
ought to be in right place I.e. creativity, innovation, risk taking and preserverance etc.To
achieve the objectives of an entrepreneurial entity,it is important to understand the
dimensions that drive entrepreneurship.Dimension means tthe he measurment of any
element, entity, article or other in physical space.Entrepreneurship is very broad concept
which can be refined only by examining six critical dimensions of business.
1. Strategic orientation
This is the first dimension of entrepreneu
entrepreneurship
rship which mainly focus on opportunity.This
dimension is based on the formulation of company’s strategy in an entrepreneurial
orientation.So this factor mainly focus on opportunities and business strategy to achieve
this opportunity for growth and develop
development.
2. Commitment to opportunity
It is the second important dimension of the entrepreneurship. This factor says that it is not
sufficient enough to describe an entrepreneur as an innovator or creator.The entrepreneur
must be able to take decisive steps sspeedily
peedily within the the time frame and drive maximum
output.After identifying opportunity, he/she has to ensure his/her commitment towards
the opportunity is long trem and dedicated.

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3. Commitment of resources
It is a commitment process where it is required to manage the risk associated with the
new venture by commitment to the opportunity.Such commitment should be long term
and multi stage which ensures maximum resuls by utilising minimum resource pool and
also taking into consideration the risk associated in this process.
4. Resource control
This dimension explains the entrepreneur should be wise enough in utilising the resources
effectively at that point which provides maximum output without spending the resources
in callous manner which creates burden on the enterprise.
5. Management structure
This dimension express that the management structure of the enterprise should be flexible
not fixed and formal hierarchical structure.
6. Reward philosophy
An entrepreneurial set-up should be based on the theme that the value and reward system
should be followed for the deserving team to motivate them,So it is the motivating
strategy being followed by the enterprise.
2.4.1 Intrapreneurship
DEFINITION of 'Intrapreneurship'
Acting like an entrepreneur within a larger organization. The term is derived from a
combination of "intra" or internal, and "entrepreneurship." Intraprenuers are usually
highly self-motivated, proactive and action-oriented people who are comfortable with
taking the initiative, even within the boundaries of an organization, in pursuit of an
innovative product or service.
Entrepreneurship and Intrapreneurship
The concept of entrepreneurship is seen as the process of uncovering and developing an
opportunity to create value through innovation and seizing that opportunity without
regard to either resources (human and capital) or the location of the entrepreneur – in a
new or existing company (Churchill, 1992).Intrapreneurship represent the initiation and
implementation of innovative systems and practices within an organization, by some of
its staff under the supervision of a manager who takes the role of an intrapreneur, in order
to improve the economical performance of the organization, by using a part of its
resources, namely those that previously have not been used in an appropriate manner.
Intrapreneurship improves the economical and financial performance of the company, by
applying a more efficient use of the resources and by using a suitable motivational system
for its employees (Istocescu, 2003).
Similarities and differences between entrepreneurship and intrapreneurship
Unlike the entrepreneur, the intrapreneur acts within an existing organization. The
intrapreneur is the revolutionary inside the organization, who fights for change and
renewal from within the system. This may give rise to conflicts within the organization,
so respect is the necessary key in order to channel these conflicts and transform them into

29
positive aspects for the organization. Even though intrapreneurs benefit from using the
resources of the organization for the implementation of the emerging opportunities, there
are several motives why innovation is more difficult to implement in an existing
organization, such as (Malek &Ilbach, 2004):
In order to give an answer to this question an analysis of the advantages and
disadvantages of both concepts is required. The table below helps someone decide what
type of business best suits him after confronting him with the advantages and
disadvantages that await him.
Table : Entrepreneurship and intrapreneurship: advantages and disadvantages
ENTREPRENEURSHIP
Advantages Disadvantages
 You are your own boss - independency  Money pressure – giving up on the
 The income increases security of a regular paycheck
 You have the chance to be original  Less benefits as the business is new
 You have part of excitement and Long working hours
adventure
 There are a lot of possibilities Mistakes are magnified
 Salary potential – you decide upon your  All decisions must be made alone
own salary
INTRAPRENEURSHIP
Advantages Disadvantages
 Ability to stay in a friendly, well  Reward may not be up to expectation
knownenvironment  Innovation may not be appreciated
 Practicing your skills within an accordingly
organization – lower risk  You can be innovative but to a certain
 Using companies resources, good name, limit – you are not your own boss
knowledge
 Access to customers, infrastructure

After seeing the pros and the cons of each concept we think that it is useful to see also
the similarities and differences between these two concepts.
Table 2: Entrepreneurship and intrapreneurship: similarities and differences
S.NO Similarities Differences
1 Both involve opportunity In start-up entrepreneurship, the
recognition and definition. entrepreneur takes the risk whereas in
intrapreneurship the company takes the
risk other than Career related risk.
2 Both require a unique business In a start-up the entrepreneur is subject or
concept that takes the form of a more susceptible to outside influences; in
product, process or service. intrapreneurship the organization is more

30
 insulated from outside forces or influence.
3 Both are driven by an individual The business is owned by an individual in
champion who works with a team entreprenueuship whereas in
to bring the concept to fruition. intrapreneurship it is owned by company
having control over intellectual property
etc.
4 Both require that the entrepreneur The rewards are unlimited in case of
be able to balance vision with entrepreneurship whereas it is limited
managerial skill, passion with under intrapreneurship.
pragmatism, and proactiveness
with patience.
5 Both involve concepts that are The entrepreneur may or may not success
most vulnerable in the formative whereas under intrapreneur the
stage, and that require adaptation organisationhas more flexibility for
over time. management errors.
6 Both require harvesting Strategies.

2.4.2 Social entrepreneurship

Social entrepreneurs are those individuals associated with non-profit organizations in
raising funds by participating in societal events and activities.The role of social
entrepreneurs is to generate social capital without focusing on profit or returns , focus on
social problems and environmental problems to bring a positive change in the
society.Some of the examples of social returns are child-rights foundation,Women
empowerment foundation and treatment of waste products. He/she explores business
opportunities that have a positive impact on the society.
Social entrepreneurship is the process by which individuals, startups and entrepreneurs
find and develop solutions which helps in addressing social issues.Social
entrepreneurship is different from traditional entrepreneurship as its main objective is to
identifying and solve the social issues and problems and bring positive change in the
society.It is a vast topic that covers all the sectors of the society.
Social entrepreneurship is the process by which people, organisations, and entrepreneurs
develop and fund solutions that specifically address social problems.”.
Social entrepreneurship play the role of change agents in the society by:
1. Adopting a mission statement to create and sustain social values.
2. Acting without being limited by resources currently in hand.
3. Recognizing new opportunities to serve the mission.
4. Continuously engagement in the process of innovations,adaptation and learning.
5. Exhibiting accountability for the outcomes created.

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As per American professor Greg Dees, “ Social entrepreneurs are a special breed of
leaders”.
Examples of social entrepreneurship:
1. Anshu Gupta,Founder of Goonj : Anshu ( media professional) wanted to provide
proper clothing to underpriviliged section of the society.So he stated collecting old
clothes to upcycle them and distribute these clothes to the poor section.
2. Harish Hands, CEO and Founder ( selco) : It is India’s first solar funding program,
aims to provide sustainable energy in the country’s rural area.
3. Urvashi sahni, Founder & CEO of study hall education Foundation ( SHEF) : It set
up to educate girls in rural India.It has transformed more than 1000 schools, trained
1000’s of teachers and impacted nearly 5 million students’s lives in uttar pradesh
and rajasthan.
Characteristics of a social entrepreneur:
1. Leadership
2. Emotional Balance
3. Vision
4. Ability to multitask
5. Decision making
6. Open to collaboration
Difference between Business and Social Entrepreneurship:
Business Entrepreneurship Social Entrepreneurship
1. It is more about the individual 1. All about collective efforts for
society.
2. It aims at producing goods and 2. It aims at producing goods and
services services that can serve the
community and solve a problem.
3. It focused on the market, demand and 3. It focus on a solution oriented
trends. approach to a social problem.
4. Measure performance according to 4. Measures performance according to
Profits. the Impact.
6. The purpose is to satisfy customer 5. The purpose is to promote their
needs and earn profits. cause and improve the society.

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Activity:
List Indian Social entrepreneurs on the basis of following:
1. For Education………………..
2. Children welfare…………………………
3. Health care…………………………
4. Women empowerment…………….

IN TEXT QUESTIONS
1. ………………………… means the measurement of any element, entity, article or
other in physical space.
2. ………………………………….. is the process by which individuals, startups and
entrepreneurs find and develop solutions which helps in addressing social issues.
3. …………………………………. dimension explains that entrepreneur should be
wise enough in utilising the resources effectively at that point which provides
maximum output without spending the resources in callous manner which creates
burden on the enterprise.
4. …………………………….dimension says that it is not sufficient enough to
describe an entrepreneur as an innovator or creator.
5. An entrepreneurial set-up should be based on the theme that the
……………………… and ………………….. system should be followed for the
deserving team to motivate them

2.5 Entrepreneurship and Globalization

There is strong relationship between entrepreneurship and globalization. Globalization
works with the entrepreneurship in different ways. Globalization provides technology
facility to entrepreneurs by fostering the rise of innovation systems.It includes enegement
between new businesses and large companies.Globalization also provides transnational
entrepreneurship.
For example, apparel businesses in italian cities like prato run by entrepreneurs from
wenhou appropriate the legitimacy of made in italy garments and the advantages of costs
associated with employing workers from wenhou.While local competitors are not always
pleased .It is useful in creating value with the benefits in favour of local economy and
laws are respected also.Globalization also facilitates social entrepreneurship.It means
creating solution to the societal problems like environmental degradation, poverty and
poor health.

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2.5.1 Entrepreneurship and new challenges of Globalization
Globalization is the interdependence of world’s economies, culture and populations
by cross-border trade in goods and services,technology , flows of information,investment
and people.
The term “Globalization” is the process by which the businesses and organisations
develop international influence on an international scale level.While globalization offers
many benefits but it is not without challenges.Some of he hurdles businesses face when
going global include:
1. Exploitation
2. High investment cost
3. Confused local system
4. Weak regulation
5. Immigration challenges
6. Localized job loss
Benefits of Globalization:
Following are the benefits of globalization:
1. Increased flow of capital
2. Better products at lower prices
3. Collaboration and shared resources
4. Cross-cultural exchange
5. Spread of knowledge and technology
6. Quick technological advances
7. Increased household income
8. Increased open-mindedness and tolerance
Globalization works with entrepreneurship in three important ways:
1. Globalization facilitates technology entrepreneurship by fostering the rise of
innovation ecosystem.It includes engagement between between new ventures and
large multinational enterprises.
2. Globalization facilitates social entrepreneurship by creating wealth as well as
addressing societal problems such as environmental degradation, poverty & poor
health.There sre many unique opportunities for shared value creationfor both profit
and non-profit organisation.
3. Globalization facilitates transnational entrepreneurship by the networks of the
countries, it can create their own businesses in the same or similar sectors.

34
Forms of Competition in Globalization:
In Globalized market, entrepreneurs who have competitive struggle in the business, has
four strategic forms of competitions:
1. Price Competition: Small and medium scale businesses have certain advantages in
terms of prices and cost with local companies and international competitors.
2. Competition by capabilities in production: Small and medium scale businesses
offer those products and services that meets the need of their customers in
comparison to competitors.
3. Competition by high quality services : Some entrepreneurs provides high quality
services to their customer in comparison to competitors.It includes superior market
knowledge , ability to satisfy customer’s needs and specific customer segment.
Positive Impact of Globalization on entrepreneurship:
1. Global advantages: Startups or entrepreneurs can sell their local products globally,
can buy the products from global market at low cost and resale them with
margins.They can also get benefits from favourable foreign exchange rates and earn
profit by margin.
2. Local advantages : Entrepreneurs can setup their outlets in the global local markets
and neighbourhood with less price and can grab the market globally.
3. Piracy : Entrepreneurs do little to restrict piracy and find themselves struggle with
cheap imitation of products even intellectual property rights protection is in vogue.
4. Adaptability speed : Small businesses and entrepreneurs has the ability to adapt the
global and local trends speedily.So globalization proves beneficial for the
entrepreneurs or startups.
Negative impact of Globalization on Entrepreneurship:
1. Imcome inequalities
2. Dominance of international companies
3. Exchange rate risk
4. Trade barriers in respect of export
5. Low environmental standards due to race of competition.
2.5.2 Role of Entrepreneurship in economic development
Entrepreneurs play an important role in economic development in multiple ways. The
important contributions towards economic development could be through providing
employment, contributing towards GDP, contributing towards foreign exchange,
infrastructure development, getting innovation, technology development and creating new
avenues of business. Entrepreneurs create new businesses, generating jobs for themselves
and those they employ. In many cases, entrepreneurial activity increases competition and,
with technological or operational changes, it can increase productivity as well. The small
businesses in India are often ones created by self-employed entrepreneurs. “Entrepreneurs
give security to other people; they are the generators of social welfare,” Carl J. Schramm,

35
president and chief executive officer of Ewing Marion Kauffman Foundation, said in
February 2007. Entrepreneurs innovate and innovation is a central ingredient in economic
growth. As Peter Drucker said, “The entrepreneur always searches for change, responds
to it, and exploits it as an opportunity.” Entrepreneurs are responsible for the commercial
introduction of many new products and services, and for opening new markets.
Moreover, it is evident from research that entrepreneurs were essential to many of the
most significant innovations, ones that revolutionized how people live and work. From
the automobile to the airplane to personal computers – individuals with dreams and
determination developed these commercial advances. The crucial role played by the
entrepreneurs in the development of the emerging countries has made the people much
conscious of the significance of entrepreneurship for economic development. Now,
people have begun to realize that for achieving the goal of economic development, it is
necessary to increase entrepreneurship both qualitatively and quantitatively in the
country. It is only active and enthusiastic entrepreneurs who fully explore the
potentialities of the country’s available resources labour, technology and capital.
An entrepreneur has to take into consideration the fact that any business direction is not
standing still. It constantly develops and changes in order to survive under the conditions
of business competition. It should be mentioned that small business life cycle can be
rather short – several years or even months. It all depends on the way an entrepreneur
runs and brands his business. According to the key concepts of business theory, every
business system has the following stages of its development: beginnings of business
(when you start a business and it enters the market); business development (business
growth and promotion); business maturity stage (the most successful period of your
company’s activity) and failure (either complete or partial bankruptcy). Most beginning
entrepreneurs believe that they achieve success when they start a business. In fact, they
are successful entrepreneurs if they manage to fight for place in the market and outstrip
competitors. Every entrepreneur may not succeed in passing business development stage.
But those who manage to reach the top of the market can make really big profits.
Entrepreneurs are among the prime movers of innovations. Entrepreneurship is a
necessary dynamic force. It is also opined that development does not occur spontaneously
as a natural consequence when economic conditions are in some sense ‘right’: a catalyst
or agent is needed, and this requires an entrepreneurial ability. Essentially, the
entrepreneur searches for change, sees need and then brings together the manpower,
material and capital required to respond the opportunity what he sees. Role of
entrepreneurship in economic development varies from economy to economy depending
upon its material resources, industrial climate and the responsiveness of the political
system to the entrepreneurial function. The entrepreneurs contribute more in favourable
opportunity conditions than the economies with relatively less favourable opportunity
conditions. Small scale industries provide immediate large scale employment, ensure a
more equitable distribution of national income and also facilitate an effective resource
mobilization of capital and skill which might otherwise remain unutilized. Lastly, the
establishment of Entrepreneurship Development Institutes and alike by the Indian
Government during the last decades is a good testimony to her strong realization about
the premium mobile role of entrepreneurship played in economic development.

36
Key role of entrepreneurship towards economic development are as follows:
1. Entrepreneurship promotes capital formation by mobilizing the idle saving, of the
public.
2. It provides immediate large scale employment. Thus, it helps reduce the
unemployment problem in the country, i.e., the root of all socio economic problems.
3. It promotes balanced regional development.
4. It helps reduce the concentration of economic power.
5. It stimulates the equitable redistribution of wealth, income and even political power
in the interest of the country.
6. It encourages effective resource mobilization of capital and skill which might
otherwise remain unutilized and idle.
7. It also induces backward and forward linkages which stimulate the process of
economic development in the country.
8. Last but no means the least, it also promotes country’s export trade i.e., an
important ingredient to economic development.
Role of entrepreneurs in economic development
The entrepreneur who is a business leader looks for ideas and puts them into effect in
fostering economic growth and development. Entrepreneurship is one of the most
important input in the economic development of a country. The entrepreneur acts as a
trigger head to give spark to economic activities by his entrepreneurial decisions. He
plays a pivotal role not only in the development of industrial sector of a country but also
in the development of farm and service sector. The major roles played by an entrepreneur
in the economic development of an economy is discussed in a systematic and orderly
manner as follows.
(1) Promotes Capital Formation:
Entrepreneurs promote capital formation by mobilising the idle savings of public. They
employ their own as well as borrowed resources for setting up their enterprises. Such type
of entrepreneurial activities lead to value addition and creation of wealth, which is very
essential for the industrial and economic development of the country.
(2) Creates Large-Scale Employment Opportunities:
Entrepreneurs provide immediate large-scale employment to the unemployed which is a
chronic problem of underdeveloped nations. With the setting upof more and more units
by entrepreneurs, both on small and large-scale numerous job opportunities are created
for others. As time passes, these enterprises grow, providing direct and indirect
employment opportunities to many more. In this way, entrepreneurs play an effective role
in reducing the problem of unemployment in the country which in turn clears the path
towards economic development of the nation.

37
(3) Promotes Balanced Regional Development:
Entrepreneurs help to remove regional disparities through setting up of industries in less
developed and backward areas. The growth of industries and business in these areas lead
to a large number of public benefits like road transport, health, education, entertainment,
etc. Setting up of more industries lead to more development of backward regions and
thereby promotes balanced regional development.
(4) Reduces Concentration of Economic Power:
Economic power is the natural outcome of industrial and business activity. Industrial
development normally lead to concentration of economic power in the hands of a few
individuals which results in the growth of monopolies. In order to redress this problem a
large number of entrepreneurs need to be developed, which will help reduce the
concentration of economic power amongst the population.
(5) Wealth Creation and Distribution:
It stimulates equitable redistribution of wealth and income in the interest of the country to
more people and geographic areas, thus giving benefit to larger sections of the society.
Entrepreneurial activities also generate more activities and give a multiplier effect in the
economy.
(6) Increasing Gross National Product and Per Capita Income:
Entrepreneurs are always exploring for new opportunities. They explore and exploit
opportunities, encourage effective resource mobilisation of capital and skill, bring in new
products and services and develops markets for growth of the economy. In this way, they
help increasing gross national product as well as per capita income of the people in a
country. Increase in gross national product and per capita income of the people in a
country, is a sign of economic growth.
(6) Improvement in the Standard of Living:
Increase in the standard of living of the people is a characteristic feature of economic
development of the country. Entrepreneurs play a key role in increasing the standard of
living of the people by adopting latest innovations in the production of wide variety of
goods and services in large scale that too at a lower cost. This enables the people to avail
better quality goods at lower prices which results in the improvement of their standard of
living.
(7) Promotes Country's Export Trade:
Entrepreneurs help in promoting a country's export-trade, which is an important
ingredient of economic development. They produce goods and services in large scale for
the purpose earning huge amount of foreign exchange from export in order to combat the
import dues requirement. Hence import substitution and export promotion ensure
economic independence and development.
(8) Induces Backward and Forward Linkages:
Entrepreneurs like to work in an environment of change and try to maximise profits by
innovation. When an enterprise is established in accordance with the changing

38
technology, it induces backward and forward linkages which stimulate the process of
economic development in the country.
(9) Facilitates Overall Development:
Entrepreneurs act as catalytic agent for change which results in chain reaction. Once an
enterprise is established, the process of industrialisation is set in motion. This unit will
generate demand for various types of units required by it and there will be so many other
units which require the output of this unit. This leads to overall development of an area
due to increase in demand and setting up of more and more units. In this way, the
entrepreneurs multiply their entrepreneurial activities, thus creating an environment of
enthusiasm and conveying an impetus for overall development of the area.
2.5.3 Advantages and Disadvantages of Globalization
Advantages of Globalization on Entrepreneurship
Global Advantage: Globalization has allowed small businesses to compete worldwide as
they are able to sell their products and services on the global platform. Small and medium
sized enterprises are always supported by the shipping companies as they offer package
shipping all around the globe. Additionally, these small business owners often purchase
the products from cross nation markets with the purpose of reselling. This practice helps
small businesses to gain a price advantage which was earlier available to the giant
conglomerates only. They even gain from the foreign exchange rates if buying from a
country where the worth of dollar is more that that of the local currency.
Local Advantage: Globalization enabled international chains to set up shops in the
neighboring markets with low prices. It can be accomplished by taking the advantage of
the cheap labouravailable and then selling it at a low level of margin. As an entrepreneur,
one can always fight back and provide the goods and services which are not available at
chain stores. For example, it is often observed that local restaurants offer the local food
that is not available in the popular restaurant chains.
Piracy: The global economy has not been able to come up with global standards. The
rules and regulation regarding the piracy are different for different nations. Some of the
nations have really liberal policies which threatens entrepreneurs with cheap imitations.
However, an increased level of competition has emerged as a shield for the patents and
encourages the innovation and risk taking.
Speed of Adaptability: The business potential is no longer dependent upon the size of
the firm as firm of any size can achieve success in the global environment. The only thing
critical to success is the speed. It is believed that small businesses are able to adapt to the
global and local changes easily as they do not follow a large bureaucracy.
Disadvantages of Globalization on Entrepre-neurship
1. The emergence of international trade worsening the inequalities of income in the
industrialized and less- industrialized nations.
2. The global trade is mainly dominated by the huge transnational companies who
only work for the profit motive without paying any consideration to the individual
needs of developing and under-developed nations.

39
3. The policies formulated in the industrialized countries favor the countries of its kind
and restrain some producers to have access to the exports.
4. In the countries where the conditions of financial institutions is weak, there is
always an element of risk in capital flows.
5. Developing nations engage in a race to attract the foreign investments which can
often lead to the lower environmental standards.
IN TEXT QUESTIONS
1. ……………………………….. is the interdependence of world’s economies,
culture and populations by cross-border trade in goods and services,technology ,
flows of information,investment and people.
2. When an enterprise is established in accordance with the changing technology, it
induces ………………………. and ……………………………. linkages which
stimulate the process of economic development in the country.
3. Entrepreneurs promote …………………………………………….. by mobilising
the idle savings of public.
4. Globalization facilitates ……………………………entrepreneurship by the
networks of the countries, it can create their own businesses in the same or similar
sectors.
5. For achieving the goal of economic development, it is necessary to increase
entrepreneurship both ……………………………………. and
……………………………………………………. in the country.
2.6 Summary
This unit deals in entrepreneurship and economic development of the society and also
discuss about various dimensions of entrepreneurship in which social entrepreneurship is
very important for societal problem’s solutions and for the development of society Social
enterprises has social concerns in priority alongside organizations own sustainability.In
the social sector, entrepreneurs works as social entrepreneurs are considered as change
agents The society who are target beneficiaries of such organisations are old age people,
economically weaker and sick people, physically challenged ,orphans and discriminant
communities.There is necessary for such organisations to provide those goods and
services which are in line with ecologically requirements.Social entrepreneurs set up
businesses that solve environmental problems or operate sustainability.The importance of
various entrepreneurial activities for the growth and development has been heightened by
the globalization process. Enterprises need to operate with macroeconomic environments
I.e domestic an global locations which are affected by the changes in this environment.It
result to increase level of globalization in the economy. So this unit explains the concept
of globalization and entrepreneurship.

40
2.7 Glossary
Facilitator : A person who helps another person or organization do something more easily
or find the solution to a problem by discussing things and suggesting how to do these
things.
Dimension :It is a measurement of the size of something in a particular direction such as
length, width, height or diameter.
Red tape : Red tape is an idiom referring to regulations or conformity to formal rules and
standards which are claimed to be excessive , rigid or redundant.
Bureaucratic : The system to maintain uniform authority within and across institutions is
known as bureaucracy.
Globalization :The integration of the economy of a nation with the world economy I.e.
the free movement of goods and services and people across the world in a seamless and
integrated manner.
2.8 Answers to In-text questions
1. Make-In India 9. Commitment to opportunity
2. Digital India 10. Value and reward
3. Bureaucratic process and red tape 11. Globalization
4. Goods and service tax 12. Backward and forward
5. Facilitator 13. Capital formation
6. Dimension 14. Transnational
7. Social entrepreneurship 15. Qualitatively and quantitatively
8. Resource control
2.9 Self-Assessment Questions
1. Define the term Entrepreneurship. How entrepreneurship plays an important role in
economic development of India?
2. Write a short note on: Globalization.
3. What is the meaning of dimension? Explain the important six dimensions of
entrepreneurship.
4. Describe the role of entrepreneur as facilitator.
2.10 References
 www.egyankosh.com
 https://www.bimkadapa.in/qp/17E00303-Entrepreneurship%20Development.pdf

41
2.11 Suggested Readings
 Mohanty, S. K. (2005): Fundamentals of Entrepreneurship , Phi Learning, New Delhi
 Ries, E. (2011): The LeanStartup: How Today’s Entrepreneurs Use Continuous
Innovations to Create Radically Successful Buisnesses, Crown Publishing ,
NewYork, USA
 Hisrich, R. D., Peters, M. P., and Stepherd, D. A. (2018): Entrepreneurship, McGraw
Hill Education, New Delhi
 Scarborough, N. M., Cornwell, J. R. (2016): Essentials of Entrepreneurship & Small
Business Management, Pearson Publications, New Delhi

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 UNIT II
LESSON 1
ENTREPRENEURIAL COMPETENCIES

Written by : Dr. Vipin Kumar

Revised by : Neha Goyal
Structure
1.1 Learning Objectives
1.2 Introduction
1.3 Entrepreneurial Competencies
1.4 Individual risk behaviour and propensity for entrepreneurship
1.5 Entrepreneurial values,attitudes and motivation
1.6 Entrepreneurial reward system
1.7 Summary
1.8 Glossary
1.9 Answers to In-text questions
1.10 Self-Assessment Questions
1.11 References
1.12 Suggested Readings
1.1 Learning Objectives
After studying this unit, student would be able to:
 understand the concept of competencies and identify the elements of entrepreneurial
competencies.
 Distinguish between the psychological and monetary basis of rewards.
 Explains the importance of values, attitude and motivation for an entrepreneur.
 Understand the individual risk behaviour in any entrepreneurial organization.
1.2 Introduction
This is the really true that for running an enterprise,mere theoretical knowledge of
entrepreneurship is not enough while it also requires certain skills and traits through
which an entrepreneur can translate his/her knowledge into reality as there is great
difference between theory and practical.The success of an entrepreneur depends upon
achievements of his/her goals which are governed by these skills and traits , called
entrepreneurial competencies.
This unit will discuss about the entrepreneurial competencies and steps for developing
such competencies.This unit also explains the topic individual risk behaviour and
propensity for entrepreneurship.The student will also learn about the entrepreneurial

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values , attitudes and motivation.Reward system are fundamental of any entreprenerial
venture as it has the ability to shape the employee’s behaviour and organizational culture
in same manner as attitude of the business owner can. So this unit explains about
entrepreneurial reward system.
After go through this lesson thoroughly, student will become able to apply all this
knowledge into real business world.
1.3 Entrepreneurial Competencies
Entrepreneurial behavior requires certain knowledge, skill or personality profile.
Generally, it is called entrepreneurial competence or traits.
A competence may be defined as an underlying characteristics of a person which results
in effective and/or superior performance in a job. A job competence is an underlying
characteristics of a person in that it may be motive, traits, skills, aspect of one’s self-
image or a body of knowledge which one uses.
Thus, success of an entrepreneur is governed by entrepreneurial competencies. If he has
all these competencies, he can be expected to achieve his entrepreneurial goals. Elements
of entrepreneurial competencies as follows:
(a) Body of Knowledge
(ii) Set of Skills
(iii) Cluster of Appropriate Motives/Traits.
(i) Body of Knowledge: Innovation is possible only through knowledge. The
inventor or originator of the idea that led to the knowledge or vision, of some
thing new; the artist of creative endeavour. Inventors include those who identify
new technological processes, new forms of plant life and new designs. Thus,
inventions deal with new processes, or new technical knowledge. In a simple way,
knowledge means collections of information and retention of facts that an
individual stores in some parts of his brain.
Creative process provides imaginative people, geminate ideas, nurture them and
develop them successfully. This type of idea has a value. However, it must be
proven useful or be marketable and to achieve either status or achievement, must
be developed. But innovation is the development process which translates an idea
into an application. It requires persistence in analytically working out the details
of product design or service, to develop marketing, obtain finances and plan
operations.
(ii) Set of Skills: Skill is the ability to demonstrate a system and sequence of behavior
that are functionally related to attaining a performance or goal. An entrepreneur is
required to have certain skills and these skills also constitute his leadership
qualities. These skills are as follows.
(a) Anticipatory Skills––foresight into a constantly changing environment;
(b) Visioning Skills––the use of persuation and example to induce a group to act
in accordance with the leader’s purposes or the shared purposes of a larger
group;

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 (c) Value Congruence Skills––the need to be in touch with employee’s
economic, safety, psychological, spiritual, sexual, aesthetic and physical needs
in order to engage people on the basis of shared motives, values and goals;
(d) Empowerment Skills––the willingness to share power and to do so
effectively; and
(e) Self understanding Skills––introspective or self underskills as well as
framework within which leaders understand both their own needs and goals
and those of their employees.
In practice, an entrepreneur who pursues the idea, planning its application, acquiring
resources and establishing its market through persistence, planning, organizing and
leadership needs above skills. With the help of these skills, entrepreneur is expected to
perform well in his entrepreneurial behavior.
(iii) Cluster of Motives and Traits: Motives deal with recurrent concern for a goal,
state or condition appearing in fantasy, which drives, directs and selects behavior
of the individual. Actually motive represents thought related to a particular goal,
state. McClellend opined that “need achievement” is social motive to excel that
tends to characterize successful entrepreneurs especially when reinforced by
cultural factors. According to Paul Wilken “entrepreneurship becomes the link
between need achievement and economic growth. Thus, need for achievement is
guiding force behind entrepreneurial activities. It is the desire to do well and it
motivates the people to undertake innovative activities.
The trait may be defined as a dispositional or characteristic way in which the person
responds to an equivalent set of stimuli. These responses represent intelligence, charisma
decisiveness, enthusiasm, strength, bravery, integrity and self-confidence. Thus, traits are
an individual’s personal characteristics. Traits are contents of leadership qualities. So an
effective leader is one who possesses intelligence, alertness to the needs of others,
understanding of the task, good communication skills, initiative and persistence in
dealing with the problems. It is important to note that personal elements that govern the
leadership ability are intelligence, self-confidence, the drive to accept responsibility, good
communication skills and education.
In this way, entrepreneur is required to have certain traits. These traits are necessary for
leadership qualities expected from an entrepreneur. An entrepreneur should be (i)
adaptable to situations, (ii) alert to social environment, (iii) ambitious and achievement
oriented, (iv) assertive, (v) cooperative. (vi) decisive, (vii) dependable, (viii) dominant
(desire to influence others), (ix) energetic (high activity level); persistent, (x) self-
confident, (xi) tolerant of stress and (xii) willing to assume responsibility.
Thus, for achieving success in his entrepreneurial behavior, entrepreneur is required to
have entrepreneurial competencies and these are consist of a set of knowledge, skills,
motives and traits.
Entrepreneurial Competencies Identified By The EDI
Entrepreneurship Development Institute of India (EDI) conducted a study under the
guidance of David C. McClelland, a reputed behavioural scientist, in three countries,
namely, India , Malawi and Equador. It was found out that possession of certain

45
competencies or abilities results in superior performance. An entrepreneur may possess
certain competencies and at the same time it is possible to develop these through training,
experience and guidance. Various competencies required for superior performance by the
entrepreneurs (identified during the study) are:
(a) Initiative: It is an inner urge in an individual to do or initiate something. These is a
popular saying, ‘Well begun is half done’. It is the entrepreneur who takes the first
move towards setting up of an enterprise. Most of the innovators have got this urge
to do something different. Entrepreneur basically is an innovator who carries out
new combinations to initiate and accelerate the process of economic development.
(b) Looking for Opportunity: An entrepreneur is always on the look out or searching
for opportunity and is ready to exploit it in the best interests of his enterprise.
(c) Persistence: An entrepreneur is never disheartened by failures. He follows Try-Try
Again for overcoming the obstacles that come in the way of achieving goals.
(d) Information Seeker: A successful entrepreneur always keeps his eyes and ears
open and is receptive to new ideas which can help in realizing his goals. He is ready
to consult expert for getting their expert advice.
(e) Concern for High Quality: Successful entrepreneurs do not believe in moderate or
average performance. They set high quality standards for themselves and then put in
their best for achieving these standards. They believe in excellence, which is
reflected in everything they do.
(f) Commitment: Top performers are prepared to make all sacrifices for honouring the
commitments they have made. Whatever they commit, they take it as a moral
binding for honouring their commitments, irrespective of the costs involved.
(g) Concern for Efficiency: Top performers are always keen to devise new methods
aimed at promoting efficiency. They are keen to evolve and try new methods aimed
at making working easier, simpler, better, and economical.
(h) Systematic Planning: Successful entrepreneurs evolve future course of action
keeping in mind the goals to be realized. They believe in developing relevant and
realistic plans and ensure proper execution of the same in their pursuit of attaining
their goals.
(i) Problem Solving: A successful entrepreneur takes each problem as a challenge and
put in best for finding out the most appropriate solution for the same. He will first of
all understand the problem and then evolve appropriate strategy dealing with the
same.
(j) Self-confidence: Entrepreneurs are not cowed down by difficulties as they believe
in their own abilities and strengths. They have full faith on their knowledge, skill
and competence and are not worried about future uncertainties.
(k) Assertiveness: An assertive person knows what to say, when to say, how to say and
whom to say. He believe in his abilities and ensures that others fall in line with his
thinking, aimed at promoting the interests of the organisation.

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(l) Persuativeness: A successful entrepreneur through his sound arguments and logical
reasoning is in position to convince others to do the work the way he wants them to
do. It is not the physical, but intellectual force he will use for convincing others.
(m) Effective Strategist: A successful entrepreneur possesses the ability to evolve
relevant strategy, aimed at safeguarding or promoting organisation’s interests.
Strategy may be with respect to facing future uncertainities or challenges posed by
competitors.
(n) Effective Monitoring: Entrepreneurs ensure that every thing is carried out in their
organizations as per their wishes. They ensure regular monitoring of the working so
that the goals of the oganisation are achieved in best possible manner.
(o) Concern for Employees Welfare: Future of the organisation depends on its
employees. If the employees are dedicated, committed and loyal, the organisation is
bound to perform well. A successful entrepreneur tries to promote organisation’s
interest through promotion of interests of the workers. He takes personal interest in
solving problems confronting works and generates the feeling that there is
interpendence of the interest of workers and the management.
Developing Entrepreneurial Competencies
Following steps are involved in developing entrepreneurial competencies:
(a) Recognising Process: Entrepreneurial behaviour starts with understanding and
recognition of the fact that in which area potential behavior is going to be
noteworthy. Specific competencies are meant for innovative behavior and that is
why recognition process should give specific competencies.
(b) Process of Self-Assessment: It deals with identifying the specific competencies
among the potential candidates for entrepreneurship. It is just like identifying a
fact––does one possess a given competence and if so how frequently one exhibit
the same in one’s day-to-day operational behaviour.
(c) Process of Practice: It covers the desired framework to what extent a potential
candidate for entrepreneurship lacks certain competencies. But being interested to
undertake entrepreneurial beahviour he would like to acquire these competencies
and strengthen others. Entrepreneurial development programmes provide help in
strengthening this process.
(d) Feed Back Process: It relates with appraisal or seeking information about the
newly acquired behaviour. It also deals with introspection process to what extent
new behaviour or act of exhibiting a competence has been beneficial.
Thus, there are different types of competencies required for developing entrepreneurship.
To become a successful entrepreneur, it is must for his to have that competencies or
leadership qualities like innovative, initiative, risk assuming personality, sensitivity to
environment, sense of work, commitment and decisiveness.

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 IN TEXT QUESTIONS
1. ……………………………………. may be defined as an underlying characteristics
of a person which results in effective and/or superior performance in a job.
2. …………………………..skills is the use of persuation and example to induce a
group to act in accordance with the leader’s purposes or the shared purposes of a
larger group;

3. A ……………………………person believe in his abilities and ensures that others

fall in line with his thinking, aimed at promoting the interests of the organisation.
4. ……………………….process relates with appraisal or seeking information about
the newly acquired behaviour and also deals with introspection process to what
extent new behaviour or act of exhibiting a competence has been beneficial.
5. ………………………………. deal with recurrent concern for a goal, state or
condition appearing in fantasy, which drives, directs and selects behavior of the
individual.
1.4 Individual Risk Behaviour And Propensity for Entrepreneurship
Individual Risk behaviour and propensity for Entrepreneurship
The Propensity of Risk Taking is referred to an entrepreneurship’s orientation of taking
risk. Risk taking is an essential part of an entrepreneurship’s personality. Risk taking is an
essential condition to get entered into the entrepreneurship career. Risk taking is
considered to be almost synonymous to the entrepreneurship. Most of the entrepreneurs
are bound to take risk and it eventually becomes the part of their personality. On a
personal level, many entrepreneurs take big risks to leave stable jobs to throw their efforts
(and sometimes their own money) into launching a business.
There is no guarantee of monthly income in the case of entrepreneurship. It does not
guarantee the success and even it becomes difficult for the entrepreneurs to spend time
with the family and friends. Below are some of the major risks taken by the
Entrepreneurs.
1. Strategic Risk: An inspiring occupational idea will appeal to investors. Though, we
live in a everchanging and fast-paced world where strategies can become obsolete
swiftly. Changes in the market or the business situation can mean that a selected
strategy is the wrong one, and a company might struggle to reach its yardsticks
and key performance indicators (KPIs).
2. Financial Risk: An entrepreneur will have to have money to launch a business either
in the form of loans from investors, out of the savings, or funds from personal
sources (family and friends). The initiator will have to put their own "skin in the
game." Any new business should have a monetarist plan within the overall business
plan showing income forecasts, how much money will be vital to break even, and
the likely return for investors in the first five-year period. Failure to predict plan
aptly could mean that the entrepreneur risks insolvency, and stakeholders would not
get nothing.

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3. Technology Risk: Novel technologies are continually evolving, mainly in the era of
the Fourth Industrial Revolution. Some of these changes are categorized as
"paradigm shifts" or "disruptive" technologies. To be viable, a new company may
have to devote heavily in new schemes and procedures, which could severely affect
the bottom line.
4. Market Risk: Numerous aspects can affect the marketplace for a product or service.
The ups and downs of the economy and new market trends pose a risk to new
industries, and a certain product might be popular one year but not the next. For
example, if the economy crashes, people are less motivated to buy luxury products
or extras. If a competitor launches a similar product at a lower price, the competitor
might steal market share. Entrepreneurs should accomplish a market analysis that
evaluates market factors, the demand for a product or service, and customer
behavior.
5. Competitive Risk: An entrepreneur must constantly be mindful of players in the
industry. If there are no players at all, this could indicate that there is no claim for a
creation. If there are a few larger competitors, the market might be saturated, or, the
firm might brawl to compete. Additionally, industrialists with new ideas and
inventions should protect intellectual property by looking for patents to guard
themselves from competitors.
6. Reputational Risk: A business's status is everything, and this can be particularly so
when a new corporate is launched and customers have inflexible expectations. If a
new business displeases customers in the initial stages, it may never gain purchase
in future. Social media plays a enormous part in business status and word-of-mouth
marketing. One tweet or undesirable post from a dissatisfied customer can lead to
vast fatalities in returns. Reputational risk can be accomplished with a strategy that
communicates product details and shapes relationships with customers and other
stakeholders.
7. Environmental, Political, and Economic Risk: Some things cannot be measured by a
good business plan or the right insurance. Earthquakes, cyclones, storms, battles,
and depressions are all dangers that corporations and new entrepreneurs may face.
There may be a robust marketplace for a product in an under-developed country, but
these countries can be unbalanced and insecure, or logistics, tax rates, or tariffs
might make trade difficult depending on the political climate at any point in time.
IN TEXT QUESTIONS
1. Match the following points:

1. Strategic Risk a. An entrepreneur will have no money to

launch a business either in the form of
loans from investors, Out of the savings, or
funds from personal sources.

2. Reputational Risk b. Changes in the market or the business

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 situation can mean that a selected strategy
is the wrong one, and a company might
struggle to reach its yardsticks and key
performance indicators (KPIs).
3. Environmental Risk c. risk that can be accomplished with a
strategy that communicates product details
and shapes relationships with customers
and other stakeholders.
4. Financial Risk d. There may be a robust marketplace for a
product in an under-developed country, but
these countries can be unbalanced and
insecure, or logistics, tax rates, or tariffs
might make trade difficult depending on
the political climate at any point in time.
5. Political, and Economic Risk e. Some things cannot be measured by a
good business plan or the right insurance.
Earthquakes, cyclones, storms, battles, and
depressions are all dangers that
corporations and new entrepreneurs may
face.

1.5 Entrepreneurial Values, Attitudes and Motivation

Motivation
Every individual acts in a distinct manner. Since people act differently, the basic question
is ‘why they do what they do’? The answer to this question lies considerably in the
explanation of motivation. The term, ‘motivation’ comes from the Latin word ‘movere’
which means ‘to move’. Motivation, as the base-building block of human action has been
studied extensively. Studies on motivation broadly refer to two areas (a) motivating self,
and (b) motivating others. Available literature suggests that it is imperative to understand
the underlying concept of motivation in order to formulate a theoretical base for both the
aspects. Motivational theories are based on the fact that behavior is essentially purposeful
and directed towards the attainment of a goal. Thus, the concept “motive” refers to the
purpose underlying all goal directed actions. All motives, however, may not be equally
important to the context of the goal. Some action arise from a biological or physiological
need, over which people do not have much control. Such motives are common to the
entire animal kingdom. But there are certain crucial and other higher order needs which
are common to human beings. The distinctly human motives are largely unrelated to
biological and survival needs. These are related to feelings of self-esteem, competency,
social acceptance, etc.
Psychologists have described the term motivation as:
 The immediate influence on the direction, vigour and persistence of action;

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 The process of arousing action, sustaining the activity in progress and regulating the
pattern of activity.
 An inner state that energises activities and directs or channels bahaviour towards
goal;
 How behavior gets started, is energized, is sustained, is directed, is stopped and
what kinds of subjective reactions are present in the organism while all this is going
on;
 Steering one’s action towards certain goals and to commit a certain part of one’s
energies reacting to them.
These descriptions help in answering any or all the following questions:
(i) What energises human behaviour?
(ii) What directs such behavior?
(iii) How is this behaviour maintained and sustained?
Significance Of Motivation
Motivation is an effective instrument in the hands of manager for inspiring the workforce
and creating a confidence in it. By motivating the workforce, management creates ‘will to
work’ which is necessary for the achievement of organizational goals. Motivation
involves getting the members of the group to pull weight effectively, to give their loyalty
to the group, to carry out properly the purpose of the organisation. The following results
may be expected if the employees are properly motivated:
(i) The workforce will be better satisfied if management provides them with
opportunities to fulfil their physiological and psychological needs. The workers will
cooperate voluntarily with the management and will contribute their maximum
towards the goals of the enterprise.
(ii) Workers will tend to be an efficient as possible by improving upon their skills and
knowledge so that they are able to contribute to the progress of the organisation.
This will also result in increased productivity.
(iii) The rates of labour turnover and absenteeism among the workers will be low.
(iv) There will be good human relations in the organisation as friction among the
workers themselves and between the workers and the management will decrease.
(v) The number of complaints and grievances will come down. Accident rate will also
be low.
(vi) There will be increase in the quantity and quality of products. Wastage and scrap
will be less. Better quality of products will also increase the public image of the
business.
Maslow’s Need Hierarchy Mode
A.H. Maslow developed a conceptual framework for understanding human motivation
which has been widely acclaimed. He defined a person’s effectiveness as a function of
matching man’s opportunity with the appropriate position of hierarchy of needs. Process

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of motivation begins with an assumption that behaviour, atleast in part, is directed
towards the achievement of sati
satisfaction
sfaction of needs. Maslow proposed that human needs can
be arranged in a particular order from the lower to the higher as shown in below. The
need hierarchy is as follows:

Fig. Maslow’s Need Hierarchy

(a) Basic Physiological Needs: the needs that are taken as the starting point for
motivation theory are the so so-called
called physiological needs. These needs relate to the
survival and maintenance of human life. They include such things a food, clothing,
shelter, air, water and other necessities of life.
(b) Safety and Security
curity Needs: After satisfying the physiological needs, people want
the assurance of maintain a given economic level. They want job security, personal
bodily security, security of source of income, provision for old age, insurance
against risks, etc.
(c) Social Needs: Man is social being, He is, therefore, interested in conversation,
sociability exchange of feelings and grievances, companionship, recognition,
belongingess, etc.
(d) Esteem and Status Needs: These needs embrace such things as self-confidence,
self
independence,
dence, achievement, competence, knowledge, and success. They are also
known an egoistic needs. They are concerned with prestige and status of the
individual.
(e) Self-fulfilment
fulfilment Needs: The final step under the need priority model is the need for
self-fulfilment
nt or the need to fulfil what a person considers to be his mission in life.
It involves realizing one’s potentialities for continued selfself-development
development and for
being creative in the broadest sense of the word. After his other needs are fulfilled, a
man has the he desire for personal achievement. He wants to do something which is
challenging and since this challenge gives him enough dash and initiative to work, it
is beneficial to him in particular and to the society in general. These sense of
achievement gives him im psychological satisfaction.

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Maslow proposed that the needshave a definite sequence of domination. Second need
does not dominate until first need is reasonably satisfied and third need does not dominate
until first two needs have been reasonably satisfied and so on. The other side of the need
hierarchy is that man is wanting animal, he continues to want something or the other. He
is never fully satisfied. If one need is satisfied, the other need arises. As said above
(according to Maslow), needs arise in a certain order of preference and not randomly.
Thus, if one’s lower level needs (physiological and security needs) are unsatisfied, he can
be motivated only by satisfying his higher level needs. Another point to note is that once
a need or a certain order of needs is satisfied, it ceases to be a motivating force. Man
lives for bread alone as long as it is not available. In the absence of air one cannot live, it
is plenty of air which ceases to be motivating.
Factors For Entrepreneurial Motivation
A number of factors have been found to be responsible for the growth of
entrepreneurship. These factors can be grouped in three categories namely
Entrepreneurial Ambitions, Competency Reasons and Facilitating Factors.
(a) Entrepreneurial Ambition
(i) To make money
(ii) To gain social prestige
(iii) To secure self-employment or independent living
(b) Compelling Reasons
(i) Unemployment or dissatisfaction with existing job or occupation
(ii) To use technical or professional knowledge and skills
(iii) To put the idle funds of the entrepreneur to use
(c) Facilitating Factors
(i) Previous knowledge, experience or association with same or similar of activity
(ii) Influence and encouragement by family member, friends and relatives
(iii) Imitation of successful entrepreneurs.
Internal And External Factors
R.A. Sharma has studied the factors that prompted new entrepreneurs to enter industry
and has classified them in two major categories: the factors that are internal to the
entrepreneur and those external to the entrepreneur. The internal factors make the
personality of an entrepreneur and induce the person to adopt entrepreneurship. Without
the presence of internal factors entrepreneurial activity in a person cannot start. However
once the entrepreneurial tendencies germinate in a person, the external factors start
playing an important role in the person becoming an entrepreneur and starting his own
business venture.
Internal Factors
 Desire to work independently

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 Occupational experience
 Technical/Trade/Qualification and knowledge
External Factors
 Supportive government policies
 Availability of financial assistance
 Ancillary support
 Availability of infrastructural facilities like industrial plot, electricity, technical
facilities etc.
People become industrial entrepreneurs because of three main reasons:
1. Desire to do something independently in life.
2. Availability of technical/manufacturing or trade knowledge and skill with
prospective entrepreneur.
3. Support from government and other agencies.
ENTREPRENERIAL VALUES AND ATTITUDES
Entrepreneurial values ate the set of beliefs or ideas that provide standards to guide the
behaviour of an entrepreneur.For Example:
1. Innovativeness
2. Independent and creative
3. Respect for work
4. Believe in achievements
The key to success for an entrepreneur is having all three values in order for the business
to thrive.These three values are:
1. Personal Values: An entrepreneur need to be a good human being before a god
businessmen.Any business venture is a reflection of the entrepreneur’s personal
values, attitudes and beliefs.And if an entrepreneur having all personal values like
honesty, passion, determination and confidence then only it helps to make the
business to thrive.
2. Professional values: Personal values reflects the personality traits of an
entrepreneur while professional values reflects the ability of an entrepreneur to
conduct themselves in the business environment.Professional values includes
healthy competition , self determined work environment and compliance of law or
order.
These values includes :
1. Guide an entrepreneur towards being a great team leader.
2. Able to fulfill their personal and social responsibilities towards family and friends.
3. Create win- win situations.

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4. Fulfill the expectations of the customers.
3. Social values: Personal
sonal and professional values helps a business person in
developing the business and social values creates values for the society as a whole.
There are two ways that creates high social value for an entrepreneur.
(A) To create those products and services that benefit society and provide solutions to
societal problems.
(B) To invest huge amount into CSR ( Corporate social responsibility) to support the
society.
The Triangle of values:
An entrepreneur is required to have these all three combined values which lead tto
business growth.As long-as as an entrepreneur keep the personal, professional and social
values balanced, it will continue to grow the bsuiness.The more actively an entrepreneur
work on improving all three aspects of the triangle together , the quicker the results will
be evident.By integrating all three values any company will develop a solid reputation
and grow prosperous.
Personal Values

Professional values Social values

Diagram: Triangle of values
Entrepreneurial Attitude means behavioral traits that help an entrepreneur to grow and
succeed in the business.Attitude will enable an individual to set up and rum a business
effectively.
For Example:
1. Risk taking tendency
2. Tendency to believe that they can change the environment
3. Valuing the customer
4. Tendency to use use imagination
5. Tendency to analyse the environment and plan action.
6. Tendency to explore business opportunities.
7. Believe in freedom of expression and action.
Essential attitudes of a successful entrepreneur:
Attitude is an important trait of an entrepreneur required for the career growth.Such
attitude should be in positive manner only.Some of the essential attitudes required of the
entrepreneurs are as follows:

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1. Attitude towards risk: Entrepreneur are inclined to deal with calculated or estimated
risks to start with new things and earn higher profits.But an entrepreneur are not
gamblers or speculators.
2. Attitude towards new opportunities : An entrepreneur should always available to
explore new opportunities and use them for profitable venture.
3. Attitude towards changes; Change is the law of life.An entrepreneur should have
positive attitude towards acceptance of change in the business.
4. Attitude towards freedom of expression and action: An entrepreneur value
independence and ownership , they like to think on their own and act
accordingly.So they have a tendency to enjoy full freedom of expression and action.
5. Attitude towards building networking: Entrepreneur should have positive attitude
towards building strong relationships with other stakeholders of the busienss.For
exmaple: Entrepreneur often lack various resources required for the completion of a
project and if they have networking with the resources suppliers such as raw
material , machinery, capital,their difficulties are solved.
6. Attitiude towards customers: Customers is the God of the market . Customer
satisfaction and trust are the priority of the business.The success of a business
depends upon the ability of the entrepreneur to listen to the customer and fulfill
their needs and demands timely .Therefore , an entrepreneur should have positive
attitude and quick response to the customers.
7. Attitude towards performance (Target) : Entrepreneur believes in outstanding
performance in the business.They have a tendency to complete the targets
successfully as it is the indicator of the good performance which gives them
satisfaction after the great performance.
Activity:
Write down 5 motivational factors that influence an entrepreneur in an enterprise.

IN TEXT QUESTIONS
1. ……………………………………….. proposed that human needs can be arranged
in a particular order from the lower to the higher as shown in below.
2. An entrepreneur value ………………………… and …………………… , they like
to think on their own and act accordingly.
3. An entrepreneur should always available to explore new ………………………..
and use them for profitable venture.
4. …………………………………….. means behavioural traits that help an
entrepreneur to grow and succeed in the business.Attitude will enable an individual
to set up and rum a business effectively.

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1.6 Entrepreneurial Reward System
Entrepreneurial reward system are the fundamental of the organization as they have the
ability to shape the employee’s behaviour and overall organization culture. Therefore,
management look into the entrepreneurial reward system with an aim to check whether
such system are working in favour or against the desired organisaion culture.
The traditional reward system was tied to the following points:
1. Achievement of short term goals and targets.
2. Increase efficiency in use of various assets.
3. Efficient utilization of resources by the employees.
4. The status and responsibilities of the employees.
5. Getting higher pay through additional responsibilities and promotions.
Today, entrepreneurial reward system are markedly different as it emphasis is placed not
on the individual but on teams. Actual reward system is the value creation that has been
realized.
Entrepreneurial reward system are not solely about monetary benefits and high status ,it
will motivate employees also by:
1. Providing participation in decision making process.
2. Recognizing their efforts and success.
3. Making their work interesting and easy.
4. Addition to their responsibilities and roles.
An effective reward system includes all form of monetary compensation and a wide
variety of other motivators that are important for the employees to motivate them in a
work setting. A reward system includes recognition, growth, additional responsibilities
,trust, authority and autonomy.
There are two main factors requires for the effectiveness of a reward system.First , the
recipient must perceive the reward as positive.Second, the reward need to encourage the
desired behaviour of the workers.The desired behaviour of the workers must be consistent
with the goals of the company.It is the ability of the entrepreneur to ensure that the
reward system should be based on the support to right behaviour of the workers.
Entrepreneurial reward system includes monetary rewardsand some other approaches that
increase the motivation and productivity of the workers which are as follows:
1. Say “Thankyou”
2. Share the big-picture
3. Treat prople fairly
4. Create a learning attitude
5. Celebrtae success
6. Increase responsibilities

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7. Trust
8. Avoid micro managing
An effective entrepreneurial reward system includes following points:
1. It should allow employees more freedom to decide about better work.
2. The employees get more appotunities to learn and develop their skills and work
with other people successed.
3. The rewards helps in enhancing an optimal entrepreneurial climate so that
information and communication are freely flowing.
4. Where change is welcomed.
5. Culture is initiative -conducive.
IN TEXT QUESTIONS
1. Entrepreneurial reward system includes monetary rewards and some other
approaches that increase the………………….. and ………………….. of the
workers
2. The rewards helps in enhancing an ………………….. entrepreneurial climate so
that information and communication are freely flowing.
3. A………………… system includes recognition, growth, additional responsibilities
,trust, authority and autonomy.
4. Management look into the entrepreneurial reward system with an aim to check
whether such system are working in favour or against the desired organisaion
………………….
5. The reward need to encourage the desired ……………………….of the workers.
1.7 Summary
It was understood that human behaviour is essential for achievement of organisational
goals better.This unit explains attitude are opinions about others, values represent
standards by which the world are evaluated. Motivation is another important factor which
helps in shaping the behaviour of any person or organisation All these terms are essential
for effective entrepreneurship. Similarly skills , beliefs and knowledge I.e entrepreneurial
competencies are also essential for the success of an enterprise.
This unit covers the topic of entrepreneurial reward system. Satisfying employees need is
a prime responsibility of every organisation. It includes psychological and monetary
needs includes compensation, reward and incentives.Reward is given to employees and
organisation also on the basis of their performance, speed , efficiency,loyalty and
innovations.
1.8 Glossary
Optimal : Optimization is the act of changing an existing process in order to increase the
occurrence of favourable outcomes and decrease the occurrence of undesirable outcomes.

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Motivation : Motivation is the process that initiates, guides and maintains goal-oriented
behaviors.It is the desire that pushes an individual to work well and influence that causes
people to behave in a particular way.
Assertive :It is use for those who are self-confident enough to make bold statements and
forceful actions.It is the ability to express your opinions positively and with
confidence.Assertive people are in control of themselves and are honest with themselves .
Motives : Something that causes a person to act in a certain way, do a certain thing.A
motive is something that causes to act or behave in order to reach a goal or desired
endpoint.It comes from the latin word means moving.Motive means emotions,
desire,phsiological need or similar impulse that acts as an incitement to action.
Competence :Competence is a series of knowledge, abilities, skills, experiences and
behaviors , which leads to the effective performance of a job.Competence is the
combination of practical and theoretical knowledge, cognitive skills, behaviour and
values used to improve performance or as the state or quality of being adequately or well
qualified , having the ability to perform a specific role.
1.9 Answers to In-text questions
1. Competence 9. Opportunities
2. Visioning 10. Entrepreneurial attitude
3. Assertive 11. Motivation and productivity
4. Feedback 12. Optimal
5. Motives 13. Reward
6. 4a, 1b, 2c, 5d and 3 e 14. Culture
7. Abraham Maslow 15. Behaviour
8. Independence and ownership
1.10 Self-Assessment Questions
1. How do you define competencies?What are the specific traits that constitute the
concept of entrepreneurial competencies?
2. Write a short note on:
A. Values
B. Attitude
C. Motivation
3. State some aspects of individual risk behaviour in an organisation.
4. Describe how reward system is designed in an organization.

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1.11 References
 www.egyankosh.com
 www.startupgrind.com
 https://www.trainingpeaks.com
 https://www.oecd.org
1.12 Suggested Readings
 Zingheim, P.K. & J. R. Scheuster (2000). Pay People Right : Break through Reward
Strategies to Create Great Companies, San Francisco: Josses-Bass.
 Rao, K. R. (2004). Are you Rewarding Right? Indian Management, 43(1), 47-51.
 Nelson, Bob (1994). 1001 Ways to Reward Employees, New York: Workman.
 Lawler, E.E. (2000) Rewarding Excellence .San Francisco: Jossey-Bass.

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 LESSON 2
ENTREPRENEURSHIP AND SUPPORT SYSTEM
Written by : Dr. Pawan Kumar Jain
Revised by : Neha Goyal
Structure
2.1 Learning Objectives
2.2 Introduction
2.3 Support system and Entrepreneurship
2.3.1 Family and social support for entrepreneurship
2.3.2 Importance of family support in entrepreneurship
2.4 Family business and Entrepreneurship
2.4.1 Introduction
2.4.2 Role and Contribution towards growth of entrepreneurship
2.5 Summary
2.6 Glossary
2.7 Answers to In-text questions
2.8 Self-Assessment Questions
2.9 References
2.10 Suggested Readings
2.11 Learning Objectives
After studying this lesson, student will be able to:
 Understand the support system and its importance in entrepreneurship
 Explain the family and social support for entrepreneurship
 Define the family business and the functions of family business in India
 Discuss about the role and contribution towards growth of entrepreneurship.
2.1 Introduction
In the previous unit, we have learnt about entrepreneurial competencies and skills which
are necessary for the success of the organization. We have also learnt about the
behavioral aspects of the entrepreneur namely, attitude and two more factors also
discussed called motivation and values.The entrepreneurial reward system was also a
discussion point which includes compensation, incentives and reward.
In the present unit, we will learn about how support system works for entrepreneurship
and their aspect like family and social support & its contribution in the success of
entrepreneurship.This unit also discuss the importance of family & social support for
entrepreneurship.Family business are the results of family connections, mutual interest,

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bonding, commitment, loyalty, honesty, trust, risk -appetite and decision -making.The
study of family business would reflect their values, business philosophies and behaviour
orientation. This study also reflect the role of family business in the growth of
entrepreneurship.
After go through this unit thoroughly, student will be able to apply this knowledge into
real life business and able to run
2.3 Support System And Entrepreneurship
Society plays now a vital role in the sphere of entrepreneurship. This role may be
classified into three categories:
1. Supporting role
2. Regulating role
3. Participative role
Support: The Government of India has launched several schemes for the growth of
entrepreneurship so as to ensure the rapid economic development of the country. It has
created a vast network of institutions and agencies which provide several types of
assistance to new and established entrepreneurs. Public financial institutions or
development banks are one part of this institutional framework. These banks at the
national and State level provide financial, managerial and promotional assistance.
At the national level Industrial Finance Corporation of India (IFCI), Industrial Credit and
Investment Corporation of India (ICICI), Industrial Development Bank of India (IDBI),
Small Industries Development Bank of India (SIDBI) are the major institutions. Every
State has its own-State financial corporation and/ or State industrial development
corporation. These agencies provide industrial finance through term loans, underwriting
and direct subscription to industrial securities. They also render assistance in the
identification and promotion of industrial projects. They have set up several institutes for
undertaking training and research in different fields of management. They have
sponsored technical consultancy organisations (TCOs) for providing necessary facilities
and guidance to new enterprises. 'Seed capital' is provided to new entrepreneurs on soft
terms. In addition a directory of industrial, technical and management consultants has
been prepared so that entrepreneurs can take their help in the formulation and
implementation of projects. Special schemes are available for backward areas, women
entrepreneurs, sick units and technical graduates, industrial Reconstruction Bank of India
(IRCBI), and Bureau of Industrial and Financial Reconstruction (BIFR) have been set up
to prevent and correct sickness in industry. National Small Industries Corporation
(NSIC) and other bodies are operating to promote small scale entrepreneurs.
In addition to institutional framework, the Government has developed industrial
infrastructure in the form of transportation, communications, power, etc. It provides
incentives and subsidies of various types to deserving entrepreneurs. But for the
assistance and facilities provided by the Government, entrepreneurial base in India would
have remained narrow.
Regulation: In order to achieve the objective of socialist pattern of society, Government
of India has enacted innumerable regulations and controls. These regulations are

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designed to set priorities of industrial development, to regulate the pattern of production
and distribution, to check the growth of monopolies and concentration of economic
power, etc. Some of the more important ways in which Government regulates business
activities are given below:
(i) Industrial Policy Resolutions
(ii) Industrial licensing under the Industries Development and Regulation Act, 1951
(iii) Capital Issues Control
(iv) The Companies Act, 1956
(v) Control over Monopolies and Restrictive Trade Practices
(vi) Fiscal and monetary controls
(vii) Controls over exports and imports
(viii) Foreign exchange regulations
(ix) Commodity controls
Private industrialists in India often complain that there are too many controls and these
controls have failed to achieve the intended objectives. In recent years there has been a
trend towards liberalisation of economic activities. The control and regulatory
mechanism is a dynamic process and has to be viewed against the environmental
situation existing at a point of time. Different degrees of control may be necessary at
different stages of economic growth.
Participation: In India, Government has emerged as the single largest entrepreneur
through the public sector. The top ten companies in India in terms of size are all in the
public sector. Key and basic industries like iron and steel, coal mining, aeronautics,
power, railways, communications, cement, etc. are mostly owned and controlled by the
Government. All major commercial banks and insurance companies have been
nationalised.
Government began to participate in industry and trade because it felt that private sector
alone will not be able to industrialise the country at the desired pace and scale.
Government enterprises seek to achieve economic (planned growth, rapid
industrialisation, generation of surplus), social (employment generation, balanced
regional development, egalitarian society), and political (self-reliance, national defence,
etc.) objectives.
2.3.1 Family and social support for entrepreneurship
In order to turn the startup ideas into valuable businesses, an entrepreneur is required
strong support and advisory system.Supporting entrepreneurship is essential for the
development and improvement of the society.A society needs innovations and effective
solutions to the problem of the society and a bright & young entrepreneur can turn their
attractive ideas into successful achievement only if support system lies with the
entrepreneur.A supporting entrepreneur leads to support in innovations.
Many small businesses relies friends and family for social , financial and operational
support.One of the most important sources of support for various entrepreneurs is the

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network of their friends and family members.Family and network of friends provides a
strong support system to help the entrepreneur so that they can face stress, balanced work
& play and helps in fulfilling their responsibilities and maintaining a successful business
in uncertain marketplace.
Family and friends serve important roles for the entrepreneur like advisors, employees,
investors and partners.Sometimes friends and family provides financial gift or loan
funding and help them in running their business.Small businesses or entrepreneurs often
viewed the support of their personal connection in their tough and good time as friends
and family are a lifeline of them and proves a resource pool for the skilled jobs.Gratitude,
emotional connection and financial support all are expected by entrepreneurs.
A survey was conducted on this topic in 2016 found that:
1. Most small business owners who borrow money from friends or family are
appreciative.
2 Most small business owners rely on family for support beyond financing.
3 Most small business owners and local communities rely on each other.
This is absolutely true that family and business are the two different parts of the life and
both are distinct from each other But there is some commonality between these two
parts.These both parts of life requires good amount of emotional attachment and are
involves at some emotional level.Emotional attachment is demanded by family and at the
same time business entrepreneurs also requires emotional attachment and they are very
emotional for their venture and task.So here we can say that an entrepreneur also
demands great emotional support from their family members as family members provides
strength in hopeless times and bring him /her up in down times.Family binds an
entrepreneur with his family members with mutual love and affections.So a family is
considered as biggest support system for an entrepreneur even at that time when he/she is
not devoting his/her full time with the family.
For Example Walt disney, a successful entrepreneur mention his statement that a person
is required to never neglect his/her family for the business in any situation.Today
entrepreneurs are realising the importance of their families in their personal and
professional life.
It has been observed that the great support of family is available for the entrepreneur at
their young nascent stage where families provides financial support and helps in
enhancing the scope of the startups. Family cohesiveness plays a major role in case of
financial support by family to nascent stage young entrepreneurs.
There is a direct relationship between family support and scope of startup activities
basically at young nascent stage.The greater the support by the family in the form of
social capital, the greater the scope of nascent stage based startup activities.
The support of family members for starting a new venture may sound like an exciting
opportunity and considered as lucrative idea but sometimes combining the personal and
professional lives cab be both rewarding and problematic but it depends on the nature of
the venture.The support of friends and family in a business can create supportive

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environment as there is deep trust level between family and friends & entrepreneur.But
the involvement of family members in a venture creates various kind of challenges .
There are various pros and cons of running a venture with the members of family:
Pros:
1. Trustworthy business partners: Trustworthy partners in business help an
entrepreneur to survive in the tough time and it generates a feeling of belongingness
and affections.Both sides can be dependent on each other as there is no worry here
about the leakage of any confidential or secret information from any side.
2. Understand each others strength and weaknesses : The best part for an entrepreneur
to work with his family is he understand the strength and weakness of his family
thoroughly and both can gain the benefits of their synergies and compensate for
each others weakness.
3 Quality time with family: An entrepreneur has a great advantage to work with his
family that he can spend his most time with his family at work .
4 Benefits stays in family: One other advantage of keeping your family with you as an
entrepreneur in venture is that the revenue stays in the home and all the members of
the family benefit when the business flourishes.There is no payment of salaries
outside the house and it can also be flexible which helps in rapidly changing
economy where the income may never be fixed.
5 Helps in maintaining traditions: The business with family support makes possible
to bring family tradition and helps in preserving it over the years.
Cons:
1. Personal conflicts can interrupt business : The major problem during working with
family members is the disagreements or arguments in the venture,In these situation
it becomes difficult for an entrepreneur to work at productive level.An entrepreneur
feels unable to deal with his family members in case of any mutual consent
mismatched.
2. Too much leniency: When an entrepreneur works with his /her family members
with no strict rules and regulations, it also creates serious problem for the venture as
too much leniency is very risky for any venture.
3. Lack of fresh and new ideas: An entrepreneur working with same professionals
every time leads to lack of new and fresh ideas in the business.A successful
business always based on the fesh ideas and skilled employees.
4. One revenue stream : A business where all family members works in a common
place, the chances of financial issues are generated.So in case of business in which
family and entrepreneur both could go into a financial crises.
Family support
Families play an important role in the entrepreneurship in terms of the strong links
between family integration and entrepreneurial outcomes or actions.For young nascent
entrepreneurs, family plays an important role in majority of young entrepreneur’s

65
activities especially when they do not have their own capital to support the
business.Fmaily support strengthens a business performance.It affects entrepreneur’s
willingness to work hard hence increase business performance.This statement argues that
support from family members reduces entrepreneur’s likelihood of establishing
enterprises. The positive and negative perception of family support is a cause for
debate.Basically there are four types of family support I.e. financial.social, human and
physical support.
1. Financial support to entrepreneur
2. Social support to entrepreneur
3. Human support to entrepreneur
4. Physical support to entrepreneur
1. Financial support to entrepreneur
Financial support includes financial resources to entrepreneur to strengthen the
business.Financial capital provides flexibility for entrepreneurs to handle the broader
range of startup activities.Fiancial capital is very critical for every business’s
sustainability.In case of new venture,it is the first challenge to get the financial capital .In
accidental external shocks, finance capital can protect businessmen by enabling them to
implement more capital-intensive strategies.
2. Social support to entrepreneur
For human to human activities that operate in a venture, social capital is needed.A family
does not directly participate in business processes and initiatives,however the social
capital of the family can still influence risk creation .Families social capital enables
additional resources to be mobilized to be successful in startups.
3. Human support to entrepreneur
Family human capital is the knowledge ,abilities and skills possessed by individuals in
the family members.Human capital is mostly contemplated to be the most important
resource in any business.The main form of human capital is mentoring.So the decision to
start a business has positive relation with having family members who are
entrepreneur,related to the mentoring facility.
4. Physical Support to entrepreneur
Family tangible capital includes tangible assets provided by the family, such as a home, a
vehicle, and computers utilised for business. Family tangible capital is sometimes
referred to as other tangible assets.
2.3.2 Importance of family support in entrepreneurship
A significant element for the entrepreneur to survive in most challenging journey is a
strong system at home and work both.So, following is the way how do family members
lend support to entrepreneurs:
1. Emotional Assistance : There are lots of burden on business owners which can ease
by the family members like lending a listening ear, showing encouragement ,
providing care and understanding and having patience during tough time.The family

66
 member’s positive reinforcement in the difficult time makes the challenges an
opportunity.
2. Financial Help: As most entrepreneurs start their business on the basis of their
savings and they have no funding sources available.There are business owners who
establish their enterprise with the help of their family members that provide
financial-aid in the form of loan or as gift.
3. Professional Advice : A family or network of friends play an important role as
guide or mentor and offer specific ideas that can give directions towards
achievement of the goals.When there may be shortcomings in the bsuiness and
entrepreneur cannot offered professional help then the guidance from the family
members proves beneficial.
4. Volunteer time: In the initial stage of the business, the budget is limited and
entrepreneur may have huge work load.In that case, relatives or family member who
have the capabilities and time helps in ease the work and reduced the work pressure.
5. Business Referrals: A strong network in the market is the first major requirement in
the business. Business referrals are a huge advantage to penetrate the the target
market in which family can help in building the customers by word of mouth.
6. Business Gifts: Family members love to give gifts by which they can participate in
the business activities and the more they grasp the nuances of the responsibilties as
owner, the more they can assist in the entrepreneurial journey.
IN TEXT QUESTIONS
1. A ………………………. entrepreneur leads to support in innovations.

2. …………………… and network of ………………. provides a strong support

system to help the entrepreneur so that they can face stress, balanced work & play
and helps in fulfilling their responsibilities and maintaining a successful business in
uncertain marketplace.
3. The family member’s positive ……………………… in the difficult time makes the
challenegs an opportunity.
4. ………………………………. are a huge advantage to penetrate the the target
market in which family can help in building the customers by word of mouth.
5. Family members love to give…………………. by which they can participate in the
business activities and the more they grasp the nuances of the responsibilties as
owner, the more they can assist in the entrepreneurial journey.
2.4 Family Business and Entrepreneurship
Family business is a broad term which includes family members, family enterprise,
family wealth and entrepreneurship, aims to understand the human elements related to the
family and business both.Entrepreneurship and family business are by no means
mutually exclusive.This is a holistic approach in which family and business drive
entrepreneurial activity and behaviour.

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2.4.1 Introduction
The definition of “Family Business” according to Donnelley (1964) is defined as one
which has been closely identified with ateast two generation of a family and when this
link has had an impact on both corporate policies and the family's interests and goals.
Family business is substantially controlled and managed by members of family and is
succeeded by the next generation of the family.Family owned business have always been
a matter of curiosity as these businesse are different from other kind of businesses in
terms of their entrepreneurial, organisational and managerial behaviours and styles.
In order to comprehend the human factors involved when family and business cross,
regardless of whether the business is a one-person startup or a global behemoth, family
business encompasses business, family enterprise, family wealth, and even
entrepreneurship.
Family-run enterprises can teach entrepreneurs a lot, and it's important to constantly
remind families to continue to be entrepreneurial.
In no way are entrepreneurship and family business incompatible.“Family
entrepreneurship” or “family enterprise” is more indicative of a practice within a family
or a portfolio of businesses or initiatives that a family may be involved in.
Understanding the various ways that a family and business influence entrepreneurial
activity and behaviour requires a more comprehensive approach.One used to think that a
good idea could sustain a company for three generations.Each generation today is more
likely to need to advocate three innovations.The global economy is currently being driven
by family enterprises, and this trend will not change.Consideration of the many factors
that contribute to these families' and enterprises' dynamic natures is made possible by
moving beyond the idea of "family company" and toward "family entrepreneurship."
The difficulties of family life are added to business concerns in family firms, broadening
the spectrum of issues, requirements, and viable solutions for every choice.Entrepreneurs
may find that understanding family dynamics, communication styles, management
approaches, and the level of support members can expect from their families is just as
crucial as understanding how to reach a market or control cash flow.
A common definition of an entrepreneur is someone who has expertise in making
judgmental decisions regarding the allocation of limited resources, lacks institutional
support, manages risk, and controls information flow.
Family business literature clearly implies that families are important and supportive
contexts for entrepreneurial behaviour, despite the fact that the literature frequently
depicts the entrepreneur as a solitary individual.
Simply put, entrepreneurship serves as the foundation and driving force behind the
majority of family enterprises, and the phenomenon of an entrepreneurial family
encourages, supports, and strengthens the entrepreneurial endeavours of its members.
Family businesses are just an expanded perspective on entrepreneurship as one or more
family members' initial entrepreneurial endeavours develop and alter through time.

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A family firm that has been around for a while needs to be managed on a daily basis as
well as with regard to succession planning for the next generation. These components
include values, life cycles, growth strategies, succession, conflict resolution, governance,
and cultural change.
There are 12 basic requirements for achieving harmony in a family business.
1. Define certain limits.
Family members that work in the same company can easily discuss shop all the
time.However, blending work, personal, and family life will eventually result in a
volatile brew.Avoid talking about work outside of the office.Even if that isn't
always possible, save them for a proper occasion instead of, say, a family wedding
or burial.
2. Create clear and frequent channels of communication.
There will always be issues and differences of opinion.Maybe you already notice
them.Consider holding weekly meetings to review progress, discuss disagreements,
and find solutions.
3. Separate duties into different groups.
Even though different family members could be qualified for the same jobs,
responsibilities should be divided up to prevent disputes.Together, you can make
big decisions, but arguing over every tiny action will slow down the family
business.
4. Manage it like a company.
The traits of a good business may not always be compatible with family harmony,
so be prepared to handle those situations when they come. Placing too much
emphasis on "family" and not enough on "business" is a common problem in a
family business.
5. Appreciate the benefits of family ownership.
Family-run enterprises have special advantages.One is having access to other family
members' human capital.This can be crucial for ensuring survival because family
members often offer free or inexpensive labour or last-minute loans.Businesses
maintained by dependable family members can likewise do without specialised
accounting software, policy manuals, and legal paperwork.
6. Be fair to family members.
While some industry gurus suggest never hiring family members, doing so negates
one of the main advantages of a family-run business.Without the perseverance and
dedication of committed family members, countless small businesses would not
have survived. Family members who are capable might be a fantastic benefit to
your company.But keep favouritism at bay.Equal treatment of family and non-
family employees should apply to pay scales, promotions, work schedules,
criticism, and appreciation.Don't hold members of your family to different standards
than you do.

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7. Document business contacts.
Without a clear plan for what they would get from the company partnership, it is
simple for family members to become involved in a firm.Put compensation,
ownership shares, tasks, and other items in writing to avoid misunderstandings or
hard emotions.
8. Avoid giving family members "sympathy" jobs.
Do not end up as your children's, cousins', or other family members' last resort
employer.The employer should hire people based on the knowledge or skills they
can contribute to the company.
9. Draw distinct managerial boundaries. Employees who don't report to family
members frequently get reprimanded since they frequently have a present or
assumed future ownership position in the company. Employee animosity results
from this.
10. Ask for outside counsel.
Sometimes, the decision-making process for expanding a family business is
excessively exclusive. The complex network of familial relationships might make it
difficult to think creatively or with fresh thoughts. To give the company a reality
check, consulting with outside experts who are not connected to any family
members can be a smart idea.
11. Create a succession strategy.
Without a documented succession plan, a family business is asking for trouble. The
strategy should specify how and when the baton will be handed over to a new
generation. It must be a financially solid plan for the company as well as for family
members who will be retiring. To create a plan, outside professional help is crucial.
12. First, you need to have outside experience.
Make sure your children have at least three to five years of business experience
elsewhere before they join the company if they will.preferably in a completely
unrelated field.This will provide them with important insight into how the
commercial world functions outside of a family environment.
Indian Family Businesses' Challenges
Big firm houses with three or more generations confront the weight of expansion and
sustenance due to the numerous difficulties faced by family businesses.Every family
business has experienced or will confront difficult obstacles.And, certainly, if they follow
the rules, the complexity may seem overwhelming.Family-owned businesses keep up
with tough challenges like:
1. Splits: There are splits that cause a firm to fail, such as a conflict between a father
and son or even between relatives.For instance, after Mr. G. D. Birla's passing, the
Birla Community broke into a number of businesses.
2. LPG: For family-run businesses, liberalisation, outsourcing, and globalisation are
major threats.So the family enterprises must respond with a new set of strategies.

70
3. HR Concerns : Maintaining the Indian brain is a significant issue for Indian
enterprises to find untapped talent, offer them wage packages and other forms of
compensation that are in line with the industry, delegate authority to them, and give
them space to operate.
4. Transnational Attack: Due to the risks associated with their global product and
service quality, multinational firms pose a significant challenge because they are
more professionalised, concentrated, coordinated, and willing to take risks.
5. Restructuring: The changed market environment necessitates a significant
improvement in overall business operations and plans, yet for the majority of these
business houses, the adjustment was painful, expensive, and necessary.Too little
may adapt from within due to a deficiency in the ability to take initiative.
6. Lack of professionalism includes incompetent management and conflicts between
experienced CEOs and family members running the company.While it is generally
acknowledged that these organisations must appoint a competent CEO, the issue of
divorce from management ownership remains troublesome. Instead, challenges
arise due to differences in management styles and methods.
2.4.2 Role and Contribution of family business towards growth of entrepreneurship
India is believed to have third highest number of family owned or family-controlled
businesses which consists of approximately 90% of all businesses that are incorporated in
the India. However, around 85% of the family-owned businesses of India do not have a
robust succession plan. 75% of top 20 business houses of India are family-owned.
Definition: “ A family business is a commercial organization in which decision-making is
influenced by multiple generations of a family, related by blood or marriage or adoption,
who has both the ability to influence the vision of the business and the willingness to use
this ability to pursue distinctive goals”
Key Takeaways
 Entirely owned and managed by members of a single family
 Owned, controlled and operated by members of one or several families.
 Interest and significant commitment towards business.
CHARACTERISTICS OF FAMILY BUSINESS
1. Family members are loyal to the principles of the founder.
2. The entity has to ensure the uniformity in its operations.
3. Succession planning in an ongoing process.
4. Indulgence of family members in business operations.
5. Ensures the effective utilization of in house talent in family.
6. Requires Single minded dedication of family members
7. Ensures survival of family business through toughest times.
8. Success depends on understanding persisting within the family

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9. Family business can consist of one or more then one family in business operations.
10. Family members who are not contributing or not involved in business are part of
business.
11. Family business values are reflection of values possessed and followed by family
members.
12. Members of family have legal control over business.
Three Circle Model of Family Business

Source: Taguri and Davis, 1982

The three circle model has the three overlapping circles consisti
consisting
ng three different groups
namely Family, Ownership and Business. A particular person carries one of the seven
sections that are formed by the overlapping groups. The owner has the position in the top
circle. The left circle is occupied by family members an and
d right circle is taken by the
employees. If a member lies in the two circle then he would be falling in the overlapping
area. For example if one member of the family is working in the business but does not
own a stake that means he lies in the bottom cent
center
er section. If a member of the family
owns a stake in the business but he is not the employee of the business then it lies on the
left center section.
The three circle model depicts seven different groups having varied level of involvement
in the family business.
usiness. All seven sections are given below:
1. Family members not involved in the business, but who are descendants or
spouses/partners of owners.
2. Family ownerss not employed in the business.
3. Non-family owners who
ho do not work in the business.
4. Non-family owners
wners who work in the business.
5. Non-family
family employees.
6. Family members who work in tthe business but are not owners.
7. Family owners who work in the business.
Each of the seven interest groups identified by the model has its own viewpoints, goals,
concerns and dynamics. The model reminds us that each sector has legitimate views that

72
deserve to be respected, but these views also must be integrated to set future direction for
the family business system. The long-term success of a family business system depends
on the functioning and mutual support of each of these groups.
Approaches to Avoid Conflicts in Family Business
1. Coping approach : which involves adopting to negotiation among family members
try and resolve conflict and agree on common terms.
2. Arbitrary approach: in this approach the elder person of the family will be allotted
with the power to frame rules and control business activity. But this approach has
not proven to be successful as most of the time elder person in family may not
prove to be effective manager for business.
3. Managed approach: this approach states that person who has ability to maintain
better relationship with key individuals of business and have ability to understand
business and manage the same should be appointed as lead person for the business.
Measures to overcome family business challenges and problems
1. Family Constitution or Governance
2. Developing a Succession Plan
3. Family Gathering and Get Together
4. Appointing an outside Board of Advisors
5. Training and orientation 6. Know Your Purpose
7. “Treat each other with grace and respect,”
8. Keep the Lines of Communication Open

Activity
Take a survey of the small businesses in any area determine how many of these are
family owned entrprises.What are the characteristics of these businesses which make
them distinct from non-family based businesses.

IN TEXT QUESTIONS
1. Family business is substantially controlled and managed by members of family and
is succeeded by the ……………………………. of the family.
2. The three circle model depicts seven different groups having varied level of
…………………………….. in the family business.
3. The long-term success of a family business system depends on the functioning and
…………………………………………. of each of these groups.
4. …………………….approach means adopting to negotiation among family
members try and resolve conflict and agree on common terms.

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5. In ……………………….approach the elder person of the family will be allotted
with the power to frame rules and control business activity.
2.5 Summary
The success of family business in India majory depends upon the beliefs and commitment
of the members forwarding the business values,ethics and prosperity.To avoid conflicts
between the members or partners of family business there is strong need to change or
modify the dynamism of the external environment. Friends , family and societal support
also plays an important role in family business success.They provides emotional as well
financial support to members of the enterprise and also helps in tough time of the
business.This chapter provides insight about the support system to entrepreneur and
family buisness in India.
2.6 Glossary
Conflict : A disagreement or argument.
Innovation : New ideas or creativity which can be explored and developed.
Avoidance : It is the strategy to ignore matter and forego egos to settle any
conflict.
Referrals : An act of referring someone or something for consultation ,review
or further action.
Values : Business ideology, belief, customs to be shared by every
stakeholder.
2.7 Answers to In-text questions
1. Supportive 6. Next generation
2. Family and Friends 7. involvement
3. Reinforcement 8. Mutual support
4. Business referrals 9. Coping approach
5. Gifts 10. Arbitrary
2.8 Self-Assessment Questions
1. Explain the meaning of family business.What is the role of family business in the
growth of entrepreneurship.
2. Describe the support system of entrepreneurship.
3. State the approaches to avoid conflicts in any family business.

2.9 References
https://egyankosh.ac.in
www.eomelbourne.org

74
www.thebalancesmb.com
2.10 Suggested Readings
 Craig E.Aronoff, stephen L. McClure, John L. Ward. (2011).Family Business
Succession : The Final Test of Greatness. Palgrave Macmillan; 2nd ed. 2011
edition ( January 11,2011).
 LeCouvie, J. Pendergast. (2014). Family Business Succession: Your Roadmap to
Continuity ////////. Palgrave Macmillan; 2014 edition (January 21, 2014).

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 UNIT III
ENTREPRENEURIAL PROCESS : THE BUSINESS PLAN
Written by : Neha Goyal

Structure
1.1 Learning Objectives
1.2 Introduction
1.3 Business Idea: Concept and Meaning
1.3.1 Generation of business ideas
1.3.2 Opportunity sensing and identification
1.3.3 Test of feasibility of business ideas
1.4 Business Proposal
1.4.1 Developing business proposal
1.4.2 Types of business proposal
1.4.3 Elements of business proposal
1.4.4 Benefits of business proposal
1.5 Business Plan/Project
1.5.1 Content of a business plan/project report
1.5.2 Project appraisal by external agencies
1.6 Summary
1.7 Glossary
1.8 Answers to in-text Questions
1.9 Self-Assessment Questions
1.10 References
1.11 Suggested Readings
1.1 Learning Objectives
After reading this lesson student will be able to:
 Explain the concept and techniques of business-idea generation.
 Describe the business opportunities and List the factors involved in sensing and
identifying opportunities.
 Evaluate a business idea by feasibility testing.
 Prepare a business proposal as per the requirement of the company.

76
 Write the essential elements of a project report.
1.2 Introduction
Entrepreneurship, as you have discovered in the earlier units, is all about taking on new
challenges. Innovation is key to building a vibrant and inventive organisation.
It is about taking risks in order to work hard and succeed in a certain undertaking.
It is about the qualities of an entrepreneur that they must possess, such as their ideals,
attitudes, and drive. The significance and contribution of family businesses in the
development of entrepreneurship and social support also plays a crucial role, both in the
Indian context and globally. Therefore, a strong business idea, business plan, and project
are required for all of this to materialize.
Business ideas, their significance, methodologies, and stages of fruitful ideation will all
be covered in this session.Following that, topics such as the sorts, advantages, and
components of business proposals as well as how to put one together will be covered.
The following part and its sub-sections cover the project report or business plan, its
components, and how external agencies evaluate projects.
The learner will be able to comprehend the obstacles faced by the firm in real life after
completing this course.They would be able to create a solid business strategy and
understand how doing so will help them succeed as entrepreneurs.
1.3 Business Concepts
A successful business always starts with a brilliant business idea, and the ideal
entrepreneur should be an innovator or problem solver who can come up with ideas to fill
the market's potential gaps or be able to handle problems with alternatives so that a better
and more profitable business model is feasible.
Definition of business concepts:
According to economist Joseph Schumpeter, a person who is an entrepreneur is one who
is eager and capable of turning a novel concept or invention into a successful venture.
Business ideas are those that are valuable to customers, investors, and are able to create a
revenue model for a company. Simply put, a business idea is a notion or solution to a
specific problem that, with the right planning and execution, can become a successful
business.
Business ideas are concepts that emerge from group discussions and can be turned into
goods or services that are used by the identified target market.
A business idea is a novel concept centred on developing goods or services targeted at a
certain market niche in order to achieve profitability and expansion.
1.3.1 Idea generation for businesses
Idea generation is the process of coming up with fresh concepts or developing existing
concepts to address market or commercial issues.It helps the company achieve its goal of
finding an absolute solution to the issues at hand.Thinking creatively is essential to
developing new business ideas.It addresses all the risks and difficulties that come with

77
expanding organisations while giving business owners and managers insightful
information.
Business concept generation is crucial.
Importance of Business Idea generation:
1. Business-Strategy:By offering innovations in a variety of business areas like
branding, advertising, and marketing, business ideas aid in the development of
corporate strategy.
2. Problem-Solving: Throughout the course of production, a problem will inevitably
occur for the company. The management will assess the viability of business
concepts to find a suitable solution to such an issue.
3. Future Direction: The management and their team must adopt cutting-edge
concepts and methods that support wise decision-making. Business concepts so
pave the way for success in the future.
4. Boost efficiency: The production of ideas improves an organization's efficiency. It
aids in choosing the optimal solution with the least amount of input or resource
utilisation, increasing efficiency and lowering costs.
5. Unique Insights: By avoiding duplication and focusing ideas and resources to
create a new, better answer, business plans generate a unique path for the growth of
the company.
Techniques for Generating Ideas:
An idea responds to the six questions: 5W (What, Where, When, Who, and Why) & H
(How) to determine whether the concept is workable to address the issue facing the
organisation.
It is believed that the proposal would be the best option if all of these conditions were
met.
The methods for generating business ideas are as follows:
1. Social listing: This technique involves polling the public to find solutions to the
issue. Because product development affects the entire market, target customers must
be included in the collection of opinions, thoughts, and ideas. Social media
platforms aid in this data gathering and the development of a product-market fit.
2. Brainstorming : It is the most well-liked technique in the business world, and
entrepreneurs should always use it while coming up with business ideas, especially
for start-ups. Using the brainstorming technique, an issue can be solved by
combining one or more of the proposals made by any number of people on a given
subject.
The stated ideas are aligned, sorted, and filtered at the conclusion of the
brainstorming session to identify the prospective solution that will generate
significant profits for the company.
3. Mind-mapping is a well-known method of idea development that uses pictures to
express the thoughts and ideas. Using contrast, colours, images, and shapes, mind

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 mapping pictures show the thoughts with many strings, better highlighting the
noteworthy parts.
4. Role-playing: In this strategy, the participants adopt various characters to perform.
It also has a playful and creative character.
5. Storyboarding: This technique entails creating storyboards to spark creativity. It
includes images, graphics, and other details to give the ideas an impressive
presentation.
For instance, if you are developing an idea for an advertisement, you can create a
storyboard to represent the many scenes. Better visualisation is facilitated by it, and
modifications can be made as needed.
7. Collaboration: This method is self-explanatory and involves all participants
working together to generate ideas. The likelihood of coming up with original ideas
increases with the diversity of the team.

Activity
Here an activity for the students on how new business idea generation by role-playing
technique is given.The students take up roles to play as customers and discuss their
expectations and what they want from products.This could lead them to stumble upon
some good ideas.

Stages of Successful Ideation:

There are three main stages namely generation, selection and implementation for
successful ideation:
Stage 1: Generation
The use of ideation to address the problem is a good starting point adopted by most of the
companies today. The companies in advance decides whether they contribute to an
ideation approach. After this step,the next come with utilizing ideation.Core –
competencies and consumer insights are important tool for ideation.In core-
competencies,company is looking for fresh application or new markets with existing
products.In consumer insights,focused-groups and surveys are effective for idea-
generation.
Stage 2: Selection:
It is the next step of the idea generation. A proper selection process begins with choose
the best ideas to develop and test, based on their viability and ability to create value for
the business. The key principle of good idea is gathering the right information to enable
evidence based decision making using a well-tested and verified approach to gain insights
that transforms ideas into a valuable business.
Stage 3: Implementation:
It is the process of executing a plan or idea so that a concept converts into reality.
Implementation phase includes the testing, inspection, adjustment, correction,

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certification of facilities and systems to ensure that the business idea performs as
specified. Therefore, finding a way to implement the business idea is the bedrock of
entrepreneurship and testing the viability of the business idea lies strictly on the market.
So it is important for the entrepreneur to look for the market first for the idea.
1.3.2 Opportunity Sensing and Identification
Entrepreneurship( Process) : It is the process of identifying opportunities in the business
and arranging the required resources to accept the identified opportunities to achieve
long-term profits.
Entrepreneur ( Person) : A person works as catalyst agent to convert the external
environment into an opportunity and work for the opportunities in the business.
Enterprise (Outcome) : The result of the entrepreneurship is an enterprise.It identifies the
ideas and convert into opportunities and provides goods and services,contributes to
national income,export and contributes to overall economic development.
Business opportunities: From an attractive economic idea to successful business
opportunities,an entrepreneur is required to have two important things:
1. Good market for the product
2. Rate of return on the investment
Elements of business opportunities:
1. Attractive ROI
2. Assured market place
3. Practical and successful idea
4. Potential for future growth
5. Competent entrepreneur
Opportunity Sensing: It is a process of identifying an opportunity by perceiving the
needs,ideas and problems of the society and by employing skills of observation, analysis
and synthesis of an entrepreneur.
Factors involved in sensing and identifying opportunities:
There are three main factors involved in sensing an opportunity:
1. Ability to perceive ideas: An entrepreneur is required to have the ability to spotting
an idea. There are various sources of emerging an idea:
A Problem: Sometime the solution of a problem becomes an opportunity. Example:
The problem of electricity generates the invertor as an opportunity. A problem gives
rise to business opportunities.
B Change: A change in the environment always give rise to new business opportunity.
For Example the change from offline learning to online learning is the result of the
movement of the society towards digitalization.
C Inventions: Innovations and inventions lead to new business opportunity.Example :
Pendrives and digital cameras.

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D Competition: Competition between rivalries resorts to new and improved ideas.
2. Different sources of information:
Various sources of information like books, journals, websites, portals, newspapers,
magazines, friends and family members can be analysed ,verified and utilized properly to
get the best idea from it.
Vision and Creativity:
The visionary and creative skills of an entrepreneur converts any situation into a business
opportunity through which he/she can constantly overcome adverse effects and exercise
control over the business.
Entrepreneurs are different from other persons in perceiving an opportunity in the
following ways:
1. Quick in perceiving the opportunity
2. Add to collect the available information.
3 Able to analyse the patterns usually ignored by others.
Stages of opportunity identification process:
Opportunity identification is the process which is based on three main factors:
Entrepreneur’s background, the influence of business and the business environment.
There are five stages for the identification of opportunities that lead to recognition. These
stages are:
Getting the idea: This is the first stage of opportunity identification process in which
entrepreneur can generate a business idea from a niche market,This stage helps the
entrepreneur to compete with already existing businesses and perform differently.
Identifying the opportunities: A business idea with good return is considered as an
opportunity that has not been discovered.IT requires deep scanning of the business
environment ,being active about the changing information and the ability to use such
information in effective manner.
Developing the opportunities: It requires to fit the generated idea into current market
environment. A research will be conducted here to determine whether business idea can
be converted into real business.
Evaluating the opportunities: In this stage, risks and profit two important factors are
assessed to find out the risks associated with the opportunities and profits generated from
the investment.
Evaluating the management team: This is the final stage with skilled team to make the
business idea into realization. Here competent and skilled employee team is crucial which
make the opportunities economically viable.
1.3.3 Test of feasibility of business concepts
In the competitive and fast paced advanced business atmosphere, there's no surety for the
success of any concern. It is a business plan or project developed for a business or

81
company is to endure good testing before finally being approved for the ultimate
development within the business. Such testing method known as feasibility testing.
Feasibility Testing suggests that an in depth, complete and thorough study regarding
achievement of satisfactory result of an inspiration. It involves the rules for the
implementation and conjointly highlights the risks related to the generated business
concepts and therefore the likelihood of success of the concept.
Before arriving to a thought into final form and investment ,to test the feasibility of the
project is the vital basis.A business plan or project signifies production capability at a
particular location,utilization of inputs like staple and technology,production prices,sales
revenue and come back on investment of the project.
So feasibility testing is bestowed within the project report and this report desires
sanctioned from the involved authorities.These authorities judge the viability of the
project on the premise of feasibility testing.
Need for feasible Testing:
The need for feasible testing arises due to the subsequent reasons:
1. Estimating human and material resources needed
2. Identifying the sources of resources
3. Understanding business connected issues
4. Formulation of methods
Types of feasible Testing:
There are different kinds of testing to examine feasibility like technical,market &
organization and money feasibility that facilitate an organization to work out the viability
of a thought.These testing explains the return on investment,the risk concerned,risk
mitigation strategies,the best alternatives offered.It conjointly facilitate the corporate to
assess the market demand and therefore the position of merchandise and services to
achieve most profits and price reduction.
There are many kinds of feasible studies are available that are given below:
1. Technical Feasibility: This testing checks the accessibility of technical resources
within the company. If technological resources exist within the company then
feasible testing team can assess and check whether or not the corporate will
customize or update the prevailing technology that suits to new strategies of
operating by checking the hardware and code.Factors have to be compelled to be
thought-about these measure I.e employees necessities,transportation and
technological ability.
2. Financial Feasibility: It determines the value –benefit analysis. It permits a
corporation to specialize in the investment to urge the specified level of profit.
Factors like total value and expenses square measure thought-about. By applying
this knowledge, an organization will verify their monetary affairs and anticipate
future monetary sources and necessities. Assessing ROI is an example of monetary
feasibility.

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3. Market Feasibility: It assess the sort of trade, market, market characteristics,
competitive atmosphere, company’s merchandise and services. Assessing sales is an
example of market feasibility.
4. Organization Feasibility: It focuses on structure aspects like organization
structure,organization system,management team ability.It conjointly assess the
organization ability to implement the business-ideas.It assess the value generated
by the simply offered alternatives.It conjointly determine deviation between actual
and budgeted amount and take corrective actions for better results.
5. Economic Feasibility: In this feasibility study,a detailed analysis is performed
regarding the value of the project for development includes resource cost,
development value and operational value etc.
6. Legal Feasibility: It includes the analysis of legal implementation of project,
knowledge protection act, project certificate, license, copyright etc.It conjointly
assess whether or not the projected project confirms all legal and moral codes and
conducts.
7. Schedule Feasibility: It principally determines the deadlines or timelines for the
proposal project includes the ultimate completion time on a project as per the given
schedule.
The below steps are considered throughout the whole feasibility analysis:
1. Information Assessment
2. Information assortment
3. Report writing
4. General info
IN-TEXT QUERIES
1. Business plan generation suggests that …………………..outside the box.
2. Feasibility study includes technical, financial, market , organization, economic
,……………………….and …………………………analysis.
3. Innovations and inventions cause new ………………………….
4. ….………………………….works as catalyst agent to convert the external
atmosphere into business chance.
5. .…………………………………….is that technique within which any range of
persons will provide suggestions on any specific topic.
1.4 Business Proposal
A business proposal are written document related to project conditions and it is mainly
for the projects which are long run in nature ..It includes additions or amendments to be
incorporated among a business framework.It provides probable answer to a specific

83
drawback or state of affairs.They can be written by individuals among or outside a
corporation.
1.4.1 Developing a business proposal
A business proposal may be a written or in written document provides an in depth
rationalization of the business goals of the corporate ,it includes how to conduct business
and the expected expenses and profit of the corporate. it's a road map of the corporate. A
business proposal in writing sent by a provider to a business in hope of winning a project.
Proposals can be solicited or unsolicited.
1.4.2 Forms of business proposal
There are varied forms of business proposals:
1. Informal solicited proposal: Company A invite a proposal to company B to
understand details regarding company B’s merchandise, price, terms and conditions
and quality etc.
2. Formal solicited Proposal : Company A( Regular shopper of company B) request
company B to send proposal regarding the merchandise ordered as company A
desires to know about the terms before payment.
3. Unsolicited Proposal: Company B desires to tell Company A regarding their
services offered and creates a general proposal while not request of company A
regarding their experience,Terms and conditions ,offers and services.
4. Request for Proposal: it's a depth document and a formally invited business
proposal within which customer send request for proposal to numerous vendors so
opt for the simplest proposal.
5. Request for Information: it's a proposal request by the aspect of consumers for
gathering the varied vendor’s product info and accustomed compare the
merchandise.
6. Request for quotation: RFQ may be a proposal issued to form a alternative
supported the worth.A company requests a quote ( as promise) from provider to
assure to shop for the merchandise at such value in the near future.
1.4.3 Components of Business proposal :
Industry-specific formats for business proposals are extensively established.In this
instance, the business adheres to the proposal creator's standard based on organizational
structure.
However, the following general framework is applicable to generic suggestions.
1. A cover letter and the proposal document are required annexures in every business
proposal. Additionally, one or more appendices may contain tables, graphs, images,
maps, and other supporting materials.
2. The cover letter acts as a document that is sent.The credentials, name, and offer
price for the bidder are included in the proposal as its main points.

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The proposal document is organised as follows:
A. Title page: It contains the name of the person or business to whom the proposal is
submitted, the date of submission, and the name of the person or business by which
the proposal is submitted.
B. Table of Contents: Only elaborate formal proposals are utilised with it.The table of
contents is a useful tool that effectively directs the reader in the case of companies
with many departments.
C. Executive Summary: It could be attached to a proposal or cover letter.
D. Description of the issue:In this part, the bidder shows how they understand the
client's objectives and ambitions.
E. Approach: In this part, the suggested approach to resolving the issues or problems is
explained.It outlines the proposal's strategic components.
F. Methodology: This section provides a thorough explanation of how the strategy will
be used.
G. Schedule and Benchmarks: The proposal's key components are shown here in
relation to a timeline. Benchmarks are used to show that the objectives have been
achieved.
H. Cost Proposal: The costs necessary to complete the project are listed in this section.

Case study

You might be familiar with the New Coke saga. In order to better compete with Pepsi,
Coca-Cola revamped its signature soft drink in the middle of the 1980s. New Coke, a new
beverage, flopped horribly. However, Coca-Cola was able to revive its sales by reissuing
the original version of Coke under the brand name Coca-Cola Classic.That is a fantastic
case study in business management on its own.The more recent development is how
Coca-Cola changed its business strategy so that no beverage—not even Coke—can
significantly affect the success or failure of the company. Coca-cola presently provides
more than 500 brands, ranging from soft drinks to fruit juices to water, as a result of years
of expansion and acquisition.Furthermore, it sells its goods in more than 200 countries.

Associated Website: waldenu.edu

1.4.4 Advantages of a Business Proposal

The advantages of a successful business proposal are as follows:
1. Greater clarity: A company plan makes decisions about capital investments,
resourcing, fundraising, leases, and other matters clearer.A strong business proposal
aids in determining the goals and benchmarks to concentrate on.
2. Support for Financing: A business plan can assist in addressing inquiries regarding
potential funding sources, such as bank loans or money from investors.

85
3. Creating a marketing road map: Marketing is a crucial component of a proposal,
and a business plan aids in identifying the target market, target audience, and ways
to promote goods and services there.
4. Offers structure: A business proposal serves as a tool for the company to stay on
track with sales goals and operational benchmarks.
It offers framework for managing and measuring the focus area's priority.
5. Secure talent: A strong business plan identifies the right talent at the right time and
shows how that skill can help the company achieve its objectives.
IN-TEXT QUESTIONS
1. ……………………………is a road map of the company.
2. Proposals may be solicited or ………………………………
3. ….……………………………are used to indicate successful fulfillment of
objectives.
4. A business proposal have at least two documents: ………………………….and
…………………………
5. The cover letter serves as a ……………………………document.
1.5 Enterprise Project or Plan
An entrepreneur's proposed course of action is outlined in a project report or business
plan.
It is essentially a plan of action outlining the goals the entrepreneur has for his company
and how he plans to get there.
1.5.1 Content of Business Plan or Project Report
The value of a well-written business strategy cannot be overstated.There are no
predetermined standards or quick fixes for creating a business plan. According to their
needs and requirements, several firms have different business plans. For instance: While a
medium-sized or small business must create a small business plan, a large-scale
corporation must create a complete business plan.
In the following situations, a business report created by the firm owner or his consultant
is helpful.
1. The plan for a new business
2. Adding on to an existing structure
3. A request for credit from a financial institution
4. Getting any form of clearance from the Government.
The following topics must be covered in a business strategy or project report.
1. General Information
It covers the following topics:

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  Name and location of the company
 Promoter's qualifications and experiences,
 Industry Profile ,
 Memorandum and Articles of Association
 Commercial Stakeholders
 The nature of the company and its customers
 Information about the businessman
 Organizational structure and management
2. Business Venture: It will cover the following topics:
 Product Specifications
 Services to be Offered or Delivered
 Scale of the Business
 Types of Employees Hired
 types of technology needed by the company
3. Organizational structure
The following are some of its components:
 Business types such single proprietorship, partnership, LLp, and Company
 Organizational governance structure
 Functional structure,
 divisional organisation,
 management hierarchy,
 management team makeup, and
 member information
 Number of directors; Number of managers; Organization's vision and mission;
Name, location, and other management information
4. Manpower Planning:
These topics will be covered:
 Skilled and semi-skilled labour requirements
 Sources of labour Procurement and their cost
 Training requirements and costs

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5. Production Plan:
This section covers the following topics:
 Land and Building: Size of Land, Construction and Plant Layout;
 Technology and Production Process;
 Physical Site of the Project;
 Plant and Machinery; Raw Material; Plant Capacity;
 Research and Development
6. Project description:
 The number of contracts,
 communication system,
 the project implementation and
 monitoring,
 the transportation facilities, and
 the environmental aspects.
7. The market plan :
It contains the following elements:
 consumers of the product;
 demand of the product;
 pricing;
 availability of substitutes;
 promotion; marketing strategies; physical distribution policies; and
 availability in new markets.
8. Marketing Plan:
Its elements include the following:
 Products and services offered
 Price
 Physical Place and
 Promotional Tools
9. Financial Plan:
It contains the following information:
 Requirement of Fixed Capital
 Requirement of Working Capital for Operating Activities

88
  Sources of Finance: Equity Capital, debt capital, loan sum, term loan, or
 Grant or subsidy from the government.
 Projections for cash flow, fixed assets, total income, profits, and growth rate.
10. Other/Appendices:
 Types of business hazards linked with contracts
 Contracts with vendors,
 Market research reports,
 Modes of transportation and communication,
 Contingency plans, and
 Company's incorporation paperwork
 Estimated P&L
11. Socio-economic aspects of the business plan ( Importance of the project to
national economy)
13. Techniques for managing productivity include:
 Logistics management,
 Total quality management, and
 Quality control.
1.5.2 Project evaluation by external agencies:
It is a thorough analytical examination of the project in which project analysis is carried
out with the aid of technical and financial data to make a judgement regarding the
acceptance or rejection of the project. Project-Appraisal is the process of determining
whether a project is viable by examining its numerous components.
There is a considerable requirement to evaluate the numerous initiatives that are available
for investment before committing the organization's limited resources to the project.
For the project appraisal,all components of a project are essential to analyse like
economic,financial.technical.managerial and social aspects. Before investing in a project,
a variety of external parties, including financial institutions, evaluate its creditworthiness.
Project assessment factors: The methodologies for project evaluation are as follows:
1. Economic analysis, first
 Raw material specifications
 Amount of capacity occupied
 Estimated revenue and costs
 Profits were made
 Location of the Company

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  Governmental Regulations
2. Analyzing finances
 Evaluation of the capital ( Fixed and Working capital)
 Break-even evaluation
 Analyzing operating cycles
 Accounting Ratios
3. Market Research:
 Demand Prediction
 Market focus
 Opinion research technique:
 Full enumeration technique
 Survey example
 Customer experience approach
 Vicarious approach
 Analysis of life cycle segmentation: Introduction, Growth, Maturity ,
Saturation and Decline
4. Technical Feasibility:
 Availability of land and site
 Access to other resources like water, power, transportation, and
communication infrastructure
 Service facilities are accessible
 The availability of a workforce with the necessary skills and projected on- and
off-the-job training arrangements. The availability of raw materials with the
necessary quantity and quality.
5. Management Talent:
 Managerial Skills
 Managerial Competence
 Managerial Ability
Techniques for project evaluation :
1. Net present worth (NPV)
External Rate of Return
2. ( IRR)
3. Payback Duration (PBP)

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4. The typical rate of return (ARR)
5. Index of Profitability (PI)
Project appraisal benefits:
1. It offers consistency and objectivity in the project selection process.
2. The Project-Appraisal project benefits every societal group.
3. Defend the project's expense.
4. In order to fulfil financial and legal duties, documentation will be given.
5. It is a useful tool for making decisions.
6. Evaluation determines whether a project is accepted or rejected.
IN-TEXT QUESTIONS
1. …………………………..is to adjudge the viability of a project by analyzing the
various aspects of the proposed project.
2. Assessment of capital and operating cycle analysis comes under
………………………………analysis.
3. Project acceptance or rejection is laid by……………………..
4. Different organizations has ……………………business plans as per their needs and
requirements.
5. Various external agencies assess ………………………………of a project before
investing in it.
1.6 Summary
In this lesson, we've covered the topic of business idea generation, its significance, and
the methods for figuring out whether an idea is workable or not in terms of solving
business challenges.
Additionally, we taught how to recognise chances based on three primary criteria: the
entrepreneur's background, the influence of their industry, and the environment in which
they operate.
Testing the viability of a project or idea entails a detailed investigation of its
acceptability.
We also learned about business proposals, which typically include a cover letter and a
proposal document, as well as their advantages for entrepreneurs. A business project
report is a crucial document for an entrepreneur since it outlines the goals the
entrepreneur has for his company and how he plans to get there.
The conversation then turned to the contents of a project report and project components
that had been evaluated by outside organisations, including financial institutions.

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1.7 Glossary
Brainstorming: An activity in which people meet in a group to suggest lot of new ideas to
choose from for possible development.
Creditworthiness: It is the opinion of a creditor or lender or investor regarding the ability
of a person or business or project to settle its obligations when due or to decide whether
invested in project or not.
Benchmark: It is something that serves as a standard by which others may be measured or
judged.
Viability: The quality of being able to happen or having a reasonable chance of success.
1.8 Answers To In-Text Questions
1. Thinking 9. Cover letter and proposal document
2. Legal and schedule feasibility 10. Transmitted Document
3. Business Opportunity 11. Project-Appraisal
4. Entrepreneur 12. Financial
5. Brainstorming 13. Appraisal
6. Business proposal 14. Different
7. Unsolicited 15. Creditworthiness
8. Benchmarks
1.9 Self Assessment Questions
1. Explain the concept of sensing and identifying opportunities. Discuss the factors
that influence sensing and identifying opportunities.
2. Prepare a project report with relevant elements necessary today in the business
environment.Illustrate your answer with relevant examples.
1.10 References
 www.alcorfund.com
 https://magazine.startus.cc/7-creative-idea-generation-methods/
 https://www.inc.com
 www.xpinnovates.com
 www.businessstudynotes.com
 https://betterproposals.io/blog/what-is-a business-proposal/
 https://www.waldenu.edu

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1.11 Suggested Readings
 https://www.thkjaincollege.ac.in/onlineStudy/commerce/set5/ARUNIMA%20RU
DRA%20ED-CHAP3%20AND%20CHAP4-4TH%20SEM.pdf
 https://www.researchgate.net/publication/293333604_Project_Planning_and_App
raisal
 Frechtling, J. (2002). The 2002 User-Friendly Handbook for Project Evaluation

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 UNIT IV
ENTREPRENEURIAL ECOSYSTEM
Written by : Neha Goyal

Structure
1.1 Learning Objectives
1.2 Introduction
1.3 Support system for entrepreneurial orientation
1.3.1 Socio - Economic support system
1.3.2 Public-Private support system
1.3.3 Institutional Support system
Financial
Marketing
Technological
Managerial
1.4 Entrepreneurial Ecosystem
1.4.1 Prototype centers
1.4.2 Private equity funds
1.4.3 Startup Action Plan and Startups & success stories
1.4.4 Business Incubators and self help groups
1.4.5 Angel investors and Venture Capital
1.4.6 Make-in India initiative
1.5 Social organizations-Trade and industry associations
1.6 Summary
1.7 Glossary
1.8 Answers to In-text questions
1.9 Self-Assessment Questions
1.10 References
1.11 Suggested Readings
1.1 Learning Objectives
After reading this lesson student will be able to:
 Explain the concept and types of Support system for entrepreneurial orientation.

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 Describe the entrepreneurial ecosystem and important elements of ecosystem model
.
 Learn about the prototype centers and startup action plan & success stories.
 Recognize the role of business incubators, angel investors and venture capitalist.
 Know about the role of self help groups towards entrepreneurial support.
 apply your learning into practical situations of life.
1.2 Introduction
In general ,a support system refers to set of elements that supplements to making of
anything. It is a complete whole that leads to an effective conclusions. Entrepreneurship
stems from the generation of a business idea. The success of a business idea
implementation depends on the presence of an effective entrepreneurial support system.
Drawing a business plan or project report is cumbersome task and the execution of such
activities in effective manner is impossible without strong support to entrepreneurs.
In this lesson we will discuss about entrepreneurial support system, types of support
system and support system model. After that entrepreneurial ecosystem and other relevant
support for entrepreneurs like angel investors. prototype centers, venture capitalists,
private equity funds, self help groups will be discussed. Startup action plans and startup
success stories with examples also explained in this lesson.
After go through this lesson student will be able to understand the schemes provided by
the state and central governments .They would be able to understand about various
support services available for the entrepreneurs like self help groups, angel investors,
venture capitalists, private equity funds and business incubators.
1.3 Support System for entrepreneurial Orientation
Entrepreneurs require solid support system in order to turn their business idea into real
business. Supporting entrepreneurship is primary necessityfor the development of the
economy which includes innovations and effective solutions to any problem.
An entrepreneurial support system does not related to the initial business startups only
while it also confine to initiation and introduction of an enterprise with the nurturing,
growth and development of the enterprise.
The support system must be attainable at all the stages of the business i.e. introduction,
growth, maturity and decline. The failure to do so will conclude the failure of
entrepreneurship. So support system works as rescue system for the entrepreneurs.
1.3.1 Socio - Economic support system
The success of the entrepreneurs depends on the several environmental factors like
social, economic, legal, political and technological factors which influence the success of
the enterprise. But the socio - economic factors are the crucial factor influencing the
behaviour of the entrepreneur and business functions.
This is the biggest challenge in front of entrepreneurs to make balance between economic
and social objectives. They must balance between profit motives and social welfare

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actions .They are required to use modern technology based machines without effecting
employment and hurt to the society and environment.
They must earn profit without charging high amount for the tangible and intangible items.
They must pay their all taxes and duties on time and not use unfair and unethical trade
practices to compete with cut-throat competition.
Factors affecting Entrepreneurship Growth and Development:
Social factors:
1. Customs and Traditions
2. Rationality of the society
3. Social set-up
4. Social system
Economic Factors:
1. Lack of basic facilities
2. Non-availability of capital
3. Non-availability of skilled labour
4. High risk associated with business
5. Non-availability of raw-material and finished goods
Social support contains dimensions based collection of material resources through social
connection with family, friends, groups, peers or professionals. Social support is related
to the outcomes which is tangible in nature like actual and potential resources individuals
obtain from knowing others ,being a part of the social networks with them and having a
good reputation.
A social support system has five dimensions:
1. Emotional support: It includes the empathy and the concernment for the individuals
so that individual feel comfortable, feel loved and cared. So such support is
important for an entrepreneur such as concerning about the happiness and healthy in
new venture creation, help in case of trouble in new venture creation and make
individual feel easy going during exhaustion.
2. Family support : Family support is essential in the decision making and motivation
process. This support will help in giving meaningful feelings for others that sees
themselves to possess different traits to others , helps in attaining self-assurance and
self-admiration for others.
3. Esteem support: It includes positive assessment on the individual, encouragement
and approved statement on individual opinion. This support improves self assurance
and self trust to the individuals.
4. Network support: It means sense of belongingness to the others as individual has
become a member of a group. Here sharing curiosity and social activity can make
an individual feels himself to be accepted by the group.

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5. Informational support: It includes the provision of opinion, guidance, suggestions ,
recommendation or feedback about how to solve a problem by using useful
information.It helps a person in easily identifying and addressing issues.
Entrepreneurs are good for satisfying the need of employment opportunities and also
helps in economic development of the country.The central and state governments
supports the startups which are profitable in nature and helps them to expand as possible.
Following are the governmental supportive system for the innovative entrepreneurship
development:
1. Increase financial scope for the entrepreneurs : The government has various
financial schemes for those entrepreneurs or startups interested in expanding their
business quickly. Such financial schemes are available only for those entrepreneurs
who are experimental and progressive in their business.
2. Promoting cooperation between researchers and the private sectors : The
government is working for the public-private partnership by working with the
private sector and other knowledge institutions.
3. Reducing the regulatory and compliance burden on the entrepreneurs: The
government focus on taking steps so that the legal regulatory burden on
entrepreneurs can be possible to minimised. It includes granting permission quickly
or even with automatic mode for operation of the businesses. Such automation is
making possible for the greater use of technology.
4. Developing IT tools for entrepreneurs: The online government services reduces the
regulatory burden on the businesses which offers unlimited scope for the new
products in the business or for making business process more efficient.
5. Help in access to networks: The government helps entrepreneurs to build an
effective network for the operations of the businesses.
1.3.2 Private -Public support system
Entrepreneurship is all about creation of business,innovation for the dynamic business
creation,risk taking so as to be successful in business,threats and challenges that directly
and indirectly impact the businesses so a strong and effective entrepreneurial support
system is must.In Indian and global context,a strong solid and effective support system is
required to stimulate entrepreneurship.
To achieve the best outcomes both public and private system works for the same aim ie.
encourage,create and development of entrepreneurship by using different approaches.The
detail explanation are:
1. Public support system : The public support system includes schemes and projects of
government I.e state and central government. The state governments have multiple
schemes and projects in various areas like tourism,hospitality,venture capital assistance
scheme to assist agriculture based entrepreneurs to kick start their agri-
business,infrastructure development scheme similarly central governments deals in
certain schemes about tourism development,hospitality sector growth ,scheme for
capacity building for service providers and entrepreneurs,market-development assistance
and scheme for infrastructure development by public-private partnership. These schemes

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of state and central governments have a direct impact on the motivation and success of
the entrepreneurs.
2. Private support system : Private support system includes personal and professional
relationship of an entrepreneur with the others.Personal private support system comprises
of family,friends and relatives. one of the most important sources of support system for
many entrepreneurs is their networks of family and friends.They can help them face
stress,balance work and life,serve role as advisors,employees,financer,investor and
partners.Gratitude,emotional connection and financial support from the other personal
relations and community helps in finding stability in the business.
At the professional level,venture capitalist,angel investors,business incubators and self
help groups plays a pivotal role the entrepreneurial support system.
Mentors.accountability partners,coaches,mastermind groups,online
groups,meetups,professional organizations with membership and business development
centres like prototype centers provides their support to entrepreneurs to make their
business successful.
1.3.3 Institutional support system :
The institutional support system means authorities and institutions whose active support
and decision in various areas like financial,marketing,managerial and technological helps
to bring various changes in the activities of the business.Such institutions includes
government ,statutory,semi-autonomous and autonomous which deals in
financing,marketing,technological and managerial activities for the success of the
business.
The central and state governments has set up number of supportive institutions to help in
entrepreneurial activities which cover financing, managerial,marketing and technology
based activities and providing subsidy & grants.
An Entrepreneur requires support system from the institutions for project preparation &
evaluation,technology upgradation,need money for initial investment in the
business,substantial investment for expansion or diversification.They need managerial
support system for the successful operation of the business. Startups at initial level or
small scale Industries are not able to compete with others and not have sufficient money
hence they require market support system.In order to support the small scale industries
.state and central governments have set up a number of institutions.In addition to these
institutions some agencies are also available like : National science and technology
Entrepreneurship board, Khadi and village industries commission, Commercial Banks,
EXIM Banks and Co-operative Banks aiming at facilitating entrepreneurial development.
Here a brief description about various institutions which are rendering support for the
promotion of entrepreneurship is given below:
 Marketing Support system
In order to strengthen the marketing activities of startups and SSI,government provides
various types of assistance like market research survey studies,quality marketing scheme,
open house discussions,buyer-seller meets,marketing tools knowledge,training
programmes, dissemination of information relating to market ,promotional tools like

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publicity,sales promotion,public relations,trade fairs,displays,seminars,consultancy
services related to marketing,trade centers and expert services and advice.
Central and state government have established various institutions to support the startups
and SSI in their marketing programme:
1. National Small Industries Corporation
2. Export promotion council
3. Commodity Boards
4. State Trading Corporation
5. Minerals and metals trading corporation
6. State small scale industries corporation
7. Small industries development organization
8. Khadi and village industries commission
 Technological Support system:
Techno park in kerala is a technology based park established in 1990 in trivandrum,India
for the electronics,software and other information technology enterprises.It is the first and
largest tech park in India with huge built-up space serving bulk of the companies.The
government of kerala promotes techpark to nurture entrepreneurship and development of
employment opportunities in the state.
Functions of Techno Park:
There are various functions performed at the techno park which are given below:
1. Plenty opportunities for the development.
2. Provisions and maintenance of infrastructure facilities.
3. Creation and sustenance of a best class working ambience.
4. Establishment of a high security zone at low cost.
5. Augmented employability quotient of youth
6. Reduction of waste and enhanced water and energy efficiency.
7. Enormous annual supply of productive workforce.
8. Lowest rate of manpower attrition.
9. Eco-friendly campus to promote to stay green.
10. Perfectly harmonious work settings.
 Managerial Support system
Management support system includes uses of information for planning and decision
making.The information used in this system is based on both the internal and external
environments and the collected information analyzed through various data analysis tools.

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Managerial support system serve for the managers at all stages like top,middle and lower
level managers.
 Financial Support system
Sometimes we think of support system only in terms of finance.But it is essential for an
entrepreneur have both financial and non-financial support system to achieve
entrepreneurial success and development. Finance is the life blood of the business but
having funds is not sufficient,its optimum utilization is also necessary for better
outputs.For example,it is important to channel the money invested into targeted
marketing.This is the only means by which the products and services of the enterprise
shall reach the client which in return ascertains the profitability of the businesses.So it is
true to say that finance in itself can have cascading effects. The financial support system
includes soft loans,fixed and working capital financing for the startup projects,expansion
and rehabilitation.Some of the institutions providing an effective support system to
entrepreneurs are given below:
The institutional support to entrepreneurs are:
CENTRAL GOVERNMENT INSTITUTIONS:
1. Small scale Industries Board (SSIB): It was established in the year 1954 in the favor
of small scale sectors to offer effective coordination.It also helps in creating association
between different institutions.
2. National bank for agriculture and rural development (NABARD) : The
establishment year of NABARD was 1982 and the major role of it is to make ease credit
flow in agriculture, cottage and village industries ,handicrafts and small scale industries.
It encourages feasible rural development for accomplishing success and growth of rural
areas in India. The function of NABARD is to induce young generations of India for
rural non-farm sector, district and industrial rural projects and conduct rural
entrepreneurship development programme.
3. Small Industries Development Organization( SIDO) : Small Industries
Development Organization was established in the year 1954 to offer support to small
scale sectors for their promotion and more further growth. The Small Industries
Development Organization has recognized the environmental change and grants
financial support in the field of credit, marketing, technology and infrastructure to SSS.
It offers facilities for testing, entrepreneurship development training ,preparation of
project, managerial and technical consultancy ,assistance for global trade and audit
affairs.SIDO provides services for entrepreneurship development ,management training,
testing services and preparation of feasibility reports for different products.
The SIDO has promoted following institutions and accountable for their management
which are:
 Small Industries service institutes (SISI)
 Product-cum-process development centers
 Regional training centers

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 Establishment of training institutes.
4. National small industries corporation Ltd.(NSIC) : It was set up in 1955 for aid
and encourage the growth of Small Scale Industries in country and allows wide range of
services to grow Small Scale Industries. Its functions are to allow machinery, equipments
,raw materials to startups and provides a variety of support services to micro and small
scale industries in the area of raw material,product marketing,credit rating,acquisition of
technology and adoption of modern management operations.
5. Small Industries Development bank of India ( SIDESI):
It is a subsidiary of IDBI grants financial and non-financial assistance to the small scale
sectors.It helps in encouraging, financing and development of small scale sectors and
coordinating the functions of the institutions engaged in it. It provides assistance for
setting up of new small scale units ,technological upgradation,quality upgradation,
development of markets and infrastructure.
6. National Board for Micro, small and medium enterprises ( NBMSME) : Its main
objective is to solve issues related to development of MSMEs and to take remedial
actions in consultation with the concerned departments or agencies.
7. Khadi and Village Industries Commission (KVIC) : This commissionwas
established in 1956 as a statutory organization involved in encouraging and developing
khadi and village industries for making employment opportunities possible in rural areas
by strengthening the rural economy.
STATE GOVERNMENT INSTITUTIONS:
1. State financial corporation : Its main objectives are to encourage self employment,
to encourage women entrepreneurs, expansion of industry and provide seed capital
assistance.
2. Small scale Industries Development corporation( SSIDC) :It provides support in
respect of how to procure and distribute raw material, supply of machines on hire-
purchase basis and providing assistance for marketing of products of small scale
industries.
3. Technical consultancy based organizations : This organization helps in preparation
of project profiles, identifies potential entrepreneurs, conduct market research and
industrial surveys & EDPs.
NON-GOVERNMENT INSTITUTIONS: Some of the institutions comes under it are:
1. Indian council for small industries (ICSI)
2. Laghu Udyog Bharti (LUB)
3. India SME technology services Ltd.
4. Credit Guarantee fund trust for micro and small industries
5. Federation of Association of small industries of India ( FASII)
6. World Association of small and medium enterprises (WASME)

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Activity

A direction to students to list as many supportive schemes as they can, provided by the
government.The time limit is 5 minutes and then highlight which scheme provided by
central government and which one by the state government.This activity helps the
students to acquaint with the schemes introduced by the government.

IN-TEXT QUESTIONS

1. Private support system includes ………………… and…………………………

relationship of an entrepreneur with others.
2. Management support system includes uses of information for
…………………………. and ………………………………
3. .………………………………..is essential in the decision making process and for
motivation.
4. ….…………………………system works as rescue system for the entrepreneurs.
5. Emotional support system includes …………………………….and
……………………… for the individuals.
1.4 Entrepreneurial Eco system
An entrepreneurship ecosystem is the social and economic environment based
entrepreneurship and a set of interdependent actors and factors and their coordination so
that they enable productive entrepreneurship within a particular territory.This ecosystem
narrows down entrepreneurship to high growth startups or scale ups and proves that
entrepreneurship is associated with innovation,growth and employment.
Entrepreneurship Ecosystem
The entrepreneurial ecosystem means a society formed by the combination of various
factors which are not dependent to each other, interact with each other in geographical
location and evolve. The main objective of entrepreneurial ecosystem is to make growth
of new businesses possible.
The Entrepreneurship Ecosystem Model
An entrepreneurship ecosystem has six important elements which helps an entrepreneur
from ideation and launch stage to growth and scaling stage.

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 Source: Leadership institute for entrepreneurs
1. LEADERSHIP AND POLICY
It provides solid strategies and regulations to entrepreneurs so that they can get
various advantages in entrepreneurship ecosystem like promotion,support,problem
solving,business friendly legislation and incentives.
2. FINANCES
This element works as power tool for all the initial stage started businesses and
profit & growth oriented startups and helps the entrepreneurs for maintaining
existence in external environment and ecosystem by way of micro loans,venture
capitalists and angel investors.This financ
financial
ial support is also available for those
startups which are small or moderate in size.
3. MARKETS
This is the very important element for entrepreneurs which provides relevant market
based opportunities like information about customers include both domestic and
foreign,sales and distribution data,government contracts and information about
various companies available in the market.
4. CULTURE AND MEDIA
The acceptance and promotion of entrepreneurs and ecosystem is based on cultural
beliefs and media sources.Various startup success stories and strategies should be
promoted by the experts through social media mode and other media sources.
5. HUMAN CAPITAL
Human capital is the most essential element for the success of the entrepreneurs. To
ensure entrepreneurial success, technical skills, managerial skills and experienced
and trained workforce are required. For the growing needs of the skilled employees

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 in the marketplace,various training centers and adoption of outsourcing services
should be responded.
6. SUPPORT SERVICES
It includes wide support system in the different fields like infrastructural support (
energy, telecom ,transport), networks of entrepreneurs and their platforms and
other connected events. To secure the success of entrepreneurial ecosystem capable
support services are required.
1.4.1 Prototype Centers
Prototype means a replica of a product as it will be manufactured which includes
following features like color,looks, graphical representation, packaging and even
instructions mentioned on the product also. The process of creating a replica called
prototype is based on three-dimensions namely, idea, budget and goals. If an entrepreneur
wish to develop a prototype, many avenues are available like hire a professional
developer,engineer and designer but their services may be perfectly sufficient only if
product design is simple and straightforward. So the best prototype is one that is simple,
rapid and low-priced make hypothetical idea more tangible which discover specific
learning needs or purposes.
A prototype center is that institute which offer access to advanced equipments, hands-on
training and manufacturing space in affordable manner.Prototype centers set up basically
for the accomodation of startups and the existing businesses so that all the members of
such centers can run short term manufacturing and prototype repetition. A prototype
center provides lease-free rental space for the storage of raw materials ,tools and finished
products. The assets in this centres are highly valuable so every member is required to
have high skills and training for the use of such instruments and require to pay an hourly
rate for the utilization.
Prototype and innovation centre is active in a variety of areas:
1. Design, production, examining and validating of prototypes.
2. Research, development and transformation for the industry.
3. Support system for startups and small businesses in the field of production and
prototype development.
4. The implementation of research solutions of researchers for businesses.
5. Permitting all the member entrepreneurs to directly participate in the manufacturing
of new products and use of technologies.
6. Co-operation of complex collaboration projects between industry and universities
with the international outreach.
7. Granting of training facilities for industries ,small and medium enterprises ( SME)
and startups.
8. Accessibility of standard offerings and customization facilities for industries, SME
and startups.

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Example:
An example : Bricks, wooden blocks and pizzas boxes

Are bricks, blocks of wood or pizzas boxes prototypes? The short answer is
that they can be -depending on what function we use them for.

Function is more important than form when we talk about prototypes.The

cheaper and simpler we can create a prototype the better. In other words,if we want
to investigate whether our new solution has appropriate dimensions weight for the
use situation,we can use or modify already existing objects, such as a brick or
wooden block to stimulate this -that is if it has the same dimensions and weight.If we
want to investigate how a laptop plays into the workflow of some particular people
we might be able to settle for pizza boxes that are weight -adjusted, rather than 3D
printing good-looking but expensive plastic models.

The key is to make it as simple as possible , while keeping in mind that the
audience must be able to understand the concept.The bottom line is that
bricks,wooden blocks and pizza boxes are random things until we use them to
simulate or instantiate something else.

Source: https://www.researchgate.net/publication/359624043

1.4.2 Private Equity Funds

A Private equity fund is a collective investment scheme used for making investment in
various equities and debt instruments. This fund is authorized by a limited liability
partnership or firm. The investment horizon for such funds is between 5-10 years .An
important characteristics of such fund is that the amount pooled in by such fund is not
traded in the stock market and even not open for subscription for all in the public.
Th money in private equity funds raised from institutional investors who invest huge
amount for long duration. The professional team-members pool and control the funds and
utilize this amount in raising new capital, future acquisition, funding startups or new
technology ,investing in other private companies or making the available fund efficiently
utilized. Private equity funds provides high rate of return.
Advantages of investment in private equity funds:
1. Large amount of funding: It is the outstanding source of capital as free of debts.
An emerging business can tap huge amounts for seed funding via private equity.
2. Active Involvement: A shareholder has active investment in private equity based
firm and able for protecting the interest.

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3. Incentives and Returns: Private Equity firms which hold and control private
equity funds are highly selective and spend resources to ascerain the returns and
risks of the companies.
4. Untapped Potential: Private equity is an untapped market with high potential.
There are wide range of options are available in the market from unicorn startups to
all private companies.
Types of Private Equity Funds:
There are two types of private equity funds:
1. Venture Capital (VC) : These funds are pools of capital that met in small early
stage of startups and emerging businesses with high growth potential and limited
access to capital. These are the necessary source to raise capital as small startups
lack access to large amount of debts. But venture capital funds carry risk of
investment with incredible returns.
2. Leveraged Buyout (LBO) : These funds invest in more mature businesses and use
extensive amounts of leverage to enhance the rate of return. These funds tend to be
larger in size than Venture capital funds. If a company borrows good amount of
money in the form of loans and bonds then leverage buyout takes place to ease its
acquisition of another company. Its purpose is to have favourable returns on the
acquisition of another company which will outweigh the interest paid on the debt.
There is only one demerit of Leveraged buyout is that it raises equity returns
simultaneously risk also increases.
Exit Route:
A Private equity focus towards an exit in an average of 5-6 years.It is important for an
investor to plan investment and exit in an investment together.In an exit plan,sale of
stocks at IPO ,selling stakeholding in the company to the third party ,chance for
promoters to buyback the shares at the prevailing market price all comes under it.An
investor mainly executes their exit plans at the two events:
1. When an investment is becoming non-performing.
2. The company is not bringing the profit upto the level and produces limited resources
to the investors.
Some of the common strategies for an investor to carry out their exit plans:
1. Increase the personal salary and pay bonuses in years before exiting the company.
2. By selling the shares to existing partner and leave the company in case of demand of
retirement.
3. Liquidate all the assets at the market value.
4. Go through an Initial public offer.

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1.4.3 Startups Action Plan and Startups & Success stories
The Action plan of any startup has a list of activities in sequential steps taken by the
Government of India.It include outline of all the prioritize steps required to focus to
achieve the aim of the startup.
An action plan is an assurance to innovative entrepreneurs and provides strong support to
Indian youths to start your own business in favour of India with full support of funds.
The initiative is the belief of Indian PM Narendra Modi for the betterment in the field of
business with strong support and chances to implement innovative and strategic ideas into
businesses. A strong action plan provides clarity to prioritize the activities and allocate
time and resources in better way to fulfill the objectives of the programme.A startup
action plan will be supported with the finance,tax benefits and various other favourable
supports by the Government system. It empowers youths in various areas like digital
sector/technology sector,agriculture,social,manufacturing,education and healthcare etc
and helps to easily solve all the potential obstacles.
Startup India initiative was announced on 15th August,2015 by the honourable prime
minister of India.Its objective is to build a strong ecosystem for nurturing startups and
their initiative in the country that will work for sustainable economic growth and generate
large scale employment opportunities.
Funds sanctioning provisions:
1. There is no fixed provisions about sanctioning of funds to startups
directly.However,Government of India has established a fund with corpus of Rs
10,000crores for the funding requirement of startups.
2. The total corpus of Rs.10,000crores is to be provided on the basis of the progress of
the scheme and availability of funds.
3. The fund amount does not directly invest into startups but provides to SEBI
regulation alternate investment funds(AIF),daughter funds invest for growing
startups only through various instruments.
4. DPIIT is the monitoring agency and SIDBI (small industries development bank of
India) is the operating agency for such initiative.
5. There is no direct fund allocation from DPIIT to states under such initiative.
Features of Action-Plan:
1. Compliance regime based on self-certification: The objectives is to reduce the
regulatory burden on innovative startups by reducing their compliance cost low and
allow them to focus on core business only.
2. Startup India Hub: The objective is to create a center point for all the startup
ecosystem so that they can exchange ther knowledge and access to funding.
3. Mobile App and Portal: To develop a single platform for all startups for
interaction with Government and other regulatory institutions regarding business
needs and information.

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4. Legal support and Fast-tracking patent examination at low cost: The objective
is to provide high quality IP services ad resources & promote awareness and
adoption of IPRs by startups.
5. Public procurement norms: To provide a common platform to all startups across
sectors for experienced entrepreneurs or companies in public procurement.
6. Exit Policy: The objective is to make easy wind up operation for startups.
7. Funding support through fund of funds (Corpus Rs.10,000crors)
8. Credit Guarantee Funds:The objective is to promote credit to innovators across all
the section of the society.
9. Tax exemptions on Capital Gains: Its min objective is to promote investment into
startups by mobilizing the capital gains arising from the proceeding of capital
assets.
10. Tax-exemptions to startups for 3 years: To promote the growth of the startups by
fulfilling working capital requirements.
11. Tax-Exemption on investment above fair market value: To encourage seed-
capital investment in startups.
12. Organize startup fest for showcasing innovation and providing a collaborative
platform.
13. Launch of Atal Innovation Mission(AIM) to serve a platform for the promotion of
world class innovation hubs,startups businesses and other self-employed activities
in tech driven areas.
14. Harnessing private sector expertise for incubator setup.
15. Build innovation centers t national level.
16. Setup new research parks by incubation and joint R&D efforts between academia
and industry.
17. Promoting startups in the bio technology sector.
18. Launching of innovation focused programs for students of science and technology.
19. Annual incubator setting for successful world class incubators in India.
STARTUPS AND SUCCESS STORIES
India is one of the greatest startup center around the world. Everyday a new startup arises
out of the box which proves an inspiration for many new startups.Today,multiple
inspirational startup stories urge to be a part of Indian startup ecosystem and its culture by
becoming an entrepreneur.
There are some examples of great startups and their success stories:
Startup story of Paytm
Founder : Vijay shekhar sharma
Year : 2010

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Industry : Fintech
Valuation : $ 15 billion
 Paytm began as a digital wallet in early days.
 Paytm’s userbase developed from 125 millions to 185 millions three months post
demonetization.
 This company arise as top Fin tech organization even in the wake of confronting
savage early rivalry from free charge.
Startup story of Byju’s
Year : 2008
Founder : Raveendran and divya gokulnath
Industry : E-learning
Valuation : $5 billion
 Byju’s begun as a simple e -learning stage.However has developed to become most
famous in ed tech brands across India.
 It starts providing internet monitoring meetings to students from study material of
class vI to material like IAS ,CAT,GRE and so-forth.
 Byju’s has enlisted 35 million clients on its learning app with 2.4 million paid
endorsers.
Startup story of First cry:
Year : 2010
Founder : Maheshwari and saha
Industry : Retailing
Valuation : $100 Millions
 Firstcry is a child based online startup site.
 It deals in more than 20,000 items with 250 brands like disney,pigeon,pampers,Mee
mee,Zapak and so on.
 It provides great web based shopping experience and offers the best items and brands
at the best cost.
 First cry is Asia’s most broad online shopping startup examples of overcoming
adversity for youngsters and infant items.
Startup story of Grofers ( Now Blinkit)
Year : 2013
Founder : Ashneer Grover (Grofers) , Albinder Dhindsa and saurabh
kumar( Blinkit)
Industry : Retailing

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Valuation : $ 535.5 Millions
 Grofers is an online startup story that provides grocery items at low cost like staple,
excellence,well-being, family care at our doorstep in less time.
 It provides around in excess of 3000 items at low cost with least time.
 Grofers business person stories right now work all through India in an aggregate of
26 urban areas like Delhi-NCR ,agra, kolkata,mumbai, chennai, nagpur, lucknow,
pune , jaipur and hyderabad.
Startup story of chaayos
Year : 2012
Organizer : Nitin saluja
Industry : Food and Beverage/Restaurants/Tea
Assessed Valuation : $ 40.8 Millions
 The chai adda , serving chai made newly,is a contemporary translation of chaayos
startup stories.
 Their emphasis is on aiding your “ Meri ali chai”, “chai made unequivocally to the
flavor of their clients the moment they put in their request,be it an adrak tulsi kadak
chi or a paani kam elaichi cinnamon chai.
 With 12 additional items startup examples of overcoming adversity,its clients can
make their chais in chaayos in an aggregate sum of more than 12,000 different ways.
 Chaayos business visionary stories is right now presen in Delhi,Mumbai,Noida and
Gurgaon.
Startup story of BookMyShow
Year : 1999
Authors : Ashish Hemrajani,Parikshit Dar and Rajesh Balpande
Industry : Online Ticket Booking
Assessed value: $1 billion
 We consider BookMyShow to be a steady stagein he online ticet booking area.
 It is considered as the one stop stage to book online tickets, particulary for motion
pictures.
 Shockingly, the change of BookMyShow is quite possibly the most inspirational
examples of overcoming adversity that feature the force of dilligence.
 The stage right now offers its types of assistance across five nations with more than
30 million clients.

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1.4.4 Business Incubators and Self-Help Groups
Business Incubators are specially designed schemes by the government to support the
young entrepreneurs and early stage startups to innovate and grow.It includes
workspaces, mentorship, education, and access to investors for startups and sole-
entrepreneurs.Incubators follow flexible schedule and available for customization as per
the businesses different needs. It includes residencies with the added benefits of
educational programming and mentorship. The process of business incubation can vary
according to the different needs of the startups.An entrepreneur can stay in an incubator
for as long as to grow the business to a sustainable level. The number of incubators has
grown in recent years.Such rise is attributed to the factors like corporate
downsizing,increased entrepreneurship,new technologies,economic globalization and the
transfer of technology.Many ventures often need different assistance from the incubators
which provides this much-ended support.So the goal of incubation is to increase the
success rate of the startups and ventures.
Types of Business Incubators:
There are mainly four types of business incubators exist in the marketplace which are
explain below:
1. Corporate Incubator
It helps to startups to keep them connected with other industries or companies or
competitors.Its objective is to enhance entrepreneurial skills in the businesses.The main
focus of this incubator is internal and external projects of the companies.Its main
challenging part is to solve the conflicts arises between company professionals about
management related decision.
2. Local Economic development Incubator
These incubators supports to small and medium enterprises and other groups for
improving the living condition of the society and to promote economic
development.These other groups consist of small enterprises,handicraft businesses and
locally sourced companies.The challenges for such incubators are volatile management
quality, long hours negotiation and government risk.
3. Private investor incubators
These incubators support to high growth oriented businesses and then gain benefits by
dealing in shares.These incubators lag in terms of quality and durability.
4. Academic Incubators
These incubators supports to academic institutions by providing sufficient funding.It
promotes entrepreneurial spirits and focus on various projects of academic institutions.
SELF HELP GROUPS:
Self help groups are informal group of people associated with the common goal to
achieve their objectives and come together to improve their living conditions.SHG also
referred as self-governed and peer controlled group of people having same socio-
economic background.This group has desire to perform for common purposes.SHG is
that kind of group in which individual problems of multiple persons belonging to each

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others solves with collective efforts.Such problems are literacy,lack of skills,poverty and
lack of finance.SHG is also called the vehicle of change for the poor and marginalized
group of the society.It encourage self-employment and poverty alleviation.
Functions:
1. To generate employment opportunities for poor and marginalized section of the
society.
2. To resolves conflicts through collective leadership and mutual discussion.
3. To provide collateral free loan to the weaker section of the society and work as
collective guarantee system so that poor section access to loans with small rate of
interest.
4. To deliver microfinance services to the poor.
Benefits:
1. Social Integrity
2. Gender equity
3. Improving socio-economic conditions of the society
4. Social justice to marginalized sections of the society.
5. Financial Inclusion
6. Improves efficiency of government schemes
7. Employment opportunities
8. Changes in consumption pattern in respect of more on education and health than
non-productive activities.
9. Banking Literacy

Case study:
Kudumbashree in kerala: It was launched in kerala in 1998 to wipe out absolutely poverty
through community action.It is the largest women empowering project in the country.It
has three components i.e microcredit,entrepreneurship and empowerment.It has also three
tier structure called-neighbourhood groups,area development society and community
development society .Kudumbashree is a government agency run by the government and
its three tiers are managed by unpaid volunteers.
source: www.drishtiias.com

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1.4.5 Angel Investors and Venture Capital
Angel Investor
A person who invests money in a company's entrepreneurial operations is referred to as a
"angel" in this context.Angel investors have a wide range of differences, but they are all
happy to take on risk and want for little ownership control over a company.
Angel investors are wealthy individuals who can provide new businesses with funds in
exchange for shares of the business they have invested in.Startups seeking angel investors
gain from their knowledge, abilities, and capital in exchange for a portion of the
company's ownership and management.Angel investors, sometimes referred to as venture
angels, seed investors, or informal investors, are the backbone of business.
They differ significantly from venture capitalists, who also played a significant part in the
development of business.Angel investors may join the board of the company they
invested in and take on active management positions.However, they also provide
managerial or technical know-how in fields where business is less secure and where skills
are rare.
In exchange for large returns, angel investors must be eager to take on long-term risks.
Compared to venture capitalists, angel investors contribute less money, making them an
attractive source of finance for firms that only require a small sum and wish to maintain
full management and ownership control.
Entrepreneur capitalist/ Venture Capitalist
Following deregulation, the venture capital approach was introduced in the nation in
1988.
At that time, venture capital funds were handled by IFC, ICICI, and IDBI, and large
corporations were their primary target market.Investors who make investments in early-
stage enterprises in exchange for equity or ownership stakes are known as venture
capitalists.
A sort of private equity known as venture capital (Vc) refers to the shares and obligations
of a private limited firm.They offer funding for new businesses as well as for business
expansion.
According to BusinessDictionary.com, venture capitalists are defined as:
Private investors or players are people who provide venture capital to successful business
enterprises.They make investments where it is possible to earn at least 25% annual
returns within one to five years, and they frequently want 50% or more ownership to
exert control over the investee company to balance out their high risk.
One prominent actor in the field of venture capital is Google Incorporation, and its
division.
The focus of Google Ventures is venture capital.With a $100 million original investment,
it has a sizable European branch.European UnionGoogle collaborates on innovative
projects and supports numerous companies.

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IT and biopharmaceutical firms are currently venture capitalists' primary target industries.
An individual investor or a group of investors who band together through investment
firms might be a venture capitalist.
Features of Venture Capital:
1. Small and medium-sized businesses can typically use Venture Capital.
2. Venture capitalists frequently make investments to bring a company's product and
service concepts to market.
3. Because it is a long-term investment, the return can be seen in 5 to 10 years.
4. Venture capitalists frequently invest in businesses that provide large profits at a
high level of risk.
5. After a promising turnover, venture capital firms or other investors may withdraw
from a venture.
Venture capital benefits include:
1. Assistance in developing company knowledge; and
2. Absence of requirements to reimburse investors for their money.
3. Aids in establishing and keeping beneficial ties
4. Aids in obtaining more capital
5 Aids in technology advancement
The drawbacks of venture capital include:
1. Loss of ownership and management stake
2 Conflict of interest develops in.
3. The VC process can take a lot of time.
4. Obtaining VC can be difficult.
Differences:
Venture capitalists and angel investors differ in that they:
1. Sources of Funds: In an angel investment, investors use their own money to make
investments in growing companies in order to make a profit.Investors in venture
capital use funds provided by third parties, including banks, pension funds,
insurance companies, and financial institutions.
2. Function in business: While venture capitalists (VC) provide sales skills,
advertising techniques, and product development support, angel investors serve as
mentors and aid in decision-making.
3. Funding :The funding requirements for angel investors are not onerous. VC has
strict criteria for investing.

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4. Amount invested: VC firms invest substantial sums of money in businesses,
whereas angel investors do not.
5. Returns: While venture capitalists require a large number of returns from their
investments, angel investors do not often demand high returns.
6. Decision process : Angel investors make quick decisions about investments as a
result of their quick decision-making, but VC decisions may take longer due to the
completion of due diligence requirements in the business.
1.4.6 Make -In India Initiatives:
The "Make-In India" Initiative was introduced by the Indian government in September
2014 to encourage local businesses to produce goods there. This plan increases foreign
investment in India with the aim of boosting domestic manufacturing. This strategy seeks
to establish India as a centre for global manufacturing. Such initiatives centre on the
sustainability of the environment as well as national progress. It contains four key pillars
that will help advance entrepreneurship in India across all industries: new methods, new
infrastructure, new sectors, and new mindsets.
The make-India Initiative, however, places the greatest emphasis on the following
industries: leather, media and entertainment, ports and shipping, railways, garments,
thermal power, tourism, hospitality, pharmaceuticals, biotechnology, and chemicals;
construction; electronic systems; food processing; IT and BPM; mining; oil and gas;
defence; aviation; renewable energy; textile; and road, highways, and space.
This program's key goals are to increase global investment and support Indian
manufacturing on a large scale.By adhering to only required laws and regulations, making
the government process more transparent, responsive, and responsible, it works to reach
India's rank high on the ease of doing business index.The ease of doing business score for
India in 2020 was 63.
The creation of employment possibilities and the empowerment of the secondary and
tertiary levels of the society make this programme extremely significant for the nation's
economic growth and development.
Plans introduced to assist the Make-In Initiative:
The Indian government has launched a number of programmes to boost Make-In-India
and encourage domestic manufacturing.It contains:
1. Startup India Program:The government developed the Startup India Program to
support the growth of startups and business owners.Additionally, it creates job
opportunities, propels sustainable economic growth, and introduces a number of
reliefs and discounts for business owners.
2. Digital India: This initiative aims to make India a digitally empowered country
where nearly all services are provided online.
3. Pradhan Mantri Jan Dhan Yojana (PMJDY): This initiative assures that
financial services, such as banking, credit, insurance, pension, and other financial
plans, are accessible to all.

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4. Smart Cities: The goal of this programme is to make Indian cities smarter. Through
a variety of initiatives and efforts, the goal is to create 100 smart cities in India.
5. Swachh Bharat Abhiyan: The goal of this programme is to improve sanitation and
hygiene among Indian residents and make India a cleaner nation.
6. AGNI : In order to advance inventions and modernization in India, the acronym
AGNI stands for Accelerating Growth of New India's Innovation.
7. AMRUT : AMRUT stands for the Atal Mission for Urban Transformation.
In order to make India more inclusive and habitable, it tries to provide basicutilities there.
IN-TEXT QUESTIONS
True/False:
1. Strong entrepreneurship ecosystem when there are more and more startups.
2. Strong entrepreneurship ecosystems need strong entrepreneurship education.
3. Family businesses squash entrepreneurial initiative in order to protect their
“Franchise”.
4. Job creation is not the primary objective of fostering an entrepreneurship
ecosystem.
5. Human capital is the most important element for the success of the entrepreneurs.
6. …………………………is a type of private equity.
7. …………………………..are the grass root of foundation of commerce.
8. …………………………..is based on three dimensions namely, Ideas, budget and
goals.
1.5 Social organization-Trade and Industry association
A trade association called industry trade association ,business association or sectoral
association,is an organization funded by various businesses that operate in a particular
industry.Such association of industry and trade participates in public relation activities
but main focused are is collaboration between companies.Some associations are profit
based and some are non-profit based organizations governed by laws and directed by
members.The role of trade associations mainly play by employer’s organizations in the
countries with social market economy.
The main purpose of trade groups is to influence public policy in the direction which is
favourable to the group members and work as the form of contribution to the activities of
political parties.Trade groups also influence the regulating bodies and their activities.
Following are the organizations deals in trade association are:
1. World Trade Organization
2. ASTM International -standard worldwide
3. CSIL Centre for industrial studies

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4. Federation of International Trade Associations (FITA)
5. International chamber of commerce (ICC)
6. International Monetary Fund (IMF)
7. International Organization for standardization (ISO)
8. International Reciprocal Trade Association( IRTA)
9. International Trade Centre (ITC)
10. Organization for economic co-operation and development(OECD).
IN-TEXT QUESTIONS
1. A trade association is also called …………………………
2. The main focused area of trade association is ……………………… between
companies.
3. Trade associationbased organizations governed by ………………. and directed by
……………………….
4. The main purpose of trade groups is to influence ……………………. policy.
5. Write the name of any two organizations deals in trade association:
1.6 Summary
In this lesson we have discussed that the entrepreneurial support system works as the
platform upon which an entrepreneur build his/her enterprise.It helps the enterprise to
nurture the business activities till the achievement of maturity stage in the business.There
are 3 types of support system for the entrepreneurs namely, socio economic support
system,public private support and institutional support includes
financial,marketing,managerial and technological support.We also learned about Eco-
system and other business terms like prototype centers,private equity funds,angel
investors,venture capitalist,Action plan and startups success stories. Some other concepts
like business incubators,make in India initiatives and social organization also discussed
here.This chapter imparts knowledge to the learner about various central and state
government schemes launched in the favour of small and medium business sectors and
startups & entrepreneurs.
1.7 Glossary
Venture Capitalist : A person or firm which invest in the feasible business ideas of the
entrepreneurs. Venture capitalists becomes partner in the business by having share in the
profits till a certain period of time.
Angel Investors: A person with a desire for socio-economic development of the
society.They provide funds to entrepreneur as investment without expecting any high
profit or return from the business.
Prototype: A copy or xerox of the product produced by the businesses with same features
at low cost.

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Business Incubator: it means a workspace created to offer startups and new venture
access to the resources they need,all under single roof.
1.8 Answers to-in text questions
1. Personal and professional 6. False
2. Planning and decision making 7. False
3. Family support 8. False
4. Support system 9. True
5. Empathy and concern 10. True
11. Venture Capitalist 15. Collaboration
12. Angel Investors 16. Laws and Members
13. Prototype 17. Public
14 Business Association 18. WTO AND IMF
1.9 Self Assessment questions
1. Discuss the role of entrepreneurs associated towards entrepreneurship development.
2. What is Self Help Group? Mention some of its advantages.
3. According to you,which entrepreneurial support system is most important: Financial
or Non-Financial?
1.10 References
 https://theintactone.com/2019/10/28/cm-u4-topic-5-small-industries-development-
bank-of-india-sidbi/
 https://101entrepreneurship.org/entrepreneurial-ecosystem/
 https://barrazacarlos.com/what-is-entrepreneurial-ecosystem/
 https://barrazacarlos.com/what-is-entrepreneurial-ecosystem/
 www.techstartupschool.com
 www.leadershipinstituteforentrepreneurs.com
 www.hbr.org
 www.tvcog.net
 www.entrepreneur.com
 https://www.researchgate.net/publication/359624043
 www.studocu.com
 www.yourarticlelibrary.com
 www.businessmanagementideas.com

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 www.theinternationaljournal.org>RJEBS:Volume:04Number:03,January-2015
 www.groww.in
 www.pmindia.gov.in
1.11 Suggested Readings
 https://www.slideshare.net/ProfDrGiri/entreprenerial-support-system
 https://sdeuoc.ac.in/sites/default/files/sde_videos/eNTREPRENEURSHIP%20DE
VELOPMENT.pdf
 https://www.iare.ac.in/sites/default/files/lecture_notes/IARE_ENTREPRENEURI
AL_DEVELOPMENT_NOTES.pdf
 https://www.egyankosh.ac.in/bitstream/123456789/56523/2/unit-14.pdf
 https://www.nios.ac.in/medis/documents/249_ENTREPRENEURSHIP/ENGLISH
_pdf/249_ENTREPRENEURSHIP_Lesson_16.pdf

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 UNIT V
LESSON 1
FINANCIAL ASPECT OF BUSINESS
Written by : Dr. Navneet Gera
Revised by : Neha Goyal
Structure
1.1 Learning Objectives
1.2 Introduction
1.3 Managing Finance
1.4 Capital Structure
1.5 Management of Asset ( Cash Management)
1.6 Cost Management
1.7 Summary
1.8 Glossary
1.9 Answers to In-text questions
1.10 Self-Assessment Questions
1.11 References
1.12 Suggested Readings
1.1 Learning Objectives
After reading this lesson student will be able to:
 Explain the concept of finance and how to manage finance of an individual or a
business.
 Describe the capital structure and important sources of capital employed by a firm
to fund its operations.
 Recognize the role of asset managers and asset management company to manage
the assets.
 Know about the cost management and can estimate,budget and control the cost of a
project.
 apply their learning into practical situations of life.
1.2 Introduction
Finance is the application of various concepts and principles to business for smooth
running of the business continuously.
In this lesson ,student will learn about how to manage finance of an individual or a
company.It includes types of capital, sources of finance. Capital structure, factors of
capital strcuture affecting capital structure of a ocmpany.This lesson also discuss about

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optimal capital structure , term loan and various components of capital strcuture with
their distinct features.The students will become expert in dealing with asset I.e. student
also learnt the concept of asset ( cash ) management and cost management along with
their multiple techniques.
After going through this lesson student would be able to apply this knowledge into
business for the management of finance, asset and cost.They will also able be able to
make optimum capital strcuture for the business.
1.3 Managing Finance
Finance is one of the important prerequisite to start an enterprise. In fact, it is the
availability of finance that facilitates an entrepreneur to bring together land, labour,
machinery and raw material to combine them to produce goods. The significance of
finance in production is elucidated like a lubricant to the process of production. There are
others also who hold even the metaphorical views that finance is the life blood of
enterprise.
Financing an enterprise whether large or small is a critical element for success in
business. Instances are galore to cite that many enterprises, though potentially successful,
failed because they were undercapitalized. Therefore, what follows is that every
enterprise should clearly chalk out its future financial requirements in its very beginning
itself.
The decisions taken by the entrepreneur well in advance regarding the future financial
aspects of his/her enterprise is called “financial planning”. In other words, financial
planning deals with futurity of present decision in terms of financial aspects of an
enterprise. In short, financial planning is a financial forecast made for the enterprise in the
beginning itself.
Imagine that you were to start your own business. Irrespective of the nature of the
business, you should answer the following keys financial questions:
 Asset investments, i.e. what sort of assets will you require?
 How should the chosen investments be financed?
 Will you borrow the money or supply whole of the required capital yourself?
 How will you manage your routine / daily financial activities like managing
inventory or collecting from your customers or paying your suppliers?
 How should the investment be rewarded? How much of the profits will you
distribute and how much will you retain?
 These financial decision form the very essence of Financial Management
In a financial plan/financial forecast, the entrepreneur should clearly answer the following
three questions:
1. How much money is needed?
2. Where will money come from? and
3. When does the money need to be available?

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As regards the money needed, it can be estimated by developing a statement of various
assets required by the enterprise.
While estimating the money needed, the entrepreneur should take the following three
things into consideration:
1. There should be adequate money to pay the purchase considerations.
2. There should be sufficient capital at his/her disposal to support the business
operations up to the three initial months of the enterprise.
3. Lastly, enough provision should be made to meet unexpected/unplanned business
expenses.
Thus, the total of these three amounts will constitute the total money needed to start the
enterprise. Integral to total amount needed is to decide about its arrangement or sources.
In every business/enterprise, capital is arranged from two sources i.e.internal and
external. Internal sources refer to the owner's own money known as 'equity.' Particularly
in the case of small enterprises, the owner's money called equity is very thin. Therefore,
an overwhelming portion of money needed is arranged from the external sources like the
financial institutions and commercial banks, etc.
There are two ways of classifying the financial needs of an enterprise:
1. on the basis of extent of permanence, the financial needs are classified into two
types:
a) fixed Capital, and
b) Working Capital.
2. on the basis of period of use, we can classify the financial needs into the following
tow types:
a) Long term Capital/Finance, and
b) Short term Capital/Finance.
Fixed Capital
The money invested in some fixed assets or durable assets like land, building, machinery,
equipment, furniture, etc., is known as fixed capital. These assets are required for
permanent use, that is, for a long period of time.
Working Capital
The money invested in current assets like raw material, finished goods, debtors, etc., is
known as working capital. In other words, money required for day-to-day operations of
business/enterprise is called 'working capital'.
Long-term Capital
This is such money whose repayment is arranged for more than five years in future. The
sources of long-term finance could be owner's equity, term-loans from financial
institutions, credit facilities from the commercial banks, hire-purchase facilities from
specific organisations, etc.

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Short-term Capital
This is a borrowed capital/money that is to be repaid within one year.
The sources of short-term
term finance include bank borrowings for working capital, deposits
or borrowings from friends and relatives, etc.
The theory of financial management suggests that, in order to ensure sound financial
health of an enterprise, short
short-term
term finance/ funds should be utilized for acquiring current
assets. Current assets, for exa
example,
mple, include the items like raw material, finished goods,
semi-finished
finished goods, debtors, etc. Basically, these are the items which keep changing
their shape. They can normally be converted into cash within a period of one year. On the
other hand, long-term finance should be used for acquiring assets which are of long
nature. These are commonly termed as 'fixed assets'. The examples of fixed assets could
be, land and building, plant and machinery, furniture, etc.
Sources Of Finance
There are various sources of finance from which an enterprise an raise required funds are
1. Internal Source
2. External Source

Source of
finance

Internal External

1. Internal Sources
Under this source, funds are raised from within the enterprise itself. The internal
sources of financing could be owner's capital known as equity, deposits and loans given
by the owner, the partners, the directors, as the case may be, to the enterprise. One source
for raising funds internally may be personal loans taken by the entrepreneurs on his/ her
personal assets like Provident Fund, Life Insurance Policy, buildings, investments, etc. In
addition to these, in case of a running enterprise, funds could also be raised through the
retention of profits or conversion of some assets into funds. The cardinal principal of
financial management also suggests that an entrepreneur should religiously plough back a
good portion of his/her profits into the enterprise itself. However, the scope for raising
funds from internal sources particularly in the case of small
small-scale
scale enterprises remains
highly limited.
2. External Sources
In short, funds raised from other than internal sources are from external sources. The
external sources usually include the following:
1. Deposits or borrowings from relatives and friends and others.

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2. Borrowings from the banks for working capital purposes.
3. Credit facilities from the commercial banks.
4. Term-loans from financial institutions.
5. Hire-purchase or leasing facility from the National Small Industries Corporation
(NSTC) and State Small Industries Corporations (SSICs).
6. Seed/Margin money, subsidies from the Government and the financial institutions.
If we now lump both the sources together, these can broadly be classified as follows:
1. Personal funds or Equity Capital.
2. Loans from relatives and friends.
3. Mortgage Loans.
4. Term-Loans.
5. Subsidiaries.
The sources used for raising funds determine what is called 'capital structure'.

IN-TEXT QUESTIONS
1. Fixed asset is also known as ……………………………………….
2. The ……………………………………principle of financial management suggest
that an entrepreneur should plough back a good portion of profit into the enterprise.
3. Raw material, finished goods and debtors are the examples of
…………………………….. asset.
4. Money required for day-to-day operations are called
……………………………….capital.
5. ….…………………………..is the important prerequisite to start an enterprise.
1.4 Capital Structure
An enterprise/business raises funds from the internal and external sources. These take the
forms of ownership capital and borrowed capital respectively. The former is also known
as equity and the latter as debt. The composition of equity and debt in overall capital of
an enterprise is called' capital structure? In simple words, capital structure is the ratio
between debt and equity capital. Hence, it is also expressed as the debt-equity ratio.
Here, it must be noted that the term capital structure differs from financial structure.
Capital structure means the permanent financing of the enterprise represented primarily
by long-term sources of funds, i.e., debt and equity. Thus, it excludes funds raised from
short-term sources. But, financial structure refers to how the firm's assets are financed by
raising funds from both long-term and short-term sources.
A business enterprise needs to maintain a proper ratio between these two in order to
function smoothly and efficiently. In fact, it depends upon the business conditions of the

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enterprise concern. As a general principle, for a successful business in favourable
conditions, debt capital may be twice or even more than equity capital. But, for a business
reeling under unfavourable conditions, say incurring losses, the proportion of debt capital
should be as low as possible. This is because on account of fluctuation in earnings and
inadequacy of cash, the enterprise may not pay interest and the amount of loan. In
consequence, the creditors and suppliers will look upon the financial position of the
enterprise as unreliable and, hence, may stop extending credit. Such position will
culminate to make the enterprise insolvent.
In simple words, an optimum capital structure can be defined as a financing mix incurring
the least cost but yielding the maximum returns. It is obtained when the market value per
equity share is the maximum.
Definition of capital structure:
"Optimum leverage can be defined as that mix of debt and equity which will maximise
the market value of a company, i.e., the aggregate value of the claims and ownership
interests represented on the credit side of the Balance Sheet. Further, the advantage of
having an optimum financial structure, if such an optimum does exist, is two-fold. It
minimises the company's cost of capital which in turn its ability to increase and find new
wealth by creating investment opportunities. Also, by increasing the firm's opportunity to
engage in future wealth-creating investment, it increases the economy's rate of investment
and growth."
Factors Determining Capital Structure
Maintaining the capital structure in any enterprise depends on a variety of factors.
1. Nature of Business:
The nature of the business itself is one of the factors determining capital structure to
be maintained. The businesses subject to wide fluctuations in sales need to maintain
smaller proportion of borrowed funds, i.e., debt capital. Companies manufacturing
televisions, refrigerators, machine tools and like are examples 'of businesses subject
to fluctuations in their sales. On the contrary, the business firms dealing in items/
goods having inelastic demand like essential consumer goods, may have larger
proportion of borrowed capital. The reason is that these firms generally have stable
earnings.
The capital structure of companies is also determined by the competitiveness found
among them. For example, in case of ready-made garments industry, competition is
mainly based on styles and fashions which are subject to frequent and unpredictable
changes. As such, these firms have to depend less on borrowed capital and more on
equity or owner's capital.
2. Size of the Enterprise:
Small enterprises have to rely less on borrowed capital and depend more on owner's
capital. This is because investors consider lending to small firms more risky. On the
other hand, large enterprises are considered less risky. Therefore, investors believe
that their money is safe and, hence, prefer to lend money to large enterprises. This
enables the large enterprises to raise funds from different sources.

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3. Trading on Equity:
In case the rate of return on capital employed is more than the rate of interest on
debentures or rate of dividend on preference shares, it is called trading on equity or
leverage effect. In such case, there is greater dependence on borrowed capital in the
capital structure.
4. Cash Flows:
The ability of a business to discharge its fixed obligations depends upon the
availability of cash, i.e. cash flows. As such more the cash inflows, more will be the
proportion of borrowed capital in the capital structure. Reverse will happen in a
converse situation.
5. Purpose of Financing:
The purpose of financing also affects the capital structure of the enterprises. In case
funds are required for some directly productive purposes, for example, purchase of
new machinery, the enterprise may rely on external sources for raising the required
funds. This is because the enterprise will be in a position to pay the fixed charges,
or say, interest out of the profits so earned. In contrast, in case the enterprise is
required to raise funds for unproductive purposes like spending on the employees'
welfare facilities, it will have to depend on owner's capital. In other words, it will
raise funds by issue of equity shares.
6. Provision for Future:
The scope of changing the capital structure in future happens to be a basic
consideration for determining the capital structure of an enterprise. As a general
principle, it will always be safe to keep the best security to be issued in the last
instead of issuing all types of securities in one stroke only.
TERM LOANS
Simply stated, loans taken for a definite period of time are called' term loans'. Based on
period, loans are broadly classified into two types:

Term
Loans

Short Term Long Term

Loan Loan
1. Short-term Loans, and
2. Long-term Loans.
Long-Term Loans
These are the loans taken for a fairly long duration of time ranging from 5 years to 10 or
15 years. Long-term loans are raised to meet the financial requirements of enterprise/

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company for acquiring the fixed assets which include the following:
1. Land and site development
2. Building and civil works
3. Plant and machinery
4. Installation expenses
5. Miscellaneous fixed assets comprising vehicles, furniture and fixtures, office
equipment and so on.
In case of units to be located in backward areas, another element of miscellaneous fixed
cost includes expenditure to be incurred in infrastructure facilities like roads, railway
sidings, water supply, power connection, etc.
Term loans or say long-term loans are also required for expansion of productive capacity
by replacing or adding to the existing equipment.
Sources of Term Loans
The following are the sources of raising term loans:
1. Issue of shares
2. Issue of Debentures
3. Loans from Financial Institutions
4. Loans from Commercial Banks
5. Public Deposits
6. Retention of Profits
Shares
Share is unit into which the total capital of a company is divided. As per Section 85 of the
Companies Act, 1956, a public limited company can issue the following two kinds of
shares:
(a) Preference Shares, and
(b) Equity Shares.
Preference Shares
These are the shares which carry a preferential right over equity shares with reference to
dividend. They also carry a preferential right over equity shares with reference to the
payment of capital at the time of winding up or repayment of capital.
The preference shares may be of various types such as cumulative and non-cumulative,
redeemable and irredeemable, participating and non-participating and convertible and
non-convertible.
Equity Shares
What is not preference share is equity share. In other words, equity shares are entitled to
dividend and capital after the payment of dividend and capital on preference shares.

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Based on the types of shares, there are two types of captials..
(i) Preference Share Capital, and
(ii) Equity Share Capital.
Procedure for Issue of Shares
The procedure followed for the issue of the shares is as follows:
1. Issue of Prospectus
First of all, in order to give the prospective investors necessary and relevant
information, the company issues statement called prospectus. It also contains
information on the manner in which the amount of shares will be collected.
2. Receipt of Applications
The company receives applications in response to its prospectus through a
scheduled bank.
3. Allotment of Shares
After the subscription is over and 'minimum subscription' is received, the shares are
allotted to the applicants within 120 days of the issue of prospectus. In case, the
'minimum subscription' is not received, the company cannot proceed with the
allotment of shares, but application money must be refunded to the application
within 130 days of the issue of the prospectus.
Debentures
Issue of debentures is another method of raising term loans from the public. A debenture
is an instrument acknowledging a debt by a company to a person or persons. Section 2
(12) of the Indian Companies Act, 1956 defines a debenture as follows:
"Debenture includes debenture stock, bonds and any other securities of the company
whether constituting a charge on the company's assets or not."
A company can issue various types of debentures, viz. redeemable and irredeemable,
registered and bearer, secured and unsecured and convertible and non-convertible
debentures.
The procedure for the issue of debentures are, more or less, the same as those for the
issue of shares.
Difference between Shares and Debentures
The major points of distinction between shares and debentures are as follows:
1. Representation
A share represents a portion of capital whereas a debenture represents a portion of
debt of a company.
2. Status
A shareholder is a member of the company, but a debenture holder is a creditor of
the company.

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3. Return
A shareholder is paid dividend while a debenture holder is paid interest.
4. Right of Control
The shareholders have a right of control over the working of the company whereas
the debentures holders don't have such right.
5. Repayment
Debentures are normally issued for a specified period after which they are repaid.
But, such repayment is not possible is case of shares.
6. Purchase
A company cannot purchase its own shares from the market, but it can purchase its
own debentures and cancel them.
7. Order of Repayment
In liquidation, debenture holders get priority in payment, but shareholders are the
last to get payment after all claims have been fully satisfied.
Optimum Capital Structure:
“Optimal Capital Structure”means a trade-off between the benefits of high leverage and
the costs of high leverage. The benefits of high leverage includes the tax deductions of
interest and low cost of debt in relation to equity.The costs of high leverage includes high
risk for all investors and potential costs financial distress.
An optimum capital structure bears the following features:
1. The capital structure should involve the minimum cost and the maximum yields.
2. The adopted capital structure should be flexible enough to fulfil the future
requirements of the capital as and when needed.
3 The use of the debts should be within the repaying capacity of the enterprise. In
fact, failure to recognize this important aspect/ fact is the common cause of
financial strain among the small scale enterprises?
4. The capital structure should ensure the proper control over the affairs of the
enterprise. In any case, it should not be a control diluting one.
While one can add certain other features to these for some particular enterprises,
the said features appear to be common and major ones.

IN-TEXT QUESTIONS
1. The composition of equity and debt in overall capital of an enterprise is called
…………………………….
2. The rate of return on capital employed is more than the rate of interest on
debentures or rateofdividend on preference shares, it is called
…………………………………

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3. In case of the …………………………………… is not received, the company
cannot proceed with the allotment of shares.
4. Preference shares carry a preferential right over ……………….. with reference to
the payment of capital at the time of winding up or repayment of capital.
5. ………………………………………….. means a trade-off between the benefits of
high leverage and the costs of high leverage.
1.5 Management of Asset (Cash Management)
Definitions of Asset Management are:
An asset that is useful to an entity, group, or person is monitored, deployed, operated,
maintained, modernised, and improved by a cost system at a reasonable cost.
Asset management refers to a financial services organisation managing a company's or
individual's investment. Tangible assets, such as machinery, as well as non-tangible
assets, such as intellectual property & goodwill and other financial assets, can both be
managed.
Both the business and the person enlist the help of financial professionals to manage their
pension funds, cash investments, and returns.
The most common service provided by a company is asset management, which involves
managing a client's financial or investment portfolio on their behalf. Investment in
minimums are usual for these businesses.Their customers frequently have substantial
wealth.
Planning, procuring, deploying, managing, and disposing of a client's assets are all
included in asset management. Asset managers assist both individuals and organisations
in reaching their financial objectives.
Asset management companies pool the capital of various investors and invest those
capital in various investments like stocks,bonds,real estate and private equity funds to
gain maximum profit.The examples of asset management company are vanguard, J.P.
Morgan and Northen Trust( NT). The role and responsibilities of asset manager or asset
management company (AMC) is to deal with assets ,accounts,finance, investment and
necessary regulations and guidelines.These companies offers various investment
alternatives i.e. mutual funds,derivative funds, pension funds,hedge funds and options
and helps in reducing,mitigating,eliminating or transmitting the risks associated with the
investment.
Cash Management
Cash management also called treasury management , is the process of collection and
management of cash flows from three different activities I.e. operating activities,
investing activities and financing activities.Cash management is the main component of
financial stability so it is valuable for both I.e. companies and individuals.Treasury
bills,certificate of deposits and various money market instruments are those financial
instruments deal in cash management process.

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Motives of cash management :
The following are the five main motives for managing the cash in a business:
1. Transaction Motive: It is a motive in which cash or nearby cash is required for
holding to meet the daily cash requirements of the business.Such cash requirements
are necessary to make purchase of raw material,payment of wages to labour and
payment of day to day expenses,taxes,interest and dividend.
2. Precautionary Motive: Such cash motive fulfills the need of unexpected
contingencies and conditions.For Example flood,strikes, lockouts and emergencies.
3. Speculative Motives: Speculative motive for holding cash to grab the advantages of
opportunities generated outside the environment.For Example A fixed amount of
cash or nearby cash is required to take advantages of the generated opportunities
like purchase of raw material at price reduced to very low or make purchase at
favourable prices.
4. Compensating Motive: Banks provide variety of services to the enterprises like
cheque clearance,transfer of funds and overdraft facilities.To compensate banks for
providing such services,sufficient amount of cash is required so such cash fulfills
compensating motive of the businesses.
In an evolving and competitive environment,there is frequent need to seek new ways to
manage the cash to increase overall productivity.To manage the assets of the company,the
area of cash management has grown importance especially in daily decision-making.The
systematic cash management helps the organization by the following ways:
1. EFFICIENCY: The automated cash management system takes place in the system
instead of manual process like paper based transactions.Automated cash-
management system provides flexibility to carry out multiple transactions in a
single way.
2. ACCURACY: Accuracy helps in minimizing the risk of human error in case of
large volume based transactions.It includes to explore multiple transactions data and
detailed audit trails.By using such data,an asset management head can analyze their
transaction data and generate comprehensive reports.
3. SECURITY: To improve the security a centralized cash management system is
essential as it provides flexible access,audit and track the payment data. In this
system, a centralized data repository is used for fetching dynamically.
4. TRANSACTION COSTS: A strong cash-management system reduced the
transaction cost associated with the portfolio.A strong cash management system
helps the asset managers and investors both in reducing their transactional costs.

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Activity: Cash management

Students have to make a list and discuss the difference between needs and wants of cash
for the business, which helps reveal the differences between life's conveniences and
actual survival. This shift in perspective is a great buildup to discussing the purpose of a
budget. That is, it is not about restrictions, but empowerment. By laying out a plan for the
money each month, student are able to make smart decisions and feel good about them,
rather than merely justify irrational desires.

Source: www.igradefinancialwellness.com

IN-TEXT QUESTIONS
1. ….…………………………………… involves planning, acquiring, deploying,
managing and disposing of a client’s assets.
2. Cash management is also called ……………………………. management.
3. Automated cash-management system provides …………………………….. to carry
out multiple transactions in a single way.
4. ….……………………………………motive fulfills the need of unexpected
contingencies and conditions.
5. ….……………..helps in minimizing the risk of human error in case of large volume
based transactions.
1.6 Cost Management
Cost management is the process of managing and controlling monetary resources while
running a business.When effective strategies are implemented to manage expenses,it
assures a business of having efficient cost control measures,helping them to have an
appropriate budget to handle different business activities. ( WallStreetMojo.com)

Source: WallStreetMojo.com

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Cost management defines the process of planning,estimating,budgeting and controlling
costs.It is a complicated process helps in planning ,creating and controlling budget for the
organization. The objective of the cost management is reduction in cost to some extent to
which the quality of the project is not hampered.The major function of the process of cost
management is to allocate the resources,to estimate cost of the project, budgeting and
controlling of the cost of project.
It consists of following steps:
1. Resource Planning: It means to plan,allocate and schedule the resources required
for the business along with the cost associated with these resources.Resource
planning helps in determining the associated costs with the project and helps in cost
-benefit analysis.
2. Cost-estimation: It is the method of forecasting the cost of completion of a whole
project within the fixed time-period and scope.This process helps in determining the
cost of each resources required for all the scheduled activities of the business.An
effective cos-estimation is that which can also estimate the cost whenever scope
changes.This method works for all involved cost from inception to completion.
Following cost-estimation techniques are available:
A. Analogous estimation technique: This technique is useful in that situation where
current project is most likely similar to past project.In this method the actual cost of
past similar project is used for the cost-estimation of current similar project.
B. Parametric modeling: This method used mathematical formulas for the cost
estimation of project which are based on assumptions.Regression analysis or
learning curve model is the methods of calculations of cost.
C. Bottom-up estimation technique: In this technique involves estimating the small
individual activities of the project and then use this small cost estimation for the
calculation of whole project cost.
3. Cost-budget: The next step of cost-estimation is the cost -budgets.In this step, the
funding sources or requirements of a project will be determine with respect to the
project schedule and resource-allocation constraints.This budget involves everything
from material cost to labor cost,factory or works cost,machinery cost, administration
costs and other costs.
The techniques for determining the cost-budget are:
A. Cost-aggregation: It requires to combine costs for all levels.The final amount of the
cost-estimation is then applied to cost-baseline.
B. Reserve analysis: This technique is used for the protection against cost overruns.It
requires to create a buffer or reserve for the risk foreseen in the project and if in
future the cost of the project goes over then such buffer amount will be used for the
balancing of cost.Such buffer is the part of project budget not the project baseline.
C. Historical data: This method is similar to analogous estimation.In this technique he
closed project cost helps in estimating the budget of the new-project.
D. Funding limit reconciliation: This technique requires to adhere to the constraints

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 based on the funding limit.Here the project cost budget is based on the limited
amount of cash available for the project and to avoid the large variations in the
project funds,project schedule or resources are required to revive time to time.
4. Cost-control: Controlling the project cost requires being aware of the original cost
of the project,approved cost, forecasted costs,actual costs and committed costs.If in
future ,any unforeseen risks have an impact on the approved project cost,then it
requires to deeply review the entire budget and take corrective actions as needed
accordingly.
Following tools and techniques will be considered to effectively control the project costs:
1. Earned value management
2. Forecasting
3. To complete performance index
4. Variance analysis
5. Performance reviews
Advantages of cost management:
Following are the benefits of the cost management process:
1. To control the project specific cost which helps in reducing the overall cost of the
business.
2. To predict the cost and expenses associated with the future which helps in
determining the expected revenue in future.
3. Cost management helps in maintaining the predefined cost as records for the future.
4. To compare the actual and budgeted cost and determine any additional cost
occurred.
5. To provide assurance that the resources and the business activities work for
achievement of pre-setted goals and objectives.
6 To analyze the business trends which are long term in nature.
7 To analyze the business positioning in making an acquisition factoring which is
involved in the cost component.
Challenges of Cost Management
Cost Management process can be tricky sometimes.The challenges of cost management
that frequently crop up :
1. Shortage of resources : In case of shortage of financial resources or a project with
small budget,it can be difficult for the company to secure the required resources like
material,labour,machinery and others and due to such shortage or lack of resources
for the successful completion of the project.
2. No updated technology: Outdated technology is another important challenge for the
cost management process.As project managers requires up-to-date technology and
tools to manage the business and control the cost effectively.

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3. Default in estimation : Poor estimation is the biggest challenge for cost management
process. A manager with no experience or does not fully understand the scope of the
project arises the chances of inaccurate estimation which lead to cost overruns and
affect the business profit.
IN-TEXT QUESTIONS
1. ….……………………………. helps in determining the associated costs with the
project and helps in cost -benefit analysis.
2. ….………………………………………………..technique is useful in that situation
where current project is most likely similar to past project
3. ….……………………………………….technique is used for the protection against
cost overruns.
4. ….………………………………………………..method used mathematical
formulas for the cost estimation of project.
5. The process of ……………………………………… is to allocate the resources,to
estimate cost of the project, budgeting and controlling of the cost of project.
1.7 Summary
This unit explains about the term finance which is essential for running a
business.Entrepreneurial finance means the process of acquiring cash and making
financial decision for a new startup or venture. In this unit we have discussed the topic
capital structure.Capital structure is the combination of various forms of external funds
including debt, equity capital, preference capital, term loan and debentures. An
entrepreneur plays a crucial role in making the capital structure of a venture.The factors
of capital structure also plays major role in the success of entrepreneurship.
This unit also discuss about asset and cost management for efficient utilisation of
resources to maximize the profit with minimum cost.After go through this lesson,learner
would be able to lay out a plan for the money each month and able to make smart
decisions and feel good about the money.
1.8 Glossary
Capital structure : The capital structure is made up of debt and equity securities which
comprise a firm’s finance of its assets.
Trading on equity : Trading on equity happens when a company incurs new debt using
bonds,loans bonds and preferred stock.
Treasury management : It means streamline business finances by managing cash,
investments and other financial assets.
Minimum subscription : The minimum amount ( 90%) which a company should raise at
the time of issuing capital.
1.9 Answers to In-text questions
1. Durable assets 11. Asset management

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 2. Cardinal 12. Treasury management
3. Current 13. Flexibility
4. Working Capital 14. Precautionary
5. Finance 15. Accuracy
6. Capital structure 16. Resource planning
7. Trading on equity 17. Analogous estimation
8. Minimum subscription 18. Reserve analysis
9. Equity shares 19. Parametric modelling
10. Optimal capital structure 20. Cost management
1.10 Self-Assessment Questions
1. Define the term entrepreneurial finance with importance of finance in
entrepreneurship development.
2. Illustrate a structure of capital for an organisation with all sources of capital.
3. Explain cash management with suitable examples.What are the ways works for
effective cash management system ?
4. How effective cost management techniques contribute in entrepreneurship growth?
1.11 References
 https://www.acquisition.gov/far/part-31\
 https://www.egyankosh.ac.in
 https://www.managementnote.com
 https://www.corporatefinanceinstitute.com
1.12 Suggested Readings
 Realey, Richard A and Myers, Stewart C., Principles of corporate Finance, Tata-
Mcgraw Hill, New Delhi
 Frederick C. Scherr, Modern Working Capital Management : Text and
cases,Prentice Hall, Englewood Cliffs, NJ.

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 LESSON 2
HUMAN RESOURCE MANAGEMENT ASPECT OF BUSINESS
Written by : Dr. Navneet Gera
Revised by : Neha Goyal
Structure
2.1 Learning Objectives
2.2 Introduction
2.3 Human Resource Management
2.4 Organizational Structure in HRM
2.5 Management of Human Resource of a new enterprise
2.6 Family Business Management
2.7 Summary
2.8 Glossary
2.9 Answers to In-text questions
2.10 Self-Assessment Questions
2.11 References & Suggested Readings
2.1 Learning Objectives
After studying this lesson, the student will be able to:
 Understand the concept of human resource management particularly highlighting its
significance to public and private companies.
 How to differentiate between various organizational structure.
 Bring out the implications of HRM for an entrepreneur in a new enterprise.
 Identify the role of family and friends in business.
2.2 Introduction
An organisation get larger ,sophisticated and more complex process and also face
difficulty in creating co-ordination between specializations at various policy and
operating levels.The HR department performs an important role in defining the personnel
department.It includes recruitment, selection ,training ,performance appraisal and
organizational structure of employees.
This lesson will explain about the concept of human resource management in which HR
planning , compensation and wages, need of human resources, process of human resource
and performance appraisal. The student will also learn about organizational structure of a
company from line and staff to matrix structure.
The student will become equipped about how to deal with HRM in a new enterprise and
also learn about the topic of family business management.Family business helps the

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students in understanding how family and friends support a business emotionally and
financially.
Students will be able to apply such knowledge in real business life that HRM is a central
and pervasive general management function and science & art both of managing people
in an organization.
2.3 Management of Human Resource
HUMAN RESOURCE PLANNING
Indian corporate sector is facing the challenge to get right skilled employees .Many
surveys have claimed majority of Indian engineering and management students
cannot be employed as they lack the expected skills set needed to be employed
which may be set back for India’s aspirations of “ Make in India “ campaign .
Indian GDP is 2 trillion US $ currently and India is expecting it to reach at
3trillion US $ by 2020.
Human Resource Planning is very important in human resource management and
development. It sees that the organisation has the right people at the right time and place
with the right skills. It believes that each employee is a resource to an organization and
contributes to its productivity.
The main objectives of Human Resource Planning are as follows:
1. Identify and assess future human resource needs
2. Analyse and improve upon utilisation of existing resources
3. Integrate and coordinate human resource policies so that the present and future
human resource needs are met easily
Human resource planning is a continuous process. HRP is a futuristic planning.
Considering the growth areas of the organisation in the next five years, the HRP
department analyses and identifies the requirements of human resource of each
department and each functional area of the organisation.
Categories of Human Resource
The human resource is classified mainly into four categories:
1. Skilled,
2. Semi-skilled,
3. Unskilled and
4. Administrative staff.
Need of Human Resources
A thorough assessment is made about the posts vacant, job requirements, future demand
for and supply of various categories of people in both management and non-management
cadres. Depending upon the product or the service, scale of operation and technique of
production, different organisations will have different requirements of human resource.
Accordingly year wise requirement of various categories of employees is assessed.

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Further details about the desired qualifications and experienced expertise are also
scrutinised and a master plan of human resource requirement is prepared.
Human resources is an asset of an organisation. It is responsible for either the success or
the failure of the organisation. It has been seen that many organisations have survived in
adverse situations only because of their dedicated, committed human resource in spite of
a conducive environment. Some are wiped off from the industrial scene only because of
unproductive, uncommitted, indisciplined human resource. Thus, human resource
employed in the organisation plays a vital role in the "making or breaking" of the
organisation.
From the organisational point of view, human resource has an economic contribution.
Organisations compare the contribution to the productivity by a worker and the cost
incurred on that worker. Human resource constitutes a major cost component as in most
of the organisations, nearly 50 per cent of the total cost is spent on the wage bills and
other benefits to the human resource. Therefore, while planning the human resource, it
becomes obligatory for the organisations to assess the productivity of the employees and
to plan for the optimum utilisation of human resource. The following specific issues are
considered for the efficient and effective utilisation of human resource.
 Whether right people are appointed for right jobs?
 Are they doing the job in the right manner?
 Do they need further training?
 Is there a surplus workforce?
 Is there a deficiency in workforce?
 How to resolve the surplus/deficient workforce situation?
A solution to the above issues cannot be given in isolation. Its impact on production,
finance and general administration has to be considered in minute details. Therefore, HRP
is a part of the strategic, integrated planning process.
Process Of Human Resources
Once the master plan of human resource requirements is prepared, the Department of
Human Resource Management and Development takes a review of the existing
employers. To facilitate the optimum utilisation of human resources, decisions are taken
with respect to the following:.
 New recruitment
 Promotion
 Job rotation
 Training
 Transfers
 Dismissals
Recruitment

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Recruiting people is mainly the responsibility of the Human Resource Management and
Development Department. The process begins with job analysis. It consists of title of the
job, department, division, location, reporting authority, subordinates, function of the job,
risks if any, professional, technical, commercial knowledge required, skills, resources to
be controlled and any other special features involved in the job. Job analysis leads to job
description. It describes particularly the duties and the responsibilities of a given job. It
decides the job requirements and consists of the qualifications, experience, special
training, age and personal qualifications.
Selection
Once the number of people to be appointed at the required posts/positions is decided, the
next step is to advertise the vacancies and invite applications. Existing employees are also
allowed to apply. They are described as the internal candidates because they are already
in association with the organisation. If they are selected and promoted for the posts, it
improves the moral commitment of the existing employees. It also saves time and money
of the organisation in training new candidates. If suitable internal candidates are not
available, search for external candidates begins. Applications of the external candidates
are scrutinised. Candidates satisfying all the conditions are scrutinised. Candidates
satisfying all the conditions and requirements are invite4 for the interviews. An interview
panel consisting of management representatives and technical experts including the head
of the department is appointed. Sometimes, candidates have to appear for the aptitude
tests, ability tests, general knowledge test and technical ability tests.
On the basis of the biodata of the candidate, performance in the interview and assessment
report of the various tests, suitable candidates are selected for appointment.
Induction
Once the candidates are appointed, their induction process begins. Induction is a process
of introducing the recruits to the organisation and explaining their role within the
organisation. Induction helps to develop proper perceptions about the organisation.
Induction makes the recruits feel comfortable with the other employees. They know the
procedures, places, people, operations, management styles-and other necessary
information. Induction in a proper way results in making the recruit feel committed to the
organisation. It also promotes good interpersonal relations.
Promotion
Human Resource Management and Development Department has to frame a Promotion
Policy. It is a strategic policy. Evaluation of the performance with predesigned
parameters and periodical appraisals of the employees helps the organisation to select the
employees for promotion.
Exit
Exit of the employees from the organisation is also a part of the function of the Human
Resource Management and Development Department. Exit of the employees is caused
due to the completion of the service period due to the attainment ofthe age of retirement.
It is the routine, usual and natural process of exit of the employee. In such a case, an
employee receives all the retirement benefits. But sometimes, exit is caused due to
extraordinary situations. Some unavoidable reasons for the exit are prolonged illness,

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career development, moving to another area, marriage in the case of women, increasing
family problems etc. Avoidable reasons are mainly personality clashes, job
dissatisfaction, lack of chances for promotion, inadequate salary, poor work environment
etc. A procedure is framed for the exit of the employee from the organisation.
Performance Appraisal
Performance appraisal is a important area in Human Resource Management. Periodical
performance appraisal is a common practice in most of the large-scale industries.
Entrepreneurs in the small-scale sector also recognise it as a tool for the up gradation of
performance of the employees.
Performance appraisals are applicable for all categories of employees-management and
non management. Sometimes, self-appraisal schemes are introduced for top management
employees. But, most of the employees are appraised by those to whom they report.
Regular appraisal forms are filled up and appraisal interviews are taken. The outcome of
the appraisal is discussed with the employees. The objective of the appraisal is not to
blame but to bring an improvement among the employees. From this point of view, the
actual performance of the employees is appraised. It gives a qualitative judgement as to
indicate how well or how bad the employee is doing the job, whether the employee is
able to complete the task assigned to him and to what extent the achievement is possible,
whether the performance is affected due to some circumstances beyond the control of the
employee and whether the employee has utilised his strengths in performing the task.
"Performance appraisals play a useful role in understanding and identifying the potential
of the employees. It focuses on the aspects like whether the strengths and capabilities of
the employee can be developed to match the specific requirements of the jobs at higher
levels. It also helps to understand which other jobs can be assigned to him. Thus, the
appraisal is the SWOT analysis of the employee. It suggests how to strengthen the
strengths and overcome the weaknesses so that he can become a better asset for the
organisation.
Performance appraisal is an important tool applied at the time of giving salary increase to
the employees. Often, the performance of an employee is so extraordinary that the
organisation plans to reward the employee with a special increase in salary over and
above the routine increase. Extra bonus, incentives and salary increase rewards are given
to an employee as recognition of his services. Considering the valuable contribution of
the employee, the organisation does not want to lose him. He is given extra benefits so
that he will not leave the organisation. Thus, performance appraisal is an integral part of
the human resource development efforts. See the fig 6.1 below

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 Effective Performance Appraisal

Behaviour of the Employee

Information and Knowledge

Precision, Accuracy, Promptness

Commitment and Integrity

Support to the Organisation

Skills, Qualities and Motivation

Fig 2.1 shows steps for performance appraisal
Training
As per the survey conducted by some of the leading players, the facts are as follow:
Aspiring Minds — a Gurgaon-based employability solutions company conducted a
survey testing Indians’ employability quotient after a management degree revealed the
employability of management students to be lower than 10% for any functional role in
human resources, marketing and finance. (Graduating management students'
employability quotient at less than 10%: Survey, 2013). The Survey covered more than
32,000 MBA students across 220 colleges.
Web portal MBAuniverse.com and assessment company Merit-Trac, conducted a survey
and revealed a majority of MBA graduates in India are not employable. Covered 2264
MBA students from 29 cities, showed that out of the top 25 business schools, the
remaining provided only 21 per cent of their graduates with a job.
Due to globalisation and privatisations, the industries face a fierce competition from
multinationals. The competitive edge of the multinationals is sharpened with the work
culture of their employees, training and continuous updation of skills and values. Training
improves the competency and the adaptability to changing organisational needs.
Basically, training performs two roles.
The reactive role of training provides the employees the necessary expertise, skills,
knowledge up gradation in response to the demands made by senior managers.
The proactive role in training identifies the needs and requirements of training to fulfil
the future developmental demands of the organisation. Fig 6.2 shows below the training
approach

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 The Assessment Phase

The Training Development Phase

The Training Evaluation Phase

Fig 2.2 Training Approach
The exercise of training activity begins with the assessment of the training needs.
Sometimes, top level managers suggest some specific training to the employees for skill
improvement and job betterment. Sometimes, organisational growth necessitates training
to cope up with the challenges. Sometimes, employees themselves suggest some training
modules.
Once, the training needs are identified, the organisationhas to develop various training
programmes. The types of training programmes popularly given to the employees are as
follows:
1. Induction Training
2. On-the-job Training
3. Functional Training
4. Behavioral Training
5. Technical Skill Improvement Training
6. Managerial Skill Improvement Training
7. Quality Circles, Total Quality Management
After the completion of training, it is essential to evaluate the effectiveness of training.
Every training programme has a set of objectives. Whether these objectives are attained
and to what extent they are attained is ascertained by evaluation. The shortcomings
identified by evaluation can be overcome by further training. The success of any training
programme largely depends upon the sincere participation of the employees.
Wage and Remunerations
Wage is a reward given to the "labour" factor for its productivity. There are various
theories of wages. It is believed that wages are fixed up according to the demand for and
supply of labour.
In recent years, wages are termed as a reward for labour. It is classified as monetary and
non-monetary reward. While deciding the monetary rewards, factors like educational
qualifications, special training, skills, experience, duties and responsibilities, risk
involved, performance, efforts required, seniority, mobility, job difficulty, hazardous
conditions etc. are given top consideration.
The main aim of the wages and salary system is to attract, retain, and motivate human
resource which the organisation requires. Specific aims are as follows:
1. To attract the qualitative human resource in required number

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2. To encourage suitable, qualified and experienced employees to remain in the
organisation
3. To plan for rewards for outstanding performance
4. To provide internally equitable and externally competitive wages
5. To create appropriate differentials between various jobs with their relative values
6. To maintain industrial peace, by giving just share to employees
7. To become cost-effective.

Activity: Balloon Questions

When new/scattered/virtual teams are concerned, the objective is often to learn more
about other team members in a stress-free, fun and interactive way.

Balloon Questions is the ideal choice in such scenarios. All you need is balloons, paper,
and pens/pencils. Give each person a balloon and a small strip of paper. Ask them to write
down a question on the slip of paper and place it in their balloon, then blow the balloon up
and tie it.
Once everyone has finished, instruct the group to hit their balloons into the air, trying to
keep all the balloons in the air for as long as possible. After a few seconds tell everyone to
grab any balloon (other than their own) and sit in a circle. Each person takes a turn
popping his/her balloon and then answering the question. For small groups you may have
each person in the group answer every question. (Source: www.blog.sage.hr)

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 IN-TEXT QUESTIONS
1. ………………. is very important in human resource management and development.
2. ………………… is a process of introducing the recruits to the organisation and
explaining their role within the organization.
3. ……………………..play a useful role in understanding and identifying the
potential of the employees.
4. While deciding the ………………….., factors like educational qualifications,
special training, skills, experience, duties and responsibilities, risk involved,
performance, efforts required, seniority, mobility, job difficulty, hazardous
conditions etc. are given top consideration.
5. Training performs …………………and ………………… roles.
2.4 Organizational Structure in HRM
Organising Process
Organising is an important function of management by which management brings
together human and material resources. This function must be performed when an activity
involves two or more persons. Organising involves determining the activities to be done,
grouping the activities, assigning the grouped activities to individuals, and creating a
structure of authority and responsibility among the people to achieve the objectives of the
enterprise.
Urwick defined organizing as determining what activities are necessary to achieve and
purpose and arranging them in groups which may be necessary to assign to the
individuals. The process of organisation involves the determination of authority and
responsibility relations in the organisation. An important function of every manager is to
determine the nature of the activities required to attain the group goals, the grouping of
these activities and the assignment of the activities to the individuals with necessary
delegation of authority.
The process of organisation involves the following steps:
(a) Determination of objectives;
(b) Identification and grouping of activities;
(c) Assignment of duties to individuals; and
(d) Development of relationships.
Organisation structure:
Organizational structure is the framework of a company indicating who reports to whom
and how each person sets into the big picture.It also works for decision making as
centralized or decentralized.An effective organizational structure is a foundation that
ensures meaning work and a sense of purpose and creates positions that leverage highest
skills and provide growth and development.

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Role of Human resource in organizational structure
The organisation structure of human resource is important as it directly impacts the
organisation’s ability to attract , engage and retain skilled HR talents.HR’s organisational
structure improves communication gap between workings, designing business
organizational structure and manages change ,integrating career planning and models to
make big data more support tools , ana analytics
lytics ,metrics and models to make big data more
useful for the workforce.
Types of Organisation Structure
There are four main types of formal orgnaisation which are as follows:
(a) Line Organisation: In this form of organisation, a straight line command existexists
from the highest to the lowest position. The authority and responsibility of every
position is clearly defined. Each subordinate is accountable to only one superior.
But there is no specialization. Line organization is considered to be most suitable
for small scale units.
Chief Executive

Fig.: Line Organisation

(b) Line and Staff Organisation: As an enterprise grows management requires the
services of staff experts. These experts advise line managers but the final
authority for taking decisions and issues orders remains with true executives. Line
and staff organisation provides the benefits of specialization and unity of
command. But there is danger of conflicts between line officers and staff experts.
Chief Executive

Fig.: Line & Staff Organisation

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(c) Project
ect Organisation: In this type of organisation, a separate team is created for
every major project. The team provides expert and focused efforts for timely
completion of the project.

Fig.: Project Organisation

(d) Matrix Organisation: This structure is a combination of functional and project

responsibilities. In addition to the permanent functional departments, project team
are created temporarily. The staff for projects is largely deputed from functional
department. On the completion of a project the staf stafff returns back to their
respective departments. A small scale firm may adopt project structure when
several projects are carried out simultaneously and each project requires high
degree of coordination among several technical experts.

Fig.: Matrix Organisation

Principles of Sound Organisation:
(a) Division of Work: The work to be performed should be divided into meaningful
tasks and one employee should as far as possible concentrate on one type of work
only.
(b) Unity of Command: Each employee should report and be accountable to only one
superior. Orders and instruction should come from a single boss.
(c) Parity Between Authority and Responsibility: The authority of every employee
should be commensurate with his responsibility. The authority and responsibility oof
every position should be clearly specified in the form of job descriptions and
organisation charts.
(d) Scalar Chain: The chain of command from the top position to the lowest position
must be direct and clear.

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(e) Departmentalisation: Similar tasks should be grouped into the same department on
an appropriate basis.
(f) Balance Between Centralisation and Decentralisation: Proper delegation of
authority should be made to ensure that there is the right degree of decentralisation.
(g) Appropriate Span: Span of control means the number of subordinates reporting
directly to one superior. The span should be appropriate in view of the nature of
work, ability of the superior, competence of subordinates, degree of coordination
required, etc. Generally, small enterprises prefer a wide span as they cannot afford
the cost of additional layers in the organization.
(h) Human Use of Human Resources: The requirements of work should integrated
with the capabilities and aspirations of employees.
(i) Flexibility: The organization structure should be able to adapt to changes in
theinternal and external environment.
IN-TEXT QUESTIONS
1. …………………is the chain of command from the top position to the lowest
position of the employees.
2. ….……………………….means similar tasks should be grouped into the same
department on an appropriate basis.
3. .……………………structure is a combination of functional and project structure.
4. The process of ………………………….. involves the determination of authority
and responsibility relations of the business.
5. Line and staff organisation provides the benefits of specialization and unity of
command
2.5 Management of Human Resource of a new enterprise
In order to achieve maximum profitability, there is strong need to integrate each
employee’s work with the strategic goals of the enterprise and ensures a clear-cut job
descriptions for every post.Here some of the HR objectives that apply to new enterprises
are given below:
Develop a competency model
The important objective of human resource department is to achieve clear-cut job
descriptions,establishing job competency model i.e. right person for the right job at the
right time ,for each department and fixed benchmarking roles for the enterprises.
1. Define organization dimensions:
Organization dimensions means human resource strategies of an enterprise should be
according to the various aspects of the business.Such aspects are nature of business of the
enterprise,the chain of command and structure of the organization.These aspects are
directly related to human resource strategies.

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2. Define mission,vision and values:
These terms play a crucial role in shaping the human resource strategies and objectives
for the future.Vision statement signifies long-term goals and objectives while mission
statement represents short term objectives of the enterprise.Values are the beliefs that
serve as a force behind the actions and operations of the organizations.
3. Perform workforce analysis:
Workforce analysis focus on organization people, culture and systems analyzing the
current situation of the company.This analysis identifies the gaps in those areas requires
specific objectives to achieve.
4. Evaluate implemented strategy:
An enterprise will consider variety of factors for evaluating the effectiveness of a human
resource strategy.Such evaluation gives accurate facts and figures about number of posts
vacant, employee turnover, customer grievances with the level of satisfaction and
dissatisfaction of employees and customers both.
Role of HRM in a startup company:
Following are the contribution of HRM in a new enterprise:
1. Recruitment and selection of workforce
2. Organisation of induction program
3. Communication with the workforce
4. Optimizing wage and salary costs
5. Tracking and recording of attendance
6. Redressal of grievances and disputes of/among employees
7. Providing safety in jobs
8. Management of company’s assets
9. Record and maintain the database of the company
10. Maintain healthy public relationships
11. Maintain good public image of company
12. Managing payroll and incentive systems

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Case Study:

Arena Corner is a new startup company engaged in applying sports venue rental related to
everything that smells of sports. In an effort company's performance, it is necessary to
implement good human resource management. The aim of this case study is is that to
determine the role of HRM in the growth of Arena Corner startup. Considering Arena
Corners of new digital startups are growing and require many human resources .The
implementation of HRM to maintain arena corner in the competitive digital startup
competitive is necessary. The method applied uses human resources the approach with
spectrum recruitment, personnel, people development, compensation benefit, and
industrial relations. The results of this study show that the application of HRM becomes a
necessity for startup companies. In winning competition, it is necessary to create a
training center to print human resources that understand technology for the needs of the
company and the needs of the startup ecosystem and can add income and new businesses
in the era of startup the competition.

Source: https://doi.org/10.52403/ijrr.20210826

IN TEXT QUESTIONS
1. The important objective of human resource department is to
establish………………… model.
2. …………….. are the beliefs that serve as a force behind the actions and operations
of the organizations.
3. ……………………statement signifies long-term goals and objectives while
…………… statement represents short term objectives of the enterprise.
4. …………………………………are directly related to human resource strategies.
5. Perform workforce analysis identifies the ………………… in those areas requires
specific objectives to achieve.
2.6 Family Business Management:
FAMILY BUSINESS
A family business is that business in which a family member is chief-executive, atleast
two generations with family control and minimum 5% of the voting-power is held by the
family associated with this business.
As per the definitions given by “Erenesto J.Poza, Family Business means:
1. Ownership control ( 15% or higher ) by two or more members of a family or a
partnership of families,
2. Concern for family-relationships,
3. Continuity of business across generations (Minimum 2 generations)

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4. Family members are involved in management of the business like being active in
management functions,to shape the culture , works as shareholders and advisors or
board members of the firm.
Family Business in India:
In India, family business account for as much as 95% of all the Indian businesses in
which nearly 80% of family business companies in India dominate the Indian
economy.Some well known companies based on family business in India are HCL, Tata-
Group, Reliance and the Wadia group.
1. Characteristics of family business or family firms are:
2. Long term view
3. A lasting mission and vision
4. Long lasting purpose
5. Nurturing and caring community
6. Act as stewards
7. To build relationships ,bonds and connections with stakeholders
8. To maintain good-governance
9. To identify and develop both family and non-family talent
10. To pursue disciplined succession
11. To preserve family gravity.( As per report of FBNI,Family business network
international,family gravity comprised of 6 elements: Value-system, vision for the
future,family involvement,cohesion and interaction,Family governance and
leadership principles and roles).
12. Separate management and ownership
13. Speak with common voice
14. High staff loyalty and low staff turnover
15. Defined roles and responsibilities towards family members,shareholders and
employees.
16. Take time to understand the family’s concerns and the need of the individuals.
Types of Family Businesses
There are three types of family business:
1. Family owned business : It is a profit-based business where majority of the shares
are owned by members of a single family but significantly influenced by other
members of family.
2. Family-owned and managed business: It is a profit based business where majority
of the shares are owned by members of a single family but significantly influenced
by other members of family.Here one family member has active participation in the
top management of company.

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3. Family-owned
owned and Led company: It is profit based business where majority of
shares are owned by member of single family but influenced by other members of
family.Here one family member has active participation in the top management of
the company.In this type,one member has major influence on business activities.
Three Circle Model of Family Business

Source: Taguri and Davis, 1982

The three circle model has the three overlapping circles consisting three different groups
namely Family, Ownership and Business. A particular person carries one of the seven
sections that are formed by the overlapping groups. The owner has the position in the top
circle. The left circle is occupied by family members and right ccircle
ircle is taken by the
employees. If a member lies in the two circle then he would be falling in the overlapping
area. For example if one member of the family is working in the business but does not
own a stake that means he lies in the bottom center sectio
section.
n. If a member of the family
owns a stake in the business but he is not the employee of the business then it lies on the
left center section.
The three circle model depicts seven different groups having varied level of involvement
in the family business. All seven sections are given below:
1. Family members not involved in the business, but who are descendants or
spouses/partners of owners.
2. Family owners not employed in th
the business.
3. Non-family owners who
ho do not work in the business.
4. Non-family owners
wners who work in the business.
5. Non-family
family employees.
6. Family members who work in tthe business but are not owners.
7. Family owners who work in the business.
Each of the seven interest groups identified by the model has its own viewpoints, goals,
concerns
erns and dynamics. The model reminds us that each sector has legitimate views that
deserve to be respected, but these views also must be integrated to set future direction for

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the family business system. The long-term success of a family business system depends
on the functioning and mutual support of each of these groups.
Advantages of Family Business
1. Strong Commitment : Family business builds a long lasting family enterprise in
which entrepreneur is more likely to put extra hours and efforts needed to make the
business successful.Apart from extra hours,family business take more flexible
approach to their working hours.
2. Common values: Family businesses are likely to share some ethics and beliefs
about how things should be done.This will give an entrepreneur a competitive edge
for the business.
3. Stability : Family businesses follows stability in efforts which encourages and
strengthens long-term thinking.
4. Flexibility : Flexibility and versatility are another major advantage of family
business as family members are often willing to take on diverse roles and bigger
workloads and bigger workloads to make sure that the company succeeds.
5. Loyalty: The members of the family business are likely to stick together in hard
times and show the determination needed for business success.
6. Decreased costs: Family members are more willing to make financial sacrificies for
the sake of the business and help the business for the long term at minimum cost.
Disadvantages of Family business:
1. Conflicts : The conflicts or personal issues between family members are more
serious topic which can be last longer and affect the work environment and
productivity of a family business.
2. Nepotism: Family members may promote other members within the business even
if they are not valuable and have not earned any position.So it may create issues
among related and non-related employees alike.
3. Pressure: The guidelines associated with the family business may add some
additional stress on non-family employees to their work-environment like how to
act,speak,dress code and other rules for employees to follow.
4. Repetitive: Repetition is the biggest limitation of the family business.Family
members who work with the same task with same people at same workplace may
feel fatigue and boredom which distract their mind and concentration.
5. Succession planning: Many family business owners may find it difficult to decide
about in charge /head of the business.So it is a daunting decision to determine who
can best for business decision and to reduce the potential for future conflicts.
6. Lack of skills or experience : Some appointed family members does not have the
skills or any training or experience to work in the family business.Thus can have a
negative effect on the success of the business and lead to a stressful working
environment.

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Approaches to Avoid Conflicts in Family Business
1. Coping approach : which involves adopting to negotiation among family members
try and resolve conflict and agree on common terms.
2. Arbitrary approach:In this approach the elder person of the family will be allotted
with the power to frame rules and control business activity. But this approach has
not proven to be successful as most of the time elder person in family may not
prove to be effective manager for business.
3. Managed approach: this approach states that person who has ability to maintain
better relationship with key individuals of business and have ability to understand
business and manage the same should be appointed as lead person for the business.
Measures to overcome family business challenges and problems
1. Family Constitution or Governance
2. Developing a Succession Plan
3. Family Gathering and Get Together
4. Appointing an outside Board of Advisors
5. Training and orientation 6. Know Your Purpose
7. “Treat each other with grace and respect,”
8. Keep the Lines of Communication Open
IN TEXT QUESTIONS
1. ……………….is a profit-based business where majority of the shares are owned by
members of a single family but significantly influenced by other members of
family.
2. The long-term success of a family business system depends on the
………………….. and ……………….. of each of these groups.
3. ……………….. and ………………. are another major advantage of family
business as family members are often willing to take on diverse roles and bigger
workloads and bigger workloads to make sure that the company succeeds.
4. In …………………………. approach the elder person of the family will be allotted
with the power to frame rules and control business activity.
5. Family members may promote other members within the business even if they are
not valuable and have not earned any position called……………………
2.7 Summary
The main focus in this lesson has been on the topic of the meaning and definition of
HRM, nature , importance , performance appraisal, wages and compensation.This lesson
also discuss about training of employees which is only one of the options to learning and
development.Here the HR manager role in new as well as existing organization works as
a consultant to all sections and is a prime mover or initiator of policy inputs and various

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other recommendations.The different types of organizational structure also discussed in
this lesson along with the family business management .
2.8 Glossary
Induction
The process of introducing a new employee to the company culture and processes with
the aim of bringing them up to speed as quickly as possible.
Arbitration
It is a method for resolving disputes between investors and brokers or between brokers.In
this technique disputes resolution is done without using court resources.
Versatility
Versatility means a person’s ability to make others feel that their concerns and
expectations are being met.It is the degree to which one is observed by others as
successfully balancing his/her needs with the needs of others and the requirements of the
task.
Nepotism
It is form of favortism shown to family members without regard to merit.An example of
nepotism is the appointment of family members to civil service,often at the expense of a
more qualified person.
Chain of command
Chain of command means individual members take orders from only one superior and
only give orders to a defined group of people immediately comes below them.
2.9 Answers to In-text questions
1. Human resource planning 11. Job competency
2. Induction 12. Values
3. Performance appraisal 13. Vision and mission
4. Monetary rewards 14. Organization dimensions
5. Reactive and proactive 15. Gaps
6. Chain of command 16. Family owned business
7. Departmentalization 17. Functioning and mutual support
8. Matrix 18. Flexibility and versatility
9. Organisation 19. Arbitrary
10. Line and staff 20. Nepotism
2.10 Self-Assessment Questions
1. How the scope of HRM differs from organization to organization?
2. What are the role and contributions of HR manager in a startup?

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3. Write down some differences between project structure and matrix structure.
4. What are the financial and emotional contributions of family and friends in
managing a business?
2.11 References and Suggested Readings:
 Aswathappa, K, 2002, Human Resource Personnel Management: Text and
Cases,
 Tata McGraw-Hill, New Delhi.
 Bach, Stephen and Keith Sisson, 2000, Personnel Management: A
Comprehensive
 Guide to Theory and Practice, Third Edition, See Contributions in Part 1
 Personnel Management in Context.
 Bennis, Warren, 1969, Organisation Development: Its Nature Origin and
 Prospects, Addison Wesley Publishing House Co. Readings Mass.
 Blunt, P, 1990, “Strategies for Enhancing Organisational Effectiveness in the
 Third World”, Public Administration and Development, Vol. 10
 Carr, Nicholas, 2004, Does IT Matter? Information Technology and the
 Corrosion of Competitive Advantage, Harvard Business School Press.
 Cohen, Stephen L, 1994, “The Future and HRD,” William R. Tracey (Ed),
 Handbook on Management and Development, Vol. II, AMACOM.
 Davis, Keith, 1972, Human Behaviour at Work, Mc Graw Hill, New York.
 Decenzo, David A. & Stephens P. Robbins, 1989, Personnel/HRM, Third
 Edition, Prentice Hall, New Delhi.
 Dickens, Linda, 1994, “Wasted Resources? Equal Opportunities in
Employment,”
 Keith Sissons (Ed), Personnel Management: A Comprehensive Guide to Theory
 and Practice in Britain.
 Duncan, Daniel M, 1994, “Organisational Design”, William R. Tracey (Ed),
 Handbook on Management and Development, Vol 11, AMACOM.
 Flamholitz, Eric G, 1971, “A Model for Human Resource Valuation: A
 Schochastic Process with Service Rewards”, The Accounting Review.
 Flamholitz, Eric G, 1972, “Towards a Theory of Human Resource Value in
 Formal Organisations”, Journal of the Accounting Review, October Issue.
 Flippo, Edwin B, 1984, Personnel Management, Fourth Edition, Mc Graw-Hill,
 New York.
 Garratt, Bob, 1990, “Creating a Learning Organisation: A Guide to Leadership,
 Learning and Development” read online at,
 www.changezone.co.uk.publications/dynamicspubs.html
 Guest, D.E, 1987, “Human Resource Management and Industrial Relations”,
 Journal of Management Studies. 2

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 LESSON 3
MARKETING ASPECT OF BUSINESS
Written by : Dr. Hem Chand Jain
Revised by : Neha Goyal
Structure
3.1 Learning Objectives
3.2 Introduction
3.3 Marketing and Marketing Mix
3.4 Relationship Management
3.5 Summary
3.6 Glossary
3.7 Answers to In-text questions
3.8 Self-Assessment Questions
3.9 References
3.10 Suggested Readings
3.1 Learning Objectives
After studying this unit, the student be able to:
 State the meaning of marketing and various marketing concepts.
 discuss the meaning of marketing mix and the use of marketing-mix components in
developing marketing strategies in real business life.
 Explain the topic of evolution in marketing mix.
 Describe the role of relationship management in marketing to convert the prospects
into customers.
 apply the knowledge of marketing in real business world.
3.2 Introduction
In this introductory unit, the student will study about the basic concept of marketing
which is useful for any entrepreneur for enhancing their marketing skills.This lesson will
discuss the meaning of marketing and various marketing concepts, evolution of
marketing, importance of marketing and marketing services.The students will also
understand the concept of marketing segmentation, marketing-mix and important
components of marketing mix.This study will also help in learning the topic of
relationship management along with the stages of relationship management. This unit
also discuss about the benefits of relationship management.

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3.3 Marketing
Marketing may be narrowly defined as a process by which goods and services are
exchanged and the value determined in terms of money prices. That means marketing
includes all those activities carried on to transfer to goods from the manufacturers of
producers the consumers.
We shall be learning later in the lesson that marketing is more than mere physical process
of distributing goods and services. It is the process of discovering and translating
consumer wants into products and services. It begins with the customer (by finding their
needs) and ends with the customer (by satisfying their needs).
The scope of marketing can be understood in terms of functions that an entrepreneur has
to perform. These include the following:
(a) Functions of exchange: which include buying and assembling and selling?
(b) Functions of physical supply: include transportation, storage and warehousing.
(c) Functions of facilitation: product planning and development, marketing research,
standardization, grading, packaging, branding, sales promotion, financing.
The Marketing Concept
The marketing concept holds that the key to achieving organizational goals consists in
determining the needs and wants of target markets and delivering the desired satisfactions
more effectively and efficiently than competitors. Under marketing concept, the emphasis
is on selling satisfaction and not merely on the selling a product. The objective of
marketing is not the maximization of profitable sales volume, but profits through the
satisfaction of customers. The consumer is the pivot point and all marketing activities
operate around this central point. It is, therefore, essential that the entrepreneurs identify
the customers, establish a rapport with them, identify their needs and deliver the goods
and services that would meet their requirements.
The components of marketing concept are as under:
(a) Satisfaction of customers: In the modern era, the customer is the focus of the
organization. The organization should aim at producing those goods and services,
which will lead to satisfaction of customers.
(b) Integrated marketing: The functions of production, finance and marketing should
be integrated to satisfy the needs and expectations of customers.
(c) Profitable sales volume: Marketing is successful only when it is capable of
maximizing profitable sales and achieves long-run customer satisfaction.
Marketing versus Selling
The basic difference between marketing and selling lies in the attitude towards business.
The selling concept takes an inside-out perspective. It starts with the factory, focuses on
the company’s existing products, and calls for heavy selling and promoting to produce
profitable sales. The marketing concept takes an outside-in perspective. It starts with a
well-defined market, focuses on customer needs, coordinates all the activities that will
affect customers, and produces profits through creating customer satisfaction.

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Starting point Focus Means Ends
Selling Concept
Factory Products Selling and Profits through
Promoting sales volume

Marketing Concept
Market Customer Coordinated Profits through
Needs marketing customer satisfaction
Importance of Marketing in Small Business
Since marketing is consumer oriented, it has a positive impact on the business firms. It
enables the entrepreneurs to improve the quality of their goods and services. Marketing
helps in improving the standards of living of the people by offering a wide variety of
goods and services with freedom of choice, and by treating the customer as the most
important person.
Marketing generates employment both in production and in distribution areas. Since a
business firm generates revenue and earns profits by carrying out marketing functions, its
will engage in exploiting more and more economic resources of the country to earn more
profits.
A large scale business can have its own formal marketing network, media campaigns, and
sales force, but a small unit may have to depend totally on personal efforts and resources,
making it informal and flexible. Marketing makes or breaks a small enterprise. An
enterprise grows, stagnates, or perishes with the success or failure, as the case may be, of
marketing. “Nirma” is an appropriate example of the success of small scale enterprise.
Marketing of Services
The services sector is more than twice the size of the manufacturing sector. The growing
competitive market for services means that a marketing orientation has become essential
for the survival for service industries too.
India’s high capabilities in Information Technology are well known. In addition, there is
the most popular segment of its services sector, the entertainment industry, particularly
films and TV happens to be one of the fastest growing in the world. Indian films are
popular across West Asia, Afghanistan, Central Asia, Russia, South Africa and South
East Asia. They are now penetrating the western world.
Market Segmentation
A market consists of large number of individual customers who differ in terms of their
needs, preferences and buying capacity. Therefore, it becomes necessary to divide the
total market into different segments or homogeneous customers groups. Such division is
called market segmentation. They may have uniformity in employment patterns,
educational qualifications, economic status, preferences, etc.

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Market segmentation enables the entrepreneur to match his marketing efforts to the
requirements of the target market. Instead of wasting his efforts in trying to sell to all
types of customers, a small scale unit can focus its efforts on the segment most
appropriate to its market.
A market can be segmented on the basis of the following variables:
1. Geographic Segmentation: The characteristics of customers often differ across
nations, states regions cities or neighbourhoods. The entrepreneur can decide to
operate in one or a few or all the geographic areas, but pay attention to differences
in geographic needs and preferences.
2. Demographic Segmentation: Variables such as age, sex, family size, income,
occupation, education, religion, race and nationality are widely used for market
segmentation.
3. Psychological Variables: Personality, life style, social class, etc. can also be used
for market segmentation. For example, some products like pens, watches, cosmetics
and briefcases are designed differently for common men and status seekers.
4. Behavioural Segmentation: Buyers are divided into groups on the basis of their
knowledge, attitude, use or response to a product.
Marketing Mix
In order to cater to the requirements of identified market segment, an entrepreneur has to
develop an appropriate marketing mix. Marketing mix is a systematic and balanced
combination of the four inputs which constitute the core of a company’s marketing
system – the product, the price structure, the promotional activities and the place or
distribution system. These are popularly known as “Four P’s” of marketing.
An appropriate combination of these four variables will help to influence demand. The
problem facing small firms is that they sometimes do not feel themselves capable of
controlling each o the four variables in order to influence the demand.
Product Mix Price Mix Place Mix Promotion Mix
 Features  List Price  Location  Advertising
 Design  Discounts  Transport  Personal selling
 Variety  Allowances  Channels  Sales
promotion
 Quality  Payment Period  Coverage
 Publicity
 Brand name  Credit Terms  Delivery
 Packaging  Availability
 Sizes  Inventory
 Services
 Warranties

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A brief description of the four elements of markets mix is as follows:
1. Product: The first element of marketing mix is product. A product is anything that
can be offered to a market for attention, acquisition, use, or consumption that might
satisfy a want or need. Products include physical objects, services, events, persons,
places, ideas or maxis of these. This element involves decisions concerning product
line, quality, design, brand name, label, after sales services, warranties, product
range, etc. An appropriate combination of features and benefits by the small firm
will provide the product with USP (unique selling proposition). This will enhance
the customer loyalty in favour of its products.
Products and services are broadly classified into consumer products and industrial
products. Consumer products are bought for final consumption; whereas industrial
products are bought by individuals and organisations for further processing or for use in
conducting business.
Other ways of classifying products are as follows:
(a) Convenience products: These are consumer products that the customer buys
very frequently, without much deliberation. They are low priced of low value
and are widely available at many outlets. They may be further subdivided as:
 Staple Products: Items like milk, bread, butter etc. which the family
consumes regularly. Once in the beginning the decision is programmed
and it is usually carried on without change.
 Impulse Products: Purchase of these is unplanned and impulsive.
Usually when the consumer is buying other products, he buys these
spontaneously for e.g. Magazines, toffees and chocolates. Usually
these products are located where they can be easily noticed.
 Emergency Products: Purchase of these products is done in an
emergency as a result of urgent and compelling needs. Often a
consumer pays more for these. For example, while travelling if
someone has forgotten his toothbrush or shaving it; he will buy it at the
available price.
(b) Shopping products: These are less frequently purchased and the customer
carefully checks suitability, quality, price and style. He spends much more
time and effort in gathering information and making comparisons. E.g.
furniture, clothing and sued cars.
(c) Specialty products: These are consumer goods with unique characteristics /
brand identification for which a significant group of buyers is willing to make
a special purchase effort. For example, Mitsubishi Lancer, Ray ban glasses.
(d) Unsought product: These are products that potential buyers do not know
exist or do not yet want. For example Life Insurance, a Lawyers services in
contesting a Will.
The above product decisions are very important to ensure the sale of products. A product
has both tangible and intangible components. While buying a product, the customer does

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not merely look for the physical product, but a bundle of satisfaction. Thus, the impact
that any product has upon a buyer goes well beyond its obvious characteristics. There is a
psychological dimension to all customer purchases; what a customer thinks about a
product is influenced by far more than the product itself. For example, the buyer of an air
conditioner is not purchasing cooling machine only. He looks for attractive colour and
design, durability, low noise, quick cooling, etc. these influencing factors must be
considered by the small firms to meet the requirements of different kinds of customers.
2. Price: The second element is the price, which affects the volume of sales. It is one
of the most difficult tasks of the marketing manager to fix the right price. The
variables that significantly influence the price of a product are: demand of the
product, cost competition and government regulation. The product mix includes:
determination of unit price of the product, pricing policies and strategies, discounts
and level of margins, credit policy, terms of delivery, payment, etc. Pricing
decisions have direct influence on the sales volume and profits of the firm. Price,
therefore, is an important element of the marketing mix. Right price can be
determined through pricing research and by adopting test-marketing techniques.
Small firms should think of pricing as a method whereby prices are set with regard
to costs, profit targets, competition and the perceived value of products. Because of
their simplicity, cost-plus-pricing are attractive to small businesses, though this is
not the only mode of pricing utilized by small firms. For example, the profit margin
in the cost-plus approach may well be fixed after examining both the nature of the
market and the competitor activity within it. It is a mistake for small firms to rely
wholly on cost-plus, but very small firms do that to the detriment of profits and
market share.
The pricing policies mainly followed by the small firms are:
(a) Competitive pricing: This method is used when market is highly competitive
and the product is not differentiated significantly from the competitor’s
products.
(b) Skimming-the-cream pricing: Under this pricing policy, higher prices are
charged during the initial stages of the introduction of a new product. The aim
is to recover the initial investment quickly. This policy is quite effective when
the demand for a product is likely to be more inelastic with respect to price in
its early stages; to segment the market into segments that differ in price
elasticity of demand and to restrict the demand to a level, which a firm can
easily meet.
(c) Penetration pricing: Under this policy, prices are fixed below the
competitive level to obtain a larger share of the market. Penetration pricing is
likely to be more successful when the product has a highly elastic demand; the
production is carried out on a large scale to achieve low cost of production per
unit; and there is strong competition in the market.
3. Promotion: Promotion refers to the various activities undertaken by the enterprise
to communicate and promote its products to the target market. The different

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 methods of promoting a product are through advertisement, personal selling, sales
promotion and publicity.
4. Place or Physical Distribution: This is another key marketing mix tool, which
stands for the various activities the company undertakes to make the product
available to target customers. Place mix or delivery mix is the physical distribution
of products at the right time and at the right place. It refers to finding out the best
means of selling, sources of selling (wholesaler, retailers, and agents), inventory
control, storage facility, location, warehousing, transportation, etc. This includes
decisions about the channels of distribution, which make the product available to
target customers at the right time, at the right place and at the right price. By
selecting wrong distribution channels or by using the ones it has traditionally used,
a small firm could be depriving it of new market opportunities.
In a situation where a small firm has only one primary product, the general rise and fall of
sales will lead to a rise and fall of the firm, unless the firm learns to consistently adjust its
marketing mix to match consumer demand.
Marketing mix of a firm selling automatic washing machines
Target market Urban household with high income and status
consciousness.
Product Latest technology, automatic washing machines.
Price High, but should not be beyond the low range high-
income groups.
Promotion Heavy advertising through high image magazines and
television stressing the high quality of the machines.
Place (distribution) Though high image retailers.

A marketing mix must be consistent for any product. Pricing, for example, must be
consistent with packaging and perceived product quality. If one of these is not in line with
others, then sales might suffer as a consequence. A manager selecting a marketing mix is
like a cook or chef preparing meal. Each knows through experience that there is no ‘one
best way’ to mix the ingredients. Different combinations may be used depending upon
one’s needs and objectives. In the marketing as in cooking, there is no standard formula
for a successful combination or ingredients. Marketing mixes vary from company to
company and from situation to situation. The right marketing mix is important for any
product to have a long life cycle.
EVOLUTION OF MARKETING-MIX
Once an entrepreneur developed the marketing strategy,there is a Seven P Formula
should use to continually evaluate the business activities.These seven P’s are: Product,
Price, Place, Promotion ,People, Process and Physical Evidence.As the advancement of
technology and other strong requirements,market dynamics have changed which means
that the businesses are required to adapt to new needs of the society.In light of the
evolutions, some other P’s also introduced in the society.The 9 P’s of marketing mix was

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developed in 2007 by “Larry-Steven Londre” to help the marketer for the success of their
brand and such P;s works as marketing strategy for the business.
The nine P’s of marketing-mix consists of:

P P P

P P P

P P P
Figure : Nine P’s of Marketing Mix
P 1: PLANNING
This element pf 9 P’s means looking at the eight other P’s and detailed formulation of a
program of action.Planning starts with continuous research and take multiple decisions
about product development, pricing, promoting, partnering, distribution channels and
others.This step also focus on total marketing budget in the marketing-mix.
P 2 : PRODUCT AND SERVICES
The combination of products and services means anything that can be offer to the market
to satisfy their wants and demands.It includes variety of product-mix , branding, designs,
packaging, sizes , services , warranties , return-policies and maintenance - policies.
P 3: PRICE
Pricing means value in the exchange of the product/services.It includes wholesale /retail/
promotional prices/ discounts/ quality discounts, credit terms and sales & payment
periods.
P 4: PLACE/ DISTRIBUTION:
It means the physical location that make the product available,using distribution and trade
channels, roles, coverage, locations, inventory and transportation characteristics etc.
P 5 : PROMOTION:
It includes the promotional tools that make the product/service visible in the mind of the
customers.It includes public -relations, advertising, white papers, websites, ad-words,
press releases, sponsoring events, training events, sales promotion, personal selling etc.
P 6 : PARTNERS
Partners also referred to as Alliances.A partnership or alliance bring business
development benefits to all sizes of business.It helps the entrepreneurs to reduce risk and
costs by expanding the customer base.
P 7 : PEOPLE OR TARGETING
Consumer, people or potential buyers is the main element of marketing-mix.People
represent everyone involved in the buying journey.There are several variables affect this

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dimensions which are employees recruitment and training , managing social interactions,
handling complaints and service failures etc.
P 8 : PRESENTATION
It is the act of presenting on strategic basis different components to the
customers,suppliers, wholesalers ,retailers, sales force , marketing intermediaries ,
employees, partners or others.Such components includes symbols or images that
represents something.
P 9: PASSION
Passion means an intense , over -mastering feelings and emotions in the planning ,
developing, pricing, promoting, partnering, selling and marketing of goods and
services.In marketing,his process starts with believing in the product /services as
marketer then show in the “ presentation” the “Passion” available for the product.
The 7 C’s Compass Model of Marketing-Mix:

Source: albertocarniel.com

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As per Koichi Shimizu, 7 C’s of compass Model are:
1. Corporation : It considered as a whole of competitors, organisations and
shareholders.(C-O-S).
2. Commodity : Commodity means co-created goods and services.:Commodity” C is
based on co-marketing concept where multiple companies work together to promote
co-branded products & services by different channels.
3. Cost: It represents the total cost of ownership for a product or service.
4. Channel: It transfer a product/service from production point to communication
point.
5. Communication: It is a two-way communication between business and consumers
(Seller- Buyer) .
6. Consumer: It follows cardinal directions N,S ,E W means needs, security ,education
and wants.
7. Circumstances: It refers to uncontrollable environmental elements for a company
which includes all elements of external environment.
IN -TEXT QUESTIONS
1. ………………….. enables the entrepreneur to match his marketing efforts to the
requirements of the target market.
2. Personality, life style, social class, etc are the ………………………..variables.
3. ……………………….. is a systematic and balanced combination of the four inputs
which constitute the core of a company’s marketing system – the product, the price
structure, the promotional activities and the place or distribution system.
4. …………………………….components includes symbols or images that represents
something.
5. Under ………………………………pricing policy, prices are fixed below the
competitive level to obtain a larger share of the market.
3.4 Relationship Management
Relationship Management is associated with highly influential business management
strategy and a powerful solution of business management strategy with relevant impact in
the area of entrepreneurship.So here proves that there is a strong link between
relationship management and entrepreneurship. The growing use of relationship
management in companies is one of the pillars of social and technological change in
entrepreneurship.
Over the years,relationship management become essential and provide bunch of benefits
to entrepreneurs like customer-interaction, automating material tasks,customer-
information organisation and a strong communication between business and customers.

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Entrepreneurs can improve their customer-retention level and customer service offerings
by the benefits of relationship management (RM) which are as follows:
1. Better customer service : There are various relationship managements systems are
available in the market which helps the small business and entrepreneurs for better
customer service experiences.These customer services has positive influence on
customer retention and sales.
2. Data analytics: CRM system has specialized data analytical feature which helps in
evaluating the success of the business and identifying the potential opportunities for
improvement and growth & plan the future accordingly.
3. Managing prospective leads: Lead generation is another important advantage of
CRM system help nurture potential leads by providing “birds -eye view”.So CRM
system has the ability to better manage prospective leads and keep track the status
of the lead as well as the information to plan for further steps.
4. Improved marketing: CRM allow a personal approach and helps in developing
new products and services according to customer specific-needs.
5. Increased sales: CRM system builds sales pipeline by streamlining the sales
process and also automates the key tasks.It analyze the sales data and helps the
business set up a step-by -step sales process.
Stages of relationship management:
1 Awareness :
This step focus on reaching new customers as per their requirement and interest.In this
stage, make the customers aware about the brand, products and services and captures the
potential customer’s attention and target audience by way of advertising, word of mouth,
social media and other.
2 Acquisition :
This stage belongs to convert the prospects into customers, subscribers or consumers.The
attentiveness to the customer’s need, provide them good and better services and prompt
response to their needs which are necessary otherwise it will discourage the prospects.
3 Conversion:
In this stage, gained the attention of prospects , providing a satisfactory pre-buying
experience ,build a rapport with the leads and imbibe a sense of trust with our brand will
be done.
4 Retention :
This stage includes build a strong relationship with the customers, prompt response to
their queries,proper support and sending follow-up emails to feel the customer valued.So
retention policy says to keep the customers happy and loyal by various lucrative
discounts and bonus and rewards.

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5 Advocacy:
Advocacy means to recommend the brand by the satisfied customer with others.So this
stage can only be achieved after the successful achievement of retention stage.
CRM stands for customer-centric marketing approach, and it is utilised to identify the
most recent marketing trendsOne of the most cutting-edge business management tools for
establishing successful channels and techniques of customer-centric information
management is CRM. With a combination of people, process, and technology, this
contemporary strategy tries to understand a company's consumers. It differs from classic
approaches like CRM.
CRM has the potential to enhance present management and spur new innovations and is a
significant tool in the digital transformation of society.
Given its potential, CRM is one of the most potent management technology solutions
available in the world of contemporary business management.
Managing relationships in your life is what the term says:Relationship management.
Relationship management has traditionally been defined as the process of preserving
favourable and gratifying interactions between a company's clientele.
But it goes much farther than that; it means fostering and upholding healthy connections
with everyone in your life, whether it be your spouse, your family, your siblings, or your
coworkers or employees. Understanding how to influence others to be their best selves is
the art of relationship management. We are known to become like the people we are
around.
When we share something as precious as our time with others, it's critical that we foster
an atmosphere that encourages natural growth. In all of your relationships in life, a
positive environment is crucial.Mostly, it comes down to how successfully you can
persuade others.
Amazing interpersonal skills are a trait of a great influencer, and these abilities can be
taught and mastered. Your ability to manage your relationships at home and at work will
improve as you become more adept at using these skills.
Similar to this, relationship management is very essential to an organization's success.
Here are a few examples of how relationship management in the workplace is
advantageous:
 Long-Term Partnerships With Clients.
Better and more enduring relationships with customers are a requirement for any business
to succeed. Through relationship management, an organisation can build more solid,
enduring ties with its clients.
 Improve Our Creativity
Our ability to be creative and demonstrate our abilities is facilitated by having positive
interactions with others at work.

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 Aid in Career Development.
It's critical to maintain positive relationships with others, by which we mean those that
are trustworthy and loyal.Only when your supervisor is confident in you and your
coworkers are friendly with you will they recommend you to others. Such interactions
also greatly expand one's job options.
Let's now talk about relationship management's key elements and how to create enduring
relationships with clients:
1. Make sense
Your customers must fully understand what you are selling, why you are selling it, and
who you are selling it to in order for your business to have a strong brand.
Make sure the message being provided to your customers is therefore crystal clear in
order to foster better interactions with them. Similar to this, you must ensure that the
message is delivered effectively to your team or employees if you want to foster better
relationships with them.
2. Be dependable
One of the most crucial elements of relationship management is this.
Why would people want to repurchase from a brand if they are inconsistent?
If we take a closer look and study, we will see that the only brands that succeed are those
who maintain consistency in their offerings.
3. Good Communication
Relationships cannot simply be established and then abandoned.
Similar to how a plant needs water to flourish, relationships also require communication
to survive and develop. The key to all relationships, whether they be personal or
professional, is to invest your time, energy, and effort into keeping them healthy.The
relationship between a business and its clients is comparable.
It is crucial that your company's reps are always accessible to your clients.
Make sure a customer service professional is constantly on hand to attend to your clients'
requirements by replying to them if you interact with them via phone calls, emails, or
online chats.
Similar to this, you must effectively communicate with your team and be accessible to
address any questions they may have if you want them to complete a task.
In addition, it's critical that you let an employee know if you have concerns about them
for any reason so they can fix the issue and move forward.
Improved partnerships require better communication.
4. Be Upbeat
Who wants to be around someone who is toxic and negative? No matter how difficult the
situation is, it's critical to maintain a positive attitude toward both yourself and other

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people. Being positive is really alluring, and it will assist you in making friends and
upholding relationships for the rest of your life.
6. Acquire interpersonal abilities
There is nothing to worry about if you think that your inability to maintain relationships
is due to poor interpersonal skills.Personality traits can be taught. It is crucial to acquire
these abilities since they will enable you to influence people and facilitate effective
communication with others.
Building strong, good, and joyful relationships in all area of your life is crucial for
leading a happy and healthy existence.Similar to how it's necessary to get along with your
coworkers, employees, and employers at work, it's also important to get along with your
friends, family, neighbours, and other relatives. Any of them could cause you stress and
take a toll on your mind and body if you have a terrible relationship with them. Both our
personal and professional life can be significantly impacted by the relationships in our
lives. Similar to how having strong relationships at home would make our life simpler
and happier, having good relationships at work can also make us content and happy.

Uber CRM : Case Study

Well, CRM is a good place to start and for Uber,its industry leading CRM software
provider salesforce that’s powering the ride sharing giant’s strategy.Salesforce helps Uber
extract data from people engagingwith its brand on social media.With this system in
place,Uber can reply with haste to customer complaints and track all its interactions with
the public from an intuitive dashboard.
And, of course, it runs its own loyalty program.Uber Rewards lets yoy earn points every
time you ride or eat with Uber and redeem them across its increasing range of services.It
is a textbook example of how Uber is incentivising customers to keep relying on its brand
as it continues to branch out.

Source: expertmarket.co.uk

IN-TEXT QUESTIONS

1. ………………….. is another important advantage of CRM system help nurture

potential leads by providing “birds -eye view”.
2. ……………….. stage focus on reaching new customers as per their requirement
and interest.
3. ………………..stage belongs to convert the prospects into customers, subscribers
or consumers.
4. …………………..stage includes build a strong relationship with the customers,
prompt response to their queries,proper support and sending follow-up emails to
feel the customer valued.

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5. .………………..means to recommend the brand by the satisfied customer with
others.
3.5 Summary
The word marketing has been defined in various ways as each and every author defines it
with a particular approach or purpose.According to Philip Kotler, “Marketing is human
activity directed at satisfying needs and wants through exchange process”.Marketing is a
broad term use for determining the needs of the customers, convert the prospects into
customers and optimum utilization of resources to satisfy the demands of the target
customers.
There are five marketing concepts : Product concept, production concept.selling concept,
marketing concept and societal marketing concept. These concepts of marketing are
adopted by many businesses for their achievements.
Marketing in developing countries is somewhat different from developed countries.All
the advantages of a matured marketing system as found in a developed country may not
be applied in developing countries.
The four basic elements of marketing called marketing mix are divided into 4 P’s namely,
product, price, place and promotion but due to evolution in marketing some more P’s also
introduced by many authors i.e. people , process, physical evidence , people and
presentation.
Relationship between company and customers also plays an important role in
marketing.There are various benefits generated by using relationship management.
3.6 Glossary
Advocacy : Advocacy is an activity by an individual or group that aims to influence
decisions within political, economic and social institutions.It is the act of pleading or
arguing in favour of something such as cause,idea or policy,active support .
Retention : The ability to recall or recognize what has been learned or experienced i.e
memory.
Customer retention means a company’s or product’s ability to retain customers over
time.If a company has high customer retention ratio then it means a company has strong
customer base.
Acquisition : An acquisition is referred to as a business transaction in which one firm
buys all or part of another company’s stock or assets.It is the act of getting something
especially knowledge and skills.
Unsought products:Unsought goods are those goods that the consumer does not know
about or does not normally think of buying and the purchase of which arises due to
danger or the fear of danger and lack of desire.some examples are fire extinguishing
services and reference books etc.
Alliance : An alliance is a relationship between among people,groups or states that have
joined together for mutual benefits or to achieve some common purpose.

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3.7 Answers to In-text questions
1. Market segmentation 6. Lead generation
2. Psychological 7. Awareness
3. Marketing-mix 8. Acquisition
4. Presentation 9. Retention
5. Penetration 10. Advocacy
3.8 Self-Assessment Questions
1. Define marketing and explain its implications. Explain how is marketing
different from selling.
2. Distinguish between marketing and societal marketing concept.
3. What is consumer’s place in modern marketing?
4. What is marketing-mix?Explain the components of marketing mix with
suitable examples.
5. What is the meaning of relationship management? Write all the important
stages of relationship management.
3.9 References
www.expertmarket.co.uk
www.albertocarniel.com
Guerola-Navarro, Vicente & Gil-Gomez, Hermenegildo & Oltra-Badenes, Raul & Soto-
Acosta, Pedro. (2022) .Customer relationship management and its impact on
entrepreneurial marketing: a literature review. International Entrepreneurship and
Management Journal.10.1007/s11365-022-00800-x.
3.10 Suggested Readings
 www.hbr.org
 www.egyankosh.com/marketingmix
 https://www.quickmba.com
 https://www.coschedule.com/marketing
 https://www.ionos.com/online-sales
 https://www.netmba.com/marketing

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