Entrepreneurship Development

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Definition

According to Cantillon an entrepreneur is an agent who buys factors of production at certain price in order to combine them into product with a view to selling it at uncertain price in future

Entrepreneur is the person who bears risk unites various factors of production and carries out innovation .

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Distinction between Entrepreneur and Manager

Point

of distinction

Venture Risk bearing Reward Continuity Innovation Status role Prerequisites

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 Entrepreneurship is the

process of identifying opportunities in the market place,marshalling the resources required to pursue these opportunities and investing the resources to exploit the opportunities for long term gain. It involves creating wealth by bringing together resources in new ways to start and operate an enterprise.

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Entrepreneurship Nature and Characteristics

Economic activity Creative activity Purposeful activity A function of Riskbearing An organizing function Gap filling function Dynamic Process Innovative function
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Entrepreneurship and Intrapreneurship

Basis

of difference

Dependence Capital Risk Operates

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Entrepreneur Entrepreneurship refers to refers to

Visualiser Vision Organizer Organisation Initiator Initiative Innovator Innovation Motivator Motivation Planner Planning Imitator Imitation Decision maker Decision-making Risk bearer Risk bearing

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Factors influencing Entrepreneurship

Technical knowledge Entrepreneurial training Market contacts Family business Availability of capital Successful rolemodels Local manpower Capable advisors and supporters Supplier assistance Governmental and institutional support

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Barriers

Lack of technical knowledge Lack of market knowledge Lack of seed capital Lack of business knowledge Social stigma Time pressures and distraction Legal and bureaucratical constraints Patent inhibitions Political instability Non cooperative attitude of banks and other institutions

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Problems of Women Entrepreneurs

Lack of need achievement,economic independence and autonomy Absence of risk bearing capacity Lack of education skill Male dominating society Lack of business information and experience Heavily involved in family problems Lack of viable concept Social stigma attached to certain vocations
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Entrepreneurial Competencies or Traits

Capacity and willingness to assume risk Willingness to hard work and be always tenacious Vision and foresightedness Creative and imaginative thinking High need achievement Innovativeness and willingness to adapt to change Ability to organize resources Total commitment,determination and perseverance High degree of ambition Initiation , watching for opportunities,persistence,information seeker,quality conscious,commitment to work,persuation,concern for employees,efficient monitoring.

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Role of Entrepreneurship in Economic Development

Capital formation Improvement in per capita income Generation of employment Balanced regional development Improvement in living standards Economic independence Backward and forward linkage

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Why should you become an entrepreneur

You will have the chance to put your ideas into practice You will make money for yourself rather than for someone else You will be your own boss and boss to other people and make decisions that are crucial to the businesss success or failure You will have the chance to work in a field or area that you really enjoy You will have the personal satisfaction of creating and running a successful business.
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Types of Entrepreneurs

Innovative Entrepreneurs: An innovative entrepreneur is one who launches new products, discovers new markets, establishes new methods of production and restructures the enterprise. Innovative Entrepreneurs can work only when definite level of progress has been previously accomplished. They focus on revolutionalisation and development.
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Types of Entrepreneurs

Imitative Entrepreneurs: Imitative Entrepreneurs adopt victorious innovations launched by the innovative entrepreneurs. They duplicate the technology and techniques innovated by others and they are suitable for underdeveloped countries.

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Types of Entrepreneurs

Fabian Entrepreneurs: Fabian entrepreneurs are exemplified by great caution and skepticism in experimenting any change in the organization. They imitate only in situations where it becomes necessary to do so.

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Types of Entrepreneurs

Drone Entrepreneurs: Drone Entrepreneurs suffer losses, as they refuse to make any modifications in the existing production methods.

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Types of Entrepreneurs

Some of the behavioral scientists have classified entrepreneurs as follows Solo operators These entrepreneurs basically work alone and if required may recruit few people.

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Types of Entrepreneurs

Active Partners These entrepreneurs set up an enterprise as a joint venture and they actively take part in the activities of the organization. Simply partners These entrepreneurs contribute funds, but are not involved in the operations of the enterprise.

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Types of Entrepreneurs

Inventors These entrepreneurs are involved in the research and development and innovative activities.

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Problems of Entrepreneurship
External Which result from factors beyond the control of entrepreneur

Internal These are not influenced by external forces they relate to organisation,structure,production channel distribution channel,tecnical know how,training,industrial relations and inadequacy of management etc

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Internal Problems

Choice of an idea Feeble structure Faulty planning Poor project implementation Poor management Poor production poor quality Poor quality Marketing Financial crunch

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Labour problems Capacity utilization Lack of vision Lack of motivation Inadequate training in skills

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External Problems
Infrastructure Location Power Water Communication Financial Long term funds Recovery Marketing Taxation

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Raw material Industrial and financial regulations Technology Competitive and volatile environment Government policy Administrative hurdles Rampant corruption
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Since the time of independence, the smallscale sector in India has been a major contributor to countrys Gross Domestic Product (GDP). This traditional sector in India is considered to have huge growth prospect with its wide range of products. With 40 percent share in total industrial output and 35 percent share in exports, the small-scale industrial sector in India is acting as Engine of Growth in the new millennium.
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The definition for small-scale industrial undertakings has changed over time. Initially they were classified into two categories- those using power with less than 50 employees and those not using power with the employee strength being more than 50 but less than 100. However the capital resources invested on plant and machinery buildings have been the primary criteria to differentiate the small-scale industries from the large and medium scale industries. An industrial unit can be categorized as a small- scale unit if it fulfils the capital investment limit fixed by the Government of India for the smallscale sector.

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As per the latest definition which is effective since December 21, 1999, for any industrial unit to be regarded as Small Scale Industrial unit the following condition is to be satisfied: Investment in fixed assets like plants and equipments either held on ownership terms on lease or on hire purchase should not be more than Rs 10 million.

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The traditional small-scale industries clearly differ from their modern counterparts in many respects. The traditional units are highly labor consuming with their age-old machineries and conventional techniques of production resulting in poor productivity rate whereas the modern small-scale units are much more productive with less manpower and more sophisticated equipments.

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Khadi and handloom, sericulture, handicrafts, village industries, coir, Bell metal are some of the traditional small-scale industries in India. The modern small industries offer a wide range of products starting from simple items like hosiery products, garments, leather products, fishing hook etc to more sophisticated items like television sets, electronics control system, various engineering products especially as ancillaries to large industrial undertakings.
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Nowadays Indian small-scale industries (SSIs) are mostly modern small-scale industries. Modernization has widened the list of products offered by this industry. The items manufactured in modern Smallscale service & Business enterprises in India now include rubber products, plastic products, chemical products, glass and ceramics, mechanical engineering items, hardware, electrical items, transport equipment, electronic components and equipments, automobile parts, bicycle parts, instruments, sports goods, stationery items and clocks and watches.

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Since independence the Government of India has nurtured this sector with special care with the following aims: To develop this sector as a major source of employment To encourage decentralized industrial expansion To ensure equitable distribution of income. To mobilize capital investment and entrepreneurship skills

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Tiny Enterprises Investment limit in plant and machinery in respect of tiny enterprises is Rs 2.5 million irrespective of location of the unit.

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Food And Allied Industries Textile Products Including Hosiery Art Silk/Man-Made Fibre Hosiery Wood And Wood Products Paper Products Leather And Leather Products Including Footwear Rubber Products Plastic Products

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Setting up a small scale industry

Small scale industries play a key role in industrialization of a developing country. This is because they provide immediate large scale employment and comparatively higher labour/capital ratio, and moreover they need a shorter gestation period.

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Location of an enterprise
Need for enterprise location When the new enterprise is to be established When the undesirable location is to be abandoned Whenever an existing factory is not in a position to obtain renewal of lease

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In case of established enterprise, the need for enterprise location arises when expansion decentralization and diversification is undertaken to meet the increased demand for its product

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Steps in enterprise location

Selection of Selection of community Selection of Selection of

the region the locality or the exact site the optimum site

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A) Selection of region

Availability of raw material Nearness to market Availability of power and fuel Transport Suitability of climate Government policy Competition among states Topography
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Selection of community

Availability of labour Civic amenities for workers Finance and research facilities Availability of water and lighting facilities Local taxes and restrictions Personal factors Existence of complementary industries Religious and social institutions

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Selection of site

Price of land Commercial services Communication Availability of amenities Expansion potential Disposal waste Floods and droughts experience Attitude of the local people Statutory considerations

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Optimum selection of site

Optimum site is selected on the basis of a comparative economic survey of the alternative sites in question

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Sources of finance

Long term More than 5 years Medium term 1 to 5 years Short Term Less than 1 year

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Long Term Sources

Equity Share Preference Share Debentures Loans from financial Institutions Lease financing Ploughing back of profits

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Medium Term

Loans from financial institutions Public deposits

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Short Term
Bank

Non Bank sources

Cash credit Overdraft Term loan Discounting of bills

sources

Trade credit Advances from customers Accrued Expenses

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Financial and developmental institutions

All India financial institutions

1. IFCI , IDBI , ICICI , HDFC , EXIM BANK , SIDBI , NSIC:National small industries corporation

2. State level institutions SFCs , SIDCs , SSIDCCs

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SFCs State financial corporation SIDCs State industrial development corporation SSIDCs State small industries development corporation District industries centre

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Incentives

The term Incentive means encouraging productivity. It is a motivational force which makes an entrepreneur take a right decision and act upon it.

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Incentives include :

Concessions Subsidies Bounties

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Subsidy

Subsidy means a single lump-sum which is given by a government to an entrepreneur to cover the cost. Bounty denotes a bonus or financial aid given to an industry to compete with other units in country or in a foreign market

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Objectives of Incentives

Entrepreneurship development Regional development Provide competitive strength Motivate people for new ventures Give stimulus to industry and business Employment for regional manpower

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Incentives in operation

Provision of seed capital Interest free loans Exemption from property tax Incentives to NRIs Special incentives to women entrepreneurs Taxation benefits (Tax holidays) Excise concessions Price preference to SSI units Land and building at concessional rate Exemption from stamp duty Concessional water Special facilities for import of raw material

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Subsidies in operation

Export/Import subsidies Subsidies for R & D work Transport subsidy Interest subsidy Subsidy for power generations Subsidies to artisans and traditional industries including handloom Subsidy/Assistance for technical consultancy
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Problem of Incentives and Subsidies

Studies reveal that the incentives and subsidies are being highly misused. I&S turned out to be ground for dishonesty They have given scope for favoritism and rampant corruption They have become the seeds of unethical business practices
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National Bank for Agriculture and Rural Development

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National Bank for Agriculture and Rural Development (NABARD) is an apex development bank in India. It has been accredited with "matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas in India".
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NABARD was established by an act of Parliament on 12 July 1982 to implement the National Bank for Agriculture and Rural Development Act 1981. It replaced the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of Reserve Bank of India, and Agricultural Refinance and Development Corporation (ARDC). It is one of the premiere agencies to provide credit in rural areas.

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ROLE

1.Providing refinance to lending institutions in rural areas 2.Bringing about or promoting institutional development and 3.Evaluating, monitoring and inspecting the client banks

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Besides this pivotal role, NABARD also: Acts as a coordinator in the operations of rural credit institutions Extends assistance to the government, the Reserve Bank of India and other organizations in matters relating to rural development Offers training and research facilities for banks, cooperatives and organizations working in the field of rural development Helps the state governments in reaching their targets of providing assistance to eligible institutions in agriculture and rural development
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NABARD's Roles and Functions are summarized below: Credit Functions Developmental and Promotional Functions Supervisory Functions Institutional and Capacity building Role in Training
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CREDIT FUNCTIONS

Framing policy and guidelines for rural financial institutions Providing credit facilities to issuing organizations Preparation of potential-linked credit plans annually for all districts for identification of credit potential Monitoring the flow of ground level rural credit

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Development and Promotional Functions

Help cooperative banks and Regional Rural Banks to prepare development actions plans for themselves Enter into MoU with state governments and cooperative banks specifying their respective obligations to improve the affairs of the banks in a stipulated timeframe Help Regional Rural Banks and the sponsor banks to enter into MoUs specifying their respective obligations to improve the affairs of the Regional Rural Banks in a stipulated timeframe Monitor implementation of development action plans of banks and fulfillment of obligations under MoUs
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Supervisory Functions

Undertakes inspection of Regional Rural Banks (RRBs) and cooperative banks (other than urban/primary cooperative banks) under the provisions of Banking Regulation Act, 1949. Undertakes inspection of State Cooperative Agriculture and Rural Development Banks (SCARDBs) and apex non-credit cooperative societies on a voluntary basis Undertakes portfolio inspections, systems study, besides off-site surveillance of cooperative banks and Regional Rural Banks (RRBs) Provides recommendations to Reserve Bank of India on opening of new branches by State Cooperative Banks and Regional Rural Banks (RRBs)
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