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Model Answer/suggested solution Entrepreneurship Development

B. Com (Hons.) (Fourth Semester) Examination, 2014

Paper Title: Entrepreneurship Development

Paper Code: AS-2629

* Prepared by Dr.Anuj Agrawal, Assistant Professor, Department of Commerce,


Note: These model answers are a depiction of important points which an examinee must
have to mention to secure high marks in particular question. The length of the answer
may vary as per the examinees understanding, interpretation and his/her ability to
comprehend the content.

Ans.1 Short Answer Type Questions

(i) Women entrepreneurship is an enterprise organized and managed by women

usually with considerable initiative and risk. The entrepreneur (a woman) owns
(more than 50%), controls and runs the enterprise.

(ii) Physical & Mental Qualities of an entrepreneur are as follows:


(iii) Two major disadvantages of being an entrepreneur are:

Becoming an entrepreneur means you have to leave behind the security of having a paycheck
each month.
Although entrepreneurs benefit from a flexible schedule they often have to work very long
hours particularly in the start-up phase. Furthermore entrepreneurs work schedules are never
predictable and they must deal with emergencies that may occur at any time.
Being responsible for all decisions can be quite stressful and handling such responsibility can
be difficult.
There is also great risk attached to entrepreneurship. The success or failure of the business
rests with the entrepreneur.
(iv) Two objectives to promote small business are :
To create immediate and permanent employment opportunities to public at large at a
relatively small costs.
SSI ensure balanced regional development. These industries can be developed in
almost all areas including backward tribal, hilly and inaccessible areas. Thus they are
helpful in achieving a wider spatial dispersal of industrial activities and reducing
regional economic imbalances.

(v) Major Barriers in the way of entrepreneurship development in India are as

Social backwardness
Indian entrepreneurs fear excessively for failure.
Excessive interference
(vi) Infrastructural facilities are generally defined as the physical framework of facilities
through which goods and services are produced by the manufacturers or service providers
and provided to the public. Its linkage to the economy are multiple and complex, because it
affects production and consumption directly, and involves large flows of investment.
(vii) A large number of schemes like Indira MahilaYojana, MahilaSamitiYojana,
MahilaVikasNidhi, Micro Credit Scheme, RashtriyaMahilaKosh,
SIDBsMahilaUdyamNidhihave been initiated to improve the condition of women
entrepreneurship in India.
(viii) The Entrepreneurship Development Programme (EDP) promotes the creation and/or
growth of enterprises through a National Team of Trainers and Counsellors that provides
training and counselling to young promoters to establish their own business and to reduce the
failure rate of start-ups, contributing thereof to the economic growth of the Country.
(ix) Full form of EDII is Entrepreneurship Development Institute of India.
(x) Entrepreneurial competencies are the skills necessary for an entrepreneur to
venture into an enterprise
organize and manage an enterprise ably and competently
realize the goal for which the enterprise is established.
Ans.2 Entrepreneur: Someone who exercises initiative by organizing a venture to
take benefit of an opportunity and, as the decision maker, decides what, how, and how much
of a good or service will be produced. An entrepreneur supplies risk capital as a risk taker,
and monitors and controls the business activities. The entrepreneur is usually a sole
proprietor, a partner, or the one who owns the majority of shares in an incorporated venture.

Types of Entrepreneur:
1. Innovative Entrepreneurs: An innovative entrepreneur strives to collect all possible
information and facts and indulges himself deeply in the proper analysis of the results
derived from activities: observe and identify the opportunities of introducing a new
technique or method of production; launches a new product or service; discovers a
new market; raises money to establish an enterprise; assembles the various resources
and allocates them among properly selected executives; builds the organization, and
reorganizes the enterprise. It may be noted that innovative entrepreneur can emerge
and work only when a certain level of economic development has been achieved by a
country and then its people look forward to further change, improvement, and
progress. Hence generally such entrepreneurs are found in developed countries, and
only a few in undeveloped countries.
2. Adoptive or Imitative Entrepreneurs: Such entrepreneurs do not innovate changes
themselves. Instead, they adopt or imitate those successful innovations which are
created by other innovative entrepreneurs. In other words, imitative entrepreneurs
simply and only copy or imitate the new technology or technique or product services
innovated by others. It may be noted that the existence of imitative entrepreneurs is
quite purposeful and significant in an underdeveloped or a developing country. Hence
imitative entrepreneurs become important in such economies because they exploit
possibilities of launching through imitation those products or services in their own
country, which have already been innovatively introduced by innovative
entrepreneurs in developed countries.
3. Fabian Entrepreneurs: Fabian entrepreneur are characterized by great precaution
and skepticism in experimenting or introducing any change in technology or product
or market. Moreover, they do not have any will or desire to adopt or imitate new
method innovated by innovative entrepreneurs. In fact such entrepreneurs are very
shy, lazy and fearful of unwanted risk. They imitate only when they clearly feel that if
they do not imitate then it would be fatal to them and result in a loss of relative
position of the enterprise in their industrial field.
4. Drone Entrepreneurs: Drone means a person who lives off the work of others.
Drone entrepreneurs keep themselves away from the innovations made by others. In
fact, they refuse to adopt and use opportunities to make changes in production either
methods or products, even though they may suffer losses or face reduced return
relative to other entrepreneurs in the same field of activity. They lay behind others in
progress or development and continue to operate on traditional lines without
indulging in any kind of changes. Sometimes when their products or services lose
marketability and their operations become uneconomical, they are pushed out of the
market, but they dont shake off conventional ideas or products.

Ans.3 Comprehensive classification of the function of an entrepreneur is as follows:

Entrepreneurial Functions:
Risk Taking
Organization Building
Promotional Functions:
Investigation of an idea
Detailed investigation of idea
Assembling the requirements
Financing the proposition
Managerial Function:
Commercial Function:
Accounting & Records
[Proper Explanation is required]

Ans. 4 Small-scale business comprises of a variety of undertakings. The definition of small-

scale industry varies from one country to another and from one time to another in the same
country depending upon the pattern and stage of development, Government Policy and
administrative set up of the particular country. As a result, there are nearly 50 different
definitions of SSIs found and used in various countries. All these definitions either relate to
capital or employment or both or any other criteria. We trace here the evolution of the legal
concept of small-scale industry in India. According to Government of India, 2000 An
undertaking having an investment in plant and machinery of not more than Rs. 1 crores.
Capital investments for this purpose means investment in plant and machinery.
Nature of Small Business:
1. Ownership: Ownership of small-scale unit is with one individual in sole proprietorship
or it can be with a few individuals in partnership.
2. Management and Control: A small scale unit is normally a one man show and even
in case of partnership the activities are mainly carried out by the active partner and rest are
generally sleeping partners. These units are managed in a personalised fashion. The owner is
actively involved in all the decisions concerning business.
3. Gestation Period: Gestation period is that period after which teething problems are
over and return on investment starts. Gestation period of small-scale unit is less as compared
to large-scale unit.
4. Area of Operation: The area of operation of small scale unit is generally localised
catering to the local or regional demand. The overall resources at the disposal of small-scale
units are limited and as a result of this, it is forced to confine its activities to the local level.
5. Technology: Small industries are fairly labour intensive with comparatively smaller
capital investment than the larger units. Therefore these units are more suited for economies
where capital is scarce and there is abundant supply of labour.
6. Resources: Small scale units use local or indigenous resources and as such can be
located anywhere subject to the availability of these resources like labour and raw materials.
7. Dispersal of Units: Small-scale units use local resources and can be dispersed over a
wide territory. The development of small-scale units in rural and backward areas promotes
more balanced regional development and can prevent the influx of job seekers from rural
areas to cities.
8. Flexibility: Small-scale units as compared to large-scale units are more change
susceptible and highly reactive and responsive to socio-economic conditions. They are more
flexible to adopt changes like new method of production, introduction of new products etc.
Role of Small Business in India:
Small-scale industries have been playing an important role in Indian economy in terms of
employment generation and growth. It is estimated that this sector has been contributing more
than 50 per cent of the gross value of output produced in the manufacturing sector and the
generation of employment by the small-sector is more than five times to that of large-scale
sector. Examinees are expected to explain the role of small business in terms of Employment
generation, Self-employment, Capital mobilization and employment opportunities, Skill
mobilization, Removal of industrial dispersal and balanced regional development, role in
equitable distribution of income and other resources, optimum utilization of scarce resources
and contribution to exports etc.
Ans. 5 Women entrepreneurship is an enterprise organized and managed by women usually
with considerable initiative and risk. The entrepreneur (a woman) owns (more than 50%),
controls and runs the enterprise. Now-a-days women enter not only in selected professions
but also in professions like trade, industry and engineering. Women are also willing to take
up business and contribute to the Nation's growth. But there are certain limitations like
tradition, customs, socio cultural values, ethics, motherhood subordinates to ling husband and
men, physically weak, hard work areas, feeling of insecurity, cannot be tough etc., that the
Indian women are coming across while they jump into entrepreneurship. Women in rural
areas have to suffer still further. They face tough resistance from men. They are considered as
helpers. The attitude of society towards her and constraints in which she has to live and work
are not very conducive. Basic problems faced by the women entrepreneurs in India are as

1. Family ties
2. Male dominated society
3. Lack of education
4. Social barriers
6. Problem of finance
7. Tough competition
8. Low risk-bearing capacity
9. Limited mobility
10. Legal formalities
11. Lack of self-confidence [Proper Explanation of the points is required]
Especially in the environment of the developing countries like ours, women
entrepreneurs have to strive hard to strike a balance between managing a family and
managing an enterprise. Sometimes she has to sacrifice her entrepreneurial urge in order to
strike a balance between the two.

Ans. 6 The Entrepreneurship Development Programme (EDP) promotes the creation and/or
growth of enterprises through a National Team of Trainers and Counsellors that provides
training and counselling to young promoters to establish their own business and to reduce the
failure rate of start-ups, contributing thereof to the economic growth of the Country.
The range of competencies needed by a potential entrepreneur can be viewed in an integrated
manner, keeping him as the central focus and arrive at a holistic model for training of
entrepreneurs. Such as model is viewed as consisting of three phases. These are: (i)
Stimulating (ii) Supporting (iii) Sustaining. The holistic model of training is used by many
practitioners in India for developing and organising relevant entrepreneurship development
programmes. The three phases of this model may be described as follows:
1. Stimulating Phase: This phase includes some of the following topical functions:
(i) Entrepreneurial awareness,
(ii) Entrepreneurial motivation,
(iii) Planned publicity for entrepreneurial opportunities,
(iv) Identification of potential entrepreneurs,
(v) Information on project planning and implementation,
(vi) Assistance in product/service identification and market survey,
(vii) Assistance in preparation of business plan/project report,
(viii) Help in development of new product/service,
(ix) Counselling.
2. Supporting Phase: This phase involves some of the following functions
(i) Assistance in registration of an enterprise,
(ii) Assistance in obtaining finance,
(iii) Help in getting land,
(iv) Help in obtaining various permissions and licences,
(v) Guidance in selection and erection of plant and equipment,
(vi) Supply of scarce raw materials,
(vii) Grants of incentives and subsidies,
(viii) Assistance in marketing,
(ix) Provision of management consultancy.
3. Sustaining Phase: This phase includes some of the following functions:
(i) Modernisation of units,
(ii) Diversification, expansion or product substitution,
(iii) Assistance in improving business and profitability,
(iv) Creation of need based common facility center,
(v) Deferred repayment/interest,
(vi) Product standardisation and testing services,
(vii) Additional finances forrehabilitation of units.
[Center for Research and Industrial Staff Performance, Bhopal, 1999]
Ans. 7 External environment:A business does not operate in a vacuum. It has to act and
react to what happens outside the factory and office walls. These factors that happen outside
the business are known as external factors or influences. These will affect the main internal
functions of the business and possibly the objectives of the business and its strategies.
Various elements of external environment can be classified as direct action environmental
factors and indirect action environmental factors which are as follows:

1. Direct action impacting environmental factors are customers, suppliers, competitors,

employees, Shareholders, Government, financial institutions etc.

2. The details of Indirect action impacting environmental factors are as follows

Social how consumers, households and communities behave and their beliefs.
Legal the way in which legislation in society affects the business. E.g. changes
in employment laws on working hours.
Economic how the economy affects a business in terms of taxation, government
spending, general demand, interest rates, exchange rates and European and global
economic factors.
Political how changes in government policy might affect the business e.g. a
decision to subsidies building new houses in an area could be good for a local
brick works.
Technological how the rapid pace of change in production processes and
product innovation affect a business.
Ethical what is regarded as morally right or wrong for a business to do? For
instance should it trade with countries which have a poor record on human rights?

[Proper Explanation of direct and indirect action factors is required]

Ans. 8 Entrepreneurship is based on purposeful and systematic innovation. It is the

purposeful activity of an individual or a group of associated individuals, undertaken to
initiate, maintain or aggrandize profit by production or distribution of economic goods and
services. It is a dynamic process of creating incremental wealth. This wealth is created by
individuals who assume the major risks in terms of equity, time, and/ or career commitment
of providing value for some product or service. Essentials business Traits of a successful
entrepreneur are as follows:
i. Entrepreneurial ability
ii. Leadership ability
iii. Task oriented
iv. Risk taking ability
v. Decision making ability
vi. Organisational skill
vii. Time management skill
viii. Technical skill
ix. Human Resource Management skill
x. Depth knowledge of business environment
xi. Knowledge of global application in technology and recent technological change
xii. Knowledge of business laws
xiii. Innovating ability
xiv. Awareness towards business environment
[Proper explanation is required]