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Q.Define Entrepreneur. Explain the Characteristics of An Entrepreneur. Ans. Meaning of Entrepreneur : Diagram : Basics of An Entrepreneur An Entrepreneur is a person who perceives a need and then brings together manpower, material and capital required to meet that need. In other words an entrepreneur is an individual or team that identifies the opportunity, gathers the necessary resources, creates and ultimately responsible for the performance of the organization. An entrepreneur is a person who is able to express and execute the urge, skill, motivation and innovative ability to establish a business or industry of his own, either alone or in collaboration with his friends. His motive is to earn profit through the production or distribution of goods or services. Adventurism, willingness to face risks, innovative urge and creative power are the inborn qualities of entrepreneurship. Entrepreneurship can also be explained as a process of executing a work in a new and better way. Organisation Urge Inovation Skill Risk Vision Enterprise Growth Management Definition of Entrepreneur : According to Harbison Characteristics of an Entrepreneur : (1)Vision : (2)Knowledge : (3)Desire to succeed : (4)Independence : (5)Optimism : (6)Value Addition : (7)Leadership : (8)Hardworking : (9)Risk-Taking Ability : "An entrepreneur is not an innovation but an organization builder or one who has the skill to build an organization and who must be able to harness the new ideas of different innovators to the best of the organization." Peter F. Drucker defines an entrepreneur as one who always searches for change, responds to it and exploits it as an opportunity. Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or service. An entrepreneur has a dream and he visualizes the ways and means to achieve dream. In doing so he visualizes : Market Demands Soicio-Economic Technological Environment And then based on these dynamic, he visualizes a future for his business venture. An entrepreneur has full knowledge about all the technicalities of his business- be it technological, operational, financial or matket dynamic. An entrepreneur has a strong desire to succeed in life. Their dreams are not just limited to achieving one single goal but they constantly work to achieve higher goals. An entrepreneur needs independence in work and decision-making. They don't follow the rules of thumb but make their own rules and destiny.
Entrepreneurs are highly optimistic about achieving their vision. Entrepreneurs do not follow the conventional rules of thumb. They have a constant desire to introduce something new to the existing business. They create, innovate or even add value to the existing products/services. An entrepreneur exhibits the qualities of leader. They are good planner, organizers, have good communication skill, good decision0makers, take initiative to implement plans and are result-oriented. At times they are called workaholics. Work is worship for then. They put in continuous efforts to achieve success and know that there is no substitute for hark work. Risk is an inherent and inseparable element of entrepreneurship. He assumes the uncertainty of future. An entrepreneur guarantees rent to the landlord, wages to employees and interest to the investor in the hope of earning more than the expenses. Construction Skill Decision Strong desire to reap benefits Economic Activity Innovative Urge Management Skill Gap-Filing Function Dynamic Process Risk-Bearing Leadership Quality Entrepreneurship Q.Define Entrepreneurship. Discuss the main Entrepreneurship Traits. Ans. Meaning of Entrepreneurship : Definition : Concept of Entrepreneurship : Concept of Entrepreneurship Characteristics of Entrepreneurship : Entrepreneurship refers to a process of action an entrepreneur undertakes to establish his enterprise. It is a creative and innovative response to the environment. In other words entrepreneurship can be defined as an ability to discover, create or invent opportunities and exploit them to the benefit of the society, which in turn brings prosperity to the innovator and his organization. B. Higgins, in his book "The economic Development" has said. "Entrepreneurship is meant the function of seeking investment and production opportunity, organizing an enterprise to undertake a new production process, raising capital, hiring labour, arranging the supply of raw materials, finding site, introducing a new technique and commodities, discovering new sources of raw materials and selecting top managers of day to day operations of the enterprise."Concept of entrepreneurship can be explained with the help of following diagram Entrepreneur Entrepreneurship Enterprise Person Process of Action Object The characteristics of entrepreneurship are:
Entrepreneurship Traits : (1)Mental Ability : (2)Clear Objectives : (3)Business Secrecy : (4)Human Relations Ability : (5)Effective Communication : (6)Technical Knowledge : (7)Decision-Making : (8)Risk-Bearing : (9)Self-Confidence : A successful entrepreneur must possess the following traits: Mental ability consists of intelligence and creative thinking. An entrepreneur should be intelligent and must have an analytical mine. He should have the capacity to analyse the problem and able to study the various situation under which decision have to be made. An entrepreneur should have a clear objective. Without objective an entrepreneur cannot success. So a successful entrepreneur must have the objective to establish his product in the market, make profit and also render social service. An entrepreneur must be able to guard business secrets. Leakage of business secrets to trade competitors is a serious matter. So the entrepreneur should be able to make a proper selection of his subordinates. An entrepreneur must have good relations with his customers to earn profit and win their confidence in his product. He must also maintain good relation with his employees. Good communication also means that the entrepreneur has the ability to put his point effectively and with clarity. Communication ability is the secret of the success of most entrepreneurs. The entrepreneurs are dealing with situations where sophisticated technology is involved. The entrepreneur must have a reasonable level
no business' or 'no risk.of technical knowledge. Entrepreneurial Traits can be explained with the help of following diagram: Mental Ability Risk Bearing Self Confidence Human Relation Abilitv Business Secrecy Effective Communication Decision Making Clear Objectives Technical Knowledge Enterpreneurial Traits . He assumes the uncertainty of future. They should also have the ability to inspire other. 'No risk. Risk is an inherent and inseparable element of entrepreneurship. Hence an entrepreneur should have the capacity to analyse the various aspects of the business for arriving at a decision. no gains'. They must have the confidence in themselves and the determination to achieve their goals. Running a business requires taking a number of decision. Entrepreneurs must have the mental capacity to face any situation.
173 ENTREPRENEURIAL DEVELOPMENT .
They are individuals who have inherited the business from their fathers and forefathers. Dhirubhai Ambani of the Reliance Group.Q. In other words an entrepreneur is an individual or team that identifies the opportunity. gathers the necessary resources. Types of entrepreneur are: Those individuals who are the founder of the business. Ans. They are the ones who conceptualize a business plan and then put in efforts to make the plan a success. Meaning of Entrepreneur : Types of Entrepreneur : (A)Classification on the Basis of Ownership : (1)Founder or "Pure Entrepreneurs" : Example : (2)Second-generation operators of family-owned business : Example : (3)Franchisees : Example : (4)Owner-Manager : Example : (B)Classification on the basis of Personality Traits and their style of running the business : (1)The Achiever : (2)The Induced Entrepreneur : An Entrepreneur is a person who perceives a need and then brings together manpower. Like Mukesh Ambani and Anil Ambani sons of Dhirubhai Ambani of the Reliance Group now split into two: Reliance Industries Limited and Reliance-Anil .Explain the Types of Entrepreneur. material and capital required to meet that need. creates and ultimately responsible for the performance of the organization.
These types of entrepreneurs are induced by some external factors to start a business. Like Sabeer Bhatia is the founder entrepreneur of Hotmail.Dhirubhai Ambani Group. These types of entrepreneurs have personal desires to excel. The external factors could be like: Government Policies Unemployment Family Support Facilitating Institutional Support etc. The only drive that pushes them is the desire to achieve something in life. NIIT has given its franchisee operations to local players after thorough scrutiny and proper training. the desire to prove their excellence. They do not need any external stimulus but are self-driven. When a person buys a business from the founder and then invests his time and resources in it he is called the owner-manager. the desire to make a mark in society. Ø Ø Ø Ø 174 . It is a method of doing business wherein the parent owner licenses his trademarks and tried and proves methods of doing business to a franchisee in exchange for a recurring payment.
. stimulates demands and generates interest among buyers to purchase a product. assess the demands of future. both in terms of opportunities and threats and then take actions based on the above assessments. They are looking for the achievement of not even their goals but also of people associated with themselves like employees. He identifies the needs and wants of customers and accordingly manufactures products to satisfy these needs and wants. He identifies potential markets.(3)The Idea Generator : (4)The Real Manager : (5)The Real Achievers : (C)Classification based on the type of Business : (1)Industrial Entrepreneur : (2)Trading Entrepreneurs : (3)Corporate Entrepreneur : (4)Agricultural Entrepreneur : (D)Classification on the Stages of Development : (1)First Generation Entrepreneur : (2)Modern Entrepreneur : (3)Classical Entrepreneur : (E)Other : (1)Innovative Entrepreneur : These kinds of entrepreneurs are highly creative people who are always in search of innovative ideas for setting up new business ventures. Trading entrepreneur is one who undertakes trading activities and is not concerned with the manufacturing of products. Industrial entrepreneur is an entrepreneur who is into manufacturing of a product. They analyse business situation. The real achievers are full of life. suppliers and distributors. They enjoy the First Movers' Advantage and are able to skim higher profits from the market. The real managers run the business in a systematic manner.
Agricultural entrepreneurs are those entrepreneurs who undertake business related to agricultural activities. Innovative entrepreneurs are full of creative ideas and offer innovate products to the society. with or without element of growth. A first-generation entrepreneur is one who starts an industrial unit by means of an innovative skill. He is essentially an innovator combining different technologies to produce a marketable product or service. 175 ENTREPRENEURIAL DEVELOPMENT .Corporate entrepreneur is a person who demonstrates his innovative skill in organizing and managing a corporate undertaking which is registered under some act that given it a separate legal entity. It is because of these innovative entrepreneurs that many important changes occur in our society. Like farm equipments. A classical entrepreneur a stereo-type entrepreneur is one whose aim is to maximize the economic returns at a level consistent with the survival of the firm. They undertake those ventures which suit the current socio-cultural trends. A modern entrepreneur is one who undertakes business to satisfy the contemporary demands of the market. fertilizers and other inputs of agriculture.
(2)Imitative Entrepreneurs : (3)Drone Entrepreneurs : (4)Copreneurs : Q.Risk Bearing Ability : 4. organizes resources and puts the plan into action to achieve his goals. formulates the plan. They are risk-aversive and so they do not try out new ideas or products.Decision Maker : 5. When both husband and wife together start and run a business venture then they are called copreneurs. He is a person who initiates the idea.Technician : 3.Explain the qualities and functions of the entrepreneurs Ans.Future Oriented : 8. Meaning of Entrepreneur : Qualities of An Entrepreneur : 1. An entrepreneur is a person who takes risk of setting up his own venture for perceived reward. gathers the necessary resources. creates and ultimately responsible for the performance of the organization. In other words an entrepreneur is an individual or team that identifies the opportunity. Drone entrepreneurs are not open to creativity and change. The entrepreneur must have following qualities:Entrepreneur has a strong desire to achieve a higher goal and make their . material and capital required to meet that need. An Entrepreneur is a person who perceives a need and then brings together manpower.Motivator : 7.Planner : 2.Interpersonal Skills : Imitative entrepreneur adapt a successful innovation. They do not like changing the working of organizations with the changing times.Ability to Find and Explore Opportunities : 6.
dreams come true. An entrepreneur must have capacity to bearing risk an entrepreneur cannot success. An entrepreneur is a person who during the course of his activities he should be a person who likes working with people and who has skills of dealing with people. So the entrepreneur must have these quality to achieve the target an entrepreneur cannot achieve the target. Without motivation an entrepreneur cannot achieve the target. They show an innovative turn of mind and convert difficulties into opportunities. An entrepreneur must have these qualities because decision making affect the profitability and reputation of the enterprise. Entrepreneur shows a high level of future orientation. An entrepreneur must have the technical knowledge. Risk is very important element. They are oriented towards present and future. An entrepreneur must have a motivator. He should know that how to use the resources and achieve the target. Entrepreneurial persons are quick to see and seize opportunities. They do not allow the past to obsess them. So motivation is very necessary for achieving the target. 176 . He inspires the employees to achieving the target. Decision making is the process of choosing best alternative among various alternatives.
The entrepreneur has to take risks in these circumstances. The entrepreneur arranges finance. if it doe not.Coordination : Functions of Entrepreneur : 1.Analysis the Environment : Internal Environment : External Environment : 8. the entrepreneur profits. The entrepreneur performs various managerial functions. So the decision of entrepreneur affects the profitability and reputation of the enterprise. He has to evolve the best possible method of production which would earn him a sizeable profit.Risk taking and Uncertainty Bearing : 2.Planning : An entrepreneur is a person who faces uncertainty. He has to formulate an action plan regarding the product and quality of the product to be produced. An entrepreneur must have a coordinator.Facing Uncertainty : 10. If the venture succeeds. All decision concerning business are taken by the entrepreneur.Managerial Functions : 4.Maintain Good-Relations : 7. He allocates the resources and utilizes the resources for achieving the target. The future is uncertain. taking risks forms an important entrepreneurial function. losses occur. purchase raw materials. Thus. Without coordination an entrepreneur cannot achieve the target.Innovation : 5. provides the necessary .Coordination : 6.9. An entrepreneur has to perform the following function: The future is unpredictable.Taking Business Decisions : 3.
The most important function of an entrepreneur is innovation. Environment are those factor which affect the business. An entrepreneur must have good relations with his customer to earn profit and win their confidence in his product. An entrepreneur analysis the environment. which is to be done. He introduces far-reaching improvements in the quantity and quality of production line. use of the best technical devices. Ø Ø 177 ENTREPRENEURIAL DEVELOPMENT . Without planning an entrepreneur cannot achieve the target. reduction of waste etc.infrastructure for production. division of labour. The entrepreneur coordinates the other factors of production. It is very necessary function of entrepreneur. how is to be done. The entrepreneur has a multifaced personality when he undertakes managerial functions. Planning is deciding in advance what is to be done. by whom is to be done. He considers the economic viability and technical feasibility of an invention. employment of each factor in the right quantity. Coordination involves selection of the right type of factors. Planning is the first function of the management. He must also maintain good relations with his employees. There are two type of environment: Internal environment are controllable External environment are beyond the control of the business.
Utilizes the Resources : Q. An Entrepreneur is a person who perceives a need and then brings together manpower. but also to see that the best combination of factors is made available for the production process. Risks are generally based on the anticipation of demand. gathers the necessary resources. Innovation implies the commercial application of an invention. material and capital required to meet that need. The entrepreneur directs production and he must do whatever is necessary for its success. If the entrepreneur doe not utilizes the resources he cannot become a successful entrepreneur. Modern production is higher complex.Explain the Role and Importance of Entrepreneur in Economic Growth. This involves not only assembling the factors. (2)The entrepreneur takes risks. This is the important function of the entrepreneur and the quantum of profit he receives is directly proportionate to the risks he takes. Ans.9. Meaning of Entrepreneur : Role of Entrepreneur in Economic Growth : Importance of Entrepreneur in Economic Development : An entrepreneur allocates the resources and utilizes the resources. (3)Finally the entrepreneur innovates. An entrepreneur must utilize the resources for the achievement of the objectives. Modern economic development is closely linked with production. The position of the entrepreneur in modern production is like that of the director of a play. As an innovator the entrepreneur assumes the role of a pioneer and an industrial leader. The entrepreneur can undertake anyone type of the following five categories of innovation: . creates and ultimately responsible for the performance of the organization. Invention is the work of scientists. His role in modern economic development has at least three aspects: (1)The entrepreneur co-ordinates the other factors of production. In other words an entrepreneur is an individual or team that identifies the opportunity. Innovation is different from invention.
(i)The introduction of a new good or a new quality of a good (ii)The introduction of a new method of production (iii)The opening of a new market (iv)The conquest of a new source of supply of raw materials (v)The carrying out of a new organization of any industry. Every country tries to achieve maximum economic development. But human resource alone will not produce economic development-there must be dynamic entrepreneurs. Importances of entrepreneurs in economic development are: 178 . The economic development of a country to a large extent depends on human resources.
transport. If a hundred persons become entrepreneur they not only create a hundred jobs for themselves but also provide employment to many more. These enterprises grow providing direct and indirect employment to many more. This results in concentration of wealth in a few families. The goods & services produced are for consumption within the country as well as to meet the demand of exports. in view of the . The growth of industry and business leads to a large number of public benefits like road. Thus entrepreneurship increases the national income. This can have a serious social and national implication. A rapid development of entrepreneurship ensures a balanced regional development. National Income consists of goods & services produced in the country and those imported. An increasing number of entrepreneurs are required to meet this increasing demand for goods and services. health. education. Thus entrepreneurship is the best way to fight the evil of unemployment. thus dispersing wealth. The domestic demand increases with ever increasing population and standard of living. entertainment etc. The export demand also increases to meet the needs of growing import due to various reasons. When the new entrepreneurs grow at a faster pace. When a society produces a small number of entrepreneurs the enterprise due to lack of competition grow into a few big business houses. a large amount of national wealth is also shared by a large number of entrepreneurs. When the number of entrepreneurs increases. This dispersal of wealth promotes the real socialism and makes the economy healthy.(1)Employment Generation : (2)National Income : (3)Dispersal of Economic Power : (4)Balance Regional Development : (5)Economic Independence : (6)Reducing Unrest and Social Tension Amongst Youth : Growing unemployment particularly educated unemployment is an acute problem of the nation.
179 ENTREPRENEURIAL DEVELOPMENT . Entrepreneurship is essential for national self-reliance. Businessman export goods and services on a large scale and earn the scarce foreign exchange for the country. alternative to wage career is the only viable option. In the changing environment where we are faced with the problem of recession in wage employment opportunities. Such alternate path through entrepreneurship could help the country in defusing social tension and unrest amongst youth. The country is required to divert the youth with latent entrepreneurial traits from wage career to self employment career. Such import substitution and export promotion help to ensure the economic independence of the country. they are forced to set up their enterprise in the smaller towns away from big cities.increasing competition in and around the cities. This helps in the development of the backward regions. Many problems associated with youth and social tensions are rightly considered to be due to youth not being engaged in productive work.
Business enterprises need to be innovative for their survival and better performance. These offer goods at lower costs and increase variety in consumption. Entrepreneurship development programmes are aimed at accelerating the pace of small firms' growth in India. Production of goods on mass scale and manufacture handicrafts etc. 180 . Increased number of small firms is expected to result in more innovations and make the Indian industry compete in international market. A few large scale industries started by entrepreneurs from outside the state in economically backward areas may help as models of pioneering efforts. Increased activities of local entrepreneurs will also result in making use of abundantly available local resources. India is considered to be very rich in natural resources.(7)Improvement in Living Standards : (8)Harnessing Locally Available Resources and Entrepreneurship : (9)Innovations in Enterprises : Entrepreneurs set up industries which remove scarcity of essential commodities and introduce new products. in the small scale sector help to improve the standard of life of a common man. but ultimately the real strength of industrialization in backward areas depends upon the involvement of local entrepreneurship in such activities.
The process of development can be generalized by five different types of events: (i)Firstly. Schumpeter called the agent who initiates the above changes as an entrepreneur. (ii)He is the agent who provides economic leadership that changes the initial conditions . but it must be deliberately and actively promoted by some agency within the system. which in turn brings prosperity to the innovator and his organization. (i)Development is not an automatic process. Ans. it can be the result of a new production technology. Schumpeter (1934).Explain the Theories of An Entrepreneurship. it may arise on account of a new market. it can be the outcome of the introduction of a new product in the market. Meaning of Entrepreneurship : Theory of Entrepreneurship : (1)Entrepreneurship : According to Schumpeter Entrepreneurship refers to a process of action an entrepreneur undertakes to establish his enterprise. it may be the consequences of a new source of supply. It is a creative and innovative response to the environment. (ii)Secondly. Main theories of entrepreneurship are summarized as follows: A Function of Innovation: Joseph A.ENTREPRENEUR DEVELOPMENT MBA 1st Semester (DDE) Q. (iv)Fourthly. create or invent opportunities and exploit them to the benefit of the society. put the human agent at the centre of the process of economic development and assigned a critical role to the entrepreneurship in his theory of economic development. (iii)Thirdly. it may be due to the new organization of any industry. (v)Fifthly. He considered economic development as a discrete technological change. for the first time. In other words entrepreneurship can be defined as an ability to discover.
he is neither technician. (v)Psychological. but he is considered an innovator. UNIT – II 181 . (iv)Entrepreneurship is not a profession or a permanent occupation and therefore.of the economy and causes discontinuous dynamic changes. entrepreneurs are not solely motivated by profit. it cannot formulate a social class like capitalists. (iii)By nature. nor a financier.
(2)Entrepreneurship : (3)Entrepreneurship : (4)Entrepreneurship : (5)Entrepreneurship : An Organisation Building Function: Fredrick Harbison states that the 'organisation building' ability is the most critical skill needed for the industrial development. According to him entrepreneurship means the skill to build an organization. Harbison spots the crux of the entrepreneurship in his ability to multiply himself by effectively delegating responsibilities to others. The main features are: (i)Unlike Schumpeter, Harbison's entrepreneur is not an innovator but an 'organisation builder' who must be able to harness the new ideas of different innovators to the rest of the organization. (ii)Such persons are not always the men with ideas or men who try new combinations of resources but they may simply be good leaders and excellent administrators. (iii)Harbison's definition of entrepreneurship lays more stress on the managerial skills and creativity so far as organisation is concerned. A Function of Managerial Skill and Leadership: Hoselitz states that a person who is to become an industrial entrepreneur must have additional personality traits. In addition to being motivated by the expectations of profit he must also have some managerial abilities and more important he must have ability to lead. Hoselitz maintains that financial skills have only a secondary consideration in entrepreneurship. According to him managerial skills and leadership are the important facts of entrepreneurship. He identifies three types of business leadership in the analysis of economic development of under-developed countries: The merchant money lender type The managerial type The entrepreneur type. A Function of High Achievement: Mc Clelland states that a business man who simply behaves in traditional ways is not an entrepreneur.
Moreover, entrepreneurial role appears to call for decision making under uncertainty. Mc Clelland identified two characteristics of entrepreneurship firstly "doing things in a new and better way" and secondly "decision making under uncertainty". Persons with high achievement would take moderate risks. They would not behave traditionally (no risk). The high achievement is associated with better performance at tasks which require some imagination, mental manipulation or new ways of putting things together, and such people do better at non routine task that require some degree of initiative or even inventiveness. People with high achievement are not influenced by money reward as compared to people with low achievement. People with low achievement are prepared to work harder for money or such other external incentives. For people with high achievement, profit is a measure of success and competency. A Function of Social, Political and Economic structure: John Kunkel states that the industrial entrepreneurship depends upon four structures which are found within a society or community. Ø Ø Ø
(i)Limitation Structure: The society limits specific activities to members of particular subcultures. This limitation structure affects all the members of a society. (ii)Demand Structure: The limitation structure is basically social and cultural but the demand structure is mainly economic. The demand structure is not static, and changes with economic progress and government policies. Demand structure can be improved by providing material rewards. (iii)Opportunities Structure: This structure is necessary to increase the probability of entrepreneurial activity. The opportunity structure constitutes the availability of capital, management and technological skills, information concerning production methods, labours and markets. All the activities associated with the effective planning and successful operation of industrial enterprises. (iv)Labours Structure: Kunkel argues that the labours supply cannot be viewed on par with the supply of other material conditions like capital. He states that labours means 'men' and is a function of several variables. The supply of factory labours is governed by available alternative means of livelihood, traditionalism and expectations of life. 'Input Completing' and 'Gap filling' Function: Liebenstein identified gap filling as an important characteristic of entrepreneurship. In economic theory the production function is considered to be well defined and completely known. But the theory is silent about the keeper of the knowledge of production function. Where and to whom in the firm this knowledge is supposed to be available is never stated. It is the entrepreneurial function to make up the deficiencies or to fill the gaps. These gaps arise because all the inputs in the production function cannot be marketed because some inputs like motivation, leadership etc. are vague in their nature and whose output is underminate. This "gap-filling" activity gives rise to a most important entrepreneurial function namely "Input-Completing". He has to marshal all the inputs to realize final products. A Function of Group Level Pattern: Frank W. Young was reluctant to accept the entrepreneurial characteristics at the individual level. According to him,
instead of individual. relative to its acceptance. 183 ENTREPRENEURIAL DEVELOPMENT . (6)Entrepreneurship : (7)Entrepreneurship : Q. one must find clusters which may qualify itself as entrepreneurial groups. it tends to intensify its internal communication which gives rise to a unified definition of the situation. as the groups with higher differentiation have the capacity to react. maintain and project a coherent definition of their situation. when a group has a higher degree of institutional and occupational diversity. of the social meanings maintained by the group.What are the objectives and Phases of Entrepreneurial Development Programme. as opposed to coherence. He defined 'reactiveness' or 'solidarity' as the degree to which the members of the group create. and 'differentiation' is defined as the diversity.
motivation pattern. create innovations. It is very necessary to promote his understanding to motives. Phases of Entrepreneurial Developement Programme: An entrepreneurial development programme consists of three broad phases: This phase includes the activities and the preparations required to launch the training programme. A programme which seeks to do this can qualify to be called as EDP. EDP has an important role to play in solving the unemployment problem.Ans. An entrepreneur make use of the factors of production to the fullest advantage of the society. generate employment. their impact on behaviour and entrepreneurial value. develop backward areas etc. improve the standard of living of people. The main activities are: (i)Creation of Infrastructure for training (ii)Preparation of training syllabus (iii)Tie up of guest faculty . In other words A EDP is primarily concerned with developing and motivating entrepreneurial talent and growing him to be an effective entrepreneur. (1)To formulate Project (2)To select Project/Product (3)To analysis the Environment (4)To acquire the basic Managerial Skills (5)To understand the process and procedure of setting up of enterprise (6)Enable to communicate clearly and effectively (7)Develop a broad vision about the business (8)Enable to take decisions. Meaning of Entrepreneurial Development Programme (EDPs) : Objectives or Need of EDPs : (A)Initial or Pre-Training Phase : Entrepreneurial development programme means a programme designed to help a person in strengthing his entrepreneurial motive and in acquiring skills and capabilities necessary for playing his entrepreneurial role effectively.
(iv)Arrangement for inauguration of the programme (v)Designing tools and techniques for selecting the trainees (vi)Formation of selection committee (vii)Publicity campaign for the programme (viii) Development of application form (ix)Pre-potential survey of environmental opportunities. 184 . pre-training stage involves the identification and selection of potential entrepreneurs and providing initial motivation to them. Thus.
The size of the family and the entrepreneur's status in the family are important. A minimum level of education is essential to perform functions like meeting officials etc. A small entrepreneur has generally to depend upon family .Selection of potential entrepreneurs has two essential components : 1.Identification of Enterprise : (B)Training or Development Phase : Every participant must have a minimum level of eligibility for developing into an entrepreneur.Identifying Entrepreneurial Traits : (a)Socio-Personal Characteristics : (i)Caste and Family Background : (ii)Age : (iii)Education : (iv)Size and Type of Family : (v)Working Hands : (b)Human Resource Factors : (i)Achievement Motivation : (ii)Risk Taking Willingness : (iii)Influence Motivation : (iv)Personal Efficacy : 2. Studies have revealed that younger people are more successful entrepreneur. Entrepreneurial traits include sociopersonal and human re-sources characteristics: The most common socio-personal characteristics are: Caste and family background help create entrepreneurial environment and occupational awareness for the entrepreneurs.
Once an entrepreneur having necessary sociopersonal and human resources characteristics is identified. The trainers have to judge how much. and how far the trainees have moved in their entrepreneurial pursuit's. should taken into consideration. It has been defined as the desire for influencing other people and surrounding environment. The objective of this phase is to bring desirable changes in the behaviours of the trainees. These are: It is the urge to improve one-self in relation to a goal. The raw materials availability. it is necessary to identify s suitable enterprise or project for him. It refers to seeking challenge in one's activity. experience in the field. It has been defined as the general sense of adequacy in a person. The enterprise must be matched with the potential entrepreneur.members as he cannot afford to hire workers. A trainer should see the following changes in the behaviour of participants: (i)Is he attitudinally tuned very strongly towards his proposed project ideas? (ii)Is he motivated to plunge for entrepreneurial venture and risk that is expected of an entrepreneur? 185 ENTREPRENEURIAL DEVELOPMENT . etc. the marketing avenues and profitability of the enterprise have to be explored. During this phase the training programme is implemented to develop motivation and skills among the participants. All the background information like his skills.
mobilizing the right resources at the right time? The main training inputs are as follows: Once the entrepreneur selects a particular enterprise the technical aspects of the trade is essential. Managerial skills are particularly essential for a small scale enterprise who cannot afford to employ specialists in different areas of management. He needs to also know the economic aspects of the technology including costs and benefits. resources and other related entrepreneurial knowledge? (vii)Is he skillful in choosing the right project. risk taking. In order to develop human resources. Once a participant is able to start the enterprise he requires managerial skills. Their active involvement in this task would provide them necessary understanding and also ensure their personal commitment. The participants should be given opportunity to actually conduct market surveys for their chosen project. Monitoring and follow up reveals drawbacks in the earlier phases and suggests guidelines for framing the future .(iii)Is there any change in his entrepreneurial outlook. development of achievement motive is essential. role and skill? (iv)How should he behave like an entrepreneur? (v)What kind of entrepreneurial behaviours does the trainee lack? (vi)Does he posses the knowledge of technology. The purpose of AMT is to develop the need to achieve. A motivational development programme creates self awareness and self confidence among the participants and enables them to think positively and realistically. The aim should be to enable the participant to look at an enterprise in its totality and to develop overall managerial understanding. initiative and other such behavioural traits. This phase involves assessment to judge how far the objectives of the programme have been achieved. A lot of time needs to be devoted to the actual preparation of project.
(4)Passing the desired information to the entrepreneur will in time. In this phase infrastructural support. counseling and assistance in establishing new enterprise and in developing the existing units can also be reviewed. Some common activities in the monitoring and follow up process are as follows: (1)Preparing and maintaining a separate file for each trainee. (3)Keeping in touch with every entrepreneur through letters. (2)A history card indicating the bio-date of each entrepreneur and the work done by him.policy. Content of Training Programme : (i)Technical Knowledge : (ii)Achievement Motivation Training : (iii)Market Survey : (iv)Managerial Skill : (v)Project Preparation : (C)Post Training or Follow-Up Phase : 186 .
(iii)Improving performance of small industries. (ii)To identify train and assist potential entrepreneurs for setting up entrepreneur/self employment ventures in small industries. promoters and entrepreneurs. (iv)To evolve standardized materials and processes of selection. Some of the major institutions for EDPs in India are as follows: The entrepreneurship development institute of India is an apex entrepreneurship institute promoted by industrial development bank of India. The National Institute for entrepreneurship and small Business Development is an apex body established by the ministry of Industry. (iv)Diversifying sources of entrepreneurship. (6)Follow up meeting and a follow up register to ensure the success of the entrepreneurial development programme. The institute enjoys acute support of government of Gujarat. The main objective of the institute are explained as follows: (i)To provide vital information support to trainers. (iii)To help and affiliate institution/Organization in carrying out training and other entrepreneurship development related activities with greater success. Industrial credit and Investment Corporation of India.(5)Visiting every entrepreneur periodically. Xavier Institute of Social Services. training support to potential entrepreneur. The institute has been operating for the past more than 15 years now. (v)Enlarging the small and small medium enterprise sector. Industrial Finance Corporation of India and state bank of India. government of India for Coordinating and overseeing the activities of various institutions/agencies engaged in entrepreneurial development in small industry and small business. The institute undertakes entrepreneurship development programmes to serve the following development objectives: (i)Accelerated industrial development. . (ii)Industrial development of rural and less-developed areas.
Ranchi has been training rural entrepreneurs since 1974. Xavier Institute provides the training and assists the trainees in drafting project proposals and obtaining the required finance. It offers a six months programme to tribal with minimum literacy and numeracy skills. The programme consists of: Q.Explain the Entrepreneurial Development Programme in India. Ans. Institutions Conducting EDPs in India : (1)Entrepreneurial Development Institute of India : (2) National Institute for entrepreneurship and small Business Development (NIESBUD) : (3)Xavier Institute of Social Services, Ranchi :
(i)Identification and selection of candidates. (ii)Motivation Training. (iii)Managerial Training. (iv)Placement and training for practical skills. (v)Market survey and preparation of project report. (vi)Financial assistance. (vii)Follow up and Counseling. This is a technical management consultancy Organization. It was promoted by all-India financial institutions and state Corporations. It undertakes assignments for project planning, detailed engineering, market surveys, management surveys and entrepreneurship development programmes. The programme consists of the following stages: (i)Identification of industrial opportunities in the target area. (ii)Advertising and promoting the programmes to attract applicants. (iii)Selection of the participants. (iv)Training, using lectures and practical instruction in the identified project. (v)Follow up with industrial development and financial institutions. This Centre was organized as registered society by a number of prominent industrialists, businessman, bankers, professionals and social workers. It was setup in response to rapidly increasing unemployment and social unrest in Calcutta during the early 1970s. It began as a vocational programme to provide self employment for educated youths. It has developed innovative approaches to help people set up their own business. The main programme are explained as follows: (i)Training in producing enterprise. (ii)Assistance in drawing up a business plan. (iii)Assistance in securing bank loans. (iv)Arranging initial business contacts for their service and production. Access to high quality consultancy services improves the operational efficiency of entrepreneurs. All India financial
institutions have set up TCOs to provide industrial consultancy and training to entrepreneurs. These organizations provide a comprehensive package of services. Ans. In an entrepreneurial development programmes, the target group refers to the group of the persons for whom the programmes is design and undertaken. Every target group has its own needs and constraints. Therefore, the programmes designed for one group might be (4)Madhya Pradesh Consultancy Organization Ltd. : (5)Calcutta "Y" Self Employment Centre : (6)Technical Consultancy Organizations (TCOs) : Q.Write a short note on Target Group.
An executive development programmes may be organized for any one of the following target groups:This group consists of those persons who have pursued technical and allied courses of study.inappropriate for others groups. Before the programmes is designed and started the target group to be trained must be clearly defined. These persons have acquired many useful skills and experience during their service period. Therefore they can become successful entrepreneurs after proper entrepreneurial training.C and S. The training programmes for such people may be design to enable and assist them in setting up their own manufacturing units. Government agencies give preference to S. The industries selected for this purpose may be directly related with their qualifications and experience. But all persons from these groups cannot be offered employment. For instance degree/ diploma holders in science. Therefore specified percentage of jobs has been reserved for these castes. Some among them are not satisfied with their present economic and social status. Some of them have certain innovative ideas which they are not able to try in their existing firms due to lack of sufficient authority. Some business executives want to start their own independent enterprise after getting sufficient business experience. They tend to be highly disciplined. agarbati.T). Women are entering the business especially traditional food processing industries like spices.governments organizations organizing entrepreneurial training programmes for women. Several Governments and non. Persons who have retired from the army. navy and air force constitute an important group for entrepreneurial training. Government of India is committed to be upliftment of scheduled castes (S.T entrepreneurs in providing finance and other necessary facilities. papad etc. The government of India has been established . engineering and innovative. hardworking. After entrepreneurial training senior business executives can become successful entrepreneurs. engineering and technology are in important group in India.C) and Scheduled Tribes (S.
develop and assist entrepreneurs.specialized agencies for training entrepreneurs. S. The main thrust of the new small 1.Serviceman : 3.Business Executives : 4.Women Entrepreneurs : 5. Ans.Explain the Government Policy towards Small-Scale Industries (SSI's). Government Policy : An Effort to Strengthen the Small-Scale Industries in India 189 ENTREPRENEURIAL DEVELOPMENT .Technical and other qualified Persons : 2. T Entrepreneurs : 6. 1991. in Parliament on August 6. Special schemes have also been launched to train.C and S. Tiny and Village Enterprise.Special agencies and Schemes : Q.Ex. The government of India for the first time tabled the new small enterprise policy in titled 'Policy Measures for Promoting and Strengthening and Supplementing Small.
To set up a Technology Development Cell in the small industries development organization.To widen the scope of the National Equity Fund (NEF) to enlarge the single window scheme and also to associate commercial banks with provision of composite loans. 5 Lakhs.Setting up of an Export Development Center in the small industries development organization.Increasing in the investment limit in plant and machinery of tiny enterprises from Rs. employment and exports. particularly in terms of growth of output.Market promotion of small-scale industries products through co-operative/public sector institutions.To introduce a limited partnership act. other specialized professional/marketing agencies and the consortium approach.Introduction of factoring services to help solve the problems of delayed payments of small-scale sector.To accord priority to small and tiny sector ion the allocation of indigenous raw materials. .Inclusion of industry related service and business enterprises. 1. 5. 2 Lakhs to Rs. 9. 7.enterprise policy was to impart more vitality and growth impetus to the sector to enable it to contribute its mite fully to the economy. This would limit the financial liability of the new enterprises to the capital invested. irrespective of their location as small-scale industries. 4. The new policy was founded on a proper understanding of the fundamental problems of the small-scale sector and the measures proposed by it have integrated the various handicaps that face this sector.Introduction of a scheme of integrated infrastructural development for small-scale industries. 8. 3. 10. 6. 2. The sector had been substantially licensed and concerted efforts were made to regulate and debureaucratize the sector with a view to remove all fetters on its growth potential on the one hand and reposing greater faith in small and new enterprises on the other. irrespective of the location of the enterprise.
but the returns are either The salient features of the price policy were : Taxation Benefits : Boon for the Growth of SSI (1)Need for tax benefits : 190 .Small-scale industries are characterized by their limited and scarce resources/capital. The first thousand days seems to be as critical in small business as in administration. In the beginning. small industries have to incur more expenses. In fact. The former needs support and the latter indoctrination for survival. it will) seems to operate without fail. small business in such a sensitive field where Murphy's Law (if anything can go wrong. These make them sensitive.
(ii)The unit should employ ten or more workers in a manufacturing process with power. and plough back profits in business. One way to support the development of small-scale industries by the government is to provide them tax benefits. an additional allowance called 'Extra Shift Allowance' is available. The amount of depreciation is calculated by the diminishing balance method. or at least twenty workers without power. new industrial undertakings. 1961. including small-scale industries. (i)The unit should not have been formed by the splitting or reconstitution of an existing unit. This helps small industries accumulate capital. A small-scale industry should satisfy the following conditions before it becomes eligible for deduction in depreciation: . The various tax benefits available to small-scale industries are now enumerated and discussed one by one. Therefore. are exempted from the payment of income-tax of their profits subject to a maximum of6% per annum of their capital employed. the government needs to come forward with various benefits to offer to smallscale industries in the country. on the one hand. Under section 80J of the Income Tax Act. 1961. The government either exempts them from tax or provides concession in tax liability. If this becomes uncontrollable. on the other. deduction from the actual cost of plant and machinery is allowed subject to a maximum of rupees 20 Lakhs. a small-scale industry is entitled to a deduction on depreciation on block of assets at the prescribed rate. In the case of the small-scale industry. depreciation is calculated on its written down value. For plant and machinery that are used in manufacturing in double or triple shift. Under section 32 of the Income Tax Act. This exemption in tax is allowed for the period of five years from the commencement of production. Hence. In case of an asset acquired before the accounting period.nil or nominal. A small-scale industry has to satisfy the following two conditions to avail of this tax exemption facility. the unit may fall sick and needs rehabilitation before it is actually anticipated. they need to be provided support and assistance to tide over the crucial initial stages to enable them to survive.
(i)The asset must be owned by the assessee. 1961. (iv)All the prescribed particulars must be furnished to the income-tax officer as required under section 34(1) of the Income-Tax Act. (iii)Depreciation allowance or deduction is allowed only on fixed assets. (ii)The asset must actually be used for the purpose of the assessee's business of profession. machinery. plant and furniture.e. building. A rehabilitation allowance is granted to small-scale industries under section 33-B of the Income-Tax Act. i. 1961.. The allowance is give to those small businesses that had to suffer on account of the following reasons: (2)Tax Holidays : (3)Depreciation : (4)Rehabilitation Allowance : 191 ENTREPRENEURIAL DEVELOPMENT .
A small-scale industry can avail of investment allowance provided it has put to use machinery or plant either in the year of installation or in the immediate following year.(i)Flood. In comparison with other industries are at an advantage in claiming a deduction of investment allowance. The investment allowance under the section 31A of the Income-tax Act. Although the investment allowance has been made available for the article or things except certain items of low priority. the undertaking of scientific research. Cyclone. yet. 1961. Under the section 35 of the Income Tax Act 1961. falling which the benefit will be forfeited. The rehabilitation allowance should be used for the business purposes within three yearsof the unit's re-establishment reconstruction of revival. a special dispensation has been provided for the plant and machinery installed in small-scale industries. as per the 11th schedule to the Income Tax Act 1961. (iii)Any capital expenditure incurred on scientific research related to the business of the assessee subject to the provision of section 35(2) of the Income Tax Act. (ii)Riot or civil disturbance Accident fire or explosion (iii)Action by an enemy or action taken in combating an enemy. The rehabilitation allowance is allowed to the unit equivalent of 60% of the amount of the deduction allowable to the unit. 1961. the following deductions in respect of expenditure on scientific research are allowed: (i)Any revenue expenditure incurred on scientific research related to the business of the assessee in the previous year. . is allowed at the rate of 25% of the cost of acquisition of new plant or machinery installed. institutions or to a public company which has as its object. earthquake or other natural upheavals. The investment allowance was introduced way back in 1976 to replace the initial depreciation allowance. college. (ii)Any sum that it pays to a scientific research association or a university.
It is more so in the context of ever increasing competition in business brought about by liberalization. etc. Further. and become weaker. small enterprises find it more difficult to face competencies. The small businesses generally lose out on this platform. The question then arises-how to develop competitive strength among small enterprises to meet competition effectively? The answer to this question is 'quality'.It is easy to start small enterprises but difficult to make them survive. Only those enterprises can survive that possess enough strength to face the stiff and complex competition. globalization and privatization of the Indian economy. (5)Investment Allowance : (6)Expenditure on Scientific Research : (7)Greater Attention on TQM in Small Enterprise : 192 .
machine of another and raw material of yet another to combine them to produce goods. etc. (ii)By providing more time for innovation and creativity. But entrepreneurship is encouraged if there is a mobile and flexible labour force. This results in increase in profit which ultimately goes to capital formation. The economic factors that affect the growth of entrepreneurship are the following: Capital is one of the most important perquisites to establish an enterprise. capitaloutput ratio also tends to increase. Most less developed countries are labour rich nations owing to a dense and even increasing population. regarded as lubricant to the process of production. Various entrepreneurial inputs influencing the entrepreneurship are as follows: Economic environment exercises the most direct and immediate influence on entrepreneurship. A quality certification scheme was launched in 1994 to improve the quality standards of SSI products which are to be assisted by awareness programmes and financial support to acquired ISO 9000 or similar international quality standards. Our accumulated experience suggests that with an increase in capital investment. TQM can help strengthening of small enterprises in the following manner: (i)By increasing efficiency in processes.In aggregate. (iii)Boosting the morale of employees (iv)Improving the quality of products and services (v)Enhancing customer satisfaction (vi)Snatching higher market share (vii)Generating higher productivity (viii) Achieving higher profits. Capital is therefore. And. This suggests that as capital supply increases. The quality rather quantity of labour is another factor which influences the emergence of entrepreneurship. entrepreneurship also increases. Availability of capital facilitates for the entrepreneur to bring together the land of one. the potential .
Entrepreneurial Input : (A)Economic Inputs : (1)Capital : (2)Labour : (3)Raw Material : 193 ENTREPRENEURIAL DEVELOPMENT .advantages of low-cost labour are regulated by the deleterious effects of labour immobility. therefore often find difficulty to secure sufficient labour. The considerations of economic and emotional security inhibit labour mobility. Ans. The necessity of raw materials hardly needs any emphasis for establishing any industrial activity and its influence in the emergence of Q.Write a note on Entrepreneurial Input. Entrepreneurs.
but expend the horizons of business too. the establishment of post and telegraph system and construction of roads and highway in India. Expansion of entrepreneurship presupposes properly developed communication and transportation facilities.e. type of family and economic status of family. Practically. The size and composition of market both influence entrepreneurship in their own ways. the proof of all function lies in consumption. Of course. By 'social mobility' we mean the freedom to move from one caste to another. The main components of social environment are as follows: There are certain cultural practices and values in every society which influence the actions of individuals. marketing. It not only helps to enlarge the market. Frankly speaking. In fact it was the highly helpful society that made the industrial revolution a glorious success in Europe. In a study by Hadimani.entrepreneurship. The caste system does not permit an individual who is born a Shudra to move to a higher caste. monopoly in a particular product in a market becomes more influential for entrepreneurship than a competitive market. These practices and value have evolved over hundred of years. consider the caste system (the varna system) among the Hindus in India. it has been revealed that Zamindar family . The fact remains that the potential of the market constitute the major determinant of probable rewards from entrepreneurial function. technological innovation can compensate for raw material inadequacies. It has divided the population on the basis of caste into four divisions: The Brahmana (Priest) The Kshatriya (Warrior) The Vaishya (Trade) The Shudra (Artisan) It has also defined limits to the social mobility of individuals. i. neither any enterprise can be established nor can an entrepreneur be emerged. This facto includes size of family. in some cases. if the proof of pudding lies in eating. In the absence of raw materials. For example. Social factors can go a long way in encouraging entrepreneurship. Take for instance.
helped to gain access to political power and exhibit higher level of entrepreneurship. Education enables one to understand the outside world and equips him with the basic knowledge and skills to deal with day-to-day problems. the system of education has a significant role to play in inculcating entrepreneurial values. Backgroud of a family in manufacturing provided a source of industrial entrepreneurship. (4)Market : (5)Infrastructure : (B)Social Inputs : (1)Caste Factor : (2)Family Background : (3)Education : Ø Ø Ø Ø 194 . In any society. Occupational and social status of the family influenced mobility.
McClelland attributed this to sociological factors. and thus approve entrepreneurs' actions and rewards like profits. had this characteristic. The strength of these motives depends upon the culture of the society. Entrepreneurial growth requires proper motives like profit-making. some societies tend to reproduce a larger percentage of people with high 'need achievement' than other societies. Similarly. Certain societies encourage innovations and novelties. Motives impel men to action. Certain others do not tolerate changes and in such circumstances. wealth accumulation as a way of life would be appreciated. Many entrepreneurial theorists have propounded theories of entrepreneurship that concentrate especially upon psychological factors. especially those who became entrepreneurs. Moreover. There are several other researchers who have tried . especially when reinforced by cultural factors.(4)Attitude of the Society : (5)Cultural Values : (C)Psychological Inputs : (1)Need Achievement : (2)Withdrawal of Status Respect : (a)Retreatist : A related aspect to these is the attitude of the society towards entrepreneurship. acquisition of prestige and attainment of social status. He found that certain kinds of people. Differences among societies and individuals accounted for 'need achievement' being greater in some societies and less in certain others. entrepreneurship cannot take root and grow. Ambitious and talented men would take risks and innovate if these motives are strong. According to McClelland 'need achievement' is social motive to excel that tends to characterize successful entrepreneurs. entrepreneurship would be applauded and praised. These are as follows: The most important psychological theories of entrepreneurship were put forward in the early 1960s by David McClelland. some societies have an inherent dislike for any money-making activity. If the culture is economically or monetarily oriented.
He further postulates that withdrawal of status respect would give rise to four possible reactions and create four difference personality types: He who continues to work in a society but remains different to his work and position. (b)It may have its valued symbols denigrated. Hagen says. Hagen attributed the withdrawal of status respect of a group to the genesis of entrepreneurship. He postulates that four types of events can produce status withdrawal: (a)The group may be displaced by force. 195 ENTREPRENEURIAL DEVELOPMENT . and (d)It may not be accepted the expected status on migration in a new society. at some point many social groups experience a radical loss of status. One such individual is Everett Hagen who stresses the psychological consequences of social change. (c)It may drift into a situation of status inconsistency.to understand the psychological roots of entrepreneurship.
fate and so on. Cole is the opinion that besides wealth. (c)Controlling entrepreneurs. (a)Managing entrepreneurs whose chief motive is security. On the same subject. and He is a creative individual and is likely to be an entrepreneur. who above all otter motives want power and authority.(b)Ritualist : (c)Reformist : (d)Innovator : (3)Motives : (4)Others : He who adopts a kind of defensive behavior and acts in the way accepted and approved in his society but no hopes of improving his position. here is what psychologists call 'Type A' behavior. He is a person who foments a rebellion and attempts to establish a new society. Thomas Begley and David P. This is nothing but "a . Boyd studied in details the psychological roots of entrepreneurship in the mid 1980s. power and regard of the society. (iii)The third dimension is the willingness to take risks. Stepanek points particularly to non-monetary aspects such as independence. (v)Finally. Evans distinguishes motive by three kinds of entrepreneurs. prestige. (b)Innovating entrepreneurs. (ii)The second dimension is that Begley and Boyd call 'locus of control' This means that the entrepreneur follows the ideas that he can control his own life and is not influenced by factors like luck. (iv)Tolerance is the next dimension of this study. entrepreneurs seek power. Other psychological theories of entrepreneurship stress the motives or goals of the entrepreneurs. security and service to society. who are interested only in excitement. They came to the conclusion that entrepreneurial attitudes based on psychological consideration have five dimensions: (i)First came 'need-achievements' as described by McClelland. person's self-esteem.
chronic. incessant struggle to achieve more and more ion less and less of time" Entrepreneurs are characterizing by the presence of 'Type A' behavior in all their endeavors. 196 .
They prefer the challenge of working at a problem and accepting the personal responsibility for success or failure. 1. They want to do something better and more more efficiently than it has done before . to strive for success and to achieve in relation to a set of standards.Need for achievement through self study. MBA 1st Semester (DDE) . and by the individual's exercise of choice. in turn is influenced by the way in which the external world is represented in the mind. they dislike succeeding by chance. High achievers are not motivated by money . rather than leaving the outcome to chance or the actions of others.From the researches into the area of achievement need McCelland found that high achievers differtiate themselves from others by their desire to do things better.Concrete measures of task performance.following are the points which explains that how entrepreneurial motivation influences entrepreneurial behavior. This drive is the achievement need (n-ach) . David McCelland has developed an Achievement Motivation Theory in the early 1960. They like to take personal responsibility for solving problems and want to know how well they are doing . They seek situations where they can attain personal responsibility for finding solutions to problems . goal setting and interpersonal support 2. Behavior.It is the drive to excel . where they can receive rapid feedback on their performance so they can set moderately challenging goals .Keen interest in situations involving moderate risk.According to this theory an individuals need for achievement refers to the need for personal accomplishment . High achievers are not gamblers. 4. 1.Explain that key to entrepreneurial behaviour is entreprenurial motivation. Such people strive for personal achievement rather than the rewards of success.NEED FOR ACHIEVEMENT The following psychological factors contribute entrepreneurial motivation:Psychology can be distinguished from other behavioral sciencesby its emphasis on the behavior of the individual person. 3. People with high achievement motive like to take calculated risk and want to win.Q.Desire for taking personal responsibility. Ans.
ENTREPRENEURIAL DEVELOPMENT UNIT – III 197 .
Individuals who are reluctant in believing in their ability to control the environment though their actions. Rotter believed that the need for achievement is related to the belief of internal locus of control.Anticipation of future possibilities. In particular. as cited in Chell. or powerful people. as cited in Shabbir and Gregorio. an individual risks financial well-being. 1991). or as part of a wider social learning theory of personality. risk and flexibility. people with an external locus of control sense that fate. whether positive to desirable events. In contrast. 1982) and Likes (1974. has a dominating influence over their lives (Chell and Colleagues. as cited in Kent and Sexton. 1996) speculate that in becoming an entrepreneur.5. 1991) developed the notion of control of reinforcement reinforcement /re·in·force·ment/ (-in-fors´ment) in behavioral science. would also be expected to be reluctant to assume the risks that starting a business entails Rotter (1966. People with an internal locus of control are those individuals who also believe themselves to be in control of their destiny (Chell. the presentation of a stimulus following a response that increases the frequency of subsequent responses. in the form of chance events outside their control. and colleagues. Risk bearing is a prime factor in the entrepreneurial character and function. Haworth and Brearley. Rotter hypothesized that individuals with internal beliefs would more likely strive for achievement than would individuals with external beliefs. The level of uncertainty involved in an entrepreneurial venture indicates that individuals drawn to such lines of business will possess a certain level of risk taking propensity.Energetic or novel instrumental activity. career opportunities. 1991). 6. Researchers such as Palmer (1971. Hull and colleagues (1980) found that the personality characteristics most important in identifying entrepreneurial types of individuals are (1) functional task preference and (2) personality constructs of creativity.Organisational skill Closely related to the concept of a high need for achievement is the belief in an internal locus of control. 7. family relatives and psychic well being. Any consideration of personality characteristics of the entrepreneur must entail .
the principles of right and wrong that are accepted by an individual or a social group. Value orientation. value-system 2. "the Puritan ethic".LOCUS OF CONTROL 3. The object of entail is to preserve large estates in land from the disintegration that is caused by equal inheritance by all the heirs and by the ordinary an examination of their value systems.RISK TAKING 4.restriction of inheritance to a limited class of descendants for at least several generations.VALUES 198 . "a person with old-fashioned values" ethic. moral principle.
From the researches into the area of achievement need McCelland found that high achievers differtiate themselves from others by their desire to do things better. 1982).One of the major studies of personal values of entrepreneurs was done by Hornaday and Aboud (1971. They like to take personal responsibility for solving problems and want to know how well they are doing . Innovation and problem solving capabilities are expected to be the core of the entrepreneurial capability of an entrepreneur. Such people strive for personal achievement rather than the rewards of success. since it is successfully taking an idea or invention to market. as cited by Sexton and Smilor. But the level of innovation is dependent upon the entrepreneur's formal education and managerial experience. Gartner (1989) refers to innovation as the central value of the entrepreneurial behavior. The researchers found that entrepreneurs scored significantly higher than the general population reflecting the need for achievement. to strive for success and to achieve in relation to a set of standards. Their study of 184 firms in the Midwest showed a correlation between a higher level of managerial experience and more years of education with a higher level of innovation David McCelland has developed an Achievement Motivation Theory in the early 1960. This drive is the achievement need (n-ach). Thus it is concluded that values may be effective in distinguishing successful entrepreneurs from the general population. High achievers arenot motivated by money .It is the drive to excel . They prefer the challenge of working at a problem and accepting the personal responsibility for success or failure. People with high achievement motive like to take calculated risk and want to win. They want to do something better and more more efficiently than it has done before . rather than leaving the outcome to chance or the actions of others. where they can receive rapid feedback on their performance so they can set moderately challenging goals . High achievers are not gamblers. They seek situations where they can attain personal responsibility for finding solutions to problems . they dislike succeeding by chance. .According to this theory an individuals need for achievement refers to the need for personal accomplishment .
Ans. goal setting and interpersonal support 2. 3. Introduction : The following psychological factors contribute entrepreneurial motivation : 199 ENTREPRENEURIAL DEVELOPMENT .PROBLEM SOLVING STYLE AND INNOVATIVENESS Q.Keen interest in situations involving moderate risk.Need for achievement through self study. 5.Discuss that n.1.Desire for taking personal responsibility.achievement theory of motivation is the key to management success.
Begley (1995) and Hornaday and Aboud (1971) consistently found that the achievement motivation exists as a stable characteristic and is more prevalent among entrepreneurs when compared to others. 5.4. The predictive power of a scientific theory refers to its ability to generate testable predictions. while in others it has a certain negative stigma There is however some empirical support for the idea that entrepreneurs have a higher motive to achieve compared to non-entrepreneurs.Organisational skill The researchers have criticized McClelland's achievement motivation theory of entrepreneurs over the last three decadOes. Other criticisms of McClelland's achievement motivation theory on entrepreneurs look at the attempt to relate economic development to the prevalence of achievement imagery (Chell. Ans. The traditional approach to rural development was 'top-down' meaning that central development authorities designed programmes which brought in infrastructure. as cited in Sexton and Smilor.Anticipation of future possibilities. 6. it did not necessarily provide a long term growing economic base. Theories with strong predictive power are highly valued.In some cultures. While the investment in infrastructure and extension services was clearly beneficial in attracting basic commercial activities and increasing the quality of life in rural areas. Haworth and Brearley. The author has pointed out that McClelland's empirical research did not directly connect need for achievement with the decision to own and manage a business.Concrete measures of task performance. failure is seen as a positive learning experience. 1986) questioned the predictive power. The new approach which emerged over the past decade is the development 'from below'. Many rural areas were not beneficiaries of such schemes.Energetic or novel instrumental activity. since many projects were too expensive to implement in all rural areas. 7. 1991). The cultural basis of the achievement is motive . It stressed the importance of community development based on local . because the predictions can often encourage the falsification of the theory. Most notably. Brockhaus (1982. human capital and investment from outside the rural community.of the theory.
entrepreneurial initiatives.Explain the concept of entrepreneurial success in rural area in detail. with the explicit goal to ensure balanced technological development of rural areas which would offer adequate employment opportunities and a quality of life comparable to urban areas. it is necessary to increase the supply of entrepreneurs that is to build up the critical mass of first generation entrepreneurs who will take risks and accept the uncertainties of new Q. This approach assumes that the development of rural areas is based on stimulating local entrepreneurial talent and subsequent growth of indigenous companies. to accelerate economic development in a rural area. Specifically. 200 .
guarantees. the community should create and foster the development of institutions and a variety of partnerships to support local development. subsidies on public utility charges and the like. Among the most important are: institutions of education and training. Today we are witnessing many examples of institutional developments that are fostering businesses and community collaborative efforts-while nurturing positive government/academic/business relationships in promoting economic growth. As experience shows. inter-firm institutions and financial institutions. In rural areas they can act as agents of change. following are the requirements of entrepreneurial success in rural area: One of the principal challenges of economic development of rural areas is the development of a socio-economic environment that would be attractive to people. tax concessions. personal and organizational networks are very effective in achieving broad and fast growing regional economic development. To support such development. This in turn requires an environment favourable to entrepreneurship which a community basically can create in two ways. They help to create a capable labour force and to maintain a skilled work force in the community. the community must develop links among key institutions. The role of institutions of education in rural development is of crucial importance. such as: • redesigning curricula to teach students high level skills and those skills that would help . These incentives usually include favourable investment conditions. Second. all available and hidden development potential of the local community must be mobilised. Such institutions and their collaborative efforts should play a significant role in rural communities/regions where the development strategy of the rural community places entrepreneurship in the centre of economic development. First. export subsidies. To meet this challenge.venture creation and who will by their example stimulate an autonomous entrepreneurial process thereby ensuring continuous rural development. the community should utilise all the available incentives provided by the government to stimulate the development of economically depressed areas. employment provisions. low interest rates. a vibrant entrepreneurial spirit and a commitment and dedication to risk taking and risk sharing.
to up-grade businesses. especially with universities outside the rural region in order to bring into the region technical expertise available Public-private institutions partnership Institutions of Education 201 ENTREPRENEURIAL DEVELOPMENT . • developing and implementing programmes to improve the competitiveness of local firms and their ability to expand into new markets. and • developing links with other higher educational institutions. • developing technical training programmes to provide people with basic skills for jobs required by local businesses.
The business incubator presents a rather unique approach to economic development. different non-profit seeking organizations facilitating networking and business support centres are one of the most successful ones promoting the growth of new and existing enterprises. The business incubator has emerged as a solution to the high failure rates among new firms. 1987). Therefore.W. administrative and business expertise and facilities which are available to entrepreneurs below or at market rates. R. not because they are not innovative enough but because in their early stage they have difficulty in competing. These institutions can significantly contribute to rural development because of the following: Business incubators are a facility designed to assist the development of new enterprises (Smilor. business luncheons and different types of activities for the purpose of networking. Many new firms fail. They organize conferences. they thus seek to give form and substance.. Among different inter-firm institutions. structure and credibility to emerging ventures. industrials parks. They help entrepreneurs by providing them with services which support and compliment their own talents and abilities. the basic concept of the incubator is to nurture entrepreneurial activities so as to provide startups with the necessary services and support until they mature and are ready to enter successfully into the competitive business environment. Unique in the sense that it is an independent enterprise whose business is the process of 'incubating' enterprises. The entrepreneurs receive not only help regarding the management of their enterprises but also other services such as provision of financial assistance and training. The business incubator industry was one of the fastest growing industries in the late . to new community enterprises. They create a good business climate inside the incubator and ensure a constant inflow of moral and financial support. As such. Their support system usually includes secretarial. business incubators. or to stimulate new entrepreneurship in the community. Efforts to support and enhance existing businesses within a community and to promote new enterprises in a community can be most successfully earned out through different inter-firm institutions.outside the region and which could be beneficial to the existing businesses in the region.
Initially.A. Inter-firm Institutions Business Incubators 202 .eighties in the U.S. were publicly supported by communities or states and public funds covered practically all investment and start-up costs. Nearly every regional development programme includes the development of the incubator network.S.A. especially in those regions which had experienced economic decline and severe job losses due to the closing down of industries. practically all incubators in the U.
. • Meet particular local employment needs. • Provide job opportunities for high-tech graduates. • Attract to the area. • Intensify training programmes to build the vocational skills of its members.Incubators in a rural area can be designed for a number of purposes to: Industrial Parks Institutions Facilitating Networking • Encourage skilled and professional people who have left the community to come back to the region to start new companies. • Foster greater access to capital for start-up firms. • Promote specific types of businesses. • Nurture a pool of potential growth enterprises through equity investments. diversify product lines and markets and expand. • Help develop flexible manufacturing networks of co-operatives and other manufacturing businesses. • Develop and produce a particular product that none of the firms could manufacture alone. laid-off skilled labour from nearby town. and • Develop ways by which technical engineering and management expertise from outside the enterprise can help start-ups to develop.
by customisable layouts that could be rearranged over time to meet user needs in a flexible way and by the final price which should be much lower than the price of equivalent buildings in other. communities could establish industrial parks by purchasing marginal agricultural property at the market price and converting it to industrial purposes in order to accelerate entrepreneurial restructuring of rural communities. Communities could increase the attractiveness of industrial parks to potential entrepreneurs by delivering conventional common infrastructural services. The benefits could be grouped into those resulting from reducing the problems of isolation in the process of starting-up. Networking among firms in the industrial park is a common outcome. those resulting from economies of scale as overhead functions among firms in the network are shared and those due to the aggregation of production of small firms with the same or compatible production and due to large scale purchases of equipment and raw material.Business incubators are usually established by private initiative with the financial assistance from the federal. They usually perform the following tasks: 203 ENTREPRENEURIAL DEVELOPMENT . As an unemployment-reducing effort and/or for revitilizing the community economic base. These are non-profit seeking associations. especially urban. The firms in the industrial park benefit in several ways through networking. areas. state and local governments and private sector contributions. registered or non-registered which facilitate networking between small firms located in the same region2.
1989.• Promote co-operation between small firms in the network. • Provide different services in the areas of finance. p.and • Provide common services of daily matters in production and administration in order to reduce transaction costs. marketing. 19): • Assistance to start-ups: business planning and finance. sales. p. • Assistance to business partnership: sub-contracting of local firms with larger enterprises outside the community. They provide different types of services according to the needs of the three different clients (Small Business Administration. thus promoting their competitive efficiency. Networking among small firms permits aggregation of production. Business support centres can be established to meet the needs of start-ups. identifying franchising opportunities to the potential local entrepreneurs. . • Assistance to emerging and established businesses: management skills in the areas of finance.6). marketing and administration. facilitates shifts from product to product and market to market and leads to important economies of scale as overhead functions are shared (Hatch. research and development. production by spinning off auxiliary production units. enables specialised firms jointly to manufacture finished products. Business support centres can be part of the local government or semi private institutions or for non-profit private organizations. They can also be established at the community colleges or at the university to help small business owners learn necessary business skills at low cost. large scale purchases. emerging or established businesses. attracting spin-offs from fast growing firms or firms who are rationalising.
the community leadership must encourage existing institutions to link new start-ups or potential entrepreneurs with such institutions outside the community.Communities should support the development of a strong venture capital base and risk capital networks specialising in funding new entrepreneurial activities. Business Support Centres Financial Institutions 204 . They should also be responsible for screening all financial schemes existing in the country for the development of new enterprises and for the growth of existing ones. Potential entrepreneurs must have access to information such as: which are the state financial agencies. special attention must be given to the creation of institutions that provide seed financing and startups targeted venture capital and are engaged in equity financing. Seed financing could be an important bottleneck for new enterprise creation. For this reason. issue tax free bonds. banks that provide guarantees. If it would be difficult for such institutions to be attractive to a rural community.
the lead organization responsible for designing and carrying out the development strategy based upon identification of an area's major problems (lack of job opportunities. What is crucial is the development of personal and organizational networks which combine otherwise individual efforts into a comprehensive approach to regional development of rural areas. It should support the creation of new agencies if ongoing implementation of a development strategy so requires. it is important to identify or to establish the principal community civic agency. Personnel should also include representatives of the major enterprises in the region. local development private or public agencies.). inability to increase local economic opportunities. The key to the evolution of economic development based on a partnership approach is the leadership that could come either from the local government or from already existing successful private companies. inability to create effective community infrastructure. bringing together public and private initiative to attain common community goals. Therefore. educational institutions and the like. . inability to meet the local business needs. etc. in order to develop programmes that would address the key barriers to community development: human and financial capital drain. etc. inability to encourage new enterprise formation.'? The impact of institutions discussed earlier on rural economic development will increase if the individual efforts of those institutions are combined into a co-ordinated action. substandard housing. It should focus on broad community concerns and co-ordination of separate efforts in the region. the task of community leadership is to encourage close co-operation among different institutions supporting rural development. community civic organizations. etc. Therefore.direct loans to smaller enterprises or to Consortia of enterprises? What type and how many economic development funds are available? Who provides favourable investment financing for the equipment and working capital? Which development corporations finance new and expanding businesses'? What state funds are available for small and medium sized enterprise development. deteriorated social infrastructure. inefficient use of natural and productive resources. both public and private. This organization should act as a planning and brokering organization. universities and research and development institutions.
The role of public policy is therefore to continually find ways to implement critical success factors of economic development. Economic development of rural areas cannot be an exception in this respect. It takes cross-institutional networking. practical mechanisms for risk taking and risk sharing in the early and most uncertain stages of entrepreneurial ventures and an organizational system conducive to growing new and existing businesses.Economic development in general requires more than just a proper macro economic environment. Public-Private Partnership Conclusions 205 ENTREPRENEURIAL DEVELOPMENT . In addition it demands institutional framework conducive to economic development.
income levels. A promoter can then find out the most profitable line of business. From the data collected through market observation.Q. one can identify the products industries which are in demand and which require increase in supply. Finally he manages his enterprise expanding. Market surveys can also reveal the demand and supply position for various products. competition and price trends can also be found through market surveys. In order to establish an entrepreneurial system an entrepreneur needs to take the following steps:The first step of entrepreneurial system is search for business ideas. Consumers knows best what he wants and the . visits to trade fairs and exhibitions. The idea may originate from various sources e.Search for Bbusiness Ideas : 2.g.Sources of Ideas : (i)Observing Markets : (ii)Prospective Consumers : (iii)Development in other Nations : 3. demand for certain products. success story of a friend or relative. so that it may be exploited.How an entrepreneurial system can be established? Ans. 1.Study of Projects Profiles : (i)Government Organizations : An entrepreneur perceives an opportunities for marketing a product or services. growing or diversifying over a period of time. A business idea may be discovered from the following sources:Careful observation of markets can reveal a business idea. The idea may relate to the starting of a new business or to takeover of an existing enterprise. meetings with government agencies etc. study of project profiles and industrial potential surveys. It is necessary to estimate future demand and to take into account anticipated changes in fashions. technology etc. the idea should be sound and workable. Then he establishes a business unit on the basis of his/her perception.
washing machines. Therefore. These profiles describe in detail the technical. which are now the“In things”in India were being used in the united states and Europe. Various government and private agencies publish periodic profiles of various projects and industries. Contacts with prospective consumers can also reveal the features that should be built into a product/service. People in underdeveloped countries generally follow the fashion trends of developed countries for example video. 206 . micro ovens etc.habits/tastes which are going to be popular in near future. state industrial development/investment corporations. financial and market requirement and prevailing position a careful scrutiny of such project profiles is very helpful in choosing the line of business. Several government organizations now-a-days assist entrepreneurs in discovering and evaluating business ideas. an entrepreneur can discover good business idea by keeping in touch with developments in advanced nations. These days good business firms generally conduct a survey among prospective consumers before choosing the product to be manufactured. Development banks.
A number of calculations have to made about the likely demand. labour skills and saw materials. Trade fairs and exhibitions provide opportunities for assessing the market trends in terms of demand potential and type of products required. cost of production. the promising idea is subjected to a thorough analysis from all angles. expected sales volume. marketing and other areas of business.technical consultancy organizations. After the evaluation of a business idea is completed. The following considerations are significantly in the evaluation and testing of business ideas. This report helps in the . After preliminary evaluation of the idea. An elaborate study of market conditions and prevailing situation is made to assess the viability and prospectus of the proposed projects. financial. machinery and equipment. A visit to these fairs provides information about new products/machines. At this stage a lot of information is required. export promotion council etc. Technical feasibility of an idea is judged in terms of availability of necessary technology. It refers to the possibility of producing the product. selling price. Government also identifies the priority sectors for investment through five year plans. Full investigation is carried out in the technical feasibility and economic viability of the proposed project. National and international trade fairs are a very good source of business ideas. It also assessing the attitude of the competitors in a particular product or marketing area. Consultations with experts in various areas of the industry may be necessary to carry out the detailed analysis. Once business ideas are discovered. screening and testing of these ideas is done. Financial and managerial feasibility of the idea are tested. break even point etc. industrial policy resolution guidelines for industry. The advice and assistance of technical experts may be necessary to judge the technical feasibility of various business ideas. A cost benefit analysis is required to ascertain the profitability if the ideas. the finding are presented in the form of a report known as“feasibility report”or project report. provide advice and assistance in technical.
Idea Selection 207 ENTREPRENEURIAL DEVELOPMENT .final selection of project. Generally the following considerations influence the selection of idea for a product or service:(i)Products whose imports are banned or restricted by the government. finance etc from governmental agencies. (ii)Products which can be exported exceeds easily and profitability. (iii)Products whose demand exceeds their supply so that there exists ready demand.Technical Feasibility : 6. It is also useful for procuring licenses. : The feasibility report is analyzed to finally choose the most promising idea. (ii)Trade Fairs and Exhibition : 4.Process the Ideas : 5.Commercial Viability : 7.
plant and machinery. collect the required finances and acquire land and buildings. (vii)Products based on the expansion or diversification plans of existing firms of the family/friends/relatives. layout etc. After considering the various factors a entrepreneur should analysis and compare pros and cons. An entrepreneur has to make the following decisions concerning the personnel. The main inputs required for launching an enterprise are as follows:In the turbulent business environment. Once the promoter is convinced of the feasibility and profitability of the project he assembles the necessary resources to launch the enterprise. Price cost volume relationship. employees etc. Volume and source of supply. patents. It also throws light on how each item can hold out some encouraging and some discouraging factors. The entrepreneurial selection needs to take all these factors into account. Decisions have to be made about the size. of the enterprise.(iv)Products which showed high profitability. (iii)Amount and sources of funds required for the enterprise. A selection matrix may be prepared for this purpose. (v)Products for which incentives and subsidies are available. (ii)Number and type of personnel required and their sources. He has to choose partners/collaborates. An entrepreneur requires relevant data on the following aspects:Size and nature of demand for the product/service. People are the most valuable asset of an enterprise and this asset does not depreciate. Sources of raw material. location. furniture and fixtures. Nature and degree of competition. . (vi)Products favoured by the country’s industrial/licensing policy. information and intelligence have become the key input in entrepreneurial success. The matrix indicates the type of diverse data that needs to be collected for each project. The form of ownership organization has to be selected.
System and criteria for evaluating the performance of employees. Sources of recruitment form which the needed staff will be procured. technical and other positions in the enterprise.Number of personnel required for management. 8. Procedure and methods of selecting the best candidates. Qualifications and experience required in the personnel to perform the jobs effectively.Personnel : Ø Ø Ø Ø Ø Ø Ø Ø Ø Ø Ø 208 . Procedure and methods of selecting the best candidates.Input Requirement : (i)Information and Intelligence : 9.
Innovation and problem solving capabilities are expected to be the core of the entrepreneurial capability of an entrepreneur the vast majority of entrepreneurs studied were characterized by sensation-thinking problem solving styles. The level of innovation is dependent upon the entrepreneur's formal education and managerial experience. Innovations are the harbingers of change. service or process simple and understandable. innovations help in making the product. entrepreneurial activity is most active during periods of upheaval: economic. Innovation is all about trying. Gartner (1989) refers to innovation as the central value of the entrepreneurial behavior. Innovations help in making the product. Innovations can be both revolutionary as well as an extension to the existing products. Entrepreneurs are faced with a number of challenges as they try to implement new ideas "Iinnovation is one of the central characteristics of entrepreneurial endeavor. Innovations can take place at the spark of light or can take a generation of experiments.e active and searching new ideas. since it is successfully taking an idea or invention to market. Innovations are action oriented i. service or process customer based. In this phase the entrepreneur integrate their resources and establish the enterprise. . This is the last step of entrepreneurial system. Ans.Policies and methods for remunerating the personnel. Those who survive the changes will be the businesses that act entrepreneurially Entereneurs are not uniformly innovative. Innovations provide a USP to a business. welfare of the staff. Such individuals were shown to be short-term oriented dealing with immediate problems. It is very important step. social. testing and revising. This is usually when traditional systems and ways of doing business are no longer affective. Facilities to be provided by the safety. or political . Looking at history. health. Their study of 184 firms in the Midwest showed a correlation between a higher level of managerial experience and more years of education with a higher level of innovation.
Present and potential customer Existing companies Ø Ø Ø 10Establish the Enterprise : Q.Write a short note on innovation related to entrepreneur Features of Innovation Sources of Innovation : Ø Ø Ø Ø Ø Ø Ø Ø Ø Ø 209 ENTREPRENEURIAL DEVELOPMENT .Thus innovation refers to a process of creation of a product that can solve existing problems or tap opportunities.
While public officials and service providers understand the differences between. For example. While there are efficiencies that arise from this specialized approach. Most entrepreneurs simply want help. a Small Business Center and a Small Business Technology Development Center and the services they offer.Ø Ø Ø Ø Raw material provider Distributors and retailers Research and development Existing employees It is very difficultand complicatedto create a system for entrepreneurs. These challenges of fragmentation are not new to economic development professionals. entrepreneurs do not. and micro loan programs provide more general support to new entrepreneurs. the cooperative extension service focuses on agriculture. but they still require significant knowledge from the aspiring entrepreneur or business owner.correctly . say. not the end of the process. These problems emerge because most service providers focus . Can the business owner find the right services and support that will "fix" his current problems? Research shows that many entrepreneurs cannot leap this hurdle. when an entrepreneur seeks assistance and is referred to "some other office.on market niches. Such sites offer user-friendly access to information. Nor should we expect entrepreneurs to understand these differences. In many cases. Small business development centers (SBDCs) focus on growth businesses. they face difficulties simply identifying their own business challenges." her typical response is intense frustration. The traditional solution has been to create a "one-stop shop." where a whole host of services for small business can be accessed in one place. These one-stop shops can exist in physical space Creating a one-stop shop should be viewed as a first step. the system's specialization often gets lost in translation to the entrepreneur. Thus. they may recognize that . They do not care which agency or program provides it.
business is slowing. A more sophisticated diagnosis of the issues is needed. Q. High-growth technology businesses can receive such support from venture investors and others. this means that business owners often receive the services that are available instead of the services that are needed. but may not know whether the slowdown is caused by marketing. financing. In practice. but most entrepreneurs make do with one-size-fits-all programs for training. and the like. financial or operational challenges. This type of sophisticated business diagnosis system does not really exist today for most entrepreneurs.? Ans. Introduction : From One-Stop Shop to no Wrong Door 210 . a potential high-growth business may be referred to a loan program even though it really needs some form of equity financing. Then.How entrepreneurial support system can be established. For example. a quality menu of support options can be developed.
when an entrepreneur calls a service provider. but. This requires that service providers explicitly state their specific areas of expertise. This new system would move the burden of understanding how best to access support services from the entrepreneur to the system itself. in most cases. The system would be defined by the concept of "no wrong door. They can no longer simply serve all entrepreneurs. these "systems" are simply a loose federation of non-profits and other support providers. operates according to common procedures. The process must be clear to both entrepreneurs and service providers. if her firm is looking for export opportunities. Their productivity and efficiency will improve as they can focus personnel and resources on their own market niche. and feel assured that other providers are effectively serving other market segments. Many regions claim that they have a small business support system in place. and offers a customized and comprehensive set of public and private services for local entrepreneurs. she will be referred to the appropriate local service provider. the system should offer an entry-level package of services that entrepreneurs receive no matter where they enter the system. For example. They can truly specialize in serving certain types of entrepreneurs. more specialized services can be delivered. Several characteristics are essential: Common intake procedures: All local service providers are trained to perform a brief intake and diagnosis of an entrepreneur's issues and service needs. At the outset.A reformed systems approach is needed. a non-profit might identify its niche as "training entrepreneurs to work with . they must focus on a specific set of issues or types of businesses." Every part of a region's small business support network should provide an initial assessment of the entrepreneur's skills and needs and identification of the best place for the entrepreneur to receive services to address those needs. Instead. At that point. she is not given an immediate referral. Clear referral systems: Referrals are the cornerstone of the system. Upon completion of this initial diagnosis. A systems approach allows service providers to "segment" their market. In addition to improving services for the entrepreneur. this system also offers benefits to service providers. Thus. her basic information is obtained and entered into the system. she will be referred to a local expert in that process. Service providers can now focus on "quality" instead of "quantity" of services. For example. A true system links all relevant service providers.
What does an entrepreneur support system look like? 211 ENTREPRENEURIAL DEVELOPMENT . Clear guidelines for entrepreneurs: As noted above. the type and level of support to be provided must be clearly understood. They must understand the purpose of the initial diagnostic process and why they have been referred to a certain service provider." Effective referrals also mean that providers must understand the system and each organization's role within it. Finally. the system must be understandable to entrepreneurs.institutional venture capitalists.
It can also stimulate a transformation for economic developers. service providers must create a single "brand" for the system so that entrepreneurs are supported by the "system" and not by a single service provider. a culture that recognizes. Program Offerings Access to Capital Access to Networks Entrepreneurial Culture The Benefits 212 . it improves productivity and program effectiveness while also generating improved outcomes in terms of jobs. some of the key program offerings to be found in comprehensive entrepreneur development systems: Entrepreneurship education . from seed capital to loans to equity. Creating an effective entrepreneur support system can generate huge benefits for local business owners and aspiring entrepreneurs. By promoting real collaboration. colleges and universities. creating a place where entrepreneurs choose to live. sources of capital to match the financing needs of entrepreneurs at various stages of development." Every region must develop its own set of program offerings targeted to the needs of local entrepreneurs. new businesses and overall quality of life. In addition.including the introduction of entrepreneurship concepts in K-12 and more advanced adult education and training in community colleges. They must meet on a regular basis. opportunities for entrepreneurs to connect with peers and mentors and to form strategic alliances to benefit their businesses. embraces and celebrates entrepreneurs. work and play.. and regularly review how the system is serving local businesses.Regular collaboration: The system will work if the partners effectively collaborate with one another.
Q.Explain the various steps of setting an enterprise Discuss. Ans. Introduction : 1.SEARCH FOR BUSINESS IDEAS : 2.SOURCES OF IDEAS : A business idea may be discovered from the following sources : (i)Observing Markets : (ii)Prospective Consumers : An entrepreneur perceives an opportunities for marketing a product or services. Then he establishes a business unit on the basis of his/her perception. Finally he manages his enterprise expanding, growing or diversifying over a period of time. In order to establish an entrepreneurial system an entrepreneur needs to take the following steps:The first step of entrepreneurial system is search for business ideas. The idea may originate from various sources e.g. success story of a friend or relative, demand for certain products, visits to trade fairs and exhibitions, study of project profiles and industrial potential surveys, meetings with government agencies etc. The idea may relate to the starting of a new business or to takeover of an existing enterprise, the idea should be sound and workable, so that it may be exploited. Careful observation of markets can reveal a business idea. Market surveys can also reveal the demand and supply position for various products. It is necessary to estimate future demand and to take into account anticipated changes in fashions, income levels, technology etc. competition and price trends can also be found through market surveys. From the data collected through market observation, one can identify the products industries which are in demand and which require increase in supply. A promoter can then find out the most profitable line of business. Consumers knows best what he wants and the habits/tastes which are going to be popular in near future. Contacts with prospective consumers can also reveal the features that should be built into a product/service. These days good business firms generally conduct a survey among prospective consumers before choosing the product to be manufactured.
MBA 1st Semester (DDE)
ENTREPRENEURIAL DEVELOPMENT UNIT – IV
(iii)Development in other Nations : 3.STUDY OF PROJECTS PROFILES : (i)Government Organizations : (ii)Trade Fairs and Exhibition : 4.PROCESS THE IDEAS : 5.TECHNICAL FEASIBILITY : 6.COMMERCIAL VIABILITY : People in underdeveloped countries generally follow the fashion trends of developed countries for example video, washing machines, micro ovens etc. which are now the "In things" in India were being used in the united states and Europe. Therefore, an entrepreneur can discover good business idea by keeping in touch with developments in advanced nations. Various government and private agencies publish periodic profiles of various projects and industries. These profiles describe in detail the technical, financial and market requirement and prevailing position a careful scrutiny of such project profiles is very helpful in choosing the line of business. Several government organizations now-a-days assist entrepreneurs in discovering and evaluating business ideas. Development banks, state industrial development/investment corporations, technical consultancy organizations, export promotion council etc. provide advice and assistance in technical, financial, marketing and other areas of business. Government also identifies the priority sectors for investment through five year plans, industrial policy resolution guidelines for industry. National and international trade fairs are a very good source of business ideas. A visit to these fairs provides information about new products/machines. Trade fairs and exhibitions provide opportunities for assessing the market trends in terms of demand potential and type of products required. It also assessing the attitude of the competitors in a particular product or marketing area. Once business ideas are discovered, screening and testing of these ideas is done. The following considerations are significantly in the evaluation and testing of business ideas. It refers to the possibility of producing the product. Technical feasibility of an idea is judged in
An elaborate study of market conditions and prevailing situation is made to assess the viability and prospectus of the proposed projects. expected sales volume. cost of production. 214 . break even point etc. labour skills and saw materials. selling price. A cost benefit analysis is required to ascertain the profitability if the ideas. A number of calculations have to made about the likely demand.terms of availability of necessary technology. The advice and assistance of technical experts may be necessary to judge the technical feasibility of various business ideas. machinery and equipment.
The feasibility report is analyzed to finally choose the most promising idea. He has to choose partners/collaborates. After the evaluation of a business idea is completed. The form of ownership organization has to be selected. (vi)Products favoured by the country's industrial/licensing policy. plant and machinery. It is also useful for procuring licenses. Decisions have to be made about the size. The matrix indicates the type of diverse data that needs to be collected for each project. location. This report helps in the final selection of project. employees etc. Consultations with experts in various areas of the industry may be necessary to carry out the detailed analysis.After preliminary evaluation of the idea. information and intelligence have become the key . Financial and managerial feasibility of the idea are tested. The entrepreneurial selection needs to take all these factors into account. Generally the following considerations influence the selection of idea for a product or service:(i)Products whose imports are banned or restricted by the government. At this stage a lot of information is required. furniture and fixtures. After considering the various factors a entrepreneur should analysis and compare pros and cons. (vii)Products based on the expansion or diversification plans of existing firms of the family/friends/relatives. Once the promoter is convinced of the feasibility and profitability of the project he assembles the necessary resources to launch the enterprise. finance etc from governmental agencies. the promising idea is subjected to a thorough analysis from all angles. It also throws light on how each item can hold out some encouraging and some discouraging factors. A selection matrix may be prepared for this purpose. (v)Products for which incentives and subsidies are available. of the enterprise. patents. layout etc. The main inputs required for launching an enterprise are as follows:In the turbulent business environment. Full investigation is carried out in the technical feasibility and economic viability of the proposed project. (iii)Products whose demand exceeds their supply so that there exists ready demand. collect the required finances and acquire land and buildings. the finding are presented in the form of a report known as "feasibility report" or project report. (iv)Products which showed high profitability. (ii)Products which can be exported exceeds easily and profitability.
IDEA SELECTION : 8.INPUT REQUIREMENT : (i)Information and Intelligence : 215 ENTREPRENEURIAL DEVELOPMENT . • Price cost volume relationship.input in entrepreneurial success. 7. • Volume and source of supply. An entrepreneur requires relevant data on the following aspects:• Size and nature of demand for the product/service.
• Number and type of personnel required and their sources. Deciding about the composition of capital or financing mix. Facilities to be provided by the safety. The basic purpose of a well through out financial planis to suggest an appropriate capital structure with right quantum of capital which will minimize the cost of funds obtained from different sources and minimises the value of the firm. The financial plan should deal with two important aspects-: Determinatin of the total amount of capital required for taping up the project.• Sources of raw material. • Amount and sources of funds required for the enterprise. Hence it is part of financial analysis to study the various sources of finance available to the project and suggest an . Sources of recruitment form which the needed staff will be procured. An entrepreneur has to make the following decisions concerning the personnel. Procedure and methods of selecting the best candidates. • Nature and degree of competition. System and criteria for evaluating the performance of employees. Qualifications and experience required in the personnel to perform the jobs effectively. In this phase the entrepreneur integrate their resources and establish the enterprise. the next step is to draw out a financial plan to meet project costs. After formulating & evaluating the project. Number of personnel required for management. Procedure and methods of selecting the best candidates. technical and other positions in the enterprise. health. People are the most valuable asset of an enterprise and this asset does not depreciate. welfare of the staff. It is very important step. Policies and methods for remunerating the personnel. This is the last step of entrepreneurial system.
PERSONNEL : 10.appropriate capital structure with adequate amount of capital. Introduction : Sources of Long Term & Short Term Finance : (a)Long Term Sources:1. Limited liability 9.Explain the Sources and function of the finance. & it is contributed by the owners of the companies. Equity capital provides the strength to the financial structure of the company.Equity Shares : 216 . The equirty shares are the main source of finance.ESTABLISH THE ENTERPRISE : Q. In the case of a new company the prmoters must contribute to equity shares first then the balance of shares is issued to the public. Ans.
Loans obtained from banks and financial institutions are generally secured loans. payment of dividends and payment of surplus at the time of liquidation. Terms loans are presently the most important source of finance. The owner retain control of the enterprise. These loans can be rapid whenever not required. are a few types of debentures. convertible debentures. From investers point of view debentures are less risky & contribute a regular income. Debentures with fixed rate of interest enable the company to take advantage of financial leverage or trading on equity. These kinds confor special rights on preference shareholders as regards the repayment of capital. As a result the financial structure remains flexible. prefer prefrence shares investment. The shareholders can retain control and earnmore income on their investment.deductible expense. Equity capital represents permanent capital & there is no liability for repayment. who like to earn a lmited but steady return on their capital. mortgage or secured debentures. Term loans are generally repayable within a period of 10-25 years. Term loans are employed to finance the aquasition of fixed assets & workng capital margin. redeemable debentures.They carry a fixed rate of interest & are payable in nstallments. Registeredb debentures.& voting rights are the two important features that confor special privilaged on equity shareholders to restrict their liabilities and at the same time keep full control over the company. A company can issue different types of prefrence shares as redeemable preference shares. They are secured and carry fixed percetage of interest. Preference shares confor on prefrence shareholders two rights viz. However the cost of equity will be very high for their expectations will be high as they provide risk capital to the ventures. oOrdinary debentures etc. The cost of debts is very klow because the interest on debentures is a tax. Debentures are very commnly used creditorship securities. cumulative preference shares. No fixed obligation as to dividend or interest is created. to receive the preference dividend & get back capital on priorty basis. participating preference etc. Investors. Different types of debentures are issued to mobilise the debt capital from the public. Term loans . Term loans provide the benefit of trading on equity.
Sometimes the suppliers of machinery provide deferred credit facility under which payment for the machinery may be made over a period of time. Reserves & surplus build over the past are called retained earnings. similar to equity share capital. These earning can be reinterested in business for moderenisation & expansion.are comparatively less costly source of finance. 2. the retained earnings get developed into working capital.Debentures : 4.Retained Earning : 6. The cost of retained earning earning is very cheap compared to cost of equity.Deferred Credits : 217 ENTREPRENEURIAL DEVELOPMENT . However it should be noted that over a period of time. From the ownership as well as cost of capital point of view. It is thebest to take up risky butvery proftable projects. it is as a source.Preference Shares : 3.Term Loans : 5.
taxes payable. A customer may pay for all or portion of future purchase before receiving the goods. expenses payable etc. Central govt. loans & advances & purchase & discounting of bills. They are interest free & securities free. Ths form of unsecured financing provides funds to purchase raw material & produce the final products. Accounts payable is a legally binding obligation of a firm. They provide 100% finance. They carry a lower rate of interest & cannot be taken back without the prior permission of financial institutions. They are created when the fir purchase raw material.The interest rate & period of payment very rather widely. or state development agencies also provide development loans/ sales tax oans & state capital subsidies. They insist that the customers should bring a portion of finance from other . They provide this faclity for backward areas which are exclusively notified in their states. These consist of promisery notes with maturities of 3 to 270 days. insurance companies & other institutions also purchase commercial paper. provides capital subsidy to industries set up in notifid bvackward area. Bank credit is the major source of finance for working capital. Many state govt. Commercial paperis usually issued in higher denomination & can be used only by large well known companies which enjoy a fairly high credit rating. overdraft. This is a very recently emerged source in India. They are short term liabilities that arise when securities are received but payment has not yet been made. Normally the supplier offering deferred credit facility ask for bank guarantee from the buyer. Unsecured loans are normally provided by the promoters to fill the gap between the promoters contribution required by financial institution & equity capital subscribed by the promoters. Examples are wages & salaries payable. Individuals. Banks offer both secured as well as unsecured loans to business firms such as cash credit. supplies goods for resale on credit terms on openaccount. They also includes bills payable.
Account Payable : 2. a mojor supplier. or other party interested in assisting the firm through a short term difficulty.Capitaal Subsidy & Develoment Loans : 8.Commercial Paper : 4.sources.Cash Advance From Customers : 5.Unsecured Loans & Deposits : (B)Sources of Short Term Finance : 1. LIC.a.Private Loans : 7.Bank Credit : 6.The rate of interest is around 18% p.Accurals : 3. A short term unsecured loans may be obtained from a wealthy shareholder. GIC & UTI provide short term loans to manufacturing companies with an excellent track record.Short term Loans From Financial Institution : 218 . 7.They are unsecuredloans & given for aperiod of one year.
On the other hand concerns engaged in trading activities and in rendering personal services need only small amount of fixed capital. Lease contract is a contract between leaser & leasee whereby t5eh formeracquires the equipments/ goods/plants as required & specified by the leasee & passes on the goods to the leasee for use for a specific pace. Funds required to acquire fixed assets are termed as fixed capital. A fixed capital requirement varies from business to business and is influenced by a number of factors. If assets are obtained through leasing then fixed capital . Wrong estimation of fixed capital may lead to over or under-capitalization. Public utilities and capital intensive manufacturing concerns require large amount of fixed capital.Describe the fixed capital? Also discuss the factor that affecting fixed capital requirements. such as:The nature of business is one of the influencing factors. There are many factors which are affected fixed capital requirements. The total amount of fixed capital is determined through project capital cost estimates.8. Any error in the fixed capital estimation will have long-term adverse effect on the financial condition of the enterprise and also its profitability. The leasee in consideration promises to pay the lessor a specifid sum in a specified mode on specific interval & at a specified place.Lease Finance : Q. Introduction : Factors affecting fixed capital requirements : (1)Nature of Business : (2)Leasing Arrangement : (3)Size of Business : (4)Ancillary Units : (5)Technology : (6)Provision for Subcontracts : (7)International Conditions : Lease financing has emerged as one of the important sources of industrialfinance in recent times. Ans.
Some of the concerns may carry on business on the international scale such concerns are very much interested in expansion plans if the international conditions are conductive for sale promotion. 219 ENTREPRENEURIAL DEVELOPMENT .requirement would be less. For a product. Instead of producing all the components which are essential. Such expansion plans demand for more fixed capital requirements. If the production process requires modern technology or imported plant and machinery then the fixed capital requirements would be more. On the contrary an international crisis may lead some companies to postpone their expansion plans. The fixed capital requirements of large units will be more units producing single product may require lesser fixed capital than those producing more number of products. If an enterprise can purchase some of the components from units the its fixed capital needs would be less. the entrepreneur may think of allowing others to produce such components and take up the assembling process alone such an attitude of the entrepreneur will minimize the fixed capital requirements.
In that case a large amount of funds has to be kept so as to invest in fixed assets. There are mainly two type of working capital. Gross working capital may be defined as the total investment in current assets which can convert into cash with in the accounting year. In other words it is defined as all the short term assets used in daily operations. Introduction : (1)Gross Working Capital : (2)Net Working Capital : Components of Working Capital:Cash Operating Cycle : Determinants or factors affecting working capital requirements : (1)Size of the firm : While assessing the fixed capital requirements.(8)Trends in the Economy : Q. Working capital is the amount of capital that is required by an enterprise to carry out its day to day operations. Net working capital may be defined as the difference between current assets and current liabilities. it gives green signal to the entrepreneur to carry out all sorts of expansion programmed of the firm.Explain the factors which affecting working capital requirements? Ans. The components of working capital are:Inventories Accounts receivable Cash and bank balance Advances paid for expenses and suppliers. accounts receivables and inventory. Debtors & B/R Raw Material Finished Goods . marketable securities. They consist of primarily cash. a study of long run trends in the economy must is anticipated to be bright.
A Firm size either in assets or sales affect it need for working capital. the operating cycle would manifest in various processes viz.Work-in-Progress Cash passes through various stages and finally gets converted into cash. 220 . But large firms with many sources of funds may need less working capital. purchase of raw material. In an industrial unit. conversion of finished goods. and conversion of goods partly into cash through cash sales and partly into accounts receivables through credit sales and finally conversion of debtors into cash. A small firm may have only limited resources for working capital Hence it may invest more amounts in current assets.
These variations in sales affect the level of working capital. Operating cycle affect the working capital requirement if the period of operating cycle is long then the amount of working capital requirement would be more depending upon the length of operating cycle the need of working capital will vary from project to project and business to business. A rise in turnover ratio will reduce the length of operating cycle and therefore the need for working capital. Public utilities and capital intensive manufacturing concerns require less amount of working capital. For example If a firm uses highly advanced plant & machinery which process more raw material at a faster rate then the working capital need for inventory purposes would be more. For .What is the requirement of technical assistance for a business enterprise? Ans. This is the most important factor affecting the size and components of working capital. Technological developments will affect the working capital needs of a firm very much. Nature of the business is also affecting the working capital requirement. A firm with readily available credit from banks can get alone with less working capital than a firm without such credit. Many of the firm polices affect the level of working capital. Most firms experience seasonal fluctuations in demand for their products and services.(2)Nature of the Business : (3)Availabilities of Credit : (4)Sales Volume : (5)Seasonal and Cyclical Factors : (6)Operating Cycle : (7)Shift in Technology : (8)Polices of the Firm : (9)Activities of Firm : Q.
its working capital needs would be more than of firms providing services or making cash sales. capital & information. labour. Production management is the process of converting the input into output through a conversion process. raw material. Production & operational plan would be having dimension:• Plant location • Plant layout • Capacity planning • Inventory Management • Quyality management Sysdtem • Budgeting the production plan 221 ENTREPRENEURIAL DEVELOPMENT . machinery.example a change in credit policy will affect the working capital requirements of firm. Production /oerational plan would lay down the detailed planning procedurs for the strategies that would be utilize in runnng the operational/productionof the organi9zation. The input are in the form of land. Production/operation plan is the blue print to run the production unit/operation activity of the business enterprise for optimum utilization of the soueces. If a firm is to invest more in inventory or sell on relatively easy credit term.
There are provision for emergency exit. while choosing the business location. proper planning of the layout should be conducted. The operation manager hasto planthe capacity in such a manner that the production/ operation has some degree of flexibility of expansion or reduction. depending on the market demand. cost of pro duction dfelays. Cost of space. There is proper light &&& ventiiilationnn in all the ares of the premises.(1)Plant location : (2)Plant Layout : (3)Capacity Planning : The role of plant locationisvery important for the success of any business enterprise. Smooth flow of operations can take place. There are provision for safe ty measures. the following elements should be taken into consaideration:Availability of raw material Availab ility of power Availability of labour Proximity to the market Climatic conditions The cost of location Tax holidays/ sibsidiary & loans availibility. Since it cannot be changed easily. . Supervision can be carriedout in all the dimensions with convenience. Capacity planning is the productive capability ofa facility. The following variables should be kept in mind while planning the layout:Space is utilized properly. cost of movement of material from one place to another place. Plant layout is the pattern in which the space would be arranged in order to utilize the machinery/ equipments & manpower optimally. There is a flexibility to introduce changes in the future.
222 .Capacity planning should be done keeping following things in mind:Flexibility of flexibility of production/operation Cost of maintaining capacity Organisation's vision & objectives Assessment of existing capacity. Short ter capacity planning Medium term capacity planning Long term capacity planning. Capacity planning can be divided into three types based on time period of which planning is done.
labor cost budget & factory maintenance budget can be prepared. Major changes in capacity planning can be introduced. Quality is an important function of production/ operation management. Inventory is managed at each level of work in progress Inventory is also managed of the final goods. Inventory is managed for the smooth flow of work and for making up the uncertainities in the availability of raw material & in the demand of final goods.Capacity planning from day to day . Medium term capacity planning is fromone year to five year . month to month up to a year is called short term capacity planning. There are two types fo inventories:The inventory ensuring availability ofmaterial at different stages in normal condition is called normal inventory. But holding inventory involves cost & therefore inventory of only adequate amount should be maintained at each level. . Quality comes first is the motto of highly competitive & growth oriented companies. Budgeting the production plan is based on following formula : Total production=sales in unit+desired ending inventory projected beginning inventory. Long termcapacity planning is planning operation above 5years. Quality is to be maintained at all the stages of production. The importance of quality has improved today. The inventory ensuring availability of material at the time of uncertainty is called buffer inventory. But keepinf inventory involves costs moreover it holds working capital & also occupies space & therefore inventory needs to be planned. Inventory is managed at three levels:The stock of raw material is kept tomeet the unforeseen hanges in the market forces. Once the production budget is prepared the other budgets like material purchase budget. With the rising competition & wide variety of products/services the consumer have become quality conscious.
Marketing plan analyses the market opportunities through market research.Normal Inventory : c.A marketing plan aims at panning the marketing Strategies for a company its products or services.Quality Management System : 6.Budgeting the Production Plan : Q. Ans. place and promotion. strategy which involves Strategies for product price.Explain the concept of marketing assistance in detail. identifies profitable segment and Targets them through a compounded marketing mix.Buffer Inventory : 5.Finished Goods Inventory : b. Introduction : 223 ENTREPRENEURIAL DEVELOPMENT . All (4)Inventory Management : a.Raw Material : Goods in Process Inventory:a.
Segmentation is the process of dividing the market/customer into similar characteristics or behavior. its analysis and interpretation to strategize.Decision Making Any business venture has limited resources and hence it can not satisfy the needs and wants of all the customer .Research design 3. identify and segments the target market and then plans the strategies for marketing mix of the proposed business enterprise. Market research is a systematic collection of information. weakness. The purpose of market research is not only to Assess customers but also make decision in relation to the direction in which the business plan should flow . What kind of discount would be more Attractive to the customer etc.Formulation Objective 2. for example the population of a city can be divided into toddlers. teenagers. old age. Marketing plan forms the backbone of any business enterprise A careful.Data collection and Tabulation 4. youth.Documentation 6. well crafted marketing plan is possible . Some relevant business decision like whether one should enter new markets .The information collected from the market research is quite exhaustive and hence strategic decision based on the market research can proper a business enterprise in to a growth path.good marketing plans must evolve from and support the overall strategic plan of the business. opportunities and threats of the market. kids. There are number of variables in which markets can be segmented:When the target market is divided on the basis of population . It is for this reason that segments are drawn. 1.Data analysis 5. whether one should change premium prices. Marketing plan is critical element in ensuring the success of business venture A marketing plan aims to plan the ma4rketing strategies for a company its products or services. Based on the market survey it identifies the strengths . if it is based on a through market research. Marketing research is the process of collecting information of any facts relevant to market. Middle age.
educational qualification etc.it is called demographic segmentation. Segmentation that is based on lifestyle/personality of individual is called psychographic segmentation. southern. western. It can be northern. gender segmentation. urban or rural. city or metro. This can be further divided in to segments. eastern. such as age segment. When the segmentation is drawn on the basis of geographical region it is called geographic segmentation. income segment. MARKETING RESEARCH : Steps involved in conducting the market research are : Segmentation : Demographic Segmentation : Psychographic Segmentation : Geographic Segmentation : 224 .
government. buyers readiness & user status. size etc. usage rate. profitability. After the target market evaluation is complete the company has to decide which segments and how many segments it would target. loyalty status. Assessment of segment growth Companies strengths and weakness to suffice the needs of the segments. Potential opportunities and threats from the competitors. . suppliers. This assessment is done on the following criteria:Assessment of the size of each segment. Selecting a number of segments that are attractive. It would depend on several factors like economies of scale. growth. benefits. If a company decides to concentrates on a single segment only. substitutes. Market targeting is the process of evaluating various segments and identifying the number and type of segments that the business venture would target. Like junior horlicks is targeted only for kids. There are five patterns available for selecting the target market.Behavior Segmentation : Market Targeting : Market Evaluation : Target Market Selection : Single segment concentration : Selective Specialization : Product specialization : Market Specialization : Full Market Leverage : Market Positioning : When the segmentation is drawn on the basis of behavior/attitude of consumer it is called behavioral segmentation. The behavior/attitude vary on occasion. The process of market targeting including following steps:It is the process of evaluating/assessing all the segments. buyers.
What image the company wants to project The pricing strategy The packaging of the product Hoe competitors project themselves The type of product Product lifecycle 225 ENTREPRENEURIAL DEVELOPMENT . The following variables should be assured for positioning the product/services. When the organization satisfies many needs of a particular group like big bazaar. For example-computer. Market positioning can be defined as the out of projecting the company's product/service in such a way that if appears attractive to them.The product that the company makes can be sold to several segments. It is an image making exercise which helps the company to portray to the targeted segment in such a way that it appears attractive to the customers. When the business tries to satisfy all the customers with entire product needs.
In product mix the entrepreneur needs to decide the length. branding decision etc. A brand decision is very important decision. services.Developing Marketing Mix Strategies : Product Mix Strategies : Pricing Mix : Promotional Mix : Distribution Mix : Product is anything that can be offered to a market to satisfy the needs or wants. reliability and confidence for its customers. experiences. Pricing strategy has been divided into following kinds:Markup pricing Target return pricing Perceived value pricing Value pricing Going rate pricing Geographical pricing Skimming pricing Promotional mix is the process of educating consumers through various forms of media about all or some of the following:Product utility Product quality Product price . depth and consistency of the product desired. Branding is the process of building. A brand creates an identify of quality. Brands have become the image building tool for any product. events. places. cost of product/services. information and ideas. Products that are marketed include physical goods. demand of the product. organizations. width. The pricing decisions are based on these factors such as competitors price. The entrepreneur has to take many decisions regarding the product such as product mix. availability of raw material and overall marketing objective of the company. protecting and enhancing identify of the product. Pricing is that element of marketing mix that produces revenue. maintaining.
Promotional mix helps in building brand image in the minds of end consumers.e. Most companies used intermediaries/middlemen to deliver the goods to the final customers and these intermediaries are called distribution channels. There are different types of distribution channels such as retailers. Infact. place (distribution) is the process through which the product is physically delivered to the customer. it plays a major role in positioning the product in the market. All the marketing 226 . The various types of promotional strategies are:Advertising Directing marketing Sales promotion Public relation The fourth process of marketing i. wholesalers. distributors and franchises.
production of goods & services. it gets into sickness. Let us the customers are called few channel levels. finance. root causes of which is directly or .intermediaries that participate in the final delivery of the product to the customers are called channel levels. Manufacture Distributor Retailer Customers When three marketing intermediaries are involved in the final delivery of the product. Similarly. an industrial unit can become sick in a minor way when only one or some aspect of its activity is affected like when its segment like production. Expansion of industry leads to greater utilization of natural resources.A person become sick if any part if body affected. Manufacture Retailer Customers When two marketing intermediaries are involved in the final delivery of the product. Industrial sickness is a universally accepted term.An industrial unit is like a human body. marketing & personnel are affected. Manufacture Customers When one marketing intermediary is involved in the final delivery of the product. Manufacture Wholesaler Distributor Retailer Customers Economic development of a country is directly related to the level of its industrial growth. creation of employment opportunities & improvement in the general standard of living. When no intermediaries exist as in direct marketing.
Channel O : Channel 1 : Channel 2 : Channel 3 : Q. of India. RBI term lending financial institutions. Ans.indirectly related to finance. Govt.Wrire a short note on Industrial sickness and its remedial measures. commercial banks are worried a lot about the rising trend of sickness prevailing in Indian industries. 227 ENTREPRENEURIAL DEVELOPMENT .
(b) ability to meet soci. lack of marketing expertise. Efforts have been made ti unearth various factors responsible for causing industrial sickness in the country. the industrial unit has no direct control. a bad employer to workers & great wastage of technical & human resources to the country. is significantly & continuously less than the prevailing rates on similar investment.Concept : Causes : Revival Measures & Strategies : The sickness of a firm has been defined as the situation where the rate of return realized on invested capital. non availability of quality raw material at right price & at right time.(d) Profitability. Of the various factor the significany to quote are mis management or inefficient management. (c) capacity to redeem its debts. there are other factors which are equally responsible for industrial sickness. a victim of technological changes to technicrats. Beside. To ascertaining the symptoms of the disease of industrial sickness. (e) ability to face competition. These may be as wrong industrial location.The external are the factors which affect industrial group as a whole. Factors causing industrial sickness can broadly be divided into two main categories:Internal cause External cause a..Internal causes are the factors which are within the control of the management of a management of a unit. In other words we can say that it is situation where the revenues of a firm are insufficient to meet the costs & the average rate of return on investment is less than the firm's cost of capital. b. improper estimation of capital cost. defective planningat initial stages.economic obligation. (a) the rate of return on investment & capital cash flow. a losing or discouraging unit to industrialists. etc. A sick unit is unhealthy unit to common men. (f) ability to acquire share in the market. a doubtful debtor & a weak borrower to creditors & bankers. etc are taken into account. taking risk involvement into consideration. delays & cost escalation. and on these. . an industrial problem unit to the govt. power shortage. a dividend postponing unit to investors.
higher overhead expenses. labour unrest. & thus a national 228 . marketing of finished goods at lower credit terms. state or region.improper formation of inventory needs. It is. Lack of research & development. demand recession. Sickness in small scale industriesis not confirmed to a particular product. poor maintainance of plant & machinery. uniformally spread over all states & regions. more or less. Inadequate investment for modernization & renovation& procedures delay in sanctioning loans by commercial banks & other institutional agencies.
government. Recently .the incidence of industrial sickness in general and in small industrial units.In addition. A number of development institutions have been setup to support entrepreneurs. plant visit. etc. To sum up . Small Industries Development Organisation(SIDO) Small Scale Industries Service Institutes(SISI). National Productivity Council)and Venture capital funds(VCF). .management financial institutions. labourers. all India financial institutions-IDBI. stock statement & return under periodical information system. A project report helps to understand the opportunities.problem. problems And weakness of the business.Entrepreneurial Guidance Bureau(EGB). It guides the entrepreneur in actually starting up and running the . Some of the institutions assisting entrepreneur include District Industries Centres(DICs) and Industrial Estate. Commercial banks & financial institution can detect the symptoms of sicknes through periodical progress report including financial statement.the Small Industries Development Bank of India(SIDBI) has been setup to help small scale units.)make a concerted effort to study the causes of and cures through their temporary sacrifices with a sense of dedication and belongingness. personnel discussion.ICICI-have promoted a number of Technical Consultance Organisations(TCOs) to assist small entrepreneur in different ways . in particular can be reduced if all the concerns(i. the establishment of management information system within the industrial unit will help its management to detect the symptoms of the sickness & forward it to adopt remedial measures.IFCI. Some of the institutions have been setup to support entrepreneurs.etc.Similarly . Turnaround here means a substantial & sustained positive change in the performance of the business entity. National Alliance of young Entrepreneurs(NAYE).e. Guidelines have been issued by the RBI so that banks can analyse & interpret the information received from assisted unit & test check their health.Process of solution to this problem involves in two process:Identify th sickness in a unitas early as possible & to analyse & diagnosis its causes Nurse the unit immediately with appropriate remedial measures with aview to turnaround the sick unit to an economically viable one.owner . report fron nominee directors.banker.With a view to prevent sickness particularly in SSI.Small Industry Development Corporation(SIDCO).
1. Q.The project report should be covering all the details about the proposed project.The project report should be sequentially arranged.it can help in proper utilization of all the resources .It help in documenting the cost estimates of the business.it can finally lead to a sustainable development of the organization. Introduction : Essential of a Project Report : 229 ENTREPRENEURIAL DEVELOPMENT .it help him to monitor whether the business is growing as was projected in the business plan or note .business venture.it can be used as a handy tool to persuade investors and financial institution to fund the project . 2.Describe the preparations of the project report?and what is essential for good project report.it can keep the morale of employees owners and investors up . Ans.
or a.The project report should not be very lengthy an subjective. The investors & financial institutions are one of the key bodies examining the project report & it is one of the primary objectives of preparing the project report. human resources & .3. It is also necessary to project how these requirements would be fulfilled.it mentions the name of the project . a careful. finance.2.it guides the person reviewing the project report to the desired section quickly.b.address of the promoters. A brief description of product/services is given in this sub section. It also gives details about the patents. well. 6. what would be the form of ownership.The project report should be attractive to the financial agencies and investors. 4 The projections should be appropriately be made from two ten years. trademarks copyrights. it will discuss the objective of the business a brief history about the past performance of the company.c.3. franchises & licensing agreements. 7. The table of contents is like the table of contents of content of a book . 5. It would also label the address of the proposed headquarters. Now t he functional plans for marketing.planned funding requirement should be documented.a good methodology would be to divide the project report into section and number or label the section like 1.The project report should also have a high aesthetic value. It includes the key features of product & the product range that would be provided tothe customers. This will give details about the business concept. 8. Executive summary is the first impression about the business personal as the saying goes the first impression is the last impression a careful presentation of information should be done to attract the more then two or three pages .The project report should justify the financial needs and financial projection. Cover sheet is like the cover pages of the book .The project report should also justify market prospects and demands.
The Product of Services : 7. Format of a Project Report : 1. The budget for the marketing plan are drawn at the end. habbit of the customer market research is the backbone of success & failure of any product in the market. Based on the information collected through market research marketing mix strategies for product/ services.Cover Sheet : 2. needs. EXECUTIVE SUMMARY : 4 THE BUSINESS : 5.TABLE OF CONTENTS : 3.operations are to be drawn. The market research provide information regarding the taste. promotion & distribution are prepared.The Plan : a. Marketing ix strategies are to be drawn based on the market research.Marketing Plan : 230 .Funding Requirement : 6. prices.
Projected ratios. The financial planis drawn for two or five years for an existing company.Exit Strategy : 10.Organization Plan : d.Projected income & expenditure statement. Critical Risks : 9. Finally the budget for operational plan is drawn. A summary of previous financial data is given whereas for a new organization the following projection are drawn1. Plant layout is mentioned in the project report to provide a pattern of mgt. In the end the organization plan is also budgeted. The organization plan indicate the pattern of flow of responsibilities & duties amongst people in the organization it provides details about the boards of directors. of the organization & would indicate the exhaustive planning for the business. 8. labour. transport facilities.Operational Plan : c. When we choose a particular location so many factors should be considered such as market suppliers. 3. etc. 7.Projected profit & loss statement 5.Projected fund flows. power supply.b. .Projected cqash flows. it can also enlist the manpower plan that would be required to put life into the company & it would be required to put life into the company & it would also enlist the details about the laws that would be goverened in managing the employees of the organization.Projected break even point 4.Projected sales 2.Appendix : The operational plan would give information about plant location & plant layout.Projected balance sheet 6. govt. 8.
certificate frompollution board. The appendix can provide information about the curriculum vitae of the owners. article of association & all the supporting agreements/documents that can help in marketing the project viability at large. It further helps in measuring the risks involved in investing. 231 ENTREPRENEURIAL DEVELOPMENT . Memorandum of understanding. The exit strategies would provide details about how the organization would be dissolved. ownership agreement.The investors are interested in knowing the tentative risks. To evaluate the viability of the project & to measure the risks invo0lved in the business.what would be the share of each stakeholder in case of winding up of the organization. This can further give confidence to the investors as they can calculate the risks involved in the business from their perspective as well.
1.Entrepreneurs are made not born’Comment and discuss the types and traits of Entrepreneurs. Distinguish between innovation and entrepreneurship. 2.Explain the role and significance of entrepreneurs in the economic development of a country like India. What is the significance of these theories? 2.Define the small scale Industry.Define Innovation. Discuss the policy of government towards SSI DURING POST LIBERALISATION period 1.Discuss the evolution and objectives of Entrepreneurship Development Programmes in India.JAN 2009 UNIT .I UNIT .IV UNIT . How far these programmes are effective? UNIT .I JULY 2008 1.II UNIT .Explain the various Competing Theories of Entrepreneurship. What are the qualities and characteristics of an entrepreneur? 2.Write short notes on : (a)Achievement motivation (b)Entrepreneurial success in rural areas 1. Discuss the role and significance of Entrepreneurs in the economic development of India.Difine Entrepreneur. How are innovations important in new economy? 2.Define Entrepreneur.III UNIT .II .What are the various sources of getting business ideas? How do entrepreneurs process business ideas? 2.What are the main causes for industrial sicknes? Discuss the various methods to solve the problem of industrial sickness in India. 1. 1.
Past Year Question Papers ENTREPRENEURIAL DEVELOPMENT 232 .
1.What is Achievement Motivation? How can achievement motivation be developed? 2. 1. 2. UNIT . 2.Critically examine government policy towards SSIs after post reform period.IV UNIT .III UNIT .Define Entrepreneurship. 1.I .What are the factors that determine fixed and working capital requirments of a business? Discuss the major sources of financing these rquirements. Discuss the role of entrepreneurship development in the economic development of a country.”Comment.How will you prepare the feasibility report of an industrial unit? What type of legal and documentation formalities are required for this purpose? 2.What do you mean by EDPs? Explain the need for and objectives of EDPs in modern organizations. and explain the qualities of an entrepreneur. What is the future of SSIs in India? 1. What steps should be taken for its growth in rural India? 1.Explain the current policy of the Government towards Small Scale Industry (SSI).“Entrepreneurs are made.Write short notes on : (a)Causes of industrial sickness (b)Types of feasibility studies 1.What is meant by Innovation? Discuss the relationship between innovation and entrepreneurs.2. 2.What is Achievenment Motivation? How is it getting promoted? 2.Who is an Entrepreneur? Discuss the characteristics and qualities of a good entrepreneur.not born.Write notes on the following : (a)Maketing assistance in business (b)Method of assessing working capitalrequirements 1.Criticall examine the entrepreneurial growth in rural sector in India.
III UNIT .II UNIT.UNIT .IV UNIT .I JAN 2008 JAN 2007 233 ENTREPRENEURIAL DEVELOPMENT .
II UNIT .III UNIT . 2.IV 234 . 1.Discuss how entrepreneur can encourage personal service for customers and why it is important to do so? UNIT .Describe the entrepreneurial success mode in the rural areas in the recent developing era.2.How an entrepreneurial systme is established in an economy? Suggest a model for the same. In light of above statement explain the role and importance of the Entrepreneurs. 1.“The primary objective of developing countries like India is to achieve rapid. 2. Discuss.”Explain. 1. balanced and sustained rate of economic growth”.“Entrepreneurship development through training is a useful method for creating a strong base for the country”.Discuss the role of government with regards to regulatory framework for encouraging development of entrepreeurship.“Choosing an idea is quite difficult and the entrepreneur has to weight objectively his intrisic capabilities in finalizing an idea. 2.
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