UNIT - 1

FOUNDATIONS OF
ENTREPRENEURSHIP

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 Chapter Outline
Nature of entrepreneurship,
Social & cultural factors in
nurturing entrepreneurship.
Institutional support for
promoting entrepreneurship in
India,
Role of universities & colleges,
CSIR labs.
Case study of incubation
 What is Entrepreneurship?
The word Entrepreneurship is derived from
the French Verb Entrependre & German
word Uternehmen both referring to
individuals who undertake i.e. those who
undertake risk of new enterprise.
It involves creativity, Risk taking, Innovation
When entrepreneurial activities are carried
out within a firm or large organization it is
referred to as intrapreneurship and may
include corporate venturing, when large
entities spin-off organizations
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 Who is an Entrepreneur?
Person conducting own business
Management experts define
entrepreneur as a person who has
a vision and generates an action
plan to achieve it.
Organizer of an economic
venture, one who owns,
organizes, manages, and
assumes the risks of the
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Benefits of Entrepreneurship
1. Originality
2. Excitement
3. Independence
4. Flexibility
5. Opportunity for growth and self development
6. Greater Monetary rewards
7. Power of decision making
8. Satisfaction of achievement
9. Contribution towards economic development

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Draw Backs of Entrepreneurship

Salary
Benefits
Work schedule
Administration
Incompetent staff
Procedures
Characteristics of an Entrepreneur

1. Vision
2. Knowledge
3. Desire to succeed
4. Independence
5. Optimism
6. Motivation
7. Leadership
8. Hardworking
9. Risk Taking ability
10.Desire to make their own fate/future.
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 Role of the Entrepreneur
An innovator who combines technical
innovations and financial finesses.
Important role in producing competitive
products, processes, and services.
Generation of new employment
Local and regional economic
development
Improved allocation of resources and
transfer of technologies
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 Inside the Entrepreneurial Mind:
From Ideas to Reality
Creativity, Innovation, and Entrepreneurship
Creativity is the ability to develop new ideas and
to discover new ways of looking at problems and
opportunities.

Innovation is the ability to apply creative

solutions to problems and opportunities to
enhance or to enrich peoples lives.

In a nutshell, creativity is thinking new things,

innovation is doing new things.

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 The Sources of Innovative and
Creative Ideas
Present and potential consumers
Existing companies
Raw material providers
Distributors and retailers
Research and development
Existing employees

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 The Creativity Process
1.Preparation :: Prepare the mind
Adopt the attitude of a lifelong student
Read more
Discuss ideas with others
2.Investigation :: Investigate the problem or
decision
Study information related to the field that
the idea is in
3.Transformation :: Observe similarities and
differences in the information collected
Evaluate the parts of the situation several
times
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Rearrange the elements of the situation
The Creativity Process
4. Incubation :: Give the subconscious time to reflect on the
information collected
Walk away from the situation
Take the time to daydream
Relax
5. Illumination :: Eureka factor moment
This moment will come randomly, just be ready to act
on it when it comes
6. Verification :: Validate that the idea is accurate and useful
Conduct experiments
Run simulations and tests
Build prototypes
7. Implementation :: Make the idea become a reality
Take your product to the stage, dont get caught up in
the planning stage
 Entrepreneurial Process

Identify An Opportunity
Establish Vision
Persuade Others
Gather Resources
Create new Venture, product or Market
Change/Adapt with time
 Failure: Just Part of the Creative
Process!
For every 3,000 new product ideas:
Four make it to the development stage.
Two are actually launched.
One becomes a success in the market.
On average, new products account
for 40 percent of companies sales!!
Creativity is an important source for
building a competitive advantage.
14
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Overruled
 Barriers to Creativity
Fearing looking foolish
Fearing mistakes and failure
Searching for the one right answer
Not ready to take risk
Blindly following the rules
Constantly being practical
Concentrating only on present
Avoiding ambiguity
Believing that Im not creative
 Tips for Enhancing
Organizational Creativity
Include creativity as a
core company value
Expect creativity
Expect and tolerate
failure
Encourage creativity
View problems as
challenges
18
 Tips for Enhancing Organizational
Creativity

Provide creativity
training
Provide support
Develop a procedure for
capturing ideas
Talk with customers
Reward creativity

Chapter 2: Creativity 19
 Tips for Enhancing Individual
Creativity

Allow yourself to be creative

Give your mind fresh input every day
Observe the products and services of
other companies, especially those in
completely different markets
Recognize the creative power of
mistakes

Chapter 2: Creativity 20
 Tips for Enhancing Individual
Creativity

Keep a journal handy to record your

thoughts and ideas
Listen to other people
Listen to customers
Read books on stimulating creativity or
take a class on creativity
Take some time off

21
 Barriers to Innovation
Corporate Culture
Hierarchical structure
Bureaucratic management style
Difficulty in managing mavericks
Punish risk-taking
Lack of motivation
Inappropriate reward systems
 Improving Innovation

Visualize the future

Create a sense of urgency
Expect calculated risk-taking
Encourage experimentation
Develop incentives
Focus on customer needs
Seek feedback from
stakeholders
 Nature and Characteristics of
Entrepreneurship
1. Ability to create Enterprise:
Entrepreneurship is a economic
activity. It creates an enterprise and
is concerned with satisfying the
needs of customers through products
and services.
2. Organising function:
Entrepreneurship brings together
various management functions like
planning, organizing, controlling etc
 Nature and Characteristics of
Entrepreneurship
3. Innovation
Entrepreneurship involves creativity
and innovation of something new
constantly because of the changes in
environment.
4. Managerial and Leadership functions
Entrepreneurship demands and
develops handling of risk and
uncertainties.
Scope of Entrepreneurship
 Scope of Entrepreneurship
Entrepreneurship works in different
ways in different economic systems.
In a Capitalistic Economy there will
be less Govt interference and an
entrepreneur enjoys more freedom.
In a Socialistic Economy private
entrepreneurship is absent and there
will be more Govt interference
In a Mixed Economy there will be co-
existance of both private and public
Social & Cultural factors in nurturing
entrepreneurship
Social factors strongly affect the
entrepreneurial development. Some
of the important factors are
1. Family Background
2. Reference Groups (Relatives, friends,
colleagues)
3. Family and Religion
4. Education
5. Social Status
 Institutional support for promoting
Entrepreneurship in India
Industrial Finance Corporation of India (IFCI)

Industrial Credit and Investment Corporation of India (ICICI)

Industrial Development Bank of India (IDBI)

Small Industries Development Bank of India (SIDBI)

National Small Industries Corporation (NSIC)

District Industrial Centres (DIC)

Technical Consultancy Organisations (TCO)

Industrial Finance Corporation of
India (IFCI)
Established on July 1, 1948 to cater to the long-term finance needs
of the industrial sector

Until the establishment of ICICI in 1956 and IDBI in 1964, IFCI

remained solely responsible for implementation of the
governments industrial policy initiatives

Some sectors that have directly benefited from IFCIs disbursals

include:

Consumer goods industry (textiles, paper, sugar)

Service industries (hotels, hospitals)
Basic industries (iron & steel, fertilizers, basic chemicals, cement)
Capital & intermediate goods industries (electronics, synthetic fibers,
synthetic, plastics, miscellaneous chemicals)
Infrastructure (power generation, telecom services)

IFCI has sanctioned financial assistance of more than Rs 500

billion to around 8000 concerns

IFCI has promoted Technical Consultancy Organizations (TCOs)

Industrial Credit and Investment
Corporation of India (ICICI)
Incorporated in 1955 at the initiative of the World Bank, the Government
of India and representatives of Indian industry

Objective of creating a development financial institution for providing

medium-term and long-term project financing

ICICI Bank, ICICI Venture, ICICI Securities Limited (i-SEC), ICICI Prudential
Life Insurance Company, ICICI Lombard General Insurance Company
Limited

Activities:

Underwriting of shares, bonds, stocks

Provision of loans in foreign currency to
pay for imported equipment
Industrial Development Bank of
India (IDBI)
Incorporated in 1964

National Stock Exchange of India (NSE), National Securities Depository Services Ltd.
(NSDL), Stock Holding Corporation of India (SHCIL) are built by IDBI

Services offered:

Loans against securities

Underwriting
Loans for modernisation, renovation
Assist financial institution by subscription to
shares, bonds
Direct financing of exports
Refinancing industrial loans granted by banks,
financial institutions
National Small Industries
Corporation (NSIC)
Establishment in 1955

Services include:

Marketing support (Exhibitions and Technology Fairs, Buyer-

seller meets, export of products)

Credit support (Financing for procurement of Raw Material,

financing for marketing activities)

Technology support (Advising on application of new

techniques, material testing facilities, common facility
support, classroom and practical training for skill up
gradation)

Small Enterprise Establishment Programme (SEEP)

Insurance of Export Credit for Micro and Small Enterprises

District Industrial Centres (DIC)
Objective - provide a focal point for the promotion of SSI, provide service and support
to the decentralized industries under a single roof at pre investment, investment and
post investment stage

Initiated from 1st May 1978

Main activities/functions of the Public authority:

Registration of SSI
Census of SSI
Financing of SSI through banks
Provision of industrial estates
Implementation of Industrial Policy
Subsidies to SSI
Technical assistance
Matters relating to KVIC
Trade fairs, exhibition, awareness programme
Training
Technical Consultancy
Organisations (TCO)
Set up by IDBI, IFCI and ICICI, state level financial institutions and
commercial banks

Services:

Consultants to individual
entrepreneurs, government
agencies, commercial banks in task
of industrial development

Project Consultancy (Identify

industrial potential through
research, feasibility reports, pre
investment studies, providing
State Financial Corporations (SFCs)
SFCs are the State-level financial institutions which play a
crucial role in the development of small and medium
enterprises in the concerned States.
They provide financial assistance in the form of term loans,
direct subscription to equity/debentures, guarantees,
discounting of bills of exchange and seed/special capital,
etc.
SFCs have been set up with the objective of generating
greater employment and widening the ownership base of
industries.
They have also started providing assistance to newer types
of business activities like floriculture, tissue culture, poultry
farming, commercial complexes and services related to
engineering, marketing, etc.
Objectives of State Financial
Corporations
1. Provide financial assistance to small and medium
industrial concerns. These may be from
corporate or co-operative sectors as in case of
IFCI or may be partnership, individual or joint
Hindu family business.
2. Provide long and medium-term loan repayable
ordinarily within a period not exceeding 20
years.
Objectives of State Financial
Corporations
3. Grant financial assistance to any single industrial
concern under corporate or co-operative sector
with an aggregate upper limit of Rupees Sixty
lakhs. In any other case (partnership, sole
proprietorship or joint Hindu family) the upper
limit is Rupees 30 lakhs.
4. Provide financial assistance generally to those
industrial concerns whose paid up share capital
and free reserves do not exceed Rs. 3 crores.
5. To lay special emphasis on the development of
backward areas and small scale industries.
Functions of State Financial
Corporations (SFCs)
1. Grant of loans and advances to or subscribe
to debentures of, industrial concerns
repayable within a period not exceeding 20
years, with option of conversion into shares
or stock of the industrial concern.
2. Guaranteeing loans raised by industrial
concerns which are repayable within a
period not exceeding 20 years.
3. Guaranteeing deferred payments due from
an industrial concern for purchase of capital
goods in India.
Functions of State Financial
Corporations (SFCs)
4. Underwriting of the issue of stock, shares, bonds
or debentures by industrial concerns.
5. Subscribing to, or purchasing of, the stock,
shares, bonds or debentures of an industrial
concern subject to a maximum of 30 percent of
the subscribed capital, or 30 percent of paid up
share capital and free reserve, whichever is less.
6. Act as agent of the Central Government, State
Government, IDBI, IFCI or any other financial
institution in the matter of grant of loan or
business of IDBI, IFCI or financial institution.
Functions of State Financial
Corporations (SFCs)
7 Providing technical and administrative
assistance to any industrial concern or any
person for the promotion, management or
expansion of any industry.
8 Planning and assisting in the promotion
and development of industries.
State Industrial Development
Corporations (SIDCs)
State Industrial Development Corporations (SIDCs) have
been established under the Companies Act, 1956, as wholly-
owned undertakings of State Governments.
They have been set up with the aim of promoting industrial
development in the respective States and providing financial
assistance to small entrepreneurs.
They are also involved in setting up of medium and large
industrial projects in the joint sector/assisted sector in
collaboration with private entrepreneurs or wholly-owned
subsidiaries.
They are undertaking a variety of promotional activities
such as preparation of feasibility reports; conducting
industrial potential surveys; entrepreneurship training and
development programs; as well as developing industrial
areas/estates.
 SIDBI
A small scale industry is one in which the
investment in plant and machinery does
not exceed Rs.1.5 Crore.
However, to facilitate technology up
gradation and enhance competitiveness,
the investment limit has been raised to Rs.
5 crore in respect of 71 high tech export
oriented items in drugs, pharmaceuticals,
hand tools and knitwear sectors, etc.
 Small Industries Development Bank of India
(SIDBI)
SIDBI was established on April 2, 1990.

It is the principal financial institution for the promotion, financing

and development of industry in the small scale sector and to co-
ordinate the functions of the institutions engaged in the
promotion and financing or developing industry in the small scale
sector .
The business domain of SIDBI consists of small scale industrial
units, which contribute significantly to the national economy in
terms of production, employment and exports.
In addition, SIDBI's assistance flows to the transport, health care
and tourism sectors and also to the professional and self-
employed persons setting up small-sized professional ventures.
OBJECTIVES OF SIDBI

1. Financing
2. Promotion
3. Development of Industries in
small scale sector
4. Coordinating functions of other
institutions engaged in similar
activities.
 Schemes of SIDBI
SIDBI has
1.Scheme for Refinance Assistance
2.Scheme for Direct Assistance
3.Bills Schemes
 Schemes of SIDBI
1. Scheme for Refinance Assistance:
a) Schemes for setting up SSI units
b) Composite loan scheme
c) Scheme for SC/ST and physically handicapped persons
d) Equipment refinance scheme
e) Scheme for Small Road Transport Operations
f) Scheme for professionals
g) Scheme for Marketing activities
h) Scheme for medical profession
i) Scheme for tourism related activities
j) Scheme for hotel and restaurant related activities
k) Scheme for Infrastructure Development
l) Scheme for women entrepreneurs
m)Scheme for Ex-servicemen
n) Single window scheme
 Schemes of SIDBI
2. Scheme of Direct Assistance:
a) Scheme for specialised marketing agencies
b)Scheme for subcontracting units
c) Scheme for development of Industrial area for
SSI Sector
3. Bills Scheme:
a) Bills Rediscounting scheme (Normal) up to 5
years.
b) Bills Rediscounting scheme (Short terms) up
to 90 days.
The major issues confronting
SSIs are identified to be:
1. Technology Obsolescence
2. Managerial Inadequacies
3. Delayed Payments
4. Poor Quality
5. Incidence of Sickness
6. Lack of Appropriate
Infrastructure and
7. Lack of Marketing Network.
 SIDBI Foundation for Micro
Credit (SFMC)
SIDBI Foundation for Micro Credit (SFMC) was
launched by the Bank in January 1999 for
channelising funds to the poor in line with the
success of pilot phase of Micro Credit Scheme.
SFMC's mission is to create a national network of
strong, viable and sustainable Micro Finance
Institutions (MFIs) from the informal and formal
financial sector to provide micro finance services
to the poor, especially women.