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SYLLABUS

ENTREPRENEURIAL
MBA4th
External Time Internal

UNIT
Entrepreneurial traits, types and significance; definitions, characteristics entrepreneurialtypes,qualitiesandfunctionsofentrepreneurs,roleandimportanceof entrepreneursineconomicgrowth. of

UNIT
Competingtheoriesofentrepreneurship;entrepreneurialdevelopmentprogrammein India objectives. policy SSIs;entrepreneurialinput.

UNIT
Entrepreneurial behaviour and entrepreneurial motivation; n-achievement and management entrepreneur;establishingentrepreneurssystem.

UNIT
Searchforbusinessidea,sourcesofideas,ideaprocessing,inputrequirments:sources andcriteriaoffinancing,fixedandworkingcapitalassessment;technicalassistance; marketing feasibilityreportsandlegalformalitiesanddocumentation.

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Q. DefineEntrepreneur.ExplaintheCharacteristicsofAnEntrepreneur. Ans. AnEntrepreneurisapersonwhoperceivesaneedand thenbringstogethermanpower,materialandcapitalrequiredtomeetthatneed.Inother wordsanentrepreneurisanindividualorteamthatidentifiestheopportunity,gathersthe necessary organization. An motivationandinnovativeabilitytoestablishabusinessorindustryofhisown,eitheralone or distributionofgoodsorservices.Adventurism,willingnesstofacerisks,innovativeurgeand creativepoweraretheinbornqualitiesofentrepreneurship.Entrepreneurshipcanalsobe explainedasaprocessofexecutingaworkinanewandbetterway. Organisation

Urge

Inovation

Skill

Risk

Vision

Enterprise

Growth

Management Diagram
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DefinitionofEntrepreneur: AccordingtoHarbison "Anentrepreneurisnotaninnovationbutanorganizationbuilderoronewhohasthe skilltobuildanorganizationandwhomustbeabletoharnessthenewideasofdifferent innovatorstothebestoftheorganization." PeterF.Druckerdefinesanentrepreneurasonewhoalwayssearchesforchange, responds entrepreneurs,themeansbywhichtheyexploitchangeasanopportunityforadifferent businessorservice. CharacteristicsofanEntrepreneur: (1) Vision An achievedream.Indoingsohevisualizes: MarketDemands Soicio-Economic TechnologicalEnvironment Andthenbasedonthesedynamic,hevisualizesafutureforhisbusinessventure. (2) Knowledge Anentrepreneurhasfullknowledgeaboutallthetechnicalitiesofhis business-beittechnological,operational,financialormatketdynamic. (3) Desire Anentrepreneur dreamsarenotjustlimitedtoachievingonesinglegoalbuttheyconstantlyworkto achievehighergoals. (4) Independence Anentrepreneurneedsindependenceinworkanddecision-making. Theydon'tfollowtherulesofthumbbutmaketheirownrulesanddestiny. (5) Optimism: Entrepreneursarehighlyoptimisticaboutachievingtheirvision. (6) Value Entrepreneursdonotfollowtheconventionalrulesofthumb.They have create,innovateorevenaddvaluetotheexistingproducts/services. (7) LeadershipAnentrepreneurexhibitsthequalitiesofleader.Theyaregoodplanner, organizers,havegoodcommunicationskill,gooddecision0makers,takeinitiativeto implementplansandareresult-oriented. (8) Hardworking Attimestheyarecalledworkaholics.Workisworshipforthen.They putincontinuouseffortstoachievesuccessandknowthatthereisnosubstitutefor harkwork. (9) Risk-Taking Ability : Risk is an inherent and inseparable element of entrepreneurship.Heassumestheuncertaintyoffuture.Anentrepreneurguarantees renttothelandlord,wagestoemployeesandinteresttotheinvestorinthehopeof earningmorethantheexpenses.
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Q.

DefineEntrepreneurship.DiscussthemainEntrepreneurshipTraits.

Ans. Entrepreneurshipreferstoaprocessofactionan entrepreneurundertakestoestablishhisenterprise.Itisacreativeandinnovativeresponse totheenvironment.Inotherwordsentrepreneurshipcanbedefinedasanabilitytodiscover, createorinventopportunitiesandexploitthemtothebenefitofthesociety,whichinturn bringsprosperitytotheinnovatorandhisorganization. Definition: B. Higgins,inhisbook"TheeconomicDevelopment"hassaid."Entrepreneurshipismeant thefunctionofseekinginvestmentandproductionopportunity,organizinganenterpriseto undertakeanewproductionprocess,raisingcapital,hiringlabour,arrangingthesupplyof rawmaterials,findingsite,introducinganewtechniqueandcommodities,discoveringnew sources enterprise." Concept helpoffollowingdiagram Entrepreneur Conceptofentrepreneurshipcanbeexplainedwiththe

Entrepreneurship

Enterprise

Person

ProcessofAction Concept

Object

CharacteristicsofEntrepreneurship: Thecharacteristicsofentrepreneurshipare: Decision Strong reap

Construction Skill

Innovative Urge Entrepreneurship

Economic Activity

Gap-Filing Function Risk-Bearing


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Management Skill

Leadership Quality

Dynamic Process

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EntrepreneurshipTraits: Asuccessfulentrepreneurmustpossessthefollowingtraits: (1) Mental Mental entrepreneurshouldbeintelligentandmusthaveananalyticalmine.Heshouldhave the whichdecisionhavetobemade. (2) Clear Anentrepreneurshouldhaveaclearobjective.Withoutobjective an objectivetoestablishhisproductinthemarket,makeprofitandalsorendersocial service. (3) Business An Leakage entrepreneurshouldbeabletomakeaproperselectionofhissubordinates. (4) Human An customerstoearnprofitandwintheirconfidenceinhisproduct.Hemustalsomaintain goodrelationwithhisemployees. (5) Effective Goodcommunicationalsomeansthattheentrepreneur hastheabilitytoputhispointeffectivelyandwithclarity.Communicationabilityisthe secretofthesuccessofmostentrepreneurs. (6) Technical The sophisticatedtechnologyisinvolved.Theentrepreneurmusthaveareasonablelevel oftechnicalknowledge. (7) Decision-Making Runningabusinessrequirestakinganumberofdecision.Hence an businessforarrivingatadecision. (8) Risk-Bearing'Norisk,nobusiness'or'norisk,nogains'.Riskisaninherentand inseparableelementofentrepreneurship.Heassumestheuncertaintyoffuture. (9) Self-Confidence: Entrepreneursmusthavethementalcapacitytofaceanysituation. Theyshouldalsohavetheabilitytoinspireother.Theymusthavetheconfidencein themselvesandthedeterminationtoachievetheirgoals. EntrepreneurialTraitscanbeexplainedwiththehelpoffollowingdiagram: Technical Knowledge Clear Objectives Decision Making Self Confidence Human RelationAbilitv Business Secrecy

Enterpreneurial Traits Risk Bearing Mental Ability

Effective Communication

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Q.

ExplaintheTypesofEntrepreneur.

Ans. AnEntrepreneurisapersonwhoperceivesaneedand thenbringstogethermanpower,materialandcapitalrequiredtomeetthatneed.Inother wordsanentrepreneurisanindividualorteamthatidentifiestheopportunity,gathersthe necessary organization. TypesofEntrepreneur: Typesofentrepreneurare: (A) ClassificationontheBasisofOwnership: (1) Founder Thoseindividualswhoarethefounderofthe business.Theyaretheoneswhoconceptualizeabusinessplanandthenputinefforts tomaketheplanasuccess. Example: DhirubhaiAmbanioftheRelianceGroup. (2) Second-generation They whohaveinheritedthebusinessfromtheirfathersandforefathers. Example LikeMukeshAmbaniandAnilAmbanisonsofDhirubhaiAmbaniofthe Reliance DhirubhaiAmbaniGroup. (3) FranchiseesItisamethodofdoingbusinesswhereintheparentownerlicenseshis trademarks exchangeforarecurringpayment. Example NIIThasgiven scrutinyandpropertraining. (4) Owner-Manager Whenapersonbuysabusinessfromthefounderandtheninvests histimeandresourcesinitheiscalledtheowner-manager. Example: LikeSabeerBhatiaisthefounderentrepreneurofHotmail. (B) Classification business: (1) The Thesetypesofentrepreneurshavepersonaldesirestoexcel.The onlydrivethatpushesthemisthedesiretoachievesomethinginlife,thedesireto makeamarkinsociety,thedesiretoprovetheirexcellence.Theydonotneedany externalstimulusbutareself-driven. (2) The These externalfactorstostartabusiness.Theexternalfactorscouldbelike:
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GovernmentPolicies Unemployment FamilySupport FacilitatingInstitutionalSupportetc.

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(3) The Thesekindsofentrepreneursarehighlycreativepeoplewho arealwaysinsearchofinnovativeideasforsettingupnewbusinessventures.They enjoytheFirstMovers'Advantageandareabletoskimhigherprofitsfromthemarket. (4) The Therealmanagersrunthebusinessinasystematicmanner. They opportunitiesandthreatsandthentakeactionsbasedontheaboveassessments. (5) The The achievementofnoteventheirgoalsbutalsoofpeopleassociatedwiththemselveslike employees,suppliersanddistributors. (C) ClassificationbasedonthetypeofBusiness: (1) Industrial Industrial manufacturing accordinglymanufacturesproductstosatisfytheseneedsandwants. (2) Trading activities potential purchaseaproduct. Trading

(3) CorporateEntrepreneur: Corporateentrepreneurisapersonwhodemonstrateshis innovative registeredundersomeactthatgivenitaseparatelegalentity. (4) Agricultural Agriculturalentrepreneursarethoseentrepreneurswho undertakebusinessrelatedtoagriculturalactivities.Likefarmequipments,fertilizers andotherinputsofagriculture. (D) ClassificationontheStagesofDevelopment: (1) First Afirst-generationentrepreneurisonewhostartsan industrialunitbymeansofaninnovativeskill.Heisessentiallyaninnovatorcombining differenttechnologiestoproduceamarketableproductorservice. (2) Modern Amodernentrepreneurisonewhoundertakesbusinessto satisfy whichsuitthecurrentsocio-culturaltrends. (3) Classical Aclassicalentrepreneurastereo-typeentrepreneurisone whoseaimistomaximizetheeconomicreturnsatalevelconsistentwiththesurvival ofthefirm,withorwithoutelementofgrowth. (E) Other: (1) Innovative Innovativeentrepreneursarefullofcreativeideasand offerinnovateproductstothesociety.Itisbecauseoftheseinnovativeentrepreneurs thatmanyimportantchangesoccurinoursociety.
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(2) Imitative Imitative Theyarerisk-aversiveandsotheydonottryoutnewideasorproducts. (3) Drone Droneentrepreneursarenotopentocreativityandchange. Theydonotlikechangingtheworkingoforganizationswiththechangingtimes. (4) Copreneurs: Whenbothhusbandandwifetogetherstartandrunabusinessventure thentheyarecalledcopreneurs. Q. Explainthequalitiesandfunctionsoftheentrepreneurs

Ans. AnEntrepreneurisapersonwhoperceivesaneedand thenbringstogethermanpower,materialandcapitalrequiredtomeetthatneed.Inother wordsanentrepreneurisanindividualorteamthatidentifiestheopportunity,gathersthe necessary organization. Qualities Anentrepreneurisapersonwhotakesriskofsettinguphis ownventureforperceivedreward.Heisapersonwhoinitiatestheidea,formulatestheplan, organizesresourcesandputstheplanintoactiontoachievehisgoals.Theentrepreneur musthavefollowingqualities:1. Planner Entrepreneurhasastrongdesiretoachieveahighergoalandmaketheir dreamscometrue.Sotheentrepreneurmusthavethesequalitytoachievethetarget anentrepreneurcannotachievethetarget. Technician Anentrepreneurmusthavethetechnicalknowledge.Heshouldknow thathowtousetheresourcesandachievethetarget. Risk Riskisveryimportantelement.Anentrepreneurmusthave capacitytobearingriskanentrepreneurcannotsuccess. Decision Decisionmakingistheprocessofchoosingbestalternativeamong various makingaffecttheprofitabilityandreputationoftheenterprise. Ability see difficultiesintoopportunities. Entrepreneurialpersonsarequickto

2. 3. 4.

5.

6.

MotivatorAnentrepreneur achievingthetarget.Withoutmotivationanentrepreneurcannotachievethetarget. Somotivationisverynecessaryforachievingthetarget. Future Entrepreneurshowsahighleveloffutureorientation.Theydonot allowthepasttoobsessthem.Theyareorientedtowardspresentandfuture. Interpersonal An activitiesheshouldbeapersonwholikesworkingwithpeopleandwhohasskillsof dealingwithpeople.


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7. 8.

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9. FacingUncertainty: Anentrepreneurisapersonwhofacesuncertainty.Thefutureis uncertain.Sothedecisionofentrepreneuraffectstheprofitabilityandreputationofthe enterprise.

10. Coordination Anentrepreneurmusthaveacoordinator.Heallocatestheresources and entrepreneurcannotachievethetarget. FunctionsofEntrepreneur: Anentrepreneurhastoperformthefollowingfunction: 1. Risk taking and Uncertainty Bearing: The future is unpredictable. entrepreneurhastotakerisksinthesecircumstances.Iftheventuresucceeds,the entrepreneurprofits;ifitdoenot,lossesoccur.Thus,takingrisksformsanimportant entrepreneurialfunction. Taking All entrepreneur.Hehastoformulateanactionplanregardingtheproductandqualityof theproducttobeproduced.Hehastoevolvethebestpossiblemethodofproduction whichwouldearnhimasizeableprofit. Managerial Theentrepreneurperformsvariousmanagerialfunctions. Theentrepreneurarrangesfinance,purchaserawmaterials,providesthenecessary infrastructureforproduction.Theentrepreneurhasamultifacedpersonalitywhenhe undertakesmanagerialfunctions. Innovation The introducesfar-reachingimprovementsinthequantityandqualityofproductionline. Heconsiderstheeconomicviabilityandtechnicalfeasibilityofaninvention. Coordination The Coordinationinvolvesselectionoftherighttypeoffactors,employmentofeachfactor intherightquantity,useofthebesttechnicaldevices,divisionoflabour,reductionof wasteetc. Maintain An customertoearnprofitandwintheirconfidenceinhisproduct.Hemustalsomaintain goodrelationswithhisemployees. AnalysistheEnvironment: Anentrepreneuranalysistheenvironment.Environment arethosefactorwhichaffectthebusiness.Therearetwotypeofenvironment: 8. InternalEnvironment: Internalenvironmentarecontrollable External business. Externalenvironmentarebeyondthecontrolofthe

2.

3.

4.

5.

6.

7.

Planning Planningisthefirstfunctionofthemanagement.Planningisdecidingin advancewhatistobedone,howistobedone,whichistobedone,bywhomistobe done.Itisverynecessaryfunctionofentrepreneur.Withoutplanninganentrepreneur cannotachievethetarget.


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9.

Utilizes resources.An objectives. successfulentrepreneur.

Anentrepreneurallocatestheresourcesandutilizesthe

Q.

ExplaintheRoleandImportanceofEntrepreneurinEconomicGrowth.

Ans. AnEntrepreneurisapersonwhoperceivesaneedand thenbringstogethermanpower,materialandcapitalrequiredtomeetthatneed.Inother wordsanentrepreneurisanindividualorteamthatidentifiestheopportunity,gathersthe necessary organization. Role Thepositionoftheentrepreneurinmodern productionislikethatofthedirectorofaplay.Moderneconomicdevelopmentisclosely linked production economicdevelopmenthasatleastthreeaspects: (1) Theentrepreneurco-ordinatestheotherfactorsofproduction.Thisinvolvesnotonly assemblingthefactors,butalsotoseethatthebestcombinationoffactorsismade availablefortheproductionprocess. Theentrepreneurtakesrisks.Thisistheimportantfunctionoftheentrepreneurand thequantumofprofithereceivesisdirectlyproportionatetotheriskshetakes.Risks aregenerallybasedontheanticipationofdemand. Finallytheentrepreneurinnovates.Innovationisdifferentfrominvention.Inventionis theworkofscientists.Innovationimpliesthecommercialapplicationofaninvention. As leader.Theentrepreneurcanundertakeanyonetypeofthefollowingfivecategoriesof innovation: (i) (ii) (iii) (iv) (v) Theintroductionofanewgoodoranewqualityofagood Theintroductionofanewmethodofproduction Theopeningofanewmarket Theconquestofanewsourceofsupplyofrawmaterials Thecarryingoutofaneworganizationofanyindustry.

(2)

(3)

Importance Everycountrytriestoachieve maximumeconomicdevelopment.Theeconomicdevelopmentofacountrytoalargeextent depends development-there economicdevelopmentare:


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(1) EmploymentGeneration: Growing unemployment particularly educated unemployment entrepreneur employment employmenttomanymore.Thusentrepreneurshipisthebestwaytofighttheevilof unemployment. (2) National National country withinthecountryaswellastomeetthedemandofexports.Thedomesticdemand increaseswitheverincreasingpopulationandstandardofliving.Theexportdemand also increasingnumberofentrepreneursarerequiredtomeetthisincreasingdemandfor goodsandservices.Thusentrepreneurshipincreasesthenationalincome. (3) Dispersal When entrepreneurstheenterpriseduetolackofcompetitiongrowintoafewbigbusiness houses. serioussocialandnationalimplication.Whenthenumberofentrepreneursincreases, alargeamountofnationalwealthisalsosharedbyalargenumberofentrepreneurs, thus makestheeconomyhealthy. (4) Balance Thegrowthofindustryandbusinessleadstoa largenumberofpublicbenefitslikeroad,transport,health,education,entertainment etc. development. increasing enterpriseinthesmallertownsawayfrombigcities.Thishelpsinthedevelopmentof thebackwardregions. (5) Economic Entrepreneurshipisessentialfornationalself-reliance. Businessmanexportgoodsandservicesonalargescaleandearnthescarceforeign exchange ensuretheeconomicindependenceofthecountry. (6) Reducing Manyproblemsassociated with engagedinproductivework.Inthechangingenvironmentwherewearefacedwiththe problemofrecessioninwageemploymentopportunities,alternativetowagecareeris the entrepreneurial paththroughentrepreneurshipcouldhelpthecountryindefusingsocialtensionand unrestamongstyouth.
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(7) Improvement Entrepreneurssetupindustrieswhichremove scarcityofessentialcommoditiesandintroducenewproducts.Productionofgoodson massscaleandmanufacturehandicraftsetc.inthesmallscalesectorhelptoimprove thestandardoflifeofacommonman.Theseoffergoodsatlowercostsandincrease varietyinconsumption. (8) Harnessing India consideredtobeveryrichinnaturalresources.Afewlargescaleindustriesstartedby entrepreneursfromoutsidethestateineconomicallybackwardareasmayhelpas models backward activities.Increasedactivitiesoflocalentrepreneurswillalsoresultinmakinguseof abundantlyavailablelocalresources. (9) Innovations Businessenterprisesneedtobeinnovativefortheir survival aimedatacceleratingthepaceofsmallfirms'growthinIndia.Increasednumberof smallfirmsisexpectedto competeininternationalmarket.

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ENTREPRENEURIAL ENTREPRENEUR
MBA MBA1st

UNIT
Q. ExplaintheTheoriesofAnEntrepreneurship. Ans. Entrepreneurshipreferstoaprocessofactionan entrepreneurundertakestoestablishhisenterprise.Itisacreativeandinnovativeresponse totheenvironment.Inotherwordsentrepreneurshipcanbedefinedasanabilitytodiscover, createorinventopportunitiesandexploitthemtothebenefitofthesociety,whichinturn bringsprosperitytotheinnovatorandhisorganization. Theory follows: Main

(1) Entrepreneurship AFunctionofInnovation:JosephA.Schumpeter(1934),forthe firsttime,putthehumanagentatthecentreoftheprocessofeconomicdevelopment and development. change. events: (i) Firstly,itcanbetheoutcomeoftheintroductionofanewproductinthemarket. (ii) Secondly,itcanbetheresultofanewproductiontechnology. (iii) Thirdly,itmayariseonaccountofanewmarket. (iv) Fourthly,itmaybetheconsequencesofanewsourceofsupply. (v) Fifthly,itmaybeduetotheneworganizationofanyindustry. AccordingtoSchumpeter (i) Development promoted initiatestheabovechangesasanentrepreneur. (ii) Heistheagentwhoprovideseconomicleadershipthatchangestheinitialconditions oftheeconomyandcausesdiscontinuousdynamicchanges. (iii) Bynature,heisneithertechnician,norafinancier,butheisconsideredaninnovator. (iv) Entrepreneurship cannotformulateasocialclasslikecapitalists. (v) Psychological,entrepreneursarenotsolelymotivatedbyprofit.
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(2) Entrepreneurship AnOrganisationBuildingFunction:FredrickHarbisonstatesthat the development. organization.Harbisonspotsthecruxoftheentrepreneurshipinhisabilitytomultiply himselfbyeffectivelydelegatingresponsibilitiestoothers.Themainfeaturesare: (i) Unlike 'organisationbuilder'whomustbeabletoharnessthenewideasofdifferent innovatorstotherestoftheorganization. (ii) Such combinationsofresourcesbuttheymaysimplybegoodleadersandexcellent administrators. (iii) Harbison'sdefinitionofentrepreneurshiplaysmorestressonthemanagerial skillsandcreativitysofarasorganisationisconcerned. (3) Entrepreneurship AFunctionofManagerialSkillandLeadership:Hoselitzstates that personalitytraits.Inadditiontobeingmotivatedbytheexpectationsofprofithemust alsohavesomemanagerialabilitiesandmoreimportanthemusthaveabilitytolead. Hoselitz entrepreneurship.Accordingtohimmanagerialskillsandleadershiparetheimportant facts analysisofeconomicdevelopmentofunder-developedcountries: Themerchantmoneylendertype Themanagerialtype Theentrepreneurtype. (4) Entrepreneurship A business Moreover,entrepreneurialroleappearstocallfordecisionmakingunderuncertainty. McClellandidentifiedtwocharacteristicsofentrepreneurshipfirstly"doingthingsina newandbetterway"andsecondly"decisionmakingunderuncertainty".Personswith highachievementwouldtakemoderaterisks.Theywouldnotbehavetraditionally(no risk). requiresomeimagination,mentalmanipulationornewwaysofputtingthingstogether, andsuchpeopledobetteratnonroutinetaskthatrequiresomedegreeofinitiativeor even rewardascomparedtopeoplewithlowachievement.Peoplewithlowachievement arepreparedtoworkharderformoneyorsuchotherexternalincentives.Forpeople withhighachievement,profitisameasureofsuccessandcompetency. (5) Entrepreneurship A Kunkelstatesthattheindustrialentrepreneurshipdependsuponfourstructureswhich arefoundwithinasocietyorcommunity.
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(i) Limitation particular society. DemandStructure:Thelimitationstructureisbasicallysocialandculturalbutthe demandstructureismainlyeconomic.Thedemandstructureisnotstatic,and changeswitheconomicprogressandgovernmentpolicies.Demandstructure canbeimprovedbyprovidingmaterialrewards. OpportunitiesStructure:Thisstructureisnecessarytoincreasetheprobability ofentrepreneurialactivity.Theopportunitystructureconstitutestheavailability of productionmethods,laboursandmarkets.Alltheactivitiesassociatedwiththe effectiveplanningandsuccessfuloperationofindustrialenterprises. LaboursStructure:Kunkelarguesthatthelabourssupplycannotbeviewedon par laboursmeans'men'andisafunctionofseveralvariables.Thesupplyoffactory laboursisgovernedbyavailablealternativemeansoflivelihood,traditionalism andexpectationsoflife.

(ii)

(iii)

(iv)

(6) Entrepreneurship 'Input identifiedgapfillingasanimportantcharacteristicofentrepreneurship.Ineconomic theorytheproductionfunctionisconsideredtobewelldefinedandcompletelyknown. But Whereandtowhominthefirmthisknowledgeissupposedtobeavailableisnever stated.Itistheentrepreneurialfunctiontomakeupthedeficienciesortofillthegaps. Thesegapsarisebecausealltheinputsintheproductionfunctioncannotbemarketed becausesomeinputslikemotivation,leadershipetc.arevagueintheirnatureand whoseoutputisunderminate.This"gap-filling"activitygivesrisetoamostimportant entrepreneurialfunctionnamely"Input-Completing".Hehastomarshalalltheinputs torealizefinalproducts. (7) Entrepreneurship: AFunctionofGroupLevelPattern:FrankW.Youngwasreluctant toaccepttheentrepreneurialcharacteristicsattheindividuallevel.Accordingtohim, insteadofindividual,onemustfindclusterswhichmayqualifyitselfasentrepreneurial groups,asthegroupswithhigherdifferentiationhavethecapacitytoreact.Hedefined 'reactiveness'or'solidarity'asthedegreetowhichthemembersofthegroupcreate, maintain definedasthediversity,asopposedtocoherence,ofthesocialmeaningsmaintained by diversity, whichgivesrisetoaunifieddefinitionofthesituation. Q. What are the objectivesand Phases of Entrepreneurial Development Programme.
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Ans. Entrepreneurial developmentprogrammemeansaprogrammedesignedtohelpapersoninstrengthinghis entrepreneurial entrepreneurialroleeffectively.Itisverynecessarytopromotehisunderstandingtomotives, motivation whichseekstodothiscanqualifytobecalledasEDP. In entrepreneurial make innovations, backward problem. ObjectivesorNeedofEDPs: (1) ToformulateProject (2) ToselectProject/Product (3) ToanalysistheEnvironment (4) ToacquirethebasicManagerialSkills (5) Tounderstandtheprocessandprocedureofsettingupofenterprise (6) Enabletocommunicateclearlyandeffectively (7) Developabroadvisionaboutthebusiness (8) Enabletotakedecisions. Phases programmeconsistsofthreebroadphases: (A) InitialorPre-TrainingPhase: Thisphaseincludestheactivitiesandthepreparations requiredtolaunchthetrainingprogramme.Themainactivitiesare: (i) CreationofInfrastructurefortraining (ii) Preparationoftrainingsyllabus (iii) Tieupofguestfaculty (iv) Arrangementforinaugurationoftheprogramme (v) Designingtoolsandtechniquesforselectingthetrainees (vi) Formationofselectioncommittee (vii) Publicitycampaignfortheprogramme (viii) (ix) Pre-potentialsurveyofenvironmentalopportunities. Thus,pre-trainingstageinvolvestheidentificationandselectionofpotentialentrepreneurs andprovidinginitialmotivationtothem.
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Selectionofpotentialentrepreneurshastwoessentialcomponents: 1. Identifying Everyparticipantmusthaveaminimumlevelof eligibility personalandhumanre-sourcescharacteristics: (a) Socio-PersonalCharacteristics : The most common socio-personal characteristicsare: (i) Caste Caste entrepreneurial environment and occupational awareness for the entrepreneurs. (ii) Age Studies entrepreneur. (iii) EducationAminimumlevelofeducationisessentialtoperformfunctionslike meetingofficialsetc. (iv) SizeandTypeofFamily: Thesizeofthefamilyandtheentrepreneur'sstatusin thefamilyareimportant. (v) Working Asmallentrepreneurhasgenerallytodependuponfamily membersashecannotaffordtohireworkers. (b) HumanResourceFactors: Theseare: (i) AchievementMotivation: Itistheurgetoimproveone-selfinrelationtoagoal. (ii) RiskTakingWillingness: Itreferstoseekingchallengeinone'sactivity. (iii) Influence Ithasbeendefinedasthedesireforinfluencingother peopleandsurroundingenvironment. (iv) Personal Ithasbeendefinedasthegeneralsenseofadequacyina person. 2. Identification Once personalandhumanresourcescharacteristicsisidentified,itisnecessarytoidentifys suitable potentialentrepreneur.Allthebackgroundinformationlikehisskills,experienceinthe field,etc.shouldtakenintoconsideration.Therawmaterialsavailability,themarketing avenuesandprofitabilityoftheenterprisehavetobeexplored.

(B) Training During implementedtodevelopmotivationandskillsamongtheparticipants.Theobjectiveof thisphaseistobringdesirablechangesinthebehavioursofthetrainees.Thetrainers havetojudgehowmuch,andhowfarthetraineeshavemovedintheirentrepreneurial pursuit's.Atrainershouldseethefollowingchangesinthebehaviourofparticipants: (i) Isheattitudinallytunedverystronglytowardshisproposedprojectideas? (ii) Ishemotivatedtoplungeforentrepreneurialventureandriskthatisexpectedof anentrepreneur?
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(iii) (iv) (v) (vi)

Isthereanychangeinhisentrepreneurialoutlook,roleandskill? Howshouldhebehavelikeanentrepreneur? Whatkindofentrepreneurialbehavioursdoesthetraineelack? Does entrepreneurialknowledge?

(vii) Isheskillfulinchoosingtherightproject,mobilizingtherightresourcesatthe righttime? ContentofTrainingProgramme: Themaintraininginputsareasfollows: (i) Technical Oncetheentrepreneurselectsaparticularenterprise the economicaspectsofthetechnologyincludingcostsandbenefits.

(ii) Achievement In development developtheneedtoachieve,risktaking,initiativeandothersuchbehavioural traits.Amotivationaldevelopmentprogrammecreatesselfawarenessandself confidence realistically. (iii) Market The conductmarketsurveysfortheirchosenproject. (iv) Managerial Onceaparticipantisabletostarttheenterpriseherequires managerialskills. enterprise management. enterpriseinitstotalityandtodevelopoverallmanagerialunderstanding. (v) ProjectPreparation: Alotoftimeneedstobedevotedtotheactualpreparation ofproject.Theiractiveinvolvementinthistaskwouldprovidethemnecessary understandingandalsoensuretheirpersonalcommitment.

(C) Post Thisphaseinvolvesassessmenttojudgehow fartheobjectivesoftheprogrammehavebeenachieved.Monitoringandfollowup revealsdrawbacksintheearlierphasesandsuggestsguidelinesforframingthefuture policy.Inthisphaseinfrastructuralsupport,counselingandassistanceinestablishing new commonactivitiesinthemonitoringandfollowupprocessareasfollows: (1) (2) (3) (4) Preparingandmaintainingaseparatefileforeachtrainee. Ahistorycardindicatingthebio-dateofeachentrepreneurandtheworkdonebyhim. Keepingintouchwitheveryentrepreneurthroughletters. Passingthedesiredinformationtotheentrepreneurwillintime.
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(5) (6) Q. Ans. Indiaareasfollows: (1) Entrepreneurial Development Instituteof India : The entrepreneurship development industrialdevelopmentbankofIndia,IndustrialcreditandInvestmentCorporationof India,IndustrialFinance enjoysacutesupportofgovernmentofGujarat.Theinstitutehasbeenoperatingfor the developmentprogrammestoservethefollowingdevelopmentobjectives: (i) (ii) (iii) (iv) (v) (2) Acceleratedindustrialdevelopment. Industrialdevelopmentofruralandless-developedareas. Improvingperformanceofsmallindustries. Diversifyingsourcesofentrepreneurship. Enlargingthesmallandsmallmediumenterprisesector. Visitingeveryentrepreneurperiodically. Follow entrepreneurialdevelopmentprogramme. ExplaintheEntrepreneurialDevelopmentProgrammeinIndia. SomeofthemajorinstitutionsforEDPsin

National (NIESBUD) The DevelopmentisanapexbodyestablishedbytheministryofIndustry,governmentof IndiaforCoordinatingandoverseeingtheactivitiesofvariousinstitutions/agencies engagedinentrepreneurialdevelopmentinsmallindustryandsmallbusiness.The mainobjectiveoftheinstituteareexplainedasfollows: (i) (ii) (iii) (iv) Toprovidevitalinformationsupporttotrainers,promotersandentrepreneurs. To identify train and assist potential entrepreneurs entrepreneur/selfemploymentventuresinsmallindustries. for setting up

Tohelpandaffiliateinstitution/Organizationincarryingouttrainingandother entrepreneurshipdevelopmentrelatedactivitieswithgreatersuccess. Toevolvestandardizedmaterialsandprocessesofselection,trainingsupportto potentialentrepreneur.

(3) Xavier Xavier Ranchihasbeentrainingruralentrepreneurssince1974.XavierInstituteprovidesthe training requiredfinance.Itoffersasixmonthsprogrammetotribalwithminimumliteracyand numeracyskills.Theprogrammeconsistsof:


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(i) (ii) (iii) (iv) (v) (vi)

Identificationandselectionofcandidates. MotivationTraining. ManagerialTraining. Placementandtrainingforpracticalskills. Marketsurveyandpreparationofprojectreport. Financialassistance.

(vii) FollowupandCounseling. (4) Madhya Thisisatechnicalmanagement consultancyOrganization.Itwaspromotedbyall-Indiafinancialinstitutionsandstate Corporations.Itundertakesassignmentsforprojectplanning,detailedengineering, market surveys, management surveys and entrepreneurship development programmes.Theprogrammeconsistsofthefollowingstages: (i) (ii) (iii) (iv) (v) Identificationofindustrialopportunitiesinthetargetarea. Advertisingandpromotingtheprogrammestoattractapplicants. Selectionoftheparticipants. Training,usinglecturesandpracticalinstructionintheidentifiedproject. Followupwithindustrialdevelopmentandfinancialinstitutions.

(5) Calcutta ThisCentrewasorganizedasregistered societybyanumberofprominentindustrialists,businessman,bankers,professionals andsocialworkers.Itwassetupinresponsetorapidlyincreasingunemploymentand socialunrestinCalcuttaduringtheearly1970s.Itbeganasavocationalprogrammeto provide self employment for educated youths. It has developed innovative approaches explainedasfollows: (i) (ii) (iii) (iv) (6) Traininginproducingenterprise. Assistanceindrawingupabusinessplan. Assistanceinsecuringbankloans. Arranginginitialbusinesscontactsfortheirserviceandproduction.

Technical Accesstohighqualityconsultancy services institutions entrepreneurs.Theseorganizationsprovideacomprehensivepackageofservices. WriteashortnoteonTargetGroup.

Q.

Ans. ofthepersonsforwhomtheprogrammesisdesignandundertaken.Everytargetgrouphas itsownneedsandconstraints.Therefore,theprogrammesdesignedforonegroupmightbe


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inappropriateforothersgroups.Beforetheprogrammesisdesignedandstartedthetarget grouptobetrainedmustbeclearlydefined.Anexecutivedevelopmentprogrammesmaybe organizedforanyoneofthefollowingtargetgroups:1. Technical Thisgroupconsistsofthosepersonswho have holdersinscience,engineeringandtechnologyareinimportantgroupinIndia.The training settinguptheirownmanufacturingunits.Theindustriesselectedforthispurposemay bedirectlyrelatedwiththeirqualificationsandexperience. Ex- Serviceman Persons constitute acquiredmanyusefulskillsandexperienceduringtheirserviceperiod.Theytendto behighlydisciplined,hardworking,engineeringandinnovative.Thereforetheycan becomesuccessfulentrepreneursafterproperentrepreneurialtraining. Business Some independent havecertaininnovativeideaswhichtheyarenotabletotryintheirexistingfirmsdueto lack economicandsocialstatus.Afterentrepreneurialtrainingseniorbusinessexecutives canbecomesuccessfulentrepreneurs. Women Women foodprocessingindustrieslikespices,agarbati,papadetc.SeveralGovernmentsand non-governmentsorganizationsorganizingentrepreneurialtrainingprogrammesfor women. S.Cand GovernmentofIndiaiscommittedtobeupliftmentof scheduledcastes(S.C)andScheduledTribes(S.T).Thereforespecifiedpercentage ofjobshasbeenreservedforthesecastes.Butallpersonsfromthesegroupscannot be entrepreneursinprovidingfinanceandothernecessaryfacilities. Special ThegovernmentofIndiahasbeenestablished specialized launchedtotrain,developandassistentrepreneurs. ExplaintheGovernmentPolicytowardsSmall-ScaleIndustries(SSI's).

2.

3.

4.

5.

6.

Q. Ans.

Thegovernment 'Policy Village


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enterprisepolicywastoimpartmorevitalityandgrowthimpetustothesectortoenableitto contributeitsmitefullytotheeconomy,particularlyintermsofgrowthofoutput,employment andexports.Thesectorhadbeensubstantiallylicensedandconcertedeffortsweremadeto regulate potentialontheonehandandreposinggreaterfaithinsmallandnewenterprisesonthe other. Thesalientfeaturesofthepricepolicywere: 1. 2. 3. 4. 5. 6. IncreasingintheinvestmentlimitinplantandmachineryoftinyenterprisesfromRs.2 LakhstoRs.5Lakhs,irrespectiveofthelocationoftheenterprise. Inclusion locationassmall-scaleindustries. Tointroducealimitedpartnershipact.Thiswouldlimitthefinancialliabilityofthenew enterprisestothecapitalinvested. Introduction industries. Introductionoffactoringservicestohelpsolvetheproblemsofdelayedpaymentsof small-scalesector. Market sector consortiumapproach. To organization. To materials. Setting organization. TowidenthescopeoftheNationalEquityFund(NEF)toenlargethesinglewindow schemeandalsotoassociatecommercialbankswithprovisionofcompositeloans. Thenewpolicywasfoundedonaproperunderstandingofthefundamentalproblems ofthesmall-scalesectorandthemeasuresproposedbyithaveintegratedthevarious handicapsthatfacethissector.

7. 8. 9. 10.

TaxationBenefits:BoonfortheGrowthofSSI (1) Need Small-scaleindustriesarecharacterizedbytheirlimitedand scarceresources/capital.Thesemakethemsensitive.Infact,smallbusinessinsucha sensitivefieldwhereMurphy'sLaw(ifanythingcangowrong,itwill)seemstooperate withoutfail.Thefirstthousanddaysseemstobeascriticalinsmallbusinessasin administration.Theformerneedssupportandthelatterindoctrinationforsurvival.In thebeginning,smallindustrieshavetoincurmoreexpenses,butthereturnsareeither


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nil rehabilitation supportandassistancetotideoverthecrucialinitialstagestoenablethemtosurvive. Hence,thegovernmentneedstocomeforwardwithvariousbenefitstooffertosmallscaleindustriesinthecountry.Onewaytosupportthedevelopmentofsmall-scale industriesbythegovernmentistoprovidethemtaxbenefits.Thegovernmenteither exempts industriesaccumulatecapital,ontheonehand,andploughbackprofitsinbusiness, on enumeratedanddiscussedonebyone. (2) Tax Under undertakings, income-tax employed. commencementofproduction.Asmall-scaleindustryhastosatisfythefollowingtwo conditionstoavailofthistaxexemptionfacility; (i) Theunitshould existingunit. (ii) Theunitshouldemploytenormoreworkersinamanufacturingprocesswith power,oratleasttwentyworkerswithoutpower. (3) Depreciation: Undersection32oftheIncomeTaxAct,1961,asmall-scaleindustryis entitledtoadeductionondepreciationonblockofassetsattheprescribedrate.Inthe caseofthesmall-scaleindustry,deductionfromtheactualcostofplantandmachinery isallowedsubjecttoamaximumofrupees20Lakhs.Theamountofdepreciationis calculatedbythediminishingbalancemethod.Incaseofanassetacquiredbeforethe accountingperiod,depreciationiscalculatedonitswrittendownvalue.Forplantand machinery allowance satisfy the conditions before it eligible deduction depreciation: (i) Theassetmustbeownedbytheassessee. (ii) Theassetmustactuallybeusedforthepurposeoftheassessee'sbusinessof profession. (iii) Depreciation building,machinery,plantandfurniture. (iv) All requiredundersection34(1)oftheIncome-TaxAct,1961. (4) Rehabilitation A industriesundersection33-BoftheIncome-TaxAct,1961.Theallowanceisgiveto thosesmallbusinessesthathadtosufferonaccountofthefollowingreasons:
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(i) (ii) (iii)

Flood,Cyclone,earthquakeorothernaturalupheavals. RiotorcivildisturbanceAccidentfireorexplosion Actionbyanenemyoractiontakenincombatinganenemy.

Therehabilitationallowanceshouldbeusedforthebusinesspurposeswithinthree years of allowance allowabletotheunit. (5) InvestmentAllowance: Theinvestmentallowancewasintroducedwaybackin1976 to section31AoftheIncome-taxAct,1961,isallowedattherateof25%ofthecostof acquisitionofnewplantormachineryinstalled.Althoughtheinvestmentallowance hasbeenmadeavailableforthearticleorthingsexceptcertainitemsoflowpriority, yet,asperthe11thscheduletotheIncomeTaxAct1961,aspecialdispensationhas been In comparison investmentallowance. Asmall-scaleindustrycanavailofinvestmentallowanceprovidedithasputtouse machineryorplanteitherintheyearofinstallationorintheimmediatefollowingyear, fallingwhichthebenefitwillbeforfeited. (6) Expenditure Underthesection35oftheIncomeTaxAct 1961, allowed: (i) Anyrevenueexpenditureincurredonscientificresearchrelatedtothebusiness oftheassesseeinthepreviousyear. (ii) Anysumthatitpaystoascientificresearchassociationorauniversity,college, institutionsortoapubliccompanywhichhasasitsobject,theundertakingof scientificresearch. (iii) Anycapitalexpenditureincurredonscientificresearchrelatedtothebusinessof theassesseesubjecttotheprovisionofsection35(2)oftheIncomeTaxAct, 1961. (7) Greater Itiseasytostartsmallenterprises but competitioninbusinessbroughtaboutbyliberalization,globalizationandprivatization oftheIndianeconomy.Thesmallbusinessesgenerallyloseoutonthisplatform.Only those complex competencies, competitivestrengthamongsmallenterprisestomeetcompetitioneffectively?The answertothisquestionis'quality'.
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In manner: (i) (ii) (iii) (iv) (v) (vi) (viii) Aqualitycertificationschemewaslaunchedin1994toimprovethequalitystandards ofSSIproductswhichare supporttoacquiredISO9000orsimilarinternationalqualitystandards. Q. WriteanoteonEntrepreneurialInput. entrepreneurial inputs influencing the Byincreasingefficiencyinprocesses. Byprovidingmoretimeforinnovationandcreativity. Boostingthemoraleofemployees Improvingthequalityofproductsandservices Enhancingcustomersatisfaction Snatchinghighermarketshare

(vii) Generatinghigherproductivity

Ans. Input : Various entrepreneurshipareasfollows:

(A) Economic Economicenvironmentexercisesthemostdirectandimmediate influence entrepreneurshiparethefollowing: (1) Capital Capitalisoneofthemostimportantperquisitestoestablishanenterprise. Availabilityofcapitalfacilitatesfortheentrepreneurtobringtogetherthelandofone, machine goods.Capitalistherefore,regardedaslubricanttotheprocessofproduction.Our accumulatedexperiencesuggeststhatwithanincreaseincapitalinvestment,capitaloutputratioalsotendstoincrease.Thisresultsinincreaseinprofitwhichultimately goes to capital formation. suggests that as capital supply increases, entrepreneurshipalsoincreases. (2) Labour Thequalityratherquantityoflabourisanotherfactorwhichinfluencesthe emergence nations encouraged advantages immobility. mobility.Entrepreneurs,thereforeoftenfinddifficultytosecuresufficientlabour. (3) Raw The establishing any industrial activity and its influence in the emergence of
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entrepreneurship. established technologicalinnovationcancompensateforrawmaterialinadequacies. (4) Market The determinantofprobablerewardsfromentrepreneurialfunction.Franklyspeaking,if theproofofpuddingliesineating,theproofofallfunctionliesinconsumption,i.e. marketing.The their moreinfluentialforentrepreneurshipthanacompetitivemarket. (5) Infrastructure Expansion communicationandtransportationfacilities.Itnotonlyhelpstoenlargethemarket,but expendthehorizonsofbusinesstoo.Takeforinstance,theestablishmentofpostand telegraphsystemandconstructionofroadsandhighwayinIndia. (B) Social Socialfactorscangoalongwayinencouragingentrepreneurship.In fact successinEurope.Themaincomponentsofsocialenvironmentareasfollows: (1) Caste Therearecertainculturalpracticesandvaluesineverysocietywhich influence hundredofyears.Forexample,considerthecastesystem(thevarnasystem)among the divisions: TheBrahmana(Priest) TheKshatriya(Warrior) TheVaishya(Trade) TheShudra(Artisan) Ithasalsodefinedlimitstothesocialmobilityofindividuals.By'socialmobility'we meanthefreedomtomovefromonecastetoanother.Thecastesystemdoesnot permitanindividualwhoisbornaShudratomovetoahighercaste. (2) Family Thisfactoincludessizeoffamily,typeoffamilyandeconomic statusoffamily.InastudybyHadimani,ithasbeenrevealedthatZamindarfamily helpedtogainaccesstopoliticalpowerandexhibithigherlevelofentrepreneurship. Backgroud of a family in manufacturing provided a source of industrial entrepreneurship.Occupationalandsocialstatusofthefamilyinfluencedmobility. (3) Education Educationenablesonetounderstandtheoutsideworldandequipshim withthebasicknowledgeandskillstodealwithday-to-dayproblems.Inanysociety, thesystemofeducationhasasignificantroletoplayininculcatingentrepreneurial values.
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(4) AttitudeoftheSociety: Arelatedaspecttotheseistheattitudeofthesocietytowards entrepreneurship.Certainsocietiesencourageinnovationsandnovelties,andthus approveentrepreneurs'actionsandrewardslikeprofits.Certainothersdonottolerate changes Similarly,somesocietieshaveaninherentdislikeforanymoney-makingactivity. (5) Cultural Motives proper status.Ambitiousandtalentedmenwouldtakerisksandinnovateifthesemotivesare strong.Thestrengthofthesemotivesdependsuponthecultureofthesociety.Ifthe cultureiseconomicallyormonetarilyoriented,entrepreneurshipwouldbeapplauded andpraised,wealthaccumulationasawayoflifewouldbeappreciated. (C) Psychological Manyentrepreneurialtheoristshavepropoundedtheoriesof entrepreneurshipthatconcentrateespeciallyuponpsychologicalfactors.Theseare asfollows: (1) NeedAchievement Themostimportantpsychologicaltheoriesofentrepreneurship wereputforwardintheearly1960sbyDavidMcClelland.AccordingtoMcClelland 'need entrepreneurs,especiallywhenreinforcedbyculturalfactors.Hefoundthatcertain kindsofpeople,especiallythosewhobecameentrepreneurs,hadthischaracteristic. Moreover,somesocietiestendtoreproducealargerpercentageofpeoplewithhigh 'need factors. Differences among societies and individuals accounted for 'need achievement'beinggreaterinsomesocietiesandlessincertainothers. (2) Withdrawal Thereareseveralotherresearcherswhohavetried to Everett Hagensays,atsomepointmanysocialgroupsexperiencearadicallossofstatus. Hagen entrepreneurship. withdrawal: (a) (b) (c) (d) Thegroupmaybedisplacedbyforce; Itmayhaveitsvaluedsymbolsdenigrated; Itmaydriftintoasituationofstatusinconsistency;and Itmaynotbeacceptedtheexpectedstatusonmigrationinanewsociety.

Hefurtherpostulatesthatwithdrawalofstatusrespectwouldgiverisetofourpossible reactionsandcreatefourdifferencepersonalitytypes: (a) RetreatistHewhocontinuestoworkinasocietybutremainsdifferenttohis workandposition;


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(b) Ritualist He acceptedandapprovedinhissocietybutnohopesofimprovinghisposition; (c) ReformistHeisapersonwhofomentsarebellionandattemptstoestablisha newsociety;and

(d) Innovator: Heisacreativeindividualandislikelytobeanentrepreneur. (3) Motives Other goals seekpower,prestige,securityandservicetosociety.Stepanekpointsparticularlyto non-monetary regardofthesociety. Onthesamesubject,Evansdistinguishesmotivebythreekindsofentrepreneurs. (a) (b) (c) Managingentrepreneurswhosechiefmotiveissecurity. Innovatingentrepreneurs,whoareinterestedonlyinexcitement. Controlling authority.

(4) Others ThomasBegleyandDavidP.Boydstudiedindetailsthepsychologicalroots of entrepreneurship in the mid 1980s. They came to the conclusion that entrepreneurialattitudesbasedonpsychologicalconsiderationhavefivedimensions: (i) (ii) Firstcame'need-achievements'asdescribedbyMcClelland. TheseconddimensionisthatBegleyandBoydcall'locusofcontrol'Thismeans thattheentrepreneurfollowstheideasthathecancontrolhisownlifeandisnot influencedbyfactorslikeluck,fateandsoon. Thethirddimensionisthewillingnesstotakerisks. Toleranceisthenextdimensionofthisstudy. Finally,hereiswhatpsychologistscall'TypeA'behavior.Thisisnothingbut"a chronic,incessantstruggletoachievemoreandmoreionlessandlessoftime" Entrepreneursarecharacterizingbythepresenceof'TypeA'behaviorinalltheir endeavors.

(iii) (iv) (v)

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MBA1st

UNIT
Q. Explainthatkeytoentrepreneurialbehaviourisentreprenurialmotivation. Ans. Psychologycanbedistinguishedfromotherbehavioral thebehavioroftheindividualperson.Behavior,inturnisinfluencedbythewayinwhichthe externalworldisrepresentedinthemind,andbytheindividual'sexerciseofchoice.following arethepointswhichexplainsthathowentrepreneurialmotivationinfluencesentrepreneurial behavior. 1. NEEDFORACHIEVEMENT

David in 1960.Accordingtothistheoryanindividualsneedforachievementreferstotheneedfor personalaccomplishment.Itisthedrivetoexcel,tostriveforsuccessandtoachievein relationtoasetofstandards.Peoplewithhighachievementmotiveliketotakecalculated riskandwanttowin.Theyliketotakepersonalresponsibilityforsolvingproblemsandwant toknowhowwelltheyaredoing.Highachieversare strive something achievement McCellandfoundthathighachieversdiffertiatethemselvesfromothersbytheirdesiretodo thingsbetter.Theyseeksituationswheretheycanattainpersonalresponsibilityforfinding solutionstoproblems,wheretheycanreceiverapidfeedbackontheirperformancesothey can succeedingbychance.Theypreferthechallengeofworkingataproblemandacceptingthe personalresponsibilityforsuccessorfailure,ratherthanleavingtheoutcometochanceor theactionsofothers. Thefollowingpsychologicalfactorscontributeentrepreneurialmotivation:1. 2. 3. 4. Needforachievementthroughselfstudy,goalsettingandinterpersonalsupport Keeninterestinsituationsinvolvingmoderaterisk. Desirefortakingpersonalresponsibility. Concretemeasuresoftaskperformance.
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5. 6. 7. 2.

Anticipationoffuturepossibilities. Energeticornovelinstrumentalactivity. Organisationalskill LOCUSOFCONTROL

Closelyrelatedtotheconceptofahighneedforachievementisthebeliefinaninternal locus environmentthoughtheiractions,wouldalsobeexpectedtobereluctanttoassumethe risksthatstartingabusinessentails Rotter(1966,ascitedinChell,HaworthandBrearley,1991)developedthenotionof control science,thepresentationofastimulusfollowingaresponsethatincreasesthefrequencyof subsequentresponses,whetherpositivetodesirableevents,or learningtheoryofpersonality.Rotterbelievedthattheneedforachievementisrelatedtothe belief individuals colleagues,1991).Incontrast,peoplewithanexternallocusofcontrolsensethatfate,inthe formofchanceeventsoutsidetheircontrol,orpowerfulpeople,hasadominatinginfluence over internalbeliefswouldmorelikelystriveforachievementthanwouldindividualswithexternal beliefs. 3. RISKTAKING

Risk particular, important preferenceand(2)personalityconstructsofcreativity,riskandflexibility. ResearcherssuchasPalmer(1971,ascitedinKentandSexton,1982)andLikes (1974,ascitedinShabbirandGregorio,1996)speculatethatinbecominganentrepreneur, anindividual well individuals propensity. 4. VALUES

Any restrictionofinheritancetoalimitedclassofdescendantsforatleastseveralgenerations. Theobjectofentailistopreservelargeestatesinlandfromthedisintegrationthatiscaused by an systems. individualorasocialgroup;"thePuritanethic";"apersonwithold-fashionedvalues"ethic, moralprinciple,value-system


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OneofthemajorstudiesofpersonalvaluesofentrepreneurswasdonebyHornaday and entrepreneursscoredsignificantlyhigherthanthegeneralpopulation achievement, Thus entrepreneursfromthegeneralpopulation. 5. PROBLEMSOLVINGSTYLEANDINNOVATIVENESS

Gartner behavior, problemsolvingcapabilitiesareexpectedtobethecoreoftheentrepreneurialcapabilityof anentrepreneur.Butthelevelofinnovationisdependentupontheentrepreneur'sformal educationandmanagerialexperience.Theirstudyof184firmsintheMidwestshoweda correlationbetweenahigherlevelofmanagerialexperienceandmoreyearsofeducation withahigherlevelofinnovation Q. Discuss success.

Ans. DavidMcCellandhasdevelopedanAchievementMotivationTheory intheearly1960.Accordingtothistheoryanindividualsneedforachievementreferstothe need achieveinrelationtoasetofstandards.Peoplewithhighachievementmotiveliketotake calculatedriskandwanttowin.Theyliketotakepersonalresponsibilityforsolvingproblems andwanttoknowhowwelltheyaredoing. High not achievementratherthantherewardsofsuccess.Theywanttodosomethingbetterand moremoreefficientlythanithasdonebefore.Thisdriveistheachievementneed(n-ach). From achieversdiffertiatethemselvesfromothersbytheirdesiretodothingsbetter.Theyseek situationswheretheycanattainpersonalresponsibilityforfindingsolutionstoproblems, wheretheycanreceiverapidfeedbackontheirperformancesotheycansetmoderately challenginggoals. Highachieversarenotgamblers,theydislikesucceedingbychance.Theypreferthe challengeofworkingataproblemandacceptingthepersonalresponsibilityforsuccessor failure,ratherthanleavingtheoutcometochanceortheactionsofothers. Thefollowingpsychologicalfactorscontributeentrepreneurialmotivation: 1. Needforachievementthroughselfstudy,goalsettingandinterpersonalsupport 2. Keeninterestinsituationsinvolvingmoderaterisk. 3. Desirefortakingpersonalresponsibility.
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4. 5. 6. 7.

Concretemeasuresoftaskperformance. Anticipationoffuturepossibilities. Energeticornovelinstrumentalactivity. Organisationalskill

The entrepreneursoverthelastthreedecadOes.Mostnotably,Brockhaus(1982,ascitedin Sexton scientifictheoryreferstoitsabilitytogeneratetestablepredictions.Theorieswithstrong predictive falsification of empiricalresearchdidnotdirectlyconnectneedforachievementwiththedecisiontoown andmanageabusiness. OthercriticismsofMcClelland'sachievementmotivationtheoryonentrepreneurslook attheattempttorelateeconomicdevelopmenttotheprevalenceofachievementimagery (Chell,Haworthand some certainnegativestigma There highermotivetoachievecomparedtonon-entrepreneurs.Begley(1995)andHornadayand Aboud characteristicandismoreprevalentamongentrepreneurswhencomparedtoothers. Q. Explaintheconceptofentrepreneurialsuccessinruralareaindetail.

Ans. development capital infrastructureandextensionserviceswasclearlybeneficialinattractingbasiccommercial activitiesandincreasingthequalityoflifeinruralareas,itdidnotnecessarilyprovidealong termgrowingeconomicbase.Manyruralareaswerenotbeneficiariesofsuchschemes, sincemanyprojectsweretooexpensivetoimplementinallruralareas. Thenewapproach below'. It stressed the importance of community development based on local entrepreneurial developmentofruralareaswhichwouldofferadequateemploymentopportunitiesanda qualityoflifecomparabletourbanareas.Thisapproachassumesthatthedevelopmentof ruralareasisbasedonstimulatinglocalentrepreneurialtalentandsubsequentgrowthof indigenouscompanies.Specifically,toaccelerateeconomicdevelopmentinaruralarea,it isnecessarytoincreasethesupplyofentrepreneursthatistobuildupthecriticalmassof first
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venturecreationandwhowillbytheirexamplestimulateanautonomousentrepreneurial processtherebyensuringcontinuousruraldevelopment.Tosupportsuchdevelopment,the communitymustdeveloplinksamongkeyinstitutions,avibrantentrepreneurialspiritanda commitmentanddedicationtorisktakingandrisksharing.followingaretherequirementsof entrepreneurialsuccessinruralarea: Public-privateinstitutionspartnership One developmentofasocio-economicenvironmentthatwouldbeattractivetopeople. Tomeetthischallenge,allavailableandhiddendevelopmentpotentialofthelocal community entrepreneurshipwhichacommunitybasicallycancreateintwoways.First,thecommunity should development of economically depressed areas. These incentives usually include favourableinvestmentconditions,lowinterestrates,taxconcessions,guarantees,export subsidies,employmentprovisions,subsidiesonpublicutilitychargesandthelike. Second,thecommunityshouldcreateandfosterthedevelopmentofinstitutionsanda varietyofpartnershipstosupportlocaldevelopment.Asexperienceshows,personaland organizational economicdevelopment. Today fostering businesses and community collaborative efforts-while nurturing positive government/academic/business relationships in promoting economic growth. Such institutions and their collaborative efforts should play a significant role in rural communities/regions entrepreneurshipinthecentreofeconomicdevelopment.Amongthemostimportantare: institutionsofeducationandtraining;inter-firminstitutionsandfinancialinstitutions. InstitutionsofEducation Theroleofinstitutionsofeducationinruraldevelopmentisofcrucialimportance.They helptocreateacapablelabourforceandtomaintainaskilledworkforceinthecommunity.In ruralareastheycanactasagentsofchange,suchas: redesigningcurriculatoteachstudentshighlevelskillsandthoseskillsthatwouldhelp toup-gradebusinesses; developingtechnicaltrainingprogrammestoprovidepeoplewithbasicskillsforjobs requiredbylocalbusinesses; developingandimplementingprogrammestoimprovethecompetitivenessoflocal firmsandtheirabilitytoexpandintonewmarkets;and developinglinkswithotherhighereducationalinstitutions,especiallywithuniversities outsidetheruralregioninordertobringintotheregiontechnicalexpertiseavailable
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outside region,to community. Inter-firmInstitutions Efforts promote differentinter-firminstitutions.Amongdifferentinter-firminstitutions,businessincubators, industrials businesssupportcentresareoneofthemostsuccessfulonespromotingthegrowthofnew andexistingenterprises.Theseinstitutionscansignificantlycontributetoruraldevelopment becauseofthefollowing: BusinessIncubators Business enterprises(Smilor,R.W.,1987).Theyhelpentrepreneursbyprovidingthemwithservices whichsupportandcomplimenttheirowntalentsandabilities. Their expertiseandfacilitieswhichareavailabletoentrepreneursbeloworatmarketrates.The entrepreneursreceivenotonlyhelpregardingthemanagementoftheirenterprisesbutalso other conferences, networking.Theycreateagoodbusinessclimateinsidetheincubatorandensureaconstant inflowofmoralandfinancialsupport.Assuch,theythusseektogiveformandsubstance, structureandcredibilitytoemergingventures. Thebusinessincubatorpresentsaratheruniqueapproachtoeconomicdevelopment. Uniqueinthesensethatitisanindependententerprisewhosebusinessistheprocessof 'incubating' failureratesamongnewfirms.Manynewfirmsfail,notbecausetheyarenotinnovative enoughbutbecauseintheirearlystagetheyhavedifficultyincompeting.Therefore,the basicconceptoftheincubatoristonurtureentrepreneurialactivitiessoastoprovidestartups successfullyintothecompetitivebusinessenvironment. Thebusinessincubatorindustrywasoneofthefastestgrowingindustriesinthelate eighties developmentoftheincubatornetwork,especiallyinthoseregionswhichhadexperienced economic practicallyallincubatorsintheU.S.A.werepubliclysupportedbycommunitiesorstatesand publicfundscoveredpracticallyallinvestmentandstart-upcosts.
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Incubatorsinaruralareacanbedesignedforanumberofpurposesto: Encourageskilledandprofessionalpeoplewhohaveleftthecommunitytocomeback totheregiontostartnewcompanies; Attracttothearea,laid-offskilledlabourfromnearbytown; Promotespecifictypesofbusinesses; Nurtureapoolofpotentialgrowthenterprisesthroughequityinvestments; Meetparticularlocalemploymentneeds; Help develop flexible manufacturing networks of co-operatives and other manufacturingbusinesses; Developandproduceaparticularproductthatnoneofthefirmscouldmanufacture alone; Fostergreateraccesstocapitalforstart-upfirms; Intensifytrainingprogrammestobuildthevocationalskillsofitsmembers; Providejobopportunitiesforhigh-techgraduates;and Develop outside marketsandexpand. Business assistancefromthefederal,stateandlocalgovernmentsandprivatesectorcontributions. IndustrialParks Asanunemployment-reducingeffortand/orforrevitilizingthecommunityeconomic base, propertyatthemarketpriceandconvertingittoindustrialpurposesinordertoaccelerate entrepreneurial attractiveness common timetomeetuserneedsinaflexiblewayandbythefinalpricewhichshouldbemuchlower thanthepriceofequivalentbuildingsinother,especiallyurban,areas. Networkingamongfirmsintheindustrialparkisacommonoutcome.Thefirmsinthe industrialparkbenefitinseveralwaysthroughnetworking.Thebenefitscouldbegrouped intothoseresultingfromreducingtheproblemsofisolationintheprocessofstarting-up, thoseresultingfromeconomiesofscaleasoverheadfunctionsamongfirmsinthenetwork aresharedandthoseduetotheaggregationofproductionofsmallfirmswiththesameor compatibleproductionandduetolargescalepurchasesofequipmentandrawmaterial. InstitutionsFacilitatingNetworking These facilitatenetworkingbetweensmallfirmslocatedinthesameregion2.Theyusuallyperform thefollowingtasks:
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Promote competitiveefficiency; Provide development;and Providecommonservicesofdailymattersinproductionandadministrationinorderto reducetransactioncosts.

Networking purchases, shiftsfromproducttoproductandmarkettomarketandleadstoimportanteconomiesof scaleasoverheadfunctionsareshared(Hatch,1989,p.6). BusinessSupportCentres Businesssupportcentrescanbeestablishedtomeettheneedsofstart-ups,emerging orestablishedbusinesses.Theyprovidedifferenttypesofservicesaccordingtotheneeds ofthethreedifferentclients(SmallBusinessAdministration,p.19): Assistancetostart-ups:businessplanningandfinance. Assistancetoemergingandestablishedbusinesses:managementskillsintheareas offinance,sales,marketingandadministration. Assistance enterprisesoutsidethecommunity;attractingspin-offsfromfastgrowingfirmsorfirms whoarerationalising,productionbyspinningoffauxiliaryproductionunits;identifying franchisingopportunitiestothepotentiallocalentrepreneurs. Business institutionsorfornon-profitprivateorganizations.Theycanalsobeestablishedatthe communitycollegesorattheuniversitytohelpsmallbusinessownerslearnnecessary businessskillsatlowcost. FinancialInstitutions Communitiesshouldsupportthedevelopmentofastrongventurecapitalbaseand riskcapitalnetworksspecialisinginfundingnewentrepreneurialactivities.Seedfinancing could attentionmustbegiventothecreationofinstitutionsthatprovideseedfinancingandstartupstargetedventurecapitalandareengagedinequityfinancing.Ifitwouldbedifficultfor such encourageexistinginstitutionstolinknewstart-upsorpotentialentrepreneurswithsuch institutions financialschemesexistinginthecountryforthedevelopmentofnewenterprisesandforthe growthofexistingones.Potentialentrepreneursmusthaveaccesstoinformationsuchas: whicharethestatefinancialagencies,banksthatprovideguarantees,issuetaxfreebonds,
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directloanstosmallerenterprisesortoConsortiaofenterprises?Whattypeandhowmany economicdevelopmentfundsareavailable?Whoprovidesfavourableinvestmentfinancing fortheequipmentandworkingcapital?Whichdevelopmentcorporationsfinancenewand expanding enterprisedevelopment,etc.'? Public-PrivatePartnership The increaseiftheindividualeffortsofthoseinstitutionsarecombinedintoaco-ordinatedaction. Therefore, different develop human inability infrastructure, economicopportunities,etc. Thekeytotheevolutionofeconomicdevelopmentbasedonapartnershipapproachis theleadershipthatcouldcomeeitherfromthelocalgovernmentorfromalreadyexisting successful civicorganizations,educationalinstitutionsandthelike.Whatiscrucialisthedevelopment ofpersonalandorganizationalnetworkswhichcombineotherwiseindividualeffortsintoa comprehensiveapproachtoregionaldevelopmentofruralareas.Therefore,itisimportant to responsible identificationofanarea'smajorproblems(lackofjobopportunities,substandardhousing, deteriorated brokering communitygoals.Itshouldsupportthecreationofnewagenciesifongoingimplementation ofadevelopmentstrategysorequires.Personnelshouldalsoincluderepresentativesofthe majorenterprisesintheregion,universitiesandresearchanddevelopmentinstitutions.It should region. Conclusions Economicdevelopmentingeneralrequiresmorethanjustapropermacroeconomic environment. development,practicalmechanismsforrisktakingandrisksharingintheearlyandmost uncertain growingnewandexistingbusinesses.Ittakescross-institutionalnetworking.Theroleof publicpolicyisthereforetocontinuallyfindwaystoimplementcriticalsuccessfactorsof economicdevelopment.Economicdevelopmentofruralareascannotbeanexceptionin thisrespect.
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Q.

Howanentrepreneurialsystemcanbeestablished?

Ans. Anentrepreneurperceivesanopportunitiesformarketingaproductorservices.Then heestablishesabusinessunitonthebasisofhis/herperception.Finallyhemanageshis enterpriseexpanding,growingordiversifyingoveraperiodoftime.Inordertoestablishan entrepreneurialsystemanentrepreneurneedstotakethefollowingsteps:1. Search Thefirststepofentrepreneurialsystemissearchfor businessideas.Theideamayoriginatefromvarioussourcese.g.successstoryofa friend studyofprojectprofilesandindustrialpotentialsurveys,meetingswithgovernment agenciesetc.Theideamayrelatetothestartingofanewbusinessortotakeoverofan existing exploited. SourcesofIdeas: Abusinessideamaybediscoveredfromthefollowingsources:(i) Observing Careful idea.Marketsurveyscanalsorevealthedemandandsupplypositionforvarious products.Itisnecessarytoestimatefuturedemandandtotakeintoaccount anticipatedchangesinfashions,incomelevels,technologyetc.competitionand pricetrendscanalsobefoundthroughmarketsurveys.Fromthedatacollected throughmarketobservation,onecanidentifytheproductsindustrieswhichare indemandandwhichrequireincreaseinsupply.Apromotercanthenfindoutthe mostprofitablelineofbusiness. (ii) Prospective Consumers habits/tastes prospectiveconsumerscanalsorevealthefeaturesthatshouldbebuiltintoa product/service.Thesedaysgoodbusinessfirmsgenerallyconductasurvey among prospective consumers before choosing the product to be manufactured. (iii) Development People generallyfollowthefashiontrendsofdevelopedcountriesforexamplevideo, washingmachines,microovensetc.whicharenowthe#Inthings$inIndiawere being discover advancednations. Study Various periodicprofilesofvariousprojectsandindustries.Theseprofilesdescribeindetailthe technical,financialandmarketrequirementandprevailingpositionacarefulscrutiny ofsuchprojectprofilesisveryhelpfulinchoosingthelineofbusiness. (i) Government Severalgovernmentorganizationsnow-a-days assist entrepreneurs in discovering and evaluating business ideas. Development
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2.

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technical advice business.Governmentalsoidentifiestheprioritysectorsforinvestmentthrough fiveyearplans,industrialpolicyresolutionguidelinesforindustry. (ii) Trade Nationalandinternationaltradefairsareavery goodsourceofbusinessideas.Avisittothesefairsprovidesinformationabout new assessingthemarkettrendsintermsofdemandpotentialandtypeofproducts required.Italsoassessingtheattitudeofthecompetitorsinaparticularproduct ormarketingarea. 4. Process Oncebusinessideasarediscovered,screeningandtestingof theseideasisdone.Thefollowingconsiderationsaresignificantlyintheevaluation andtestingofbusinessideas. Technical Itreferstothepossibilityofproducingtheproduct.Technical feasibility machineryandequipment,labourskillsandsawmaterials.Theadviceandassistance of businessideas. Commercial Acostbenefitanalysisisrequiredtoascertaintheprofitability iftheideas.Anelaboratestudyofmarketconditionsandprevailingsituationismadeto assesstheviabilityandprospectusoftheproposedprojects.Anumberofcalculations havetomadeaboutthelikelydemand,expectedsalesvolume,sellingprice,costof production,breakevenpointetc. Afterpreliminaryevaluationof analysisfromallangles.Fullinvestigationiscarriedoutinthetechnicalfeasibilityand economicviabilityoftheproposedproject.Financialandmanagerialfeasibilityofthe ideaaretested.Atthisstagealotofinformationisrequired.Consultationswithexperts invariousareasoftheindustrymaybenecessarytocarryoutthedetailedanalysis. Aftertheevaluationofabusinessideaiscompleted,thefindingarepresentedinthe formofareportknownas#feasibilityreport$orprojectreport.Thisreporthelpsinthe final governmentalagencies. 7. Idea :Thefeasibilityreportisanalyzedtofinallychoosethemostpromising idea. productorservice:(i) Productswhoseimportsarebannedorrestrictedbythegovernment. (ii) Productswhichcanbeexportedexceedseasilyandprofitability. (iii) Products demand.
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5.

6.

(iv) (v) (vi) (vii)

Productswhichshowedhighprofitability. Productsforwhichincentivesandsubsidiesareavailable. Productsfavouredbythecountry!sindustrial/licensingpolicy. Productsbasedontheexpansionordiversificationplansofexistingfirmsofthe family/friends/relatives.

After pros indicatesthetypeofdiversedatathatneedstobecollectedforeachproject.Italso throwslightonhoweachitemcanholdoutsomeencouragingandsomediscouraging factors.Theentrepreneurialselectionneedstotakeallthesefactorsintoaccount. 8. InputRequirement: Oncethepromoterisconvincedofthefeasibilityandprofitability oftheprojectheassemblesthenecessaryresourcestolaunchtheenterprise.Hehas tochoosepartners/collaborates,collecttherequiredfinancesandacquirelandand buildings, Decisionshavetobemadeaboutthesize,location,layoutetc.oftheenterprise.The form launchinganenterpriseareasfollows:(i) Information In information success.Anentrepreneurrequiresrelevantdataonthefollowingaspects: Sizeandnatureofdemandfortheproduct/service. Volumeandsourceofsupply. Pricecostvolumerelationship. Sourcesofrawmaterial. Natureanddegreeofcompetition. (ii) Numberandtypeofpersonnelrequiredandtheirsources. (iii) Amountandsourcesoffundsrequiredfortheenterprise. PersonnelPeoplearethemostvaluableassetofanenterpriseandthisassetdoes notdepreciate.Anentrepreneurhastomakethefollowingdecisionsconcerningthe personnel. Numberofpersonnelrequiredformanagement,technicalandotherpositionsin theenterprise. Qualifications effectively. Sourcesofrecruitmentformwhichtheneededstaffwillbeprocured. Procedureandmethodsofselectingthebestcandidates. Systemandcriteriaforevaluatingtheperformanceofemployees. Procedureandmethodsofselectingthebestcandidates.
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9.

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10 Policiesandmethodsforremuneratingthepersonnel. Facilitiestobeprovidedbythesafety,health,welfareofthestaff.

Establish Thisisthelaststepofentrepreneurialsystem.Itisvery importantstep.Inthisphasetheentrepreneurintegratetheirresourcesandestablish theenterprise. Writeashortnoteoninnovationrelatedtoentrepreneur

Q.

Ans. behavior,sinceitissuccessfullytakinganideaorinventiontomarket. Innovation entrepreneurial werecharacterized bysensation-thinkingproblemsolvingstyles.Suchindividualswere showntobeshort-termorienteddealingwithimmediateproblems.Entrepreneursarefaced withanumberofchallengesastheytrytoimplementnewideas"Iinnovationisoneofthe central activity usuallywhentraditionalsystemsandwaysofdoingbusinessarenolongeraffective.Those whosurvivethechangeswillbethebusinessesthatactentrepreneurially Entereneursarenotuniformlyinnovative.Thelevelofinnovationisdependentupon theentrepreneur'sformaleducationandmanagerialexperience.Theirstudyof184firmsin the moreyearsofeducationwithahigherlevelofinnovation. FeaturesofInnovation Innovationsaretheharbingersofchange. Innovations experiments. Innovationscanbebothrevolutionaryaswellasanextensiontotheexistingproducts. InnovationsprovideaUSPtoabusiness. Innovationsareactionorientedi.eactiveandsearchingnewideas. Innovations help in making the product, service or process simple and understandable. innovationshelpinmakingtheproduct,serviceorprocesscustomerbased. Innovationisallabouttrying,testingandrevising. Thusinnovationreferstoaprocessofcreationofaproductthatcansolveexisting problemsortapopportunities. SourcesofInnovation: Presentandpotentialcustomer Existingcompanies
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Q.

Rawmaterialprovider Distributorsandretailers Researchanddevelopment Existingemployees Howentrepreneurialsupportsystemcanbeestablished.?

Ans. It and to entrepreneurs. between,say,aSmallBusinessCenter Center entrepreneurs assistanceandisreferredto"someotheroffice,"hertypicalresponseisintensefrustration. Theseproblemsemergebecausemostserviceprovidersfocus-correctly-onmarket niches. cooperative moregeneralsupporttonewentrepreneurs.Whilethereareefficienciesthatarisefromthis specialized entrepreneur. programprovidesit. These challenges of fragmentation are not new to economic development professionals.Thetraditionalsolutionhasbeentocreatea"one-stopshop,"whereawhole hostofservicesforsmallbusinesscanbeaccessedinoneplace.Theseone-stopshopscan existinphysicalspaceCreatingaone-stopshopshouldbeviewedasafirststep,nottheend of significantknowledgefromtheaspiringentrepreneurorbusinessowner.Canthebusiness owner showsthatmanyentrepreneurscannotleapthishurdle.Inmanycases,theyfacedifficulties simply business financialoroperationalchallenges.Amoresophisticateddiagnosisoftheissuesisneeded. Then,aqualitymenuofsupportoptionscanbedeveloped. FromOne-StopShoptonoWrongDoor Thistypeofsophisticatedbusinessdiagnosissystemdoesnotreallyexisttodayfor most venture programsfortraining,financing,andthelike.Inpractice,thismeansthatbusinessowners oftenreceivetheservicesthatareavailableinsteadoftheservicesthatareneeded.For example,apotentialhigh-growthbusinessmaybereferredtoaloanprogrameventhoughit reallyneedssomeformofequityfinancing.
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Areformedsystemsapproachisneeded.Attheoutset,thesystemshouldofferan entry-levelpackageofservicesthatentrepreneursreceivenomatterwheretheyenterthe system.Thesystemwouldbedefinedbytheconceptof"nowrongdoor."Everypartofa region's entrepreneur'sskillsandneedsandidentificationofthebestplacefortheentrepreneurto receive understandinghowbesttoaccesssupportservicesfromtheentrepreneurtothesystem itself.Uponcompletionofthisinitialdiagnosis,morespecializedservicescanbedelivered. Inadditiontoimprovingservicesfortheentrepreneur,thissystemalsooffersbenefits to market.Theycantrulyspecializeinservingcertaintypesofentrepreneurs,andfeelassured thatotherprovidersareeffectivelyservingothermarketsegments.Theirproductivityand efficiency niche.Serviceproviderscannowfocuson"quality"insteadof"quantity"ofservices. Whatdoesanentrepreneursupportsystemlooklike? Manyregionsclaimthattheyhaveasmallbusinesssupportsysteminplace,but,in mostcases,these"systems"aresimplyaloosefederationofnon-profitsandothersupport providers.Atruesystemlinksallrelevantserviceproviders,operatesaccordingtocommon procedures,andoffersacustomizedandcomprehensivesetofpublicandprivateservices forlocalentrepreneurs.Severalcharacteristicsareessential: Commonintakeprocedures:Alllocalserviceprovidersaretrainedtoperformabrief intake entrepreneurcallsaserviceprovider,sheisnotgivenanimmediatereferral.Instead,her basicinformationisobtainedandenteredintothesystem.Atthatpoint,shewillbereferred to opportunities,shewillbereferredtoalocalexpertinthatprocess. Clearreferralsystems:Referralsarethecornerstoneofthesystem.Theprocessmust becleartobothentrepreneursandserviceproviders.Thisrequiresthatserviceproviders explicitly entrepreneurs; example, institutional understandthesystemandeachorganization'srolewithinit. Clear guidelines for entrepreneurs: noted above, the system must be understandable diagnosticprocessandwhytheyhavebeenreferredtoacertainserviceprovider.Finally, thetypeandlevelofsupporttobeprovidedmustbeclearlyunderstood.
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Regularcollaboration:Thesystemwillworkifthepartnerseffectivelycollaboratewith oneanother.Theymustmeetonaregularbasis,andregularlyreviewhowthesystemis servinglocalbusinesses.Inaddition,serviceprovidersmustcreateasingle"brand"forthe systemsothatentrepreneursaresupportedbythe"system"andnotbyasingleservice provider.." ProgramOfferings Everyregionmustdevelopitsownsetofprogramofferingstargetedtotheneedsof local entrepreneurdevelopmentsystems: Entrepreneurshipeducation-includingtheintroductionofentrepreneurshipconcepts inK-12andmoreadvancedadulteducationandtrainingincommunitycolleges,colleges anduniversities. Access sourcesofcapitaltomatchthefinancingneedsofentrepreneursat variousstagesofdevelopment,fromseedcapitaltoloanstoequity. Access opportunitiesforentrepreneurstoconnectwithpeersandmentors andtoformstrategicalliancestobenefittheirbusinesses. Entrepreneurial Culture - a culture that recognizes, embraces and celebrates entrepreneurs,creatingaplacewhereentrepreneurschoosetolive,workandplay. TheBenefits Creating localbusinessownersandaspiringentrepreneurs.Itcanalsostimulateatransformationfor economicdevelopers.Bypromotingrealcollaboration,itimprovesproductivityandprogram effectivenesswhilealsogeneratingimprovedoutcomesintermsofjobs,newbusinesses andoverallqualityoflife.

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MBA1st

UNIT
Q. ExplainthevariousstepsofsettinganenterpriseDiscuss. Ans. Anentrepreneurperceivesanopportunitiesformarketingaproductor services.Thenheestablishesabusinessunitonthebasisofhis/herperception.Finallyhe manageshisenterpriseexpanding,growingordiversifyingoveraperiodoftime.Inorderto establishanentrepreneurialsystemanentrepreneurneedstotakethefollowingsteps:1. SEARCHFORBUSINESSIDEAS:

Thefirststepofentrepreneurialsystemissearchforbusinessideas.Theideamay originatefromvarioussourcese.g.successstoryofafriendorrelative,demandforcertain products,visitstotradefairsandexhibitions,studyofprojectprofilesandindustrialpotential surveys,meetingswithgovernmentagenciesetc.Theideamayrelatetothestartingofa new workable,sothatitmaybeexploited. 2. (i) SOURCESOFIDEAS: Abusinessideamaybediscoveredfromthefollowingsources: ObservingMarkets:

Carefulobservationofmarketscanrevealabusinessidea.Marketsurveyscanalso reveal future technologyetc.competitionandpricetrendscanalsobefoundthroughmarketsurveys. From industrieswhichareindemandandwhichrequireincreaseinsupply.Apromotercanthen findoutthemostprofitablelineofbusiness. (ii) ProspectiveConsumers: Consumersknowsbestwhathewantsandthehabits/tasteswhicharegoingtobe popularinnearfuture.Contactswithprospectiveconsumerscanalsorevealthefeatures that conduct manufactured.
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(iii) DevelopmentinotherNations: People countriesforexamplevideo,washingmachines,microovensetc.whicharenowthe"In things"inIndiawerebeingusedintheunitedstatesandEurope.Therefore,anentrepreneur can nations. 3. STUDYOFPROJECTSPROFILES: Variousgovernmentandprivateagenciespublishperiodicprofilesofvariousprojectsand industries.Theseprofilesdescribeindetailthetechnical,financialandmarketrequirement andprevailingpositionacarefulscrutinyofsuchprojectprofilesisveryhelpfulinchoosing thelineofbusiness. (i) GovernmentOrganizations: Several evaluating corporations, advice Government industrialpolicyresolutionguidelinesforindustry. (ii) TradeFairsandExhibition: Nationalandinternationaltradefairsareaverygoodsourceofbusinessideas.Avisitto thesefairsprovidesinformationaboutnewproducts/machines.Tradefairsandexhibitions provideopportunitiesforassessingthemarkettrendsintermsofdemandpotentialandtype ofproductsrequired.Italsoassessingtheattitudeofthecompetitorsinaparticularproduct ormarketingarea. 4. PROCESSTHEIDEAS: Once followingconsiderationsaresignificantlyintheevaluationandtestingofbusinessideas. 5. TECHNICALFEASIBILITY: Itreferstothepossibilityofproducingtheproduct.Technicalfeasibilityofanideaisjudgedin termsofavailabilityofnecessarytechnology,machineryandequipment,labourskillsand sawmaterials.Theadviceandassistanceoftechnicalexpertsmaybenecessarytojudge thetechnicalfeasibilityofvariousbusinessideas. 6. COMMERCIALVIABILITY: Acostbenefitanalysisisrequiredtoascertaintheprofitabilityiftheideas.Anelaboratestudy ofmarketconditionsandprevailingsituationismadetoassesstheviabilityandprospectus oftheproposedprojects.Anumberofcalculationshavetomadeaboutthelikelydemand, expectedsalesvolume,sellingprice,costofproduction,breakevenpointetc.
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After the analysis economicviabilityoftheproposedproject.Financialandmanagerialfeasibilityoftheidea aretested.Atthisstagealotofinformationisrequired.Consultationswithexpertsinvarious areasoftheindustrymaybenecessarytocarryoutthedetailedanalysis. Aftertheevaluationofabusinessideaiscompleted,thefindingarepresentedintheformof areportknownas"feasibilityreport"orprojectreport.Thisreporthelpsinthefinalselection ofproject.Itisalsousefulforprocuringlicenses,financeetcfromgovernmentalagencies. 7. IDEASELECTION:

Thefeasibilityreportisanalyzedtofinallychoosethemostpromisingidea.Generallythe followingconsiderationsinfluencetheselectionofideaforaproductorservice:(i) Productswhoseimportsarebannedorrestrictedbythegovernment. (ii) Productswhichcanbeexportedexceedseasilyandprofitability. (iii) Productswhosedemandexceedstheirsupplysothatthereexistsreadydemand. (iv) Productswhichshowedhighprofitability. (v) Productsforwhichincentivesandsubsidiesareavailable. (vi) Productsfavouredbythecountry'sindustrial/licensingpolicy. (vii) Products family/friends/relatives. Afterconsideringthevariousfactorsaentrepreneurshouldanalysisandcompareprosand cons.Aselectionmatrixmaybepreparedforthispurpose.Thematrixindicatesthetypeof diversedatathatneedstobecollectedforeachproject.Italsothrowslightonhoweachitem can selectionneedstotakeallthesefactorsintoaccount. 8. INPUTREQUIREMENT: Oncethepromoterisconvincedofthefeasibilityandprofitabilityoftheprojectheassembles thenecessaryresourcestolaunchtheenterprise.Hehastochoosepartners/collaborates, collecttherequiredfinancesandacquirelandandbuildings,plantandmachinery,furniture andfixtures,patents,employeesetc.Decisionshavetobemadeaboutthesize,location, layoutetc.oftheenterprise.Theformofownershiporganizationhastobeselected.The maininputsrequiredforlaunchinganenterpriseareasfollows:(i) InformationandIntelligence: Intheturbulentbusinessenvironment,informationandintelligencehavebecomethekey inputinentrepreneurialsuccess.Anentrepreneurrequiresrelevantdataonthefollowing aspects: Sizeandnatureofdemandfortheproduct/service. Volumeandsourceofsupply. Pricecostvolumerelationship.
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9.

Sourcesofrawmaterial. Natureanddegreeofcompetition. Numberandtypeofpersonnelrequiredandtheirsources. Amountandsourcesoffundsrequiredfortheenterprise. PERSONNEL:

Peoplearethemostvaluableassetofanenterpriseandthisassetdoesnotdepreciate.An entrepreneurhastomakethefollowingdecisionsconcerningthepersonnel. Number enterprise. Qualificationsandexperiencerequiredinthepersonneltoperformthejobseffectively. Sourcesofrecruitmentformwhichtheneededstaffwillbeprocured. Procedureandmethodsofselectingthebestcandidates. Systemandcriteriaforevaluatingtheperformanceofemployees. Procedureandmethodsofselectingthebestcandidates. Policiesandmethodsforremuneratingthepersonnel. Facilitiestobeprovidedbythesafety,health,welfareofthestaff. 10. ESTABLISHTHEENTERPRISE: Thisisthelaststepofentrepreneurialsystem.Itisveryimportantstep.Inthisphasethe entrepreneurintegratetheirresourcesandestablishtheenterprise. Q. ExplaintheSourcesandfunctionofthefinance.

Ans. Afterformulating&evaluatingtheproject,thenextstepistodrawouta financial aspects-: Determinatinofthetotalamountofcapitalrequiredfortapinguptheproject. Decidingaboutthecompositionofcapitalorfinancingmix. The capitalstructurewithrightquantumofcapitalwhichwillminimizethecostoffundsobtained from analysis appropriatecapitalstructurewithadequateamountofcapital. SourcesofLongTerm&ShortTerm (a) LongTermSources:1. Equity Theequirtysharesarethemainsourceoffinance,&itiscontributed bytheownersofthecompanies.Equitycapitalprovidesthestrengthtothefinancial structureofthecompany.Inthecaseofanewcompanytheprmotersmustcontribute toequitysharesfirstthenthebalanceofsharesisissuedtothepublic.Limitedliability
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&votingrightsarethetwoimportantfeaturesthatconforspecialprivilagedonequity shareholderstorestricttheirliabilitiesandatthesametimekeepfullcontroloverthe company.Howeverthecostofequitywillbeveryhighfortheirexpectationswillbehigh as capital&thereisnoliabilityforrepayment.Nofixedobligationastodividendorinterest iscreated. 2. Preference Preferencesharesconforonprefrenceshareholderstworights viz.toreceivethepreferencedividend&getbackcapitalonpriortybasis.Investors, wholiketoearnalmitedbutsteadyreturnontheircapital,preferprefrenceshares investment.Acompanycanissuedifferenttypesofprefrencesharesasredeemable preferenceshares,cumulativepreferenceshares,participatingpreferenceetc.These kindsconforspecialrightsonpreferenceshareholdersasregardstherepaymentof capital,paymentofdividendsandpaymentofsurplusatthetimeofliquidation. DebenturesDebenturesareverycommnlyusedcreditorshipsecurities.Different typesofdebenturesareissuedtomobilisethedebtcapitalfromthepublic.Theyare securedandcarryfixedpercetageofinterest.Registeredbdebentures,redeemable debentures, debentures debenturesarelessrisky&contributearegularincome.Debentureswithfixedrateof interest equity.Theshareholderscanretaincontrolandearnmoreincomeontheirinvestment. Thecostofdebtsisveryklowbecausetheinterestondebenturesisatax-deductible expense. Term Termsloansarepresentlythemostimportantsourceoffinance.Loans obtainedfrombanksandfinancialinstitutionsaregenerallysecuredloans.Theycarry a repayable aquasitionoffixedassets&workngcapitalmargin.Termloansprovidethebenefitof tradingonequity.Theownerretaincontroloftheenterprise.Theseloanscanberapid whenevernotrequired.Asaresultthefinancial arecomparativelylesscostlysourceoffinance. Retained Reserves earnings. expansion.Fromtheownershipaswellascostofcapitalpointofview,itisasasource, similartoequitysharecapital.Howeveritshouldbenotedthatoveraperiodoftime, theretainedearningsgetdevelopedintoworkingcapital.Thecostofretainedearning earningisverycheapcomparedtocostofequity.Itisthebesttotakeupriskybutvery proftableprojects. Deferred Sometimes facilityunderwhichpaymentforthemachinerymaybemadeoveraperiodoftime.
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3.

4.

5.

6.

Theinterestrate&periodofpaymentveryratherwidely.Normallythesupplieroffering deferredcreditfacilityaskforbankguaranteefromthebuyer. 7. Capitaal Centralgovt.providescapitalsubsidyto industriessetupinnotifidbvackwardarea.Manystategovt.orstatedevelopment agenciesalsoprovidedevelopmentloans/salestaxoans&statecapitalsubsidies. They states. Unsecured Unsecured promoters institution&equitycapitalsubscribedbythepromoters.Theycarryalowerrateof interest&cannotbetakenbackwithoutthepriorpermissionoffinancialinstitutions. Account Theyarecreatedwhenthefirpurchaserawmaterial,supplies goodsforresaleoncredittermsonopenaccount.Theyareinterestfree&securities free.Accountspayableisalegallybindingobligationofafirm.Theyalsoincludesbills payable. Accurals Theyareshorttermliabilitiesthatarisewhensecuritiesarereceivedbut payment payable,expensespayableetc. Commercial Theseconsistof days.Commercialpaperisusuallyissuedinhigherdenomination&canbeusedonly by insurancecompanies&otherinstitutionsalsopurchasecommercialpaper.Thisisa veryrecentlyemergedsourceinIndia. Cash Acustomermaypayforallorportionoffuture purchasebeforereceivingthegoods.Thsformofunsecuredfinancingprovidesfunds topurchaserawmaterial&producethefinalproducts. Bank Bankcreditisthemajorsourceoffinanceforworkingcapital.Banks offerbothsecuredaswellasunsecuredloanstobusinessfirmssuchascashcredit, overdraft,loans&advances&purchase&discountingofbills.Theyprovide100% finance.Theyinsistthatthecustomersshouldbringaportionoffinancefromother sources. PrivateLoans:A shareholder,amojorsupplier,orotherpartyinterestedinassistingthefirmthrougha shorttermdifficulty. Short LIC,GIC&UTIprovideshortterm loans unsecuredloans&givenforaperiodofoneyear.Therateofinterestisaround18%p.a.
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8.

(B) SourcesofShortTermFinance: 1.

2.

3.

4.

5.

6.

7.

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8. Lease Leasefinancinghasemergedasoneoftheimportantsourcesof industrialfinanceinrecenttimes.Leasecontractisacontractbetweenleaser&leasee wherebyt5ehformeracquirestheequipments/goods/plantsasrequired&specified bytheleasee&passesonthegoodstotheleaseeforuseforaspecificpace.The leaseeinconsiderationpromisestopaythelessoraspecifidsuminaspecifiedmode onspecificinterval&ataspecifiedplace. Describe requirements.

Q.

Ans. Fundsrequiredtoacquirefixedassetsaretermedasfixedcapital.The totalamountoffixedcapitalisdeterminedthroughprojectcapitalcostestimates.Anyerrorin thefixedcapitalestimationwillhavelong-termadverseeffectonthefinancialconditionof theenterpriseandalsoitsprofitability.Wrongestimationoffixedcapitalmayleadtooveror under-capitalization.Afixedcapital influencedbyanumberoffactors. Factorsaffectingfixedcapitalrequirements: Therearemanyfactorswhichareaffectedfixedcapitalrequirements,suchas:(1) Nature Thenatureofbusinessisoneoftheinfluencingfactors.Public utilitiesandcapitalintensivemanufacturingconcernsrequirelargeamountoffixed capital. personalservicesneedonlysmallamountoffixedcapital. (2) Leasing If requirementwouldbeless. (3) Size Thefixedcapitalrequirementsoflargeunitswillbemoreunits producingsingleproductmayrequirelesserfixedcapitalthanthoseproducingmore numberofproducts. (4) AncillaryUnits: Ifanenterprisecanpurchasesomeofthecomponentsfromunitsthe itsfixedcapitalneedswouldbeless. (5) TechnologyIftheproductionprocessrequiresmoderntechnologyorimportedplant andmachinerythenthefixedcapitalrequirementswouldbemore. (6) Provision Instead essential. suchcomponentsandtakeuptheassemblingprocessalonesuchanattitudeofthe entrepreneurwillminimizethefixedcapitalrequirements. (7) International Some internationalscalesuchconcernsareverymuchinterestedinexpansionplansifthe international demandformorefixedcapitalrequirements.Onthecontraryaninternationalcrisis mayleadsomecompaniestopostponetheirexpansionplans.
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(8) Trends Whileassessingthefixedcapitalrequirements,astudyof longruntrendsintheeconomymustisanticipatedtobebright,itgivesgreensignalto theentrepreneurtocarryoutallsortsofexpansionprogrammedofthefirm.Inthat casealargeamountoffundshastobekeptsoastoinvestinfixedassets. Q. Explainthefactorswhichaffectingworkingcapitalrequirements?

Ans. Working enterprisetocarryoutitsdaytodayoperations.Inotherwordsitisdefinedasalltheshort termassetsusedindailyoperations.Theyconsistofprimarilycash,marketablesecurities, accountsreceivablesandinventory.Therearemainlytwotypeofworkingcapital. (1) Gross Gross investmentincurrentassetswhichcanconvertintocashwithintheaccountingyear. (2) Net Networkingcapitalmaybedefinedasthedifferencebetween currentassetsandcurrentliabilities. ComponentsofWorkingCapital:Thecomponentsofworkingcapitalare:Inventories Accountsreceivable Cashandbankbalance Advancespaidforexpensesandsuppliers. Cash Debtors&B/R RawMaterial

FinishedGoods OperatingCycle:

Work-in-Progress

Cashpassesthroughvariousstagesandfinallygetsconvertedintocash.Inanindustrial unit,theoperatingcyclewouldmanifestinvariousprocessesviz.purchaseofrawmaterial, conversionoffinishedgoods,andconversionofgoodspartlyintocashthroughcashsales andpartlyintoaccountsreceivablesthroughcreditsalesandfinallyconversionofdebtors intocash. Determinantsorfactorsaffectingworkingcapitalrequirements: (1) Size AFirmsizeeitherinassetsorsalesaffectitneedforworkingcapital. AsmallfirmmayhaveonlylimitedresourcesforworkingcapitalHenceitmayinvest moreamountsincurrentassets.Butlargefirmswithmanysourcesoffundsmayneed lessworkingcapital.
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(2) Nature Natureofthebusinessisalsoaffectingtheworkingcapital requirement.Publicutilitiesandcapitalintensivemanufacturingconcernsrequireless amountofworkingcapital. (3) Availabilities Afirmwithreadilyavailablecreditfrombankscangetalone withlessworkingcapitalthanafirmwithoutsuchcredit. (4) Sales Thisisthemostimportantfactoraffectingthesizeandcomponentsof workingcapital.Ariseinturnoverratiowillreducethelengthofoperatingcycleand thereforetheneedforworkingcapital. (5) Seasonal Most demandfortheirproductsandservices.Thesevariationsinsalesaffectthelevelof workingcapital. (6) Operating Operatingcycleaffecttheworkingcapitalrequirementiftheperiod ofoperatingcycleislongthentheamountofworkingcapitalrequirementwouldbe moredependinguponthelengthofoperatingcycletheneedofworkingcapitalwill varyfromprojecttoprojectandbusinesstobusiness. (7) Shift Technological needs machinerywhichprocessmorerawmaterialatafasterratethentheworkingcapital needforinventorypurposeswouldbemore. (8) Polices Manyofthefirmpolicesaffectthelevelofworkingcapital.For exampleachangeincreditpolicywillaffecttheworkingcapitalrequirementsoffirm. (9) Activities Ifafirmistoinvestmoreininventoryorsellonrelativelyeasy creditterm,itsworkingcapitalneedswouldbemorethanoffirmsprovidingservicesor makingcashsales. Q. Whatistherequirementoftechnicalassistanceforabusinessenterprise?

Ans. Productionmanagementistheprocessofconvertingtheinputintooutputthrougha conversion The capital unit/operation Production strategies Production&operationalplanwouldbehavingdimension: Plantlocation Plantlayout Capacityplanning InventoryManagement QuyalitymanagementSysdtem Budgetingtheproductionplan
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(1) Plant The business shouldbetakenintoconsaideration:Availabilityofrawmaterial Availabilityofpower Availabilityoflabour Proximitytothemarket Climaticconditions Thecostoflocation Taxholidays/sibsidiary&loans (2) Plant Plantlayoutisthepatterninwhichthespacewouldbearrangedin ordertoutilizethemachinery/equipments&manpoweroptimally.Sinceitcannotbe changedeasily,properplanningofthelayoutshouldbeconducted. Thefollowingvariablesshouldbekeptinmindwhileplanningthelayout:Spaceisutilizedproperly. Thereisproperlight&&&ventiiilationnninallthearesof Smoothflowofoperationscantakeplace. Thereisaflexibilitytointroducechangesinthefuture. Supervisioncanbecarriedoutinallthedimensionswithconvenience. Thereareprovisionforemergencyexit. Thereareprovisionforsafetymeasures. Costofspace,costofproductiondfelays,costofmovementofmaterialfromoneplaceto anotherplace. (3) Capacity Capacityplanningistheproductivecapabilityofafacility.The operation the operationhas marketdemand. Capacityplanningshouldbedonekeepingfollowingthingsinmind:Flexibilityofflexibilityofproduction/operation Costofmaintainingcapacity Organisation'svision&objectives Assessmentofexistingcapacity. Capacityplanningcanbedividedintothreetypesbasedontimeperiodofwhichplanningis done. Shorttercapacityplanning Mediumtermcapacityplanning Longtermcapacityplanning.
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Capacityplanningfromdaytoday,monthtomonthuptoayeariscalledshorttermcapacity planning.Mediumtermcapacityplanningisfromoneyeartofiveyear.Longtermcapacity planningisplanningoperationabove5years.Majorchangesincapacityplanningcanbe introduced. (4) Inventory Inventoryismanagedforthesmoothflowofworkandfor makinguptheuncertainitiesintheavailabilityofrawmaterial&inthedemandoffinal goods.Butkeepinfinventoryinvolvescostsmoreoveritholdsworkingcapital&also occupiesspace&thereforeinventoryneedstobeplanned.Inventoryismanagedat threelevels:a. Raw Thestockofrawmaterialiskepttomeettheunforeseenhangesinthe marketforces. GoodsinProcessInventory:Inventoryismanagedateachlevelofworkinprogress a. FinishedGoodsInventory: Inventoryisalso Butholdinginventoryinvolvescost&thereforeinventoryofonlyadequateamount shouldbemaintainedateachlevel.Therearetwotypesfoinventories:b. c. 5. Normal Inventory The stagesinnormalconditioniscallednormalinventory. Buffer The uncertaintyiscalledbufferinventory. Quality Quality highly competitive production/operationmanagement.Theimportanceofqualityhasimprovedtoday. Withtherisingcompetition&widevarietyofproducts/servicestheconsumerhave becomequalityconscious.Qualityistobemaintainedatallthestagesofproduction. Budgeting followingformula:Totalproduction projectedbeginninginventory. Budgeting = salesinunit + desiredendinginventorymaterial

6.

Once budget,laborcostbudget&factorymaintenancebudgetcanbeprepared. Q. Explaintheconceptofmarketingassistanceindetail.

Ans. A companyitsproductsorservices.Marketingplananalysesthemarketopportunitiesthrough marketresearch,identifiesprofitablesegment marketingmix,strategywhichinvolvesStrategiesforproductprice,placeandpromotion.All


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good business. craftedmarketingplanispossible,ifitisbasedonathroughmarket planiscriticalelementinensuringthesuccessofbusinessventureA planthema4rketingstrategiesfor surveyitidentifiesthestrengths,weakness,opportunitiesandthreatsofthemarket,identify and proposedbusinessenterprise. MARKETINGRESEARCH: Marketingresearchistheprocessofcollectinginformationof market. interpretationtostrategize.Somerelevantbusinessdecisionlikewhetheroneshouldenter newmarkets,whetheroneshouldchangepremiumprices,Whatkindofdiscountwouldbe moreAttractivetothecustomeretc. customersbut shouldflow hencestrategicdecisionbasedonthemarketresearchcanproperabusinessenterprisein toagrowthpath. Stepsinvolvedinconductingthemarketresearchare: 1. FormulationObjective 2. Researchdesign 3. DatacollectionandTabulation 4. Dataanalysis 5. Documentation 6. DecisionMaking Segmentation: Anybusinessventurehaslimitedresourcesandhenceitcannotsatisfythe needs Segmentationistheprocessofdividingthemarket/customerintosimilarcharacteristicsor behavior.forexamplethepopulationofacitycanbedividedintotoddlers,kids,teenagers, youth, segmented:DemographicSegmentation: Whenthetargetmarketisdividedonthebasisofpopulation itiscalleddemographicsegmentation.Thiscanbefurtherdividedintosegments;suchas agesegment,incomesegment,gendersegmentation,educationalqualificationetc. Psychographic Segmentation individualiscalledpsychographicsegmentation. GeographicSegmentation: Whenthesegmentationisdrawnonthebasisofgeographical regionitiscalledgeographicsegmentation.Itcanbenorthern,southern,western,eastern, cityormetro,urbanorrural.
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Behavior Segmentation : When the segmentation is drawn on the basis of behavior/attitudeofconsumeritiscalledbehavioralsegmentation.Thebehavior/attitude varyonoccasion,usagerate,benefits,loyaltystatus,buyersreadiness&userstatus. Market Market identifyingthenumberandtypeofsegmentsthatthebusinessventurewouldtarget.The processofmarkettargetingincludingfollowingsteps:Market It assessmentisdoneonthefollowingcriteria:Assessmentofthesizeofeachsegment. Assessmentofsegmentgrowth Companiesstrengthsandweaknesstosufficetheneedsofthesegments. Potential government. Target Afterthetargetmarketevaluationiscompletethecompanyhas to severalfactorslikeeconomiesofscale,profitability,growth,sizeetc.Therearefivepatterns availableforselectingthetargetmarket. Single If segmentonly.Likejuniorhorlicksistargetedonlyforkids. SelectiveSpecialization: Selectinganumberofsegmentsthatareattractive. Product The segments.Forexample-computer. Market likebigbazaar. Full productneeds. Whentheorganizationsatisfiesmanyneedsofaparticulargroup When

Market Market company'sproduct/serviceinsuchawaythatifappearsattractivetothem.Itisanimage makingexercisewhichhelpsthecompanytoportraytothetargetedsegmentinsuchaway thatitappearsattractivetothecustomers.Thefollowingvariablesshouldbeassuredfor positioningtheproduct/services. Whatimagethecompanywantstoproject Thepricingstrategy Thepackagingoftheproduct Hoecompetitorsprojectthemselves Thetypeofproduct Productlifecycle
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DevelopingMarketingMixStrategies: ProductMixStrategies: Product Productsthataremarketedincludephysicalgoods,services,experiences,events,places, organizations, regarding entrepreneur desired.Abranddecisionisveryimportantdecision.Abrandcreatesanidentifyofquality, reliabilityandconfidenceforitscustomers.Brandshavebecometheimagebuildingtoolfor any identifyoftheproduct. Pricing Pricingisthatelementofmarketingmixthatproducesrevenue.Thepricing decisionsarebasedonthesefactorssuchascompetitorsprice,costofproduct/services, demandoftheproduct,availabilityofrawmaterialandoverallmarketingobjectiveofthe company.Pricingstrategyhasbeendividedintofollowingkinds:Markuppricing Targetreturnpricing Perceivedvaluepricing Valuepricing Goingratepricing Geographicalpricing Skimmingpricing Promotional Promotionalmixistheprocessofeducatingconsumersthroughvarious formsofmediaaboutallorsomeofthefollowing:Productutility Productquality Productprice Promotionalmixhelpsinbuildingbrandimageinthemindsofendconsumers.Infact,it playsamajorroleinpositioningtheproductinthemarket.Thevarioustypesofpromotional strategiesare:Advertising Directingmarketing Salespromotion Publicrelation Distribution Thefourthprocessofmarketingi.e.place(distribution)istheprocess throughwhichtheproductisphysicallydeliveredtothecustomer.Mostcompaniesused intermediaries/middlemen intermediaries channels
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intermediariesthatparticipateinthefinaldeliveryoftheproducttothecustomersarecalled channellevels.Letusthecustomersarecalledfewchannellevels. ChannelO: Whennointermediariesexistasindirectmarketing.

Manufacture

Customers

Channel1: Whenonemarketingintermediaryisinvolvedinthefinaldeliveryoftheproduct.

Manufacture

Retailer

Customers

Channel product.

When

Manufacture

Distributor

Retailer

Customers

Channel product.

Whenthreemarketingintermediariesareinvolvedinthefinaldeliveryofthe

Manufacture Q.

Wholesaler

Distributor

Retailer

Customers

WrireashortnoteonIndustrialsicknessanditsremedialmeasures.

Ans. Economic growth.Expansionofindustryleadstogreaterutilizationofnaturalresources,productionof goods standardofliving.Anindustrialunitislikeahumanbody.Apersonbecomesickifanypartif bodyaffected.Similarly,anindustrialunitcanbecomesickinaminorwaywhenonlyoneor some marketing&personnelareaffected,itgetsintosickness. Industrialsicknessisauniversallyacceptedterm,rootcausesofwhichisdirectlyor indirectly commercialbanksareworriedalotabouttherisingtrendofsicknessprevailinginIndian industries.
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Concept: The realized continuouslylessthantheprevailingratesonsimilarinvestment.Inotherwordswecansay that averagerateofreturnoninvestmentislessthan Asickunitisunhealthyunittocommonmen,adividendpostponingunittoinvestors,a losingordiscouragingunittoindustrialists,adoubtfuldebtor&aweakborrowertocreditors & technicrats,abademployertoworkers&greatwastageoftechnical&humanresourcesto thecountry. To returnoninvestment&capitalcashflow,(b)abilitytomeetsoci-economicobligation,(c) capacity acquireshareinthemarket.etcaretakenintoaccount. Causes: Factorscausingindustrialsicknesscanbroadlybedividedintotwomaincategories:Internalcause Externalcause a. Internalcausesarethefactorswhicharewithinthecontrolofthemanagementofa managementofaunit. b. Theexternalarethefactorswhichaffectindustrialgroupasawhole,andonthese,the industrialunithasnodirectcontrol. Effortshavebeenmadetiunearthvariousfactorsresponsibleforcausingindustrial sicknessinthecountry.Ofthevariousfactorthesignificanytoquotearemismanagementor inefficientmanagement,nonavailabilityofqualityrawmaterialatrightprice&atrighttime, powershortage,defectiveplanningatinitialstages,lackofmarketingexpertise,etc.Beside, thereareotherfactorswhichareequallyresponsibleforindustrialsickness.Thesemaybe aswrongindustriallocation,improperestimationofcapitalcost,delays&costescalation, improperformationofinventoryneeds,marketingoffinishedgoodsatlowercreditterms, labourunrest,poormaintainanceofplant&machinery,higheroverheadexpenses,demand recession.Lackofresearch&development.Inadequateinvestmentformodernization& renovation& institutionalagencies. RevivalMeasures&Strategies: Sickness region.Itis,moreorless,uniformallyspreadoverallstates&regions,&thusanational
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problem.Processofsolutiontothisprobleminvolvesintwoprocess:Identifythsicknessinaunitasearlyaspossible&toanalyse&diagnosisitscauses theunitimmediatelywithappropriateremedialmeasureswithaviewtoturnaroundthesick unit positivechangeintheperformanceofthebusinessentity. Commercialbanks&financialinstitutioncandetectthesymptomsofsicknesthrough periodical periodical directors,etc.GuidelineshavebeenissuedbytheRBIsothatbankscananalyse&interpret the establishment management measures. Anumberofdevelopmentinstitutionshavebeensetuptosupportentrepreneurs.With aviewtopreventsicknessparticularlyinSSI,Someoftheinstitutionshavebeensetupto support Industries Centres(DICs) and Industrial Estate, Small Industries Development Organisation(SIDO) Small Scale Industries Service Institutes(SISI),Small Industry Development Corporation(SIDCO),Entrepreneurial Guidance Bureau(EGB), National AllianceofyoungEntrepreneurs(NAYE),NationalProductivityCouncil)andVenturecapital funds(VCF).In number differentways.Recently,theSmallIndustriesDevelopmentBankofIndia(SIDBI) setuptohelpsmallscaleunits. Tosumup,theincidenceofindustrialsicknessingeneralandinsmallindustrialunits, inparticularcanbereducedifalltheconcerns(i.e,owner,banker,labourers,,management financialinstitutions,government,etc.)makeaconcertedefforttostudythecausesofand curesthroughtheirtemporarysacrificeswithasenseofdedicationandbelongingness. Q. Describe projectreport.

Ans. Aprojectreporthelpstounderstandtheopportunities,problemsAnd weaknessofthebusiness.Itguidestheentrepreneurinactuallystartingupandrunning businessventure.ithelphimtomonitorwhetherthebusinessisgrowingaswasprojectedin thebusinessplan usedasahandytooltopersuadeinvestorsandfinancialinstitutiontofundtheproject.itcan helpinproperutilizationofalltheresources.itcankeepthemoraleofemployeesowners andinvestorsup.itcanfinallyleadtoasustainabledevelopmentoftheorganization. EssentialofaProjectReport: 1. Theprojectreportshouldbesequentiallyarranged. 2. Theprojectreportshouldbecoveringallthedetailsabouttheproposedproject.
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3. 4 5. 6. 7. 8.

Theprojectreportshouldnotbeverylengthyansubjective. Theprojectionsshouldbeappropriatelybemadefromtwotenyears. Theprojectreportshouldjustifythefinancialneedsandfinancialprojection. Theprojectreportshouldalsojustifymarketprospectsanddemands. Theprojectreportshouldbeattractivetothefinancialagenciesandinvestors. Theprojectreportshouldalsohaveahighaestheticvalue.

FormatofaProjectReport: 1. 2. Cover Coversheetislikethecoverpagesofthebook.itmentionsthenameof theproject,addressofthepromoters. TABLE Thetableofcontentsislikethetableofcontentsofcontent of quickly.a numberorlabelthesectionlike1,2,3,or EXECUTIVE Executive businesspersonal asthesayinggoesthefirstimpressionisthelastimpressiona carefulpresentationofinformationshouldbedonetoattractthemorethentwoorthree pages. THE Thiswillgivedetailsaboutthebusinessconcept.itwilldiscussthe objectiveofthebusinessabriefhistoryaboutthepastperformanceofthecompany, whatwouldbetheformofownership.Itwouldalsolabeltheaddressoftheproposed headquarters. Funding The bodiesexaminingtheprojectreport&itisoneoftheprimaryobjectivesofpreparing the report, careful, funding should documented.Itisalsonecessarytoprojecthowtheserequirementswouldbefulfilled. The Abriefdescriptionofproduct/servicesisgiveninthissub section. provided the copyrights,franchises&licensingagreements. The Now operationsaretobedrawn. a. Marketing Marketingixstrategiesaretobedrawnbasedonthemarket research.Themarketresearchprovideinformationregardingthetaste,needs, habbitofthecustomermarketresearchisthebackboneofsuccess&failureof anyproductinthemarket.Basedontheinformationcollectedthroughmarket research distributionareprepared.Thebudgetforthemarketingplanaredrawnatthe end.

3.

5.

6.

7.

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b. Operational The location&plantlayout.Whenwechooseaparticularlocationsomanyfactors should power provideapatternofmgt.oftheorganization&wouldindicatetheexhaustive planningforthebusiness.Finallythebudgetforoperationalplanisdrawn. Organization The responsibilities&dutiesamongstpeopleintheorganizationitprovidesdetails abouttheboardsofdirectors,itcanalsoenlistthemanpowerplanthatwouldbe requiredtoputlifeintothecompany&itwouldberequiredtoputlifeintothe company goverened organizationplanisalsobudgeted. The drawn summaryofpreviousfinancialdataisgivenwhereasforaneworganizationthe followingprojectionaredrawnProjectedsales Projectedincome&expenditurestatement. Projectedbreakevenpoint Projectedprofit&lossstatement Projectedbalancesheet Projectedcqashflows. Projectedfundflows. Projectedratios.

c.

d.

1. 2. 3. 4. 5. 6. 7. 8.

8.Critical Theinvestorsareinterestedinknowingthetentativerisks.Toevaluate theviabilityoftheproject&tomeasuretherisksinvo0lvedinthebusiness.Thiscan furthergiveconfidencetotheinvestorsastheycancalculatetherisksinvolvedinthe businessfromtheirperspectiveaswell. 9. Exit Theexitstrategieswouldprovidedetailsabouthowtheorganization wouldbedissolved,whatwouldbetheshareofeachstakeholderincaseofwindingup of

10. Appendix Theappendixcanprovideinformationaboutthecurriculumvitaeofthe owners, pollution understanding,articleofassociation&allthesupportingagreements/documentsthat canhelpinmarketingtheprojectviabilityatlarge.

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PastYear
JAN UNIT 1. 2. Entrepreneurs Entrepreneurs. Difine economicdevelopmentofIndia.

UNIT
1. 2. ExplainthevariousCompetingTheoriesofEntrepreneurship.Whatisthesignificance ofthesetheories? Define DURINGPOSTLIBERALISATIONperiod

UNIT
1. 2. Define innovationsimportantinneweconomy? Writeshortnoteson: (a) Achievementmotivation (b) Entrepreneurialsuccessinruralareas

UNIT
1. 2. What processbusinessideas? Whatarethemaincausesforindustrialsicknes?Discussthevariousmethodstosolve theproblemofindustrialsicknessinIndia. JULY

UNIT
1. 2. DefineEntrepreneur.Whatarethequalitiesandcharacteristicsofanentrepreneur? Explaintheroleandsignificanceofentrepreneursintheeconomicdevelopmentofa countrylikeIndia.

UNIT
1. DiscusstheevolutionandobjectivesofEntrepreneurshipDevelopmentProgrammes inIndia.Howfartheseprogrammesareeffective?
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2. Explain WhatisthefutureofSSIsinIndia?

UNIT
1. 2. WhatisAchievenmentMotivation?Howisitgettingpromoted? CriticallexaminetheentrepreneurialgrowthinruralsectorinIndia.Whatstepsshould betakenforitsgrowthinruralIndia?

UNIT
1. 2. What business?Discussthemajorsourcesoffinancingtheserquirements. Writeshortnoteson: (a) Causesofindustrialsickness (b) Typesoffeasibilitystudies JAN

UNIT
1. 2. Define economicdevelopmentofacountry. Entrepreneurs are made,not born. Comment, and explain the qualities of an entrepreneur.

UNIT
1. 2. 1. 2. WhatdoyoumeanbyEDPs?ExplaintheneedforandobjectivesofEDPsinmodern organizations. CriticallyexaminegovernmentpolicytowardsSSIsafterpostreformperiod.

UNITWhatisAchievementMotivation?Howcanachievementmotivationbedeveloped? What entrepreneurs.

UNIT
1. 2. Howwillyoupreparethefeasibilityreportofanindustrialunit?Whattypeoflegaland documentationformalitiesarerequiredforthispurpose? Writenotesonthefollowing: (a) Maketingassistanceinbusiness (b) Methodofassessingworkingcapitalrequirements JAN

UNIT
1. Who entrepreneur.
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2.

TheprimaryobjectiveofdevelopingcountrieslikeIndiaistoachieverapid,balanced andsustainedrateofeconomicgrowth$.Inlightofabovestatementexplaintherole andimportanceoftheEntrepreneurs.

UNIT
1. 2. Discusstheroleofgovernmentwithregardstoregulatoryframeworkforencouraging developmentofentrepreeurship. Entrepreneurship development through training is a useful method for creating a strongbaseforthecountry$.Discuss.

UNIT
1. 2. Describetheentrepreneurialsuccessmodeintheruralareasintherecentdeveloping era. Howanentrepreneurialsystmeisestablishedinaneconomy?Suggestamodelfor thesame.

UNIT
1. 2. Choosinganideaisquitedifficultandtheentrepreneurhastoweightobjectivelyhis intrisiccapabilitiesinfinalizinganidea.$Explain. Discusshowentrepreneurcanencouragepersonalserviceforcustomersandwhyitis importanttodoso?

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