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Ø The Concept of Entrepreneurship

v Definition of Entrepreneurship
v Need for Entrepreneurship
v Factors Influencing Entrepreneurship

Ø Emergence of Entrepreneurial Class

v Introduction
v Communities that promoted entrepreneurship in India
v Causes of slow growth of Entrepreneurship in India
Family Business in India
v Stages of Evolution of Entrepreneurship

Ø Characteristics of Entrepreneurship

v Qualities of Entrepreneurship
v Entrepreneurial functions
v Classification of Entrepreneurs

Ø Difference between
v Entrepreneur & Manager
v Entrepreneur and Entrepreneurship
v Entrepreneur and Enterprises
v Entrepreneur and Administrator
v Entrepreneur & Intrapreneurship



The ultimate measure of a man

Is not where he stands
In moments of comfort and convenience
But where he stands
At times of challenge and controversy.

- Martin Luther King.

The words entrepreneur, intrapreneur and entrepreneurship have acquired

special significance in the context of economic growth in a rapidly changing
socio-economic and socio-cultural climates, particularly in industry, both in
developed and developing countries. Entrepreneurial development is a
complex phenomenon. Productive activity undertaken by him and constant
endeavor to sustain and improve it are the outward expression of this process
of development of his personality.


An entrepreneur is a person with a dream, originality and daring, who acts as

the boss, who decides as to how the commercial organization shall run, who
co-ordinates all activities or other factors of production, who anticipates the
future trend of demand and prices of products.

An entrepreneur is one of the important segments of economic growth.

Basically he is a person responsible for setting up a business or an enterprise.
Infact, he is one who has the initiative, skill for innovation and who looks for
high achievements. He is a catalytic agent of change and works for the good
of people. He puts up new green-field projects that create wealth, open up
many employment opportunities and leads to the growth of other sectors.

The entrepreneur displays courage to take risk of putting his money into an
idea, courage to face the competition and courage to take a leap into unknown
future and create new enterprises/ business. This creative process is the life
blood of the strong enterprise that leads to the growth and contributes to the
national development.

The entrepreneur will always work towards the creation and enhancement of
entrepreneurial society.


The best entrepreneur in any developing country is not the one who uses
much capital but an individual who knows how to organize the employment
and training of his employees.

A classic example is that of Mr. Dhirubhai Ambani because he had all the
dynamic qualities of a successful entrepreneur, as a result of which today, he
was the owner of the largest private company in India. All decisions which he
had taken to grow were instinct and no one had taught him to take decisions.



Urge Innovation

Skill Risk

Vision Enterprise



We can define entrepreneur as one who innovates, raises money, assembles

inputs, choose managers and sets the organization going with his ability to
identify them.

As per Peter Drucker- “An entrepreneur is one who always searches for
change, responds to it as an opportunity. Entrepreneurs innovate. Innovation
is a specific instrument of entrepreneurship”.

As per Joseph A. Schumpeter- “Entrepreneur is one who innovates, raises

money, and assembles inputs, chooses managers and sets the commercial
organization going with his ability to identify them and opportunities which
others are not able to identify and is able to fulfill such economic


As per Walker- “An entrepreneur is one who is endowed with more than
average capacities in the task of organizing and co-coordinating the various

The process undertaken by an entrepreneur to augment his business interests

gave birth to “ENTREPRENEURSHIP”.


Entrepreneur Entrepreneurship Enterprise

Person Process of action Object

Fig 1. Concept of Entrepreneurship


Entrepreneurship is an elusive concept.

“Entrepreneurship is based on purposeful and systematic innovation. It

included not only the independent businessman but also company
directors and managers who actually carry out innovative functions.”


In the above definition, entrepreneurship refers to the functions performed by

an entrepreneur in establishing an enterprise. Just as management is regarded
as what managers do, entrepreneurship may be regarded as what
entrepreneurs do. In other words, entrepreneurship is the act of being an
entrepreneur. Entrepreneurship is a process involving various actions to be
undertaken to establish an enterprise. It is thus, process of giving birth to a
new enterprise. Entrepreneurship is composite skill, the resultant of a mix of
many qualities and traits- these include tangible factors as imagination,
readiness to take risks, ability to bring together and put to use other factors of
production, capital, labour, land, as also tangible factors such as the ability to
mobilize scientific and technological advances. A practical approach is
necessary to implement and mange a project by securing the required

licenses, approvals and finance from governmental and financial agencies.

The personal incentive is to make profits from the successful management of
the project. A sense of cost consciousness is even more necessary for the long-
term success of the enterprise. However, both are different sides of the same
coin. Entrepreneurship lies more in the ability to minimize the use of
resources and put them to maximum advantage. Without any awareness of
quality and desire for excellence, consumer acceptance cannot be achieved
and sustained. Above all, entrepreneurship today is the product of teamwork
and the ability to create, build and work as a team. The entrepreneur is the
maestro of the business orchestra, wielding his baton to which the band is

The basic two elements involved in entrepreneurship are as follows;-


Innovation Risk- bearing


Innovation, i.e. doing something new or something different is a necessary

condition to be called a person as an entrepreneur. The entrepreneurs are
constantly on the look out to do something different and unique to meet the
requirements of the customers. They may or may not be inventors of new
products or new methods f production but they possess the ability to foresee
the possibility of making use of the inventions for their enterprises. In order to
satisfy the changing preference of customers nowadays many enterprises
have adopted the technique of innovation. For instance, pidilite industries
innovated the new 5.rs pack of fevi quick which was accepted by the
customers as it was easy to use when it was needed. Other example would be
of the mobile enterprise which came up with the scheme for the customers of
refill pack of 999.rs which says “Zindagi bhar mobile raho” which was
accepted bye the customers. Since customers taste and preferences always
keep on changing, hence the entrepreneur needs to apply invention on a
continuous basis to meet the customers changing demand for products.


Entrepreneurship is the propensity of mind to take calculated risks with

confidence to achieve a predetermined business or Industrial objective. The
capacity to take risk independently and individually with a view to making
profits and seizing the opportunity to make more earnings in the market-


oriented economy is the dominant characteristic of modern entrepreneurship.

In fact he needs to be a risk taker, not risk avoider. His risk bearing ability
enables him even if he fails in one succeed. The Japanese proverb says “Fall
seven times, stand up eight”. Though the term entrepreneur is often used
interchangeably with entrepreneurship, yet they are conceptually different.
The relationship between the two is just like the two sides of the same coin.
Thus, entrepreneurship is concerned with the performance and co-ordination
of the entrepreneurial functions. This also means that entrepreneur precedes


Entrepreneurship promotes small business in the society. Government has

accepted the fact that small firms have a crucial role to play in the economic
development of the country. Small businesses are an essential part of our
future economic prosperity because of the following reasons-


Entrepreneurial development is looked at as a vehicle for employment

generation through promotion of small business. India, being far more
developed and forward looking country than some of the third world
countries, can provide lead to entrepreneurial development activities.
However, India can benefit from the well- documented success experiences of
developed countries like USA, Japan and UK in the field of employment
generation and small business promotion.

Steady growth in consumer spending, expanding retail sales, a strong

housing market, continued expansion of the service sector, low rates of
inflation and of labour cost increases and failing interest rates contributed to a
healthy environment for small business.

In India, the government policies, political and economic environment greatly

encourage the establishment of new and small enterprises. Self- employment
and small scale industry schemes have been further liberalized during the last
decade. The employment in the small-sector increased from 9.00 million
people in 1984-85 to 13.9 million people in 1994-95. This indicates an increase
of 5.4% p.a in employment in this sector.


Great dynamism is one of the qualities of the small and medium enterprises.
This quality of dynamism originates in the inherent nature of the small
business. The structure of small and medium enterprises is less complex than


that of large enterprises and therefore facilitates quicker and smoother

communication and decision- making. This allows for the greater flexibility
and mobility of small business management. Also, small enterprises, more
often make it possible for owners, who have a stronger entrepreneurial spirit
than employed mangers, to undertake risk and challenges.


Small business promotion needs relatively low investment and therefore can
be easily undertaken in rural and semi-urban areas. This in turn creates
additional employment in these areas and prevents migration of people from
rural to urban areas. Since majority of the people are living in the rural areas,
therefore, more of our development efforts should be directed towards this
sector. Small enterprises use local resources and are best suited to rural and
underdeveloped sector. This in turn will also lead to dispersal of industries,
reduction in concentration of economic power and balanced regional


Business enterprises need to be innovative for survival and better

performance. It is believed that smaller firms have a relatively higher
necessity and capability to innovate. The smaller firms do not face the
constraints imposed by large investment in existing technology. Thus they are
both free and compelled to innovate.

Entrepreneurship development is accelerating the pace of small firm’s growth

in India. An increased number of small firms are expected to result in more
innovations and make the Indian industry compete in the international


The emergence of entrepreneurs in a society depends upon closely interlinked
social, religious, cultural, psychological, and political and economic factors.


Individuals who for some reason, initiate, establish maintain and expand new
enterprises generate entrepreneurship in society. It is observed that
entrepreneurs grow in the tradition of their families and society and accept
certain values and norms from these sources.



Religious, social and cultural factors also influence the individual taking up
an entrepreneurial career, in some countries there is religious and cultural
belief that high profit is unethical. This type of belief inhibits growth of


The psychological factors like high need for achievement, determination of

unique accomplishment, self confidence, creativity, vision, leadership etc,
promote entrepreneurship among individuals. On the other hand
psychological factors like security, conformity and compliance, need for
affiliation etc restrict promotion of entrepreneurship.


The political and also the political stability of country influence the growth of
entrepreneurship. The political system, which promotes free market,
individual freedom and private enterprise, will promote entrepreneurship.


The economic policies of the government and other financial institutions and
the opportunities available in a society as a result of such policies play a
crucial role in exerting direct influence on entrepreneurship.

In view of the haphazard development of economic zones, Government is

encouraging the entrepreneurs to establish their business in backward and
tribal areas. This is primarily to arrest the migration of people from the
villages to cities and to create employment opportunities locally. Government
is promoting such development by giving incentives like tax holidays (both
sales and income), subsidized power tariff, raw materials, transportation cost


From times immemorial, the Indian society has been characterized by a kind
of stratification of religious and regional sections. The Hindu society projected
a type of hierarchy in which the caste groups were separated from each other
on the basis of function. Every member of the society followed the family
occupation. This caused immobility between occupations.


The Bania was a caste that carried on the trading and money lending
business. They specialized in trade and commerce and came from urban
areas. In fact, because of their good financial, standing, their position was an
enviable one in the urban centers. However they ranked third in the caste-
hierarchy. The Brahmins ranked first and kshatriyas second.
The caste system was so rigid, that people were afraid of ostracisation .But in
places where the caste system was relatively loose and the trading caste were
missing, people from other castes, undertook commercial activities and were
also regarded as the members of the business community.

The mid nineteenth century witnessed a fairly developed business

community in India. Saurasthra (now known as Gujarat) was the most
developed and urbanized region in the whole of India. It had a continuous
record of foreign trade, which had lasted for centuries. This tract had a
developed Bania (both Hindu and Jain) community and also large trading
communities, popularly known as the Bohras, Khojas and Kacchi, Memone.
They were converts from Hinduism. Trading was their occupation. They
mainly dealt in cotton. They also carried out overseas trade. They had
business dealing with Persian Gulf, Arabia and Africa to the west and with
Malaya (now known as Malaysia), Indonesia to the south and south east coast
India. The above trading communities are responsible for the supply of
entrepreneurs in India. Following important communities can take the credit
for the supply of entrepreneurs in India.




Parsis migrated from Persia in the century. They performed artisans,

carpenters, weavers etc, in the 17th century. By 18th century, they became well-
known shipbuilders; they had set merchant houses in Bombay, Burma,
China and London. Their chief overseas trade comprised of yarn and opium.
They acted as brokers for the European traders at Bombay and Surat. They
were regarded as merchants and traders of repute. They emerged as the most
prominent trading and financing community or Bombay and Gujarat. Parsees
and Gujarat trading castes that controlled even foreign trade become the
wealthiest Indian communities by the 19th century.


The trading castes of South India were the chettis. They were dividing into
various groups such as the Telugu komatia, the Tamil, Nattukottai Chettis,
and Beri- Chettis etc. The Komatia were the chief traders not only in the


Telugu districts but also in Mysore, Coimbatore, Canara and other places. The
chief financiers are bankers of South India were the Nattukottai Chettis.
Trading in drugs grain and cloth was done by the Beri-Chettis. In the early
19th century they were known to be respectable peddlers who traveled in
caravans. The communities that traded had trade relations with South- East
Asian countries like Burma, Ceylon, and Malaya, Singapore etc. The chettiars
established connections with reputed Indian business firms and also made
good investments in and property. They became important suppliers of rural
credit. The Nattukottai Chettiars were a well- known business community in
Burma. Their working funds invested abroad were mainly employed in

Trading was done by Syrian Christians called Nazrani Mappilas and

Mohammedan merchants known as Moplahs on the West coast in South
India. The Nazrani Mappilas financed internal trading activities of Travancore
and Cochin. Moplahs traded in Malabar and Canara. They shared the
functions of trade with the koknies who conducted banking business in the

When the monopoly of the East India Company ended in 1857, a period of
boom began for the Christians who prospered as merchants. They played the
role of private bankers. The Syrian and Chaldean Christians were active in
promoting Joint Stock Banks at the end of the 19th century.


This important and fairly developed business community came from Marwari
in Rajasthan. The trading and money lending cases got tremendous
development in Gujarat and Rajputana on account of the famous route from
Gujarat ports to the historical center of the Great Mughal state.

Rajputana was torn by feudal strife during the first half of the 19th century. It
was not the place for large scale trading and money lending operations.
Though the local trade was good, it provided a limited scope for
development. Trade remained fairly constant and it was because of this that
investment crossed the borders of Rajputana. Trade spread in towns
throughout the north, east and west of India, especially to the commercial
centers of Bombay and Calcutta.

With the rise of British commerce, these traders gradually replaced the
Bengalis who served as British agents in Calcutta. The Brahmins and the
Kayasthas of Bengal who operated as the British agents started tuning their
attention to investments in land. They even got into 9 professions and
administrative services. But the Subarna Banika, a Bengal trading community
filled the void created by such an occurrence. But Bengal soon became the
center for political revolution. The Britishers both rulers and traders did not
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approve of this. Wherever possible, they tried to replace a Bengali by

someone who proved to be more dependable. The Rajasthani traders tried to
be more co-operative than the Bengali Commercial castes. It is because of this
that the Bengali names in business are relatively un important and where they
occur; they mostly represent the professional agent class and not the
indigenous trading class.

Besides the above trading, money- lending communities that could be

regarded as the source of entrepreneurs in India. There were the Bhatia’s and
Lohanas. These communities carried out local trade and were spread all over
the country. The “Khatris’ a community that trade not only in Punjab but also
in Afghanistan, Central Asia etc. has also been a source of entrepreneurs. In
Maharashtra the contribution of Yajurvedi Brahmins and the Chitapavan
Brahmans who took active part in trading, money lending ad indigenous
banking cannot be forgotten.

The above was on account of the origin of entrepreneurs in India.


Entrepreneurship developed only in the beginning of the 19th century and
though the base for industrialization had been laid a century ago. The
following be the main reasons, which could be responsible for lack of
initiative and entrepreneurial spirit among the Indians.

1. Caste System: - This decided occupation for members from each caste.
The altitudes were restrictive and therefore there were no changes of
accumulating wealth and promoting production.

2. Agriculture: - Agriculture was the main occupation. Farmers and

cultivators were always in the clutches of the money lenders. The
zamindars, nawabs and rajahs exploited the laborers. They spent
money on enjoyment and luxury and never risked money in industry.
Banking and commercial system was also absent so even if there were
savings, they could not be utilized for productive use.

3. Educational System: - Talented young men were prepared to take

white collared jobs or join government or professional services. Many
were attracted towards politics. The result was that very few young
men got attracted towards becoming efficient, industrialists,
technicians, managers etc.

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4. Colonial Rules: - The British rulers adopted discriminatory policy Rich

Indian businessman had special connections with foreign rulers and
both satisfied their self interests. Even the few insurance and banking
services catered to the needs of some rich Indian businessman,
Britishers in India did also not encourage Industrialization.

5. Managing Agents: - There were just a handful of people who were

known to be having managerial skills. On common basis, these agents
would lend their skills to some top industries. Industrialists could not
manage their own units. They were always at the mercy of the
managing agents who filled their pockets with big chunks of the
companies’ profits and took full advantage of Indian industrialists till
the managing agency system was abolished in 1970.

6. Joint Family System: - Younger members of the family always

depended on the Head who never gave any kind of independence or
encouraged units other than family business ones. A number of young
men were discouraged from diversifying from family business and
doing something new and different.

7. Religious attitude: - Indians were very religious mi9nded. They gave

more time to religion than to earning material wealth. Religion got
priority over business. Some religions even condemned excess earnings
and indulgence I in comforts. Industrial activity was, therefore, given
secondary consideration by the religious Indians.

8. Mindset: - The mindset of the average Indian was never

entrepreneurial. Our religious literature and epics told us to have
patience and to keep on working without expecting the fruits of labor.
This also killed the drive and desire to get into entrepreneurial

9. Recognition by the society: - In earlier days, the heroes India were the
social reformers and the politicians. Now it is the era of sportsmen,
models and film stars. It is sad that successful or the struggling
entrepreneurs have never been recognized as heroes. Entrepreneurial
activity did not get due importance in the India society.

10. Family Background: - Empirical studies have shown that a good

number of entrepreneurs come from families with industrial
backgrounds. Unfortunately, only a few entrepreneurial communities
in India made entrepreneurial contribution. These communities could
also not make headway in the entrepreneurial field on account of the
colonial rule, lack of infrastructure and other facilities.
Entrepreneurship development could only take place after
independence in India.
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In India, family business accounts for about 70prcent of the total sales and net
profits of the biggest 250 private sector companies. Big families’ have carved
up the big industries. In vehicles, for example, the Tatas make Lorries, the
Birlas make ambassador cars, the Bajaj family makes two wheelers and the
Mahindras make jeeps. They diversified into any business where they could
get a permit to operate. Borrowing, mainly from public sector institutions,
was easy, and company law makes it simple to control subsidiaries through
very small shareholdings. The Tata Empire, for example, embraces some 70
companies, making everything from tea to watches in which the parent
company’s average stake is rarely above 15 percent.

Entrepreneurship is not just a way to- increase the level of innovation and
productivity of organizations, although it will do it. More importantly, it is a
way of initiating vast business so that work becomes a joyful expression of
one’s contribution to society. The Indian entrepreneur, intrapreneur and/or
manger of the 90’s have to be molded in psycho- philosophy rooted in the
Indian context and values.

“The crisis in business is spiritual” says Prof. Sitangshu Kumar Chakraborty,

“All management ideas till now have been external directed paradigms,
developing behavior, skills, not character, and values. But meaning and
richness must flow from mind to work, not the other way. We need a
fundamental shift from the current reductionism, fragmentize and
materialistic paradigm to one which recognizes consciousness and spirit as
the right approach”.

The concept of entrepreneur and entrepreneurship incorporates basic

qualities of leadership, innovation, enterprise, hard work, vision and
maximization of profits. All his socio-economic, organizational and society
and the community. He is committed to progress. He is a catalytic agent of
development and change. Personal satisfaction and monetary rewards are
blended with social betterment and welfare of mankind.

In August 1992, with their combined savings of Rs. 25,000, Alka and Anupam
Joshi launched premier clothing as an export- oriented unit. The premier
clothing has been licensed to market, for the first time, The Disney babies’
range of products in India.

Having several information mail- order companies, not to mention store

chains, in the bag isn’t enough for Joshi. Now, he’s planning a move into the
booming readymade shirts business. As always, Joshi plans to hedge his bets:
he’s talking to some foreign companies about starting off by producing shirts
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for them. That’s clearly part of his philosophy of manufacturing for a ready-
made market. And, as in the case of the Disney babies’ line, to a ready- made
mindset, either ways, it’s a premier strategy.

Chandan Sumaya look plunge in 1985 armed with only” a passion for cars”
borrowing Rs 30,000 from his mother to float Kent. This name he chose
because it rhymed with rent and had an international ring- car. Apparently,
he fell in love with the business while helping his uncle run one. Working out
of his home in Bombay’s Nepean Sea Road, Sumaya installed a desk and a
telephone in the front half of his garage; the car took up the rest. Only by the
end of the second year could he afford to invest in two more Ambassadors

He has invested in a fleet of 136 cars and concentrates on the corporate sector,
where they are market leaders. Kent Cars is now poised to drive into the
national market place through the franchising route. Whether or not he does
as well in these cities as he is in Mumbai, Chandan Sumaya has driven a long
way from the home garage he started from. And that’s the spirit of Kent.


The evolutionary process of entrepreneurship activities may be divided into
the following broad stages:

1. Hunting Stage: - The primary stage of the evolution of the economic life
of man was hunting stage. Wants were limited and very few in numbers.
The family members themselves satisfied problems of food, clothing and
shelter. Producers were the consumers also. Robinson Crusoe, living in
the deserted island, satisfying his own requirements had no knowledge of
business. People in some parts of Africa and India still lead this type of
life. In this stage problems of production and distribution were not
complexed since wants were simple and limited.

2. Pastoral Stage: - With the progress of mankind gradually mental

understanding developed and people started realizing that instead of
killing animals, they should breed and rear them. Thus cattle breeding
encouraged the use of milk, and they had to think in terms of grazing
areas for their cattle. The surplus milk, meat and other related products
were spared of exchange. This stage can be termed as the first stage of
economic development and the beginning of commerce.

3. Agricultural Stage: - In search of grazing areas, they further realized that

they should grow plants as food for animals. They started testing some
grain products and slowly developed a taste in plants and the land was
used for cultivation. Groups of persons started living together on their
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agricultural fields, which were subsequently converted into small villages

with their farms. Free exchange of goods was started and the activities
were also divided to the extent of division of labor at the village level to
complement the needs of each other. Initially each village was self-
sufficient, but later they began small trading activities on barter basis.

4. Handicraft Stage: - In the agricultural stage, people started learning the

use of cloth made of cotton products, and they developed the segments of
the workers for different activities. Cottage scale setup was developed at
the village level to nearby villages, and in exchange they brought
requirements either to consume themselves or for their village friends.
Since the demand for gold coins, silver coins, skin and hide etc increased
the activities of cobblers, gold smiths, and blacksmiths, laborers also
rapidly increased, and caste system was also formed on the basis of
activities they did. Everybody selected their job according to their own
choice and taste.

5. Present Industrial Stage: - The use of mechanical devices and the

commonly acceptable form of monetary system accelerated the growth of
entrepreneurship activities. The progress of science and the increase in the
means of transportation and communication enabled to travel widely and
the markets were developed in the country and abroad.

The qualities that contribute to the success of an entrepreneur are as follows: -

1. Risk Taking: - Entrepreneurs are moderate risk takers. They enjoy he

excitement of a challenge, but they do not gamble. Entrepreneurs avoid
low- risk situations because there is a lack of challenge. They avoid
high risk situations because they want to succeed. They like achievable
challenges. They do not tend to like situations where the outcome of a
quest depends upon a chance and not on their efforts. They like to
influence the outcome of their quest by putting in more efforts and
then experiencing a sense of accomplishment. A risk situation occurs
when an entrepreneur is required to make a choice between two or
more alternatives whose potential outcomes are not known and must
be evaluated in advance, with limited information. A risk situation
involves potential gain and potential loss. As the size of the business
expands the problems and opportunities become more numerous and
complex. Business growth and development require an entrepreneur
not to be afraid of taking decisions and certain risks. Most people are
afraid to take risks because they want to be safe and avoid failure. An
entrepreneur always takes a calculated risk and is not afraid of failure.

- 15 -

2. Self- Confidence: - A man with self – confidence has clear thoughts

and well- defined goals to achieve in his life. An entrepreneur gets into
business or industry with a high level of self- confidence. He is able to
evaluate his competencies and capabilities in a realistic manner. He can
set realistic and challenging goals. He is confident of achieving these
goals. He possesses a sense of effectiveness, which ultimately
contributes to success of his venture. He puts forward his case
confidently and gets needed help from concerned agencies/

3. Optimist: - An entrepreneur is able to visualize the hidden

opportunities in the environment and translate them into business
realities. An entrepreneur exhibits a positive and optimistic attitude
towards such opportunities. The entrepreneur approaches his task
with the hope of success and not with a fear of failure. In the process of
accomplishing his task he may also fail but the failure experience does
not change his thinking. He is always an optimist in his outlook. The
positive outlook develops a drive in the entrepreneur to attempt new
things and innovate.

4. Need for achievement: - The need to excel known as achievement is a

critical factor in the personality of an entrepreneur. People with high
need for achievement have desire for success in competition with
others or with a self- imposed standard of excellence. They try to
accomplish something new and try to innovate themselves in long-
term goals. They try to accomplish challenging tasks. They know their
own strengths and weaknesses, the facilitating factors and constraints
in the environment and the resources needed to accomplish their tasks.
If the objectives are accomplished they feel elated.

5. Need for independence: - The need for independence is the prime

characteristic that has driven the entrepreneurs to start their own
business. These entrepreneurs do not like to be controlled by others.
They do not wait for direction from others and choose their own course
of action. They set their own challenging goals and put efforts to
achieve this goal. The independence provides opportunity for trying
out new ideas and helps them achieve their goals.

6. Creativity: - Entrepreneurs are highly creative people. They always try

to develop new products, processes or markets. They are innovative,
flexible and are willing to adopt changes. They are not satisfied with
conventional and routine way of doing things. They involve
themselves in finding new ways of doing the things for the better.

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7. Imaginative: - Successful entrepreneurs possess a high degree of

imagination and foresightedness. Entrepreneurs have a great vision.
Knowing the present and the past the entrepreneur is able to predict
the future events the business more accurately than others. It is because
of their visionary nature and power of imagination that helps them in
anticipating problems and evolving actions strategies for such

8. Administrative ability: - A successful entrepreneur is always a good

administrator. He knows the art of getting things done by other people
without hurting their feelings of self- respect. He has strong motivation
towards the achievement of a task and puts in necessary efforts in
getting things done by others.

9. Communication ability: - Communication ability is the ability to

communicate effectively. Good communications also means that both
the sender and the receiver understand each other and are being
understood. An entrepreneur who can effectively communicate with
customers, employees, suppliers and bankers will always succeed in
their business.

10. Clear objectives: - An entrepreneur has clear objectives as to the exact

nature of the business, the nature of the goods to be produced and the
subsidiary activities to be undertaken. A successful entrepreneur has
the objective to establish the product to make profit or to render social

11. Business Secrecy: - An entrepreneur who is successful always guards

his business secrets. Leakage of business secrets to trade competitors is
a serious matter; therefore an entrepreneur should carefully guard it.
An entrepreneur must be able to make a proper selection of his
assistant since most of the time it is the assistant who leaks the trade

12. Emotional stability: - The most important personality factors

contributing to the success of an entrepreneur are emotional stability,
personal relations, consideration and tactfulness. An entrepreneur
must maintain good relations with the customers if he wishes to enjoy
their continued patronage. He must also maintain good relation with
his employees, whom he shall motivate to perform their jobs at a high
level of efficiency. An entrepreneur who maintains good human
relations with customers, employees, suppliers and the community has
a better chance to succeed in his/ her business.

13. Open-mindedness: - Open- mindedness means a free and frank

approach in accepting one’s own errors and change for the better. An
- 17 -

entrepreneur must be willing to learn from his past experience,

mistakes and moulds himself for better.

14. Technical knowledge: - Technical knowledge implies knowledge

about the product, process or technology used in manufacturing. An
entrepreneur who has reasonable level of technical knowledge will
always be successful. Technical knowledge is easy to acquire if the
entrepreneur tries hard to acquire it.

15. Patience: - Patience means ability to wait. Patience also means doing
the work and waiting for the result. A certain amount of patience is
necessary in any type of vocation. An entrepreneur should not wait for
actions but can certainly wait for result for his efforts.

16. Hard working and energetic: - Ability and willingness to work hard is
an important quality of an entrepreneur. A person having physical and
mental stamina to cope with the hard work and human relation is fit to
become a successful entrepreneur. By carrying out well- planned and
systematic work, success is always the end result.

17. Good organizer: - Entrepreneurs are good organizers of resources like

men, machines, materials and money needed to start and run the
business smoothly. They can convince the employees, investors,
customers and co- ordinate the activities of individuals and groups in
the accomplishment of business objectives. An entrepreneur works like
a coordinating force among the resources, mould and manages them

An entrepreneur is said to perform the following functions:

1. Assumption of risk: - Risk bearing or uncertainty bearing is the most

important function of an entrepreneur which he tries to reduce by his
initiative, skill and good judgment.

2. Business decisions: - The entrepreneur has to decide

a. To enter the industry this offers him the best prospects

b. To produce goods that he thinks will pay him the most
c. To employ those methods of production which seem to him the
most profitable.
d. To effect suitable changes in the size of the business, its location
that are needed for the development of his business.

- 18 -

3. Managerial Functions: - The entrepreneur performs the managerial

functions such as

a. Formulating production plans

b. Overseeing finances
c. Dealing with the purchases of raw materials
d. Providing production facilities
e. Organizing sales

In large establishments these management functions are delegated to

professional managers an entrepreneur performs many useful functions such
v Undertakes a venture
v Assumes risk and
v Earns profits
v Identifies opportunities to start business either as a manufacturer or a

The entrepreneurship exists in every field of economic endeavor.

Entrepreneurship has also been developed in the trading sector. A
manufacturing entrepreneur demonstrates his entrepreneurial talents by
bringing out new products while a trading entrepreneur performs his
entrepreneurial functions in creating demand for the business he deals.

Deciding the Raising Planning

Project. Finance Production

Risk - Managing
Taking Enterprise

Innovation Earning Profits


Fig.2 Entrepreneurial function

- 19 -

The entrepreneurs have been broadly classified according to

v Types of business
v Use of professional skill
v Motivation
v Growth
v Stages of development


v Business entrepreneurs are those individuals for a new product or

service and then translate the same into business reality. Tap both
production and marketing resources to develop a new business
opportunity. Setup big establishment or small unit such as printing
press, textile processing house, advertising agency, readymade
garments or confectionery. In majority of cases, entrepreneurs are
found in small trading and manufacturing business. Entrepreneurship
flourishes when the size of business is small.

v Industrial entrepreneurs are essentially a manufacturer who identifies

potential needs of customers and products or service to meet the
marketing needs. He should have the ability to convert economic
resources and technology into a profitable venture.

v Corporate entrepreneur is an individual who demonstrates his

innovative skill in organizing and managing corporate undertaking.
He plans, develop and manage a corporate body.

v Agricultural entrepreneur are the ones who undertake agricultural

activities such as raising and marketing of crops, fertilizers and other
inputs of agriculture. They are motivated to improve agriculture
through mechanization, irrigation, and application of technologies for
dry land agricultural products.


v Technical entrepreneur is the one who is essentially a craftsman. He

develops improved quality of goods because of his craftsmanship. He
concentrates more on production than on marketing. He demonstrates
his innovative capabilities in matter of production of goods and
rendering of services.

- 20 -

v Non- technical entrepreneur are those who are not concerned with the
technical aspects of the product in which they deal. They are concerned
only with developing alternative marketing and distribution strategies
to promote their business.

v Professional entrepreneur is interested in establishing a business but

does not have interest in managing or operating it once it is
established. He sells out the running business and starts another
venture with the sales proceeds.


An entrepreneur is motivated to achieve or prove his excellence in job

performance. He influences others by demonstrating his business acumen.

v Pure entrepreneur is an individual who is motivated by psychological

and economic rewards. He undertakes entrepreneurial activity for his
personal satisfaction in work, ego and status.

v Induced entrepreneur is one who is induced to take up an

entrepreneurial task due to policy measures of the government that
provides assistance, incentives, and concessions and other facilities to
start a venture. Enter business due to financial, technical and other
facilities provided to them by the state agencies to promote

v Motivated entrepreneur: they come into being because of the challenge

involved in developing and marketing a new product for the
satisfaction of consumers. If the product succeeds, the entrepreneur is
further motivated for launching of newer products.

v Growth and entrepreneur are those who take up a high growth

industry which has substantial growth prospects. Super growth
entrepreneurs are those who show enormous growth or performance
in their venture.


v First generation entrepreneur is the one who starts an industrial unit

by his innovative skill. He is the one who combines different
technologies to produce a marketable product or services.

v Modern entrepreneur is one who undertakes those ventures which go

well with the changing demand in the market. He undertakes those
ventures that suit the current market needs.
- 21 -

v Classic entrepreneur is one who is concerned with maximizing the

economic returns at consistent level. He is concerned more about the
survival of the firm with or without an element of growth. Apart from
the above, there are entrepreneurs who can be classified into
innovative and imitative categories.

v Innovating entrepreneurs are generally aggressive in collecting

information, analyzing and experimenting attractive possibilities into
practice. They are quick to convert old established products or services
by changing their utility, their value, their economic characteristics into
something new, attractive and utilitarian. They can see the opportunity
for introducing a new technique of production process or a new
commodity or a new service or even the reorganization of an existing
enterprise. They are very commonly found in developed countries
while there is dearth of such entrepreneurs in underdeveloped
countries. They are always creative and bringing in innovation in their

v Imitative entrepreneurs are ready to adopt and are more flexible in

imitating techniques developed by others. They exploit opportunities
as they come and are mostly on a small scale. He is more of an
organizer of factors of production than a creator. In the context of a
poor country, he is definitely a change agent and hence he is important
in underdeveloped countries.




1. The main motive of an The main motive of a manager is to

entrepreneur is to start a venture render his services in an enterprise
by setting up an enterprise. He already set up by someone else.
understands the venture for his
personal gratification.

2. An entrepreneur is the owner of A manger is the servant in the

the enterprise. enterprise owned by the entrepreneur.

- 22 -

3. An entrepreneur being the owner A manger is a servant does not bear

of the enterprise assumes all risk any risk involved in the enterprise.
and uncertainty involved in
running the enterprise.

4. The reward an entrepreneur gets A manger gets salary for the services
for baring risks involved in the rendered by him in the enterprise.
enterprise is profit which is
highly uncertain.

5. Entrepreneur himself thinks over A manager simply executes the plan

what and how to produce goods prepared by the entrepreneur. Thus, a
to meet the changing demands of manger simply translates the
the customers. Hence, he acts as entrepreneur’s ideas into practice.
an innovator also called as a
change agent.

6. An entrepreneur needs to On the contrary a manger needs to

possess qualities and possess distinct qualifications in terms
qualification like high of sound knowledge in management,
achievement motive, originality theory and practice.
in thinking, foresight, risk-
bearing, ability and soon.



1. Refers to a person Refers to a process

2. Is a visualiser Is a vision
3. Is a creator Is a creation
4. Is an organizer Is an organization
5. Is an innovator Is an innovation
6. Is a technician Is a technology
7. Is an initiator Is an initiative
8. Is a decision- maker Involves decision making
9. Is a planner Involves planning
10. Is a leader Involves leadership

- 23 -


Entrepreneur is the fourth factor of enterprise




The entrepreneur and enterprise are Inter- linked. Enterprise is an offshoot of

an entrepreneur. Its success is dependent on the entrepreneur.



1. Entrepreneurship are associated Administrations are associated

with connotations of enterprise, with notions of organization,
opportunism, individuality planning, professionalism,
rationality and predictive
management processes.

2. The entrepreneur of a small The administrator in a large firm is

business organization needs primarily concerned with those
primarily to perform activities activities relevant top predictive
relevant to adaptive management processes that are
management process, activities with activities related to prediction
that enable him to exploit the and control.
advantages he has in being a
small enterprise.

3. An entrepreneur puts emphasis An administrator of a large

on the entrepreneurial activities organization would hold attitudes
of management process, so his related to the administrative
hold attitudes related to orientation of the management
entrepreneurial orientation. process.

- 24 -



1. An entrepreneur is independent An intrapreneur is dependent on

in his operations the entrepreneur i.e. the owner

2. An entrepreneur himself raises The intrapreneur does not raise

funds required for the funds.

3. Entrepreneur bears the risk An intrapreneur does not fully

involved in the business. bear the risk involved in the

4. An entrepreneur operates from An intrapreneur operates from

outside. within the organization itself.


- 25 -



Ø Knight on the Role of Uncertainty

Ø Schumpeter on Innovation

Ø Mc Clelland’s Achievement and Motivation theory

Ø Peter Druckers views on Entrepreneurship

- 26 -


Knight identifies the entrepreneur as a recipient of pure profit. Profit is the

residual income available after all contractual payments have been deducted
from the revenues of the enterprise. It is the reward to the entrepreneur for
bearing the costs of uncertainty.

Knight identifies uncertainty with a situation where the probabilities of

alternative outcomes cannot be determined either by a priori reasoning or by
statistical interference. A priori reasoning is simply irrelevant to economic
situations. Statistical interference is impossible because the situation involves
a unique event. It does not belong to a larger population of identical events. In
particular there is no precedent for it, so that no assessment of probability can
be made on the basis of relative frequency. This is the foundation for Knight’s
distinction between uncertainty and risk.

Uncertainty is a ubiquitous aspect of business decisions because production

takes time. Decisions on inputs must be made now in order to create output
for the future. Households as factor owners demand spot payment for their
services. At the same time they are unwilling to commit themselves on future
demand for the product because they anticipate that unforeseeable changes
will occur.

speaking. A part of the reason might be the consumer’s uncertainty as to his
ability to pay the end of the period, but this does not seem to be important in
much, and how badly. Consequently, he leaves it to producers to create goods
apparent paradox is of course in the law of large numbers. The consolidation
of risks (or uncertainties). The consumer is to himself only one to the producer
outsider can foresee the wants of am multitude with more ease and accuracy

Knight is mainly concerned to show how markets, together with

institutions such as the large corporation, contribute to specializing
uncertainty-bearing in the hands of those best equipped to make decisions
under uncertainty. The main quality required for making production
decisions is foresight they have, and competition ensures that individuals

- 27 -

with the greatest degree of foresight (relative to other abilities) specialize in

making production decisions.

However, it does not follow that individuals with foresight will become self-
employed and make decisions on their own behalf. They may instead become
managers of a large firm. Knight argues that business uncertainty can be
reduced through ‘consolidation’. Consolidation is to uncertainty what
insurance is to risk: It is a method of reducing total uncertainty by pooling
individual instances and allowing each individual to hold a share of the pool.
It is widely recognized today that an individual’s exposure to uncertainty can
be reduced through portfolio diversification in the equity market. Knight
recognizes this possibility which he calls ‘diffusion’ but he does not accord it
much prominence as a vehicle for the reduction of uncertainty. He believes
that uncertainty is reduced mainly through the pooling of uncertainties by the
large firm.

The gains in uncertainty- reduction from large scale organization are, in

Knight’s view, quite considerable. So much so, that the most important
uncertainties relate not to producing for a market itself, but to the selection
of suitable mangers to take production decisions. Once the firm has
recruited a person with foresight much of the uncertainty in producing of a
market is eliminated. The crucial decisions made within the large firm are
decisions about personal recruitment. The pure profit generated by a firm is
compensation to people for bearing uncertainty that they have delegated
decisions to the wrong sort of person.

Knight does not seem to anticipate that there will be much difficulty in
ensuring that managers with foresight exercise it properly on the stockholders
behalf. The moral hazard problem is negligible. Presumably, because close
supervision of the manager is possible. Much greater moral hazard arises
with the directors of the firm who recruit the managers and supervise them
on the stock holder’s behalf. The unavoidable moral hazard involved in
delegating direction means that directors cannot possibly be fully insured
against the consequences of their decisions. They must operate under profit
related incentives and so effectively they must become stock holders in the
firm. Thus, directors who make decisions under uncertainty also bear the
consequences of those decisions and are ipso facto recipients of pure profit.

Some people have good judgment of other people’s abilities and others do
not. But no one can be certain of his or her own judgment of other people’s
abilities. As a result, confidence in his own judgment is perhaps the most
important characteristic of the entrepreneur. This has to be coupled with a
low version to risk, as reflected in a disposition to back up his judgment with
his own capital. The elasticity of supply of self- confident people is, in
Knight’s view, the single- most important determinant of the level of profit
and of the number of entrepreneurs.

- 28 -

The income of nay particular entrepreneur will, in general, tend to be larger

(i) as he himself as ability and good luck but (ii) perhaps more important , as
there is in the society a scarcity itself- confidence combined with the power to
make effective guarantees to employees. The abundance or scarcity of mere
ability to mange business successfully exerts relatively little influence on
profit. The main thing is the rashness or timidity of entrepreneurs (actual and

Entrepreneur’s income, being residual, is determined by the demand for these

other services, where demand is a matter of the self- confidence of
natural result in a population combining low ability with high courage. On
condition for large profit is a narrowly limited supply of high- grade ability
with a low level of initiative as well as ability.

Knight’s analysis exhibits very clearly the difficulties in theorizing about

entrepreneurship, and in particular the problems of structuring the analysis in
a coherent way. As a result, Knight’s views have been widely misinterpreted
in the past. Many parts of the present work are simply a reformulation of
ideas first presented by Knight. The concepts of probability and judgment are
slightly different but the basic view of the way that market system allocates
judgmental decision- making to entrepreneurs is the same both in cases.


Schumpeter, perhaps more than any other writer, is very explicit about the
economic function of the entrepreneur. The entrepreneur is the prime mover
in economic development and his function is to innovate or to carry out new
combinations. Five types of innovation are distinguished the introduction of
new good (or an improvement in the quality of an existing good); the
introduction of anew method of production; the opening of an new market, in
particular, a export a market in a new territory the ‘conquest of a new source
of supply of raw materials or half- manufactured goods’ and the creation of
a new type of industrial organization, in particular, the formation of a trust or
some other type of monopoly.

- 29 -

Anyone who performs this function is an entrepreneur whether he is at

independent businessman or a “dependent” employee of a company such as a
manager or a director. Not all businessmen are entrepreneurs; the typical
entrepreneur is the founder of a new firm rather than the manager of an
established one.

Schumpeter is adamant that the entrepreneur is not a risk- bearer. Risk

bearing is the function of the capitalist who lends his funds to the
entrepreneur. The entrepreneur bears risk only in so far as he acts as his own
capitalist. Unlike Knight, Schumpeter does not perceive much problem of
moral hazard for a capitalist lending to an entrepreneur.

Entrepreneurs spend a lot of heir time doing non-entrepreneurial things:

The entrepreneur of earlier times was not only as a rule a capitalist too; also
he was also often- as he is still today in the case of small concerns- his own
technical expert, in so far as a professional specialist was not called in for
special cases. Likewise he was (and is) often his own buying and selling
agent, the head of his office, his own personal manager, and sometimes, even
though as a rule he, of course employed solicitors, his own legal advisor in
current affairs. And it was performing some or all of these functions that
regularly filled his days.

The carrying out of new combinations can no more be a vocation than the
making and execution of strategically decisions, although it is this function
and not his routine work that characterizes the military leader. Therefore, the
entrepreneur’s essential function must always appear mixed with other kinds
of activity which as a rule must be much more conspicuous than the essential
one. Hence, the Marshallian definition of the entrepreneur, which simply
treats the entrepreneurial function as ‘management’ in the widest meaning,
will naturally appeal to most of us. We do not accept it, simply because it
does not bring out what we consider to be the salient point and the only one
which specifically distinguishes entrepreneurial from other activities.

The climate most favorable to innovation is when the economy is approaching

in equilibrium for then the future seems relatively easy to foresee. The first
innovations made by the most talented entrepreneurs prove successful and
this encourages less talented entrepreneurs to follow suit in a swarm. Because
they are adapting ideas which are pioneers have already tried out the risks
that the capitalists perceive in backing the less talented entrepreneurs are
relatively low.

A wave of innovation follows which then, for a variety of reasons quickly

Schumpeter believed that talented entrepreneurs were very scarce breed.
Their scarcity lays not so much in their alertness or their professionalism as in
- 30 -

their psychology. While entrepreneurs are rational economic men, their

objective is not to the pursuit of consumption in the usual sense of that word.
The motivating factors are three fold:

First of all there is the dream and the will to found a private kingdom usually
though not necessarily also a dynasty. The modern world really does not
know any such positions but what may be maintained by industrial or
commercial success is still the nearest approach to medieval lordship possible
to modern man. Its fascination is especially strong for people we have no
other chance of achieving social distinction.

Then there is the will to conquer- the impulse to fight, to prove one superior
to others, to succeed for the sake, not of the fruits of success itself. From this
aspect economic action becomes akin to sport- there are financial races, or
other boxing- matches.

Finally, there is the joy of creating of getting things done or simply of

exercising one’s energy and ingenuity. Our type seeks out difficulties,
changes in order, delight in ventures. This group of motives is the distinctly
anti-hedonist among the three.

The precursor to innovation is invention, which is a field of imaginative

activity outside the province of the entrepreneur. The process of invention
forms no part of Schumpeter’s theory, but one of the attractive features of the
theory is how easily the dynamics of invention can be grafted on it.
Schumpeter recognized that invention could be an endogenous process
stimulated by the desire to alleviate pressing scarcities, but his attitude is
basically to regard it as autonomous.

The possibility of grafting on a theory of invention may be illustrated as

follows. It is often suggested that modern economic growth related to the
innovation of the mass market. Multipurpose goods, such was the typical
consumer durable. The innovation of these goods often depends critically
upon the invention of components from which they can be made up.
Innovation of a new multi-purpose good is possible when the design of each
of the constituent components has involved sufficiently providing the
requisite standards of compactness, reliability and performance.

If an autonomous random process of invention generates improvements in

component design then there will come a critical point at which mass
production of themulti- purpose good becomes viable. This is the point at
which each of the components has jus evolved to the requisite standard. This
may trigger of a major innovation, such as the railway or the motorcar, whose
repercussions are sufficiently widespread to stimulate a wave of subsidiary
innovations. This wave of innovations uses up the outstanding stock of

- 31 -

inventions, which were pending adoption and lead to a subsequent fall in

invention until the stock of inventions builds up again to a threshold level.

Schumpeter himself was very cautious about relying upon major innovation
and their consequent economies and spins off as an explanation for the
clustering of innovation observed during the business cycle. Basically, he
regarded wave of innovation and their creative destruction as a basic
phenomenon of capitalist economic development so much that he dated the
origin of capitalist from the first appearance of these waves. He recognized
that the waves could take different forms in different times and places. He
was concerned to offer analytical frame work for the interpretation of varied
historical experience rather than to formulate a narrow theory to which all
historical experience was alleged to conform.



David McClelland has developed an achievement motivation theory.

According to this theory, an individual’s need for achievement refers to the
need for personal accomplishment. It is the drive excel, to strive for success
and to achieve in relation to a set standards. People with high achievement
motive like take calculated risks and want to win; they like to take on
personal responsibility for solving problems and want to know how well they
are doing. High achievers are not motivated by money; but instead employ
money as a method of keeping sure of the achievements. Such people strive
for personal achievement rather than the rewards of success. They want to do
something better and more efficiently than has been done before.

Need for achievement is simply the desire to do well not so much for the sake
of social recognition or prestige but for the sake of an inner feeling of personal
accomplishment. It is the need for achievement that motivates people to take
risk. People with high need for achievement behave in an entrepreneurial
way. Need for achievement stimulates the behavior of a person to be an

The following psychological factors contribute to an entrepreneurial


1. Need for achievement through self- study, goal setting and inter-
personal support.
2. Keen interest in situations involving moderate risk.
3. Desire for taking responsibility.
- 32 -

4. Concrete measures of task performance.

5. Anticipation of future responsibilities.
6. Energetic or novel instrumental activity
7. Organizational skills, etc.

Some societies produce a large percentage of people with high need for
achievement. Entrepreneurship becomes the link between need achievement
and economic growth.

Mc Clelland considers the need for achievement to be most critical to a

nation’s economic development. He held that a strong ‘inner spirit’ in
individuals to attain is a measurable variable arising from a need, which the
individual develops mainly in childhood and seeks to satisfy throughout his
life. This ‘inner spirit’ which he called need for achievement, if higher, would
produce more energetic entrepreneurs capable of generating rapid economic
development. High need for achievement or ambition motivates an
entrepreneur to take risks, work hard, find new things, save more, and
reinvest the savings in industry and so on. The limited empirical evidence
supports the hypothesis that need for achievement contributes to
entrepreneurial success.

Mc Clelland rated the achievement motivation of different countries on the

basis of ideas related to need for achievement contained in the children’s
stories. This has come to be known as n-factor rating. He established a
correlation between n- factor rating and the prosperity of the countries a
generation ahead.

The criterion on n- factor rating was the inherent concern for achievement or
non- induced achievement motivation.

Mc Clelland found that achievement motivation was lower among people

under developed countries than among these of developed nations. Even in
USA only about ten percent of the people were actually high achievers. It is
the level of aspirations or ambitions that explains the lack of enterprise
underdeveloped countries. Ambition is the level of all motives and aimless
life a goal- less game. Ambitions motivate men, activate them, broaden their
vision and make life meaningful. Ambition builds up achievement pressure in
the individual and provides the base for Mc Clelland’s n- factor. Ambition is
the lever of all motives. The initiative intentions of an individual are directed
by his ambitions. It is the ambition electrifies man’s actions. Therefore, what
matters are not merely the people are their aspirations and the means to
achieve the goals? Therefore, it is the duty leaders and teachers to build up
ambitions into the minds of the young people however ambitions differ greed
and windfall. Greed results in disaster a windfall makes one speculator
.Sometimes personal ambitions may come in way of family aspirations or

- 33 -

national aspirations. Unfulfilled ambitions passed to the next generation who

may chase the goal with redoubled effort and vigor

Thus, ambition nourishes achievement motivation and brings economic

growth. The biggest obstacle to economic progress in countries like India is
perhaps the limited ambition of people. The initiative of an individual is
directed by his ambitions, which nourish the entrepreneurial spirit and bring
about economic development. Hence, what matters are not merely the people
and then talents but their aspirations? However, ambitions differ among
individuals on the basis of environment in which they are born and brought
up. Galbraith has also attributed the backwardness of many Asian and
African countries to lack ambition.



Peter Drucker has aptly observed that, “Innovation is the specific tool of
entrepreneur’s, the means by which they exploit changes as an opportunity
as a discipline, capable of being learned and practiced. Entrepreneurs need to
search purposefully for the sources of innovation, the changes and their
symptoms that indicate opportunities for successful innovation. And they
need to know and apply the principles of successful innovation.”

Systematic innovation, according to him, consists in the purposeful and

organized search for changes and in the systematic analysis of the
opportunities such changes might offer scope for economic and social

According to Drucker, three conditions have to be fulfilled.

1. Innovation at work. It requires knowledge and ingenuity. It makes

great demands on diligence, persistence and commitment.

2. To succeed, innovation must build on their strengths

3. Innovation always has to be closed to the market focused on the

market, indeed market- driven.
Specially, systematic innovation means monitoring sources for innovative

The first three sources lie within the enterprise, whether it be a business or
a public service institution or within an industry or service sector. They
- 34 -

are therefore, visible primarily to people within that industry or service

sector. They are basically symptoms. But they are highly reliable indicators
of changes that have already occurred or can be made to occur with little

These four source areas are:

1. The unexpected success, the unexpected failure, the unexpected

outside event.

2. The incongruity between reality as it actually is and reality as it is

assumed to be or as it “ought to be”.

3. Innovation in industry structure or market structure that catches

everyone unawares.

4. The second set of sources for innovative opportunity, a set of three,

involves changes outside the enterprise or industry:

Ø Demographics (population changes).

Ø Changes in perception, mood and meaning.

Ø New knowledge, scientific and non- scientific.


- 35 -




Ø Introduction Ø Search of a Business Idea.

Ø Writing a Business Plan Ø Selection of a Product.

Ø Contents of a Business Plan Ø Adoption Process.

Ø Failure of a Business Plan Ø Concept of Project and its


Ø Basic Components of a

- 36 -


The business plan is written document prepared by the entrepreneur that

describes all the relevant external and internal involved in starting a venture.
Entrepreneur should consult with many other sources in its preparation like
lawyers, accountants, marketing consultants and engineers. Business plan
could take more than 200 hrs to prepare but varies from person to person
according to their knowledge and experience, with purpose about a new
venture to a potential investor.



A. Name and address of business.

B. Name(s) and address (es) of principals.
C. Nature of business.
D. Statement of financing method.
E. Statement of confidentiality of report.


Three to four pages summarizing the complete business Plan.


A. Future outlook and trends.

B. Analysis of competitors.
C. Market Segmentation.
D. Industry forecasts.


A. Product(s)
B. Service(s)
C. Size of business.
D. Office equipment and personnel.
E. Background of entrepreneurs.

- 37 -


A. Manufacturing process (amount subcontracted)

B. Physical Plant.
C. Machinery and Equipment.
D. Names of Suppliers of raw materials.


A. Pricing.
B. Distribution.
C. Promotion.
D. Product forecasts.
E. Controls.


A. Form of ownership.
B. Identification of partners or principal shareholders.
C. Authority of principals.
D. Management- team background.
E. Roles and responsibilities of members of organization.


A. Evaluate weakness of business.

B. New technologies.
C. Contingency Plans.


A. Proforma income statement.

B. Cash Flow Projections.
C. Proforma balance sheet
D. Break-Even analysis.
E. Sources and application of funds.

X. APPENDIX (contains backup material)

A. Letters.
B. Market Research Data.
C. Leases or contracts.
D. Price lists from suppliers.

- 38 -


The business plan can take more than 200 hours to prepare, depending on the
intended to serve. It should be comprehensive enough to give any potential
investor a complete picture and understanding of the new venture and will
help the entrepreneur clarify his or her thinking about the business. Many
entrepreneurs incorrectly estimate the length of time that an effective plan
will take to prepare. Once the process has begun, however, the entrepreneur
will realize that it is invaluable in sorting out the business functions of a new
venture. Each of the items in the contents of the business plan is explained in
detail as follows.


This is the title page or cover that provides a brief summary of the venture
and should include the following things:

Ø Name and address of the company.

Ø Name of the entrepreneur(s) and telephone number.
Ø Description about the company and also stating nature of
Ø Stating their financial requirements.
Ø A statement of the confidentiality of the report.


This is prepared after total plan is written. This about 3 to 4pages in length,
this summary should stimulate the interest of the potential investor. This
highlight concise and convincing manner the key point in the business plan
stating the nature of the venture, financing needed, market potential, and
supports to why it will succeed.


This reviews industry trends and competitive strategies. The industry

outlook, including future trends and historical achievements, insight of new
product developments in this industry. Competitor should be identified, with
appropriate strengths and weakness described and how will it affect the new
ventures potential success in the market.

- 39 -


It states the product produced by venture which includes patent, copyright,

or trademark status. It also gives a brief idea where the business will be
located including the construction of building, leased or owned. In
description of venture the type of office equipment will be required whether it
will be purchased or leased. He (entrepreneur) should also look at the
management experience, stating their education, age, special abilities and


This includes details of manufacturing process a product, which is very

necessary. If the manufacturing is to be carried out in whole or in part by the
entrepreneur, he or she will need to describe to physical plan layout: the
machinery and equipment needed to perform the manufacturing operations:
raw material and suppliers names, addresses, and the terms; costs of
manufacturing and any future capital equipment needs. It should also include
state subcontractors name and addresses; costs of subcontracted
manufacturing; raw material required for manufacturing.


The marketing plan represents a significant element in the business plan for a
new venture. Marketing planning should be an annual activity that focuses on
implementing decisions related to the marketing mix variables (product,
price, distribution, and promotion). Like the annual budgeting cycle, market
planning has also become an annual activity and should be incorporated by
all the entrepreneurs, regardless of the size or type of the business. These
marketing plans must be monitored frequently, especially in the early stages
of start up.


The organizational plan describes the venture form of ownership i.e. whether
it is proprietorship, partnership or a corporation. If the venture is a
partnership, the term of partnership should be included, name of partners,
term of agreement, specimen signatures of the partners etc. If it is a
corporation venture than it is important to detail the shares of the stock
authorized, share options, names and address, resumes of the directors and
officers of the corporation. If it is an incorporation venture than it should state
the principal shareholders and shares owned by them; type and number of
shares stating voting or non-voting stocks have been issued, members of
board of directors, check signing authority or control. The plan also states
how many members are there in management team and their background,
their roles and responsibilities stating their salaries, bonuses or other forms of
- 40 -

payment for each members of the management team. This is also helpful to
provide an organization chart indicating the line of authority and
responsibilities of the members of the organization. This information provides
the potential investor with a clear understanding of who controls the
organization and how other members will interact in performing their
management functions.


All ventures face some potential hazards, given the particular industry and
competitive environment. An entrepreneur should make assessment of risk
and prepare an effective strategy to deal with them. Even if these factors
present no risks to the new venture, the business plan should discuss why
that is the case. Contingency plans and strategies illustrate to the potential
investor that the entrepreneur is sensitive to important risks and is prepared
should any occur.


The financial plan should include proforma income statements, break -even
analysis, proforma cash flow, proforma balance sheet, and proforma sources
and uses of funds.


It generally contains business plan generally back up material that is not

necessary in the text of the document. Reference to any of the documents in
the appendix should be made in the plan itself. Letters from customers,
distributors or sub- contractors are examples of information that should be
included in the appendix. Any documentation of information that is
secondary data or primary research data used to support plan decisions
should also be included. Leases, contracts or any others types of agreement
that have been initiated may also are included in the appendix. It should also
include price lists from suppliers and competitors may be added.


A business plan is a crucial component for an entrepreneur. A business plan is

presented to a bank to obtain funds in the initial stage of a project. It is a
monetary rule that a business plan has to be presented to a bank before the
release of funds by the financial institutions. Hence, business plan is a
stepping- stone for an entrepreneur in the commencement of a project.

- 41 -


Generally a poorly prepared business plan can be blamed on one or more of
the following factors:

v Goals set by the entrepreneur are unreasonable.

v Goals are not measurable.
v The entrepreneur has not made a total commitment to the business or
to the family.
v The entrepreneur has no experience in the planned business.
v The entrepreneur has no sense of potential threats or weaknesses to the
v No customer need was established for the proposed product or service.

Setting goals requires the entrepreneur to be well informed about the type of
business and the competitive environment. Goals should be specific and not
so mundane as to lack any basis of control. For example, the entrepreneur
may target a specific market share, units sold, or revenue. These goals are
measurable and be monitored overtime.

In addition, the entrepreneur and his or her family must make a total
commitment to the business in order to be able to meet the demands of a new
venture. For example, it is difficult to operate a new venture on a part- time
basis while still holding on to a full- time position. And it is difficult to
operate a business without an understanding from family members as to the
time and resources that will be needed. Lenders or investors will not be
favorably inclined toward a venture that does not have full- time
commitment. Moreover, lenders or investors will expect the entrepreneur to
make a significant financial commitment to the business even if it means a
second mortgage or a depletion of savings.

Generally, a lack of experience will result in failure unless the entrepreneur

can either attain the necessary knowledge or team up with someone who
already has it. For example, an entrepreneur trying to start a new restaurant
without any experience or knowledge of the restaurant business would be

The entrepreneur should also document customer needs before preparing the
plan. Customer needs can be identified from direct experience, letters from
customers, or from marketing research. A clear understanding of these needs
and how the entrepreneur’s business will effectively meet them is vital to the
success of the new venture.

- 42 -



It is a specialized branch of management that includes variety of factors such

as organization structure, the process of planning and control, human
relations etc. It is executed as under:

a) Decide the scheme of operations.

b) Break down work into series of operations.
c) Evolve an orderly sequence or programme.

Every project has three basic attributes, namely

v The input characteristics

v Output characteristics, and
v Social cost benefit characteristics

The input characteristics define what the project requires such as raw
materials, energy, manpower, financial resources and organizational

The output characteristics define what the project will generate viz.
production of additional goods, provision of additional services etc. The
social cost benefit aspect affects the equilibrium of availabilities and non-
availabilities in an economy. Thus the benefits which will be accrued to the
society have to be carefully evaluated.

The project idea needs to be evaluated for its feasibility and the setting up of
an enterprise should be based on careful and sound evaluation. Project
appraisal brings credibility to a project and projects from in built weaknesses
and consequently a healthy and viable industry comes up.



To get established as a successful entrepreneur depends to a large extent on a

good idea.

Idea must not only be good for the market, but good for the project and good
for the entrepreneurs.

- 43 -

Further, it should be manageable without much dependence on others and

should provide satisfactory results to the entrepreneur.

In the idea stage, suggestions for new products are obtained from all possible
sources viz. customers, competitors, R&D, distributors and company
employees. Essentially the entrepreneur needs to scan the environment.


Ø Personal Informal Sources

a. Family
b. Customers
c. Friends
d. Colleagues
e. Salesman
f. Social Contacts
g. Employees

Ø Personal Formal Sources

a. Bankers
b. Business Consultants

Ø Impersonal Written Sources

a. Magazines
b. Journals
c. Books
d. Newsletter
e. Newspapers
f. Catalogues

Ø Impersonal Oral Sources

a. Trade Shows
b. Seminars/ Workshops
c. Professional Organizations
d. Small Business Organizations
e. Suppliers/ Dealers

One should use as many resources as possible for the purpose of scanning the

- 44 -


Ø With constant observation, entrepreneurs target potential market,

consumers, products and availability raw materials and widening of
market demand.

Ø Entrepreneurs get tempted to step into the field that profit potential
and is socially acceptable.

Very essential for being success in business venture. The various factors that
influence the entrepreneur in selecting the right product are:

v The import restrictions or whether the import of the selected items is

banned- In case of banned item, the domestic market will offer
considerable scope for selling as the demand for such a product would
not be met by import.

v Whether the entrepreneur or his partners have substantial experience

in the manufacture and marketing of certain products. Most often, the
items selected are of those lines of products in which entrepreneur or
his colleagues have gathered enough experience.

v Degree of profitability that rules in the market. Such information can

be obtained from the banks or the financial corporations or the market

v Concessions available from the government for producing a product

that may be import substitution. Entrepreneur will select a particular
product that enjoys a substantial amount of incentives, concessions,
liberal taxation policies etc.

v Products belonging to priority industries or small- scale sector- certain

products are listed by the government for purchasing exclusively from
the small- sector.

v Market for the product – if the product also has an export market, it
widens the scope of marketing and hence the success of the enterprise.

v Certain products are permitted for production only if the others belong
to de- licensed category. Hence a product belonging to licensed

- 45 -

category or de- licensed category is also considered before selecting the


v Products enjoying specific advantages such as locations viz, if

produced in free trade zone in a backward area.

v Product belonging to an ancillary unit serves as a major component for

the OEM- provides a ready demand and hence ensures easy

v Finally, whether the machinery and raw materials required to

manufacture the product would be imported or indigenous,
requirement of skilled/ unskilled labor, indigenous technical know-
how or foreign collaboration. The study of project idea is the starting
point of the feasibility analysis.


A process to bring about a change in buyer’s attitudes and perception. A
consumer invariably undergoes the following steps in determining the
feasibility of buying the new products

1. Awareness
2. Interest
3. Evaluation or mental trial
4. Trial- physical


A consumer learns about anew idea or a product and obtains limited

information about its qualities, usefulness, performance through
advertisements etc.


Once the consumer develops an interest in the innovation, he demands

detailed information about the new products, its utility, its performance, etc.
He gets more information through jingles on radio or TV ads and teaches
through sales- persons, opinion leaders, peers, friends etc.


The consumer tries to weigh the value of the new product in relation to the
benefits obtained from it i.e. conducts a mental trial of the new product.

- 46 -


The consumer is now ready to put the idea into practice. Competent
assistance may become necessary to put the innovation to use.


1. The consumer mow decides to adopt the new idea or a product for
continued use.

2. Depending the post- purchase experience the consumer becomes a

repeat buyer and consequently the advocate for the innovation.


Product Innovation takes place through the process of product planning and

Covers search for new products and innovations as well as the improvement
of existing products.


Internal Licensing Acquisition



Discovering and developing new products by the firm itself a desirable



Securing right to produce the product from a patent holder i.e. contractual
arrangement e.g. coca cola.


Buying the firm that developed or patented the product- a costly means.

- 47 -



The term “project” connotes programme of action. Project is always

interwoven with all socio- economic and cultural activities the project
involves a scheme and a speculative imagination.

The kinds of projects

1. Agricultural projects- relating to

a. Land development
b. Irrigation
c. Soil- conservation
d. Fertilizers, and
e. Seeds etc.

2. Research projects

Definition of “Project”- According to World Bank, project can be defined as

“An approval for a capital investment to develop facilities to provide goods
and services”.

Little and Mireless defines project as “A scheme or a part of scheme for

investing resources which can be reasonably analyzed and evaluated as an
independent unit”. “It is an appraisal for investment with the definite aim of
producing a flow of output over a specific period of time”.

Gittinger has defined it as the whole gamut of activities involved in using

resources to gain benefits.

According to Dr. Albert O. Hirchman” The development project connotes

purposefulness, some minimum size, a specific location, the introduction of
something qualitative new, and the expectation that a sequence of further
development will be set in motion”.

Project can be defined as a scientifically evolved work plan devised to achieve

a specific objective with a specified period of time. The three basic attributes
of a project are
1. A course of action
2. Specific objectives, and
3. Definite time perspective.

- 48 -


Establishment of a new business unit to manufacture some product or arrange

for the distribution of products of another company poses a challenge to the

Ø Helps in expressing and highlighting the essential features of the


Ø Project includes all activities aimed at:

a. Increased production of goods and/ or services.

b. Increasing the capability of existing projects and
c. Increasing the productivity of these goods/ services.

The projects can be classified as under:

1. Quantifiable and Non- quantifiable projects

v Quantifiable projects- quantitative assessment of benefits can be

made. Concerned with industrial development, power
generation, and mineral development.

v Non- quantifiable projects- where quantitative assessment is not

possible. Concerned with health, education, defense etc.

2. Sectoral Projects

In India planning commission has accepted the Sectoral basis as the criterion
for classification

v Agriculture & Allied sector

v Irrigation and power sector
v Industry and Mining sector
v Transport and communication
v Social service sector
v Miscellaneous

Useful in resource allocation at macro level

3. Techno- Economic Projects

Based on their techno- economic characteristics

- 49 -

(a) Factor intensity- oriented classification

v Capital intensive
v Labour- intensive

(b) Causation-oriented classification

v Demand based or,

v Raw materials based

Dominant reasons for starting a project

Ø Non- availability of certain goods or services and consequent demand

for such goods or services.
Ø Availability of certain raw materials, skills or other inputs.

(c) Magnitude- oriented classification- based on the size of the investment.

v Large- scale.
v Medium- scale.
v Small- scale.
Techno- economic classification facilitates the process of project feasibility

4. Financial Institution Classification

All India and state financial institutions classify projects according to their
age, experience and the purpose.

v New projects
v Expansion projects
v Modernization projects
v Diversification projects

These projects are invariably are profit- oriented.

5. Services Projects

v Welfare projects
v Service projects
v Research and development projects
v Educational projects

- 50 -



Internal rate of

A Scheme

Organization Benefits

Conceptual Framework of a Project

v A productive activity, which can be analyzed appraised and monitored


v A specific objective in terms of a geographic location, specific starting

and end point

v Serve the target population by achieving good returns on investment.

v Has an organization to implement it.


Start Identification Formulation Appraisal

Selection Implementation Management

- 51 -

v Identification: - Careful scanning of the environment for investment

opportunity and the ROI.

v Formulation: - Translation of idea into a concrete project, scrutiny and

preparation of feasibility report.

v Appraisal: - Analysis and evaluation of market, technical, financial and

economic variables, return on investment and break- even point.

v Selection: - Rational choice considering objectives and limitations.

v Implementation: - Expeditious completion within allocated resources.

v Management: - Operation of an enterprise with maximum of net

present value, maximization of return. Increase in rate of return at low

To summarize, it can be said that

v Project is a scheme for investing resources in an enterprise.

v It can be a massive scheme like a multipurpose river valley project or a

venture with small investment.

v It provides complete details and analysis of technical, marketing and

economic aspects.

v To an entrepreneur it opens up a programme for action, profitability

and economic viability.

v A sound project will definitely contribute towards economic



- 52 -



Ø Concept of Women entrepreneurship

Ø Growth of women entrepreneurship

Ø Problems of women entrepreneurship

Ø Special schemes for women entrepreneurship

- 53 -


Based on the general concept of entrepreneurship women entrepreneurs may

be defined as a woman or group of women who initiate, organize and run a
business enterprise. In terms of Schumpeterian concept of innovative
entrepreneurs, women who innovate, imitate or adopt a business activity are
called “women entrepreneurs”. The government of India has defined women
entrepreneurs based on women participation in equity and employment of a
business enterprise. Accordingly, a women entrepreneur is defined as an
“enterprise owned and controlled by a women having a minimum financial
interest of 51 percent of the capital and giving at least 51 percent of the
employment generated in the enterprise to women”. However, this definition
is subject to criticism mainly on the condition of employing more than 50
percent women workers in the enterprises owned and run by the women.

In nutshell, women entrepreneurs are those women who think of a business

enterprise, initiate it, organize and combine the factors of production, operate
the enterprise and undertake risks and handle economic uncertainty involved
in running a business enterprise.


Women entrepreneurs in India accounted for 9.01% of the total value 11.70
million entrepreneurs during 1988-89.

A cross country comparison reveals that emergence and development of

entrepreneurship is largely caused by the availability of supporting
conditions in a country. To quote, with improving supporting conditions, the
share of women owned enterprises in the United States has risen from 7.1% in
1977 to 32% in 1990. It is likely to reach to 50% by the turn of the 20th century.

In India, women entry into business is a new phenomenon. Women entry into
business, or say, entrepreneurship is traced out as an extension of their
kitchen activities mainly to 3 Ps viz, pickles, powder and pappad. Women in
India plugged into business for both pull and push factors. Pull factors imply
the factors, which encourage women to start an occupation or venture with an
urge to do something independently. Push factors refer to those factors,
which compel to take up their own business to tide over their economic
difficulties and responsibilities.

With growing awareness about business and spread of education among

women over the period, women have started shifting from 3 Ps to engross to 3
modern E’s, viz. Engineering, Electronics and Energy. They have excelled in
these activities. Women entrepreneurs manufacturing solar cookers in

- 54 -

Gujarat, small foundries in Maharashtra and T.V. capacitors in Orissa have

proved beyond doubt that given the opportunities, they can excel their male
counterparts. Smt. Sumati Morarji (Shipping Corporation), Smt. Yumutai
Kirloskar (Mahila Udyog Limited), Smt. Neena Malhotra (Exports) and Smt.
Shahnaz Hussain (Beauty Clinic) are some exemplary names of successful and
accomplished women entrepreneurs in our country.

In India, Kerela is a state with highest literacy (including women literacy)

reflecting a congenial atmosphere for the emergence and development of
women entrepreneurship in the state. According to a study, the number of
women’s industrial units in Kerela was 358 in 1981, which rose to 782 in
March 1984. These 782 units included 592 proprietary concerns, 43
partnership firms, 42 charitable institutions, 3 joint stock companies and 102
co- operative societies covering a wide range of activities. On the whole,
proper education of women in Kerela resulted in high motivation among
them to enter into business. The financial, marketing and training assistance
provided by the state government also helped motivate women to assume
entrepreneurial career. Women’s desire to work at the place of residence,
difficulty of getting jobs in the public and private sectors and the desire for
social recognition also motivated women in Kerela for self- employment. Like
Kerela, an increasing number of women are entering the business in the state
of Maharashtra also.


Women entrepreneurs encounter two sets of problems, viz, general problems
of entrepreneurs and problems specific to women entrepreneurs. These are
discussed as follows:

1. Problem of finance: Finance is regarded as “life blood” for any

enterprise, be it big or small. However, women entrepreneurs suffer
from shortage of finance on two counts. Firstly, women do not
generally have property on their names to use them as collateral for
obtaining funds from external sources. Thus, their access to the
external sources of funds is limited. Secondly, the banks also consider
women less credit- worthy and discourage women borrowers on the
belief that they can at any time leave their business. Given such
situation, women entrepreneurs are bound to rely on their own
savings, if any and loans from friends and relatives who are expectedly
meager and negligible. Thus, women enterprises fail due to the
shortage of finance.

2. Scarcity of raw material: Most of the women enterprises are

plagued by the scarcity of raw material and necessary inputs. Added
to this are the high prices of raw material, on the other. The failure of

- 55 -

nay women co- operatives in 1971 engaged in basket making is an

example how the scarcity of raw material sounds the dealth- knell of
enterprises run by women.

3. Stiff Competition: Women entrepreneurs do not have organization

Thus, they have to face a stiff competition for marketing their products
with both organized sector and their male counterparts. Such a
competition ultimately results in the liquidation of women enterprises.

4. Limited Mobility: Unlike men, women mobility in India is highly

limited due to various reasons. A single woman asking for room is still
upon suspicion. Cumbersome exercise involved in starting an
enterprise coupled with the officials humiliating attitude towards
women compels them to give up an idea of starting an enterprise.

5. Family Ties: In India, it is mainly a woman’s duty to look after the

children and other members of the family. Man plays a secondary role
only. In case of married woman, she has to strike a fine balance
between her business and family. Her total involvement in family
leaves little or no energy and time to devote for business. Support and
approval of husbands seem necessary condition or women’s entry in to
business. Accordingly, the educational level and family background of
husbands positively influence women’s entry into business activities.

6. Lack of Education: In India, around three- fifths (60%) of women

are still illiterate illiteracy is the root cause of socio- economic
problems. Due to the lack of education and that too qualitative
education, women are not aware of business, technology and market
knowledge. Also, lack of education cases low achievement motivation
among women. Thus, lack of education creates problems for women in
the setting up and running of business enterprises.

7. Male dominated Society: Male chauvinism is till the order of the

day in India. The constitution of India speaks of equality between
sexes. But, in practice women are looked upon as able i.e. Weak in all
respects. Women suffer from male reservations about a women’s role,
ability and capacity and are treated accordingly. In nutshell, in the
male-dominated Indian society, women are not treated equal to men.
This in turn, serves as a barrier to women entry into business.

8. Low Risk- Bearing Ability: Women in India lead a protected life.

They are less educated and economically not self- dependent. All these
reduce their ability to bear risk involved in running an enterprise. Risk
bearing is an essential requisite of a successful entrepreneur. In
- 56 -

addition to above problems, inadequate infra structural facilities,

shortage of power, high cost of production, social attitude, low need
for achievement and socio- economic constraints also hold the women
back from entering into business.


With a view that women entrepreneurs should come forward in industrial
field and become self- sufficient, government and financial institutions have
announced many schemes of providing financial assistance.

1. Seed Capital Scheme: In order to start one’s own business this

scheme is undertaken by the government. Government provides funds
@ 10% to unemployed youths and women. The seed capital provided is
10% to 15% of the total cost of the project. The percentage of seed
capitalist 22.5% for backward class candidates. The woman is treated
unemployed even if their husbands are in business or service. The
qualification is they should have passed at least the standard and
should be between 18- 50 years of age. The maximum capital available
is 5 lacs. For a partnership firm, the contribution of employed should
be more than 75%. The seed capital granted is to be aid within the
period of 7 years. More details in regard are provided by District
Industries Centre.

2. National equity Fund: National Bank or State finance Corporation

implements this scheme. There is no condition of age or education
under this scheme. Loan granted for industrial or service oriented
business purpose. It is expected that the candidate should contribute
minimum 105 of the cost of the project. 15% of the project cost is
granted by the bank towards capital @ 10% equity fund as loan.75% of
project cost is granted by the bank in the form of loan.

3. Finance Corporation Scheme: All the schemes announced by the

finance corporation scheme are applicable to women entrepreneurs.
Prime minister’s employment guarantee scheme, Central
government’s scheme for educated unemployment: This scheme is
sponsored by central government. The age limit applicant is 35 years
and minimum education is Std.Xth. Under this scheme 95% of loan is
granted by the bank. 15% subsidy is available. Rs. 5,000 for business
purpose. Rs. 25,000 for service industry and Rs. 35,000 for the purpose
of individual loan is granted. The candidate is not expected to
contribute his share. 15% of subsidy is directly remitted to bank by
central government. This scheme has been revised from April 1999.
The income limit of the partners of the women should not be more

- 57 -

than Rs. 24,000 p.a. for availing loan under this scheme, the candidate
has to make an application to District Industries Center.

4. Women Industries Fund scheme: Under this scheme women

entrepreneur’s get 15% seed capital of total cost of the project for
starting a new business. The seed capital money is restricted to Rs. 4
lacs. The cost of the project should not exceed 10 lacs. It is expected that
women entrepreneurs should contribute 10% of total project cost.
Incase of partnership firms/ private limited company the contribution
of women entrepreneurs should be minimum 51% of the total project
cost. For availing this facility application must be made to nationalized
banks or State Finance Corporation.

5. Single Window Scheme: To facilitate women entrepreneurs in

getting term loan and working capital from one and the same
institution, the Small Industrial Development bank of India has started
this scheme. It is applicable to both, male and female entrepreneurs.
This scheme is applicable to project where total expenses are up to 20
lacs (excluding working capital and margin money). The loan is too
repaid within the period of 1 year. Entrepreneurs share in the project
should be 25%. This scheme is implemented through Finance
Corporation. The corporation also provides term loan and working
capital. Bank has to take the responsibility of providing working

6. Joint Loan Scheme: Under this scheme, the artisans living in rural
areas, where the populations is up to 5 lacs get the loans to purchase
instruments and working capital needs. Financial assistance is
available cent per up to Rs. 50,000 lacs with minimum rate of interest.
Loan granted is to repaid within a period of 8 years. There is no
restriction of age education qualification of the candidate.

7. District Industries Center Scheme: The main objective of this

scheme is to start industries in rural areas where the population is less
than 1 lacs. The industries with investment in machinery not exceeding
Rs. 2 lacs are eligible for financial assistance under this scheme. 20% of
2 lacs for general category and 30%incase of backward people are
granted as seed capital from the District Industries Center. The
remaining amount of entrepreneur has to invest rest of the amount.
The government sponsors this scheme. The rate of interest on seed
capital is 4%. The District Industries Center implements the scheme
and the applicant has to apply to them for financial assistance.

- 58 -

8. Scheme of KVIC: Many schemes are implemented by KVIC for

women entrepreneurs to start their own business (cottage industries) in
rural and semi- urban areas.

9. Women Financial Corporation: For overall financial

development of women, Government establishes Women Financial

10. Training For Women Entrepreneurs: The Indian small

development bank has undertaken training programme for women
entrepreneurs with an object of getting more opportunities for starting
self employment industries/ business for women. This scheme is
implemented in the state of Maharashtra at Maharashtra District
Center, Aurangabad and other centers.

11. Banks Scheme for women entrepreneurs: Bank implements

various scheme for women entrepreneurs, one of which is “stree-
shakti” in State bank of India.

12. Subsidy on Interest Scheme: The Indian Finance Corporation ahs

implemented this scheme. The subsidy is granted loans up to Rs. 10
lacs. The women entrepreneurs are encouraged to start their own
business. They are encouraged to undergo training in industrial
development. The industry should be run by the women entrepreneur
with the contribution of 51% of total cost of project. The amount of
subsidy available is interest for 1 year or Rs. 20,000 granted through
financial institution to women entrepreneurs. Indian Financial
Corporation reimburses this amount to the financial institutions.


- 59 -


Ø What is an ancillary unit?

Ø Development of ancillary industry in India

Ø Factors affecting ancillarization

Ø Role played by Financial Institutions and commercial


Ø Meaning of sub- contracting

Ø Advantages and disadvantages of sub- contracting

Ø Franchising

- 60 -


An industrial unit which is engaged or is proposed to be engaged in the

manufacture or production of parts, components, sub- assemblies, tooling or
intermediaries, or the rendering of services and the undertaking supplies or
renders or proposes to supply or render not less than 5o percent of its
production or services, as the case may be, to one or more other industrial
takings and whose investment in fixed assets in plant and machinery whether
held on ownership terms or on lease or on hire purchase, does not exceed Rs
75 lacs.


The programme of ancillarisation includes motivation of public and private

sector units to offload production of components, parts, sub- assemblies,
tools, intermediates, services etc to ancillary units. The programme of
ancillary development has specific advantages for both for large as well as
small industries and also for the total economy of the country. The large scale
units have the advantages in the form of savings in investments, inventories,
employment of labour, etc. and getting the items of the desired specifications,
while the small scale units have the advantage of getting assured market for
their products, availability of technical assistance and improved technology
from the parent units. This programme also helps in overall economy of the
country. The strategy for ancillary development was originally outlined with
the objective of:

1. Development of employment opportunities coupled with growth of

entrepreneurship in different fields and different parts of the country.
2. Increase in productivity of the small scale units.
3. Growth of a low cost economy through reduction in costs brought by
appropriate technology followed by ancillary units.
4. Development of a single or multi discipline expertise in different fields
to bring about economies of scale.


Recently there has been a growing trend towards ancillarisation due to the
series of rapid developments that have been taken place in the industrial
structure in the country.

- 61 -

Ø The size of operations of industrial units has increased enormously;

with the result that they are compelled to sub- contract some of the
items of production to ancillaries.

Ø It was more convenient for large scale manufactures to get the ancillary
units to produce certain items for them. With the growing complexity
of management, the large scale manufacturer can now concentrate on
the problems of organization, marketing etc, rather than concentrating
on availability of raw materials etc.

Ø Large scale manufacturers can economize on transport costs, storage

space, etc, by contracting rather than by producing the same
components themselves.

Ø It is economic to have some items manufactured by ancillary units

because the cost of these items is higher when they are fabricated by
large scale manufacturers.

Ø By outsourcing, large scale manufacturer is able to insulate him against

fluctuations in the prices of raw materials over a period of time by
entering into contracts for the supply of these items.

All these facts underscore the point that the development of ancillaries and
their growing popularity have been well supported by economic and
management considerations.



Role played by financial institutions and commercial banks in providing

financial assistance to small scale entrepreneurs.

The small scale industrial sector raises term credit and working, capital
required by it from commercial banks, co- operative banks, regional rural
banks and state- financial corporations. The banking system provided mainly
working capital and the State Financial Corporations mainly provides
investment capital.

Financial assistance in kind is available to the small- scale industrial sector

from the National Small Industries Corporation (NSIC) at the national level,
the State Small Industries Development Corporations (SSIDCs) at the state
level which supply machinery on hire- purchase basis. The Industrial
Development Bank of India (IDBI), the National Bank for Agriculture and

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Rural Development (NABARD) and the Industrial Reconstruction Bank of

India (IRBI) provides refinance facilities to banks and financial corporations
for financing the small scale industrial sector.

The credit provided by banks to the small scale industrial sector is treated as
credit to the ‘priority sector’. The commercial banks are required to lend 40%
of their total loans to the ‘priority sector’, of which 15% to 16% are required to
be in the form of direct agricultural advances and the rest can be to small scale
industry, small business, small transport, operators etc.

State Financial Corporations provide financial assistance up to Rs. 60 Lakhs to

private/ public limited companies and up to Rs. 30 Lakhs to proprietors and
partnership firms. Rates of interest charged vary according to the size of the
loan and category of entrepreneurs like SC/ ST, women entrepreneurs, ex-
servicemen, physically handicapped persons etc. Composite loans up to Rs.
50,000 are provided form meeting both term- loan and working capital so
that, the small scale entrepreneurs does not have to go to other institutions.

Locus of control is an attribute indicating the sense of control that a person

has over life. One of the concerns the people have when considering forming
a new venture is, whether they will be able to sustain the drive and energy
required not only to overcome the inertia in forming something new but also
to manage the new enterprise and make it grow.


Sub- contracting system is a mutually beneficial commercial relationship

between the two companies. This is known as ancillarisation in India and
more generally as sub- contracting. Sub- contracting can be defined as

A sub- contracting relationship exists when a company (called the sub-

contractee) places on order with another company (called the sub- contractee0
for the production of parts, components, sub- assemblies or assemblies to be
incorporated into a product sold by the contractor. Such orders may include
the processing, transformation or finishing of materials or parts by the sub-
contractor at the request of the contractor.

In practice, large scale industries do not produce all goods on their own
instead they rely on small scale enterprises called sub- contractors for a great
deal of production. When the work assigned to small enterprises involves
manufacturing works, it is called Industrial Sub- contracting. In other cases, it
is known as commercial sub- contracting. It is not unusual for sub- contractors
to work for more than one contractor.

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1. It increases production in the fastest way without making much effort.

2. The contractor can produce products without investing in plant and
3. Sub- contracting is particularly suitable to manufacture goods
4. It enables the contractor to make use of technical and managerial
abilities of the sub-contractors.
5. Despite leading to dependence, sub- contracting ensures existence of
sub- contractors by providing them business.
6. Last but no means the least; sub- contracting makes the core firms
more flexible in their production.


However, sub-contracting is not an unmixed blessing. It has some

disadvantages also. These are:

1. It does not ensure the regular and uninterrupted supply of goods to the
core firms, i.e. contractors that adversely affect the functioning of the
core firms.
2. Goods produced under sub- contracting system are often qualitatively
3. Sub- contracting also delimits the expansion and the diversification of
the core firms.
4. Delays in payments, a common feature by the contractor to the sub-
contractor’s endanger the very survival of the latter.


In a sense, franchising is very much similar to branching. Franchising is a

system for selectively distributing goods or services through outlets owned by
the retailer or dealer. Basically, a franchise is a patent or trademark license,
entitling the holder to market particular products or services under a brand
name or trademark according the different terms and conditions.

According to David D. Settz “A franchisee is a form of business ownership

selling or distributing its product or services under a prescribed business

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format in exchange for royalties or shares or profits. The buyer is called the
“franchisee” and the company that sells rights to its business concept is called
the “franchiser”.

David H. Holt has defined franchising as a ‘business system created by a

contract between a parent company, called the franchiser and the acquiring
sell goods or services, to use certain products, names, or branded, or to
manufacture certain brands”. Now, franchising can simply be defined as a
form of contractual arrangement in which a retailer (Franchisee) enters into an
agreement with a producer (Franchiser) to sell the producers goods or
services for a specified fee or commission. Franchising arrangements are
broadly classified into three types:

1. Product Franchising
2. Manufacturing Franchising
3. Business- Format Franchising


This is the earliest type of franchising. Under this dealers were given the right
to distribute goods for a manufacturer. For this right, the dealer pays a fee for
the right to sell the trademarked goods of the producer. The Singer
Corporation used product franchising perhaps for the first time during the
1800s to distribute its sewing machines. This practice subsequently became
popular in the petroleum and automobile machines also.


Under this agreement, the franchiser (manufacturer) gives the dealer (bottler)
the exclusive right to produce and distribute the product in a particular area.
This type of franchising is commonly used in the soft- drink industry.


This is recent type of franchising and is the most popular one at present. This
is the type that most people today mean when they use the term franchising.
In the United States, this form accounts for nearly three- fourth of all
franchised outlets. Business- format wide range of services to the franchisee,
including marketing, advertising, strategic planning, training, production of
operations manuals and standards and quality – control guidance. The
International Franchise Association (IFA) of America has defined format
franchising as follows:
“A franchise operation is a contractual relationship between the franchiser
and franchisee in which the franchiser offers or is obligated to maintain a
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how and training, wherein the franchisee operates under a common trade
name, format and or procedure owned or controlled by the franchiser and in
business from his own resources”.


Franchising agreement is a symbolic one for the franchiser and the franchisee.
Following are the advantages that franchising provides to the franchisee.

1) Franchising makes the task of getting started easier because the

franchisee gets a business format already market tested and found to
work. Hence buying a franchise is so far safer than trying to start a new

2) It reduces chances for failure. Here significant to mention is that less

than 10 percent of all franchise fails. In dramatic contrast with this is
the fact that two out of every five entrepreneurs who start on their own
fail within three years and eight out of every ten fail within ten years.

3) A well established franchise brings with it the very important

advantage of recognition. Many new businesses experience lean
months or years after start up. Obviously, the longer the period the
business must experience it, the greater the chances of failure. With the
well tested franchise, this period of agency may reduce to only weeks
or perhaps just days.

4) Franchising may increase the franchisee’s purchasing power also.

Because, being part of a large and that too recognized organization
means paying less for a variety of things such as supplies equipment,
inventory, services, insurance and so on. It also can mean getting better
service from suppliers because of the importance of the organization
(franchise) of you is part franchisee).

5) One gets the benefit of the franchiser’s research and development in

improving the product.

6) The franchisee has the protected or privileged rights to franchise

within a given area.

7) The prospects of obtaining loan facilities from the bank are also

8) The banking of a known trading name (franchiser) becomes quite

helpful while negotiating for good sites with setting agents or building
- 66 -


Franchising is not an unmixed blessing. There are some disadvantages as well

associated with a franchise arrangement. The main ones are listed as follows:

1) Unlike entrepreneurs who start their own business, the franchisees find
no room or scope for enjoying their creativity. They have to work as
per the given format. One classic example of regimentation in
franchising can be found in the Mc Donald’s restaurant organization. A
Mc Donald’s franchise is given very little operational latitude, indeed
the operations manual attends to such minor details as when to boil the
bearings on the potato slicer. The purpose of these restrictions is not to
frustrate the franchises, but to ensure that each outlet is run in a
uniform correct manner.

2) A number of restrictions are also imposed upon the franchisees.

Restrictions may relate to remain confined to product line or a
particular geographical location only.

3) Franchisees usually do not have the right to sell their business to the
highest bidder or to leave it to a member of their family without
approval from the franchiser.

4) Though the franchisee can build up goodwill for his or her business by
his or her efforts goodwill still remains the property of the franchiser.

5) The franchisee may become subject to fail with the failure of the
franchiser, another disadvantage facing franchisees is that franchisers
generally reserve the option to buy back an outlet upon termination of
the contract. Many franchisees become vulnerable to this option. As
such, they operate under the constant fear of non- renewal of the
franchise agreements.

Then do these disadvantages mean that franchising is no longer desirable way

to go small business? Certainly not franchising is a proven and complete
business concept. In fact, what do they really mean is that the security that
some people associate with franchising is an illusion? Hard work, realistic
expectations, and very careful investigation are required if becoming a
franchisee is to be a successful, satisfying experience. This underlines the need
for evaluation of a franchising agreement.


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Ø Swot Analysis

Ø Entrepreneurial Environment

Ø Environmental Analysis

Ø Scope for Entrepreneurship in small business sector

Ø Entrepreneurship process of liberalization

Ø Changing Role of Entrepreneurship in the era of

liberalization, privatization and globalization

Ø Entrepreneurship as a Catalyst for meeting global


Ø Creativity & Innovation

Ø Key sectors for the new age Entrepreneurs

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The business environment keeps changing. Government policies and

regulations, economic conditions, social conditions, technological factors,
competitive situation etc. Undergo changes. The environmental changes may
open up new opportunities or pose new threats.

Constant monitoring of the environment is therefore, necessary to identify the

emerging opportunities and threats. In order to understand to what extent a
firm will be able to exploit the opportunities and fight the threats, it is
necessary to evaluate the strengths and weaknesses of the firm. Thus, an
analysis of the strengths and weaknesses of the firm and the opportunities
and threats in the environment that is the ‘SWOT’ analysis is essential for
framing the business strategies.

S- Strengths.
W- Weaknesses.
O- Opportunities.
T- Threats.


Strengths and weakness analysis is a real test for management. The strength
and weaknesses would decide whether a company should continue in a
business, take up new lines of business, as well as the strategy to be employed
in doing so.

For e.g. in case of some products, small scale units have definite advantage
over large- scale units in costs. If a large scale unit were not able to compete
with the small- scale units, in such a case, it would be wise on the part of the
large unit to give up the business of such products.

The strengths and weakness analysis is done by functional audit of different

areas like marketing, finance, design/ engineering, operations etc. The audit
is to be done on the basis of the quantity and quality of skills and the
infrastructures support 3 available facilities in terms of physical facilities,
resource available, speed and flexibility in arranging them.

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Monitoring of the environmental changes is necessary to reshape the

company’s business and products, if needed, to ensure survival and growth.
Certain changes in the environment may bring about new opportunities for
some companies while they pose new threats for some others.

For e.g. the new industrial policy of India has brought about enormous new
business opportunities but at the same time it poses new threats or challenges
to many existing firms because of the increase in competition. The existing
firms should therefore, frame strategies to effectively fight the increasing

The primary reason of the environmental analysis is to identify the threats as

well as the opportunities developing in the business environment. The search
for opportunities may start on account of increased aspiration for
performance of the organization. While the analysis of threat is to examine the
development in the environment that may affect the current strategies
ineffective and irrelevant and thus, affect the survival of the organization. The
threats or opportunities for any business developed because the needs of the
customer keep on changing. For e.g. a customer who was happy with the
product now wants another because of change in his needs. In view of the
above, many companies have to reframe their objectives and strategies in
order to survive in the changing business environment.


Entrepreneurship environment refers to the various facets within which

enterprises- big, medium and small and others have to operate. The
environment therefore, influences the enterprise. By and large, an
environment created by political, social, economic, national, legal forces etc
influences entrepreneurship.

v INTERNAL ENVIRONMENT (Micro Environment)

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The business has to produce a product that people want to buy. They
have to decide which ‘market segment’ they are aiming at – age, income,
geographical location etc. They then have to differentiate their product so that
it is slightly different from what is on offer at present so that people can be
persuaded to ‘give them a try’.
In other words product is a bundle of satisfaction that a costumer buys. It
represent solution to a customer’s problem .It is in this context that
marketing definition of a product is more than just what the manufacturer
understand it.


To a manufacturer, price represent quantity of money received by the firm or

seller .To customer, it represent sacrifice and hence his perception of the value
of product.

The price must be high enough to cover costs and make a profit but low
enough to attract customers. There are a number of possible pricing strategies.
The most commonly used are:

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• PENETRATION PRICING – charging a low price, possibly not quite

covering costs, to gain a position in the market. This is quite popular
with new businesses trying to get a ‘toehold’.
• CREAMING – the opposite to penetration pricing, this involves
charging a deliberately high price to persuade people that the product
is of high quality. Luxury car makers often use this strategy
• COST PLUS PRICING – this is the most common form of pricing.
Costs are totaled and a margin is added on for profit to make the total


The business must have a location that it can afford, and that is convenient
and suitable for customers and any supplier.


Promotion means moving from one end to another. Promotion means all
those tools that a marketer uses to take his product from the factory to the
customer and hence involves advertising, sales promotion, personal selling,
public relations publicity and merchandising.

Customers have to be made aware of the product. The two main

considerations are target market and cost. A new business will not be able to
afford to advertise on national television, for instance and would not wish to
because its market will be local to start with. Leaflets, billboards,
advertisements in local newspapers, Yellow Pages and ‘word of mouth’
would be more appropriate.

v EXTERNAL ENVIRONMENT (Macro Environment)

External Environment:

Also known as Macro Environment, are the “uncontrollable factors” which a

company must monitor and respond to. They consist of economic, political,
technological, social-cultural and legal.

Economic Environment:

It consists of factors that affect consumer purchasing power and spending

patterns. Markets require purchasing power as well as people. Economic
conditions, economic policies and economic systems are the important
external factors that constitute the economic environment of a business.
For example, the economic conditions of a country, the nature of the
economy, the stage of development of the economy, economic resources, the

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level of income, the distribution of income and assets etc. are among very
important determinants of business strategies.

Technological Environment:

Technology is the most dramatic force shaping people’s lives. Factors such as
–technological development, stages of development, change and rate of
change in technology and research and development affect marketing
strategies. Also the cost of technology acquisition, impact of technology on
human beings and the environmental effects of technology affect marketing

Political environment:

Political environment is composed of laws, government agencies and pressure

groups that influence and limit various organizations and individuals in a
society. The main political trends are:
(a) Substantial amount of legislation regulating business.
(b) Growth of public interest groups and
(c) Changing government agency enforcement.

Socio-cultural environment:

The basic beliefs, values and norms shape the society and its people. Even
when people of different cultures use the same basic product, the mode of
consumption, condition of use, purpose of use or the perception of the
product attributes may vary so much so that the product attributes, method of
promoting the product may have to be varied to suit the characteristics of
different markets. Even the value and beliefs associated with colour vary
significantly between different cultures.

Legal environment:

Government all over the world are an important aspects of their economy and
even in the so called free economy, viz.US, government intervention in
industry is a reality. The extent of intervention varies .while in US this is
relatively low; in developing countries this is quite high. India ,for example
,has had a history of a controlled economy with the government deciding the
rules of the game ,be it the extent of foreign private investment ,or goods to be
exported or imported or even whether a unit can be allowed to produce a
product Regulation in advertising ,like ban on advertising a specific product
like cigarettes, pan masala, liquor and distribution of goods as in the case of
kerosene and earlier in case of food product too, is the reality of Indian

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This integrated approach which is the key to the development of backward

areas implies a very careful environment analysis or research study of the
target groups of beneficiaries, their activities and differential needs and the
practical modes of operation by which their activities can be linked with the
covering enterprise. Unless these studies are made meticulously, the entire
planning will only give unproductive results. Most of the development
schemes fail to benefit the target clientele because elaborate linkages are not
identified and built up. An imaginative study should

1. Identify the beneficiaries or target groups.

2. Analyze the environment for immediate feasible enterprises in an
integrated manner.
3. Delineate the linkages and institutional arrangements.
4. Recommend appropriate organizational structures to provide
necessary promotional support.

Unfortunately, in most of the studies on backward areas, there is a tendency

to make generalizations and ignore the specific details of feasible projects. As
a result, immediate perception of concrete opportunities by interested
entrepreneurs is left in confusion. Sometime! “Area studies” make a general
statement of demand and resources and recommend certain enterprises,
which are not immediately feasible due to important reasons unaccounted for
in such studies. It is also not seriously contemplated whether the
recommended enterprises are feasible within the capabilities and investment
capacity of the target- group.

In short, most of the studies fail to disconcern the real issues of growth in the
target area and fail to identify the concrete and specific needs of these
endowments like resource skill etc. to flourish. Enunciation of general
objectives, generic beneficiaries tend to blur the distinct contours of one
homogeneous group from the other. Also, the extension of certain standard
facilities or services does not serve their actual needs. All this possibly
happens because in such basic studies we fail to identify clearly the target-
groups and their specific problems, and make theoretical studies on resources
and demand in an impersonal manner, as a result of which even the schemes
devised on the basis of such studies tend to become too impersonal and rigid.
Sometimes, the scheme become so flexible on account of a standardized
petrified approach that in some most genuine cases demanding a certain
departure from the fixed framework, the scheme is incapable of giving
requisite help. It is therefore, absolutely necessary that any action plan for a
backward area must first identify the target- group, identify the specific

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services they need for monitoring their enterprises and devise an appropriate
structural support for comprehensive coverage of their needs.



Small- scale business provides good scope for the growth of entrepreneurial
activities .An entrepreneur has good opportunity and vast scope in selling
service rather than manufacturing a product. The entrepreneur can achieve
better results if the size of the business is small. It is for this reason that small
firms have higher productivity, greater efficiency and low labour turnover.
The scope for entrepreneurial activities in small business sector can broadly
be classified into:

1. Industrial sector
2. Agricultural and allied industrial sector
3. Service sector


Small scale industries occupy an important place in the industrial sector. They
have contributed over 40% in the gross industrial production in 1998.

Small- scale industries: The basic objectives underlying the development of

small- scale are the increase in the supply of manufactured goods, promotion
of capital information the development of indigenous entrepreneurial talents
and skills and the creation of broader employment opportunities. This sector
provides a wider scope for the potential entrepreneur to develop his or her
own industry. There is a good scope and enormous potential to use
technology based products in the small- scale sector. An entrepreneur can
exploit a profitable venture in any of the industries reserved for exclusive
department under the small- scale sector. There are as many at 384 items for
exclusive purchase from the small- scale industries.

Small- scale industries play an important role in increasing the national

income, in meeting the shortage of consumer’s goods, in promoting balanced
regional development, in reducing inequalities in the distribution of income
and wealth and in relieving the economic pressure on land and over
crowding in urban areas. Outdated technology, shortage of finance, shortage
of raw material and inadequate marketing facilities are some of the problems
faced by small entrepreneurs.

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There is a vast cope for entrepreneurial activities in the agricultural sector. By

establishing a link between agriculture and allied industries, the rural
entrepreneur can exploit opportunities in areas of farming, agricultural
processing and marketing. The government has given priority to IRDP
programme and ensured adequate flow of credit to small and marginal
farmers through re-financing facilities and by establishing national bank for
agriculture and small development.

Trade: Trading takes place in wholesaling and retailing. It may be in domestic

or overseas market. The retailer entrepreneur makes the goods available at the
time and places the consumer wants them. He may decide to start single line
store, specialty shop, departmental store etc. trade in overseas market is in
wholesale. The business environment directly influences the growth of
entrepreneurship in a particular line of trade. The trade policy of India has
been directed to promote export. Hence incentives and facilities have been
provided to the entrepreneurs to motivate them to develop export.


The service sector has gained importance for the entrepreneurs because of its
rapid expansion. Service sector includes all kinds of business and provides
opportunities to the entrepreneurs in business such as hotels, tourist services,
personal services such as dry cleaning, beauty shops, photographic studies,
auto repair, electric repair shops, wielding repair etc.

Transport: They provide time and place utilities in urban and rural areas to
both men and material. The different modes or transport are of immense
importance in the areas, which are not served by roads and railways. There is
a scope for entrepreneur to design prototypes of new carts with the
application of indigenous technology so that they may have better mobility
and greater carrying capacity. The primary need in the rural area is an
efficient system of road transport.

The rural economy has a good opportunity for an entrepreneur to develop

some business. They can exploit possibilities for a venture in some shops or
services. Entrepreneurship flourishes in small business sector for they have
enormous opportunities in manufacturing and non- manufacturing activities.
The government is keen in encouraging the competitive strength of the small
scale producers and it has taken a number of measures such as:-

§ The establishment of a network of industrial estates through ought the

country where work sheds equipped with the necessary facilities made
available to prospective entrepreneurs on subsidized rental basis.

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§ The reservation of a number of products for the exclusive production

to small sector

§ The introduction of ancillarization programme under which large and

small industries are to be linked in a harmonious productive

§ The supply of machines on hire purchase basis to the small

entrepreneurs on easy terms of payment

§ Technical counseling to small units so as to improve their efficiency

and viability

These are golden opportunities for the prospective entrepreneurs to self-

employed independent businessman. The future is very bright.


The process of liberalization and privatization initiated since 1991 is trying to
make environment more conducive to growth of entrepreneurship. Many
areas like telecommunication, power, generation, oil and natural gas, coal
and steel, civil aviation, banking etc. which were earlier reserved for public
sector are now made open to private participation also. The process of
liberalization has opened the floodgates of entrepreneurial opportunities.
Private initiative and funds have started flowing into these sectors. Reforms
have swept all major sectors of the economy, opening up the country for the
easier movement of the population and material across the national
boundaries. Foreign trade and investment regime points to liberal order
which is welcome to domestic and foreign private sector entrepreneurs. The
opening up has been substantial and going by the ratio of foreign trade
turnover to GDP and flows of market based foreign capital, India had truly
entered the global regime.

The world is shrinking into a global village due to economic interdependence

and the revolution in communication technology. ‘Globalization’ has become
the password. Today changes are taking place at a greater pace and the world
is passing through an exciting stage of technological progress on several

Technology is perhaps the most important resource for any nation. Invention,
innovation, adoption of new technologies, processes and their
commercialization are the major factors in wealth creation and making the
country technologically superior, which in turn, leads to economic
supremacy. India has a large reservoir of qualified science and technology

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manpower and the necessary infrastructure for indigenous R&D and

industrial development. It cannot lag behind in this regard and should be
prepared to be a global player in its own right in the coming century.

Now we face the implication of anew international economy, which is less

energy- intensive and more knowledge- intensive. New materials are
reducing the demand for ferrous and non- ferrous materials; transportation
costs are falling as products become lighter and smaller; international
communication is instantaneous. It is a new order in which central planning
by large institutions is becoming less effective, and small- scale enterprises are
becoming more efficient and effective.

Entrepreneurs and new enterprises, rather than governments and major

corporations are the instruments of change. The relative growth of the
information/service sector in the new international economy that is emerging
is removing many of the traditional barriers. In this sector, geography access
to capital and access to resources is of less importance.



Challenges of liberalization, privatization and globalization call upon the

entrepreneurship to play amore creative and dynamic role than ever before.
Entrepreneurship can now set the goal of making India a developed country.
They need not just aspire but make it a mission take it up and accomplish it.
Ignited mind of entrepreneurs can be powerful resources, which can help
India, becoming a big economic power in the years to come.

It is indeed characteristic of entrepreneurs to have foresight, a vision and skill

to see an opportunity and exploit it. Globalization, which means integration
with the world economy, brings the influence of external sources into our
society. Experts have pointed out that these are economic of trade or market
forces and the have a beneficial influence in developing our core
competencies in area which have a competitive advantage. As already
discussed we have a good scope for developing our services. Entrepreneurs
have to exploit this opportunity and with their sense of efficiency help the
service sector to start, grow and develop perfectly. Direct linkages of
technology to the nation’s strategic strengths are becoming clear since the last
decade. Entrepreneurs have to realize that technology is the core strength of
our nation and therefore help it get on the path of technological development.
By core strength and competency it is meant that in certain areas we have

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inherent strength and therefore show better result in a shorter period of time.
Indian human resource based is one of the greatest core competencies.

India is known for A-1 class entrepreneurs. The Indian entrepreneurial

history is rich with examples or entrepreneurs who have contributed towards
India’s economic activity even during the colonial rule and in the face of all
opposition. Indians not only have a greater learning capability but also
competitive entrepreneurial spirit. It is this spirit that is to be released to meet
the challenges of 21st century.

India has the core strength of its natural resources. It is abundant supplies of
most of them; it has a vast coast line, which stores resource and energy
supply. The can become our future strength if entrepreneurs, exploit them
and put them to productive use. Entrepreneur’s role is even called upon to
explore undersea resources.

Services in India have a vast scope of development in India. Entrepreneurs are

called upon to study and identify India’s strong base and to initiate activities
in those specific areas, there are technologies that dramatically change India’s
social and economic conditions. India can excel and usher in a new era in
agriculture. India can emerge as a global power in terms of agricultural
produce and agro- based industries.

Entrepreneurs have the p [potential to explore the spirit of adventure, the

capability to initiate, organize and undertake risks and the ability to face
challenges. It is the role of an entrepreneur that is called upon in this new era
the role of innovating and imitating entrepreneurs. The slogan of the
entrepreneurs in the new international scenario, in the words of Subrahmanya
Bharathi can be

“We will take many mines,

And take out gold and many other things,
And go eight directions to sell these,
And bring home many things!”

Changing role of entrepreneurs may be summed up as follows:

In the era of liberalization, privatization and globalization, an entrepreneur

will have to

v Explore and exploit opportunities for trade in the world

v Discover, utilize, and develop the core strength of the economy.
v Conduct R&D activities to meet the global standards
v Improve the quality of technology and quality of manufacture to
be able to complete well with foreign competition.
- 79 -

v Reduction of cost of production to make the product/service

available at a competitive price.
v Undertake advertising, sales promotion, marketing, packaging
effectively for capturing foreign markets.
v Develop new products, new areas of production for widening
the countries trade.
v Search new markets and capture more and more markets.
v Expanding the geographical base of the marketing.
v Increase production to accelerate economic growth rate
v Come up with innovative ideas to solve financial, economic and
other problems of the countries.
v Play the role of imitating entrepreneurs i.e. study the latest
changes in the advanced countries- and use them gainfully.
v Utilize the underutilized/ unutilized capacity so that full
benefits can be enjoyed e.g. Hydropower capacities are still



The relationship between entrepreneurship and economic growth

development has already been analyzed. The later is the result of
entrepreneurship. Every process of economic growth/ development is the
outcome of changes that occur in various spheres. Infact one cannot imagine
either of them without a change. Change is therefore the essence of growth
and development. Entrepreneurs are some times called carriers or agents of
change. It is in this context that entrepreneurs are known as catalysts of
change. In the capacity of catalyst an entrepreneur reaches for opportunities
and areas- where changes can be expected and are necessary. An innovative
entrepreneur is instrumental in bringing about a change. He introduces new
ideas, new techniques, new combinations, discovers new sources of supplies
etc. An imitating entrepreneur on the other hand uses the changes launched
by others.

Changes and entrepreneurship go together. Drucker says, “Entrepreneurs see

changes as the norm and all healthy. Usually they do not bring about the
changes themselves. But the entrepreneur always searches for change,
responds to it and exploits it as an opportunity”. Entrepreneurs have to play
an important role- the role of catalysts in the new international scenario that is
going to open the economy to new areas and prospects.

Entrepreneurs are supposed to visualize and utilize the opportunities that are
going to occur. The world trade is going to open doors to new challenges.

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New and changed approaches will have to be adopted for meeting these
challenges successfully. As a catalyst an entrepreneur will have to:-

v Foresee prospect changes in the global economic and social

environment. He will also have to be instrumental in bringing about

v Absorb new inventions and innovations in the technological sphere as

technology plays an important role in the world of trade and
v Initiate new activities in both business and non- business spheres. In
the capacity of an innovative entrepreneur. He has to introduce new
combination of resources, come up with bright ideas to utilize
underutilized resources, to put them to multiple uses and apply them
to new and unknown activities.

v Bring about an attitudinal change in the minds of the people and the
society in general. A conservative and religious society or a society that
is bound by customs and traditions cannot take full advantage of
entrepreneurial opportunities. An entrepreneur may have to strive to
convert the society into a dynamic, rational and a progressive one. He
may have to influence the government into bringing about economic
reforms of various types for exploiting global opportunities.

v Exploit change and use it not only for his and for the benefit of his
organization but also for the benefit of his economy.

Entrepreneurs play a crucial role in the development of an economy. They

play the role of catalysts of change and are capable of converting an
underdeveloped economy into a developing one and a developing economy
into a developed one.

Global changes and challenges may be compared to a knife. A knife when

used properly brings benefits or serves as a tool for work. The same knife can
cut and harm if used wrongly. Entrepreneurs have to convert global changes
and challenges into opportunities, exploit them effectively and intelligently so
that the economy emerges a winner, a beneficiary of globalization and not as
its victim.


Creativity implies conceptualizing, visualizing or bringing into being

something that does not yet exist. It is about curiosity and observation. In the
history of science, there are interesting examples of creativity occurring at the

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same time with no contact between the individuals involved. Newton and
Leibritz created the mathematics of calculus in the seventeenth century quite
independently of each other, despite their allegations of plagiarism.

Creativity seems to come “out of the blue” triggered by a problem to be

solved or an idea to be expressed. Its roots and origins are mysterious and
unknown but its existence cannot be denied. This meta- physical aspect has
meant that science has shied away from the topic though it is now becoming a
subject of serious study among cognitive scientists and experimental
Entrepreneurs are familiar with ideas that suddenly come to mind and are not
too concerned with their origins. This is the starting point of the
entrepreneurial process. We see creativity as a talent, an innate ability, though
we recognize that it can be developed and that there are techniques that
promote creativity and problem solving. Creativity is also a function of how
people feel. Some are more creative under pressure whilst others need
complete relaxation. Some use divergent thinking in their creativity whilst
others prefer convergent thinking.

One thing that seems common to all forms of creativity is joy. Einstein
comments that the idea that the gravitational field has only a relative
existence was the happiest thought of my life. His creative genius had come
up with the idea of relativity and it made him happy. There is an intense
personal satisfaction in having come up with something new and novel. This
is one reason why entrepreneurs see their activities as fun. There is the joy of
creativity all around them. For the entrepreneur, creativity is both the starting
point and the reason for continued success. It is the secret formula by which
he or she overcomes obstacles and outsmarts the competition. Arguably every
one of us has the ability to be creative but do we all use and exploit this
ability? Many of us simply do not act creatively much of the time.

Possibly we are not motivated and encouraged perhaps we do not believe in

ourselves and the contribution and difference we could make. There is
certainly a skills and technique element to creativity- in a business context, for
example, we can be taught creative thinking and behaviour in the context of
decision making but this is clearly only part of the explanation. The issue of
making is also a critical element.

Many people have the ability to play a musical instrument. They have a skill
and possibly natural talent and they can be taught more skills and techniques
whilst they are willing to persevere and practice. Furthermore, some people
who play music naturally appreciate the meaning the composer was trying to
convey when the work was written. Others have to be taught this
interpretation. Some people simply see things that others cannot until they are
given a detailed explanation. The same implies to opportunity spotting.

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People who miss the valuable opportunities that others see first often have
access to the same information but it means something different to them.

something different. In just the same way many young people can dribble,
head and pass a football, and their skills can be improved with coaching. But
when they watch a football match or play in one are they able to see the whole
game? Can they spot goal scoring opportunities and positions and get there
ahead of a defender? Most people who watch team sports such as football
simply follow the movement of the ball exactly as the television camera tends
to do. They ignore or miss the emerging patterns as the other player’s move of
the ball in search of good positions. This partially explains why we do not all
seem to see the same game evolve, even though we are present at the same


Innovation builds creativity when something new, tangible and value

creating is developed from the ideas, innovation can be focused on the theme
of being better-incremental improvements-as well as the theme of being
radically different. The former will often form the world of the entrepreneur,
who us attempting to make his or her organization d stronger than his rivals
.The later is often ,but certainly not always, reserved for the true
entrepreneur, who is more concerned with doing something genuinely new
and different rather than improving on ideas that have gone before.

Innovation is about seeing the creative new idea through to completion, to

final application but, of course, this will not necessarily be a business. It is the
entrepreneur who builds a business around the idea and innovation. Both can
e difficult roads and require courage and perseverance as well as creativity
and imagination. These are attributes that the entrepreneur brings and his or
her role in innovation is crucial.

There are the basic approaches with innovation, which are not mutually
exclusive, and we have seen illustrated in the stories in part two. First, it is
possible to have a problem and to be seeking solution, or at least a resolution.
Edwin Land invented Polaroid camera because his young daughter could not
understand why she had to wait for the pictures to be printed when he took
her photograph. Second, we might have an idea in effect a solution and be
searching for a problem to which it can be applied 3Ms. Post- it notes
happened when a 3m employee created a glue with only loose sticking
properties, and a college applied it to a need he had for making page in a
manuscript. Third, we might identify a need and design something that fits.
James Dyson’s dual cyclone cleaner came about because of his frustration

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with his existing machine, which was providing inadequate for cleaning up
the dirt and dust he generated when he converted an old property.

Generating opportunities form ideas requires us to attribute meaning to the

ideas. Ideas from in our minds and at this stage they mean something to us,
personally. Typically, they became a real opportunity when we expose the
ideas and share them with other people, who may well have different
perceptions, attribute different meanings and see something we miss initially.
This process of exploration is fundamental for determining where the
opportunities for building new values are. In other words, innovation comes
from the way we use our ideas.

Crucially the person with the initial idea may not be the person who realizes
where the real opportunity lies. An inventor is not always an opportunity-
spotter and often not a natural project champion. Picasso claimed that great
people steal ideas and create opportunities where others cannot see the
potential. Creativity is the talent of the inventor and innovation is the talent of
the project champion who turns ideas into reality. Entrepreneurs do both
these things but they do more. They do not just complete the successful
application of an idea; they build something of value in the process.

The Sony walkman provides an excellent illustration of what happens. The

idea came to Sony co- founder Akio Morita when he was questioning why he
was finding it difficult to listen to music when he was in public places or
walking round a golf course. The idea became an innovative new product and
a valuable opportunity when Morita shared his idea with other colleagues in
Sony, and existing technologies and competencies were used to develop the
compact personal radio with adequate playing time from its batteries and
individual headphones.

The project was championed, resourced and implemented. Personal cassette

and CD players have systematically joined the original radio. It was simply a
great idea that rejuvenated Sony at the time it was conceived; and it has
brought value and affected the lives of millions of people around the world.

This endeavors to pull the stand together. Creativity (the idea) is the starting
point whether it is associated with invention or opportunity spotting. This
creativity is turned to a practical reality (a product, for example) through
innovation. Entrepreneurship then sets that innovation in the context of an
enterprise (the actual business), which is something of recognized value.

To be exploited fully and effectively, creativity and innovation need to be

supported by certain talents and aspects of temperament. We also need a base
of knowledge, which we use to help generate and develop our new ideas. In
part of this is developed through our experiences but it also needs to be
supplemented further by certain key skills. In very simple terms, talent and
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temperament combined with knowledge helps us find out and discover

new possibilities. Key skills can enhance the discovery process, whilst
other skills help us design and craft new opportunities from the ideas.


v Cyber Cafes
v Bio Tech
v Apparels
v Rural Products like Handicrafts etc
v Beauty Parlours……

Wish u ALL THE BEST for your Exams!!!!

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