1260.Full Notes of Entrepreneurship

CONCEPT OF ENTREPRENEURSHIPORIGIN:- The term ‘entrepreneur first of all appeared in the French Language. In the early 16th century it was applied to a person engaged in military expedition. To was extended to cover the construction and civil engineering activities in the 17th century. It was the only in the 18th century that the word was used to refer to economic activities. Richard Cantillon, a French banker applied the word entrepreneur to mean a person who bears uncertainty and risk ’ Introduction Economic development essentially means a process of upward change. It can be defined as a process of a upward change. It can be define as a process whereby the real per capita income of the country increases over a long period of time.Concept Entrepreneurship is the tendency of a person to organize the business of his own and it run a profitably, using the quality of leadership, decisions making and managerial caliber etc. The term entrepreneurship is often used interchangeably with entrepreneurship. But conceptually they are different ENTREPRENEUR ENTREPRENEURSHIP

Refer to a person Refer to a process Creators Creation Organizer Organization Decision Maker Decision making Initiator Initiative

Notes By: Guljinder Randhawa 1

Leader Leadership Motivator Motivation Risk Taker RiskTaking

In a way entrepreneur precedes entrepreneurship. Entrepreneurship is an abstraction and entrepreneur are tangible person. Well designed and controlled research studies on entrepreneurship are very few.

Entrepreneurship is an abstraction and entrepreneurs are tangible persons. Well Designed and controlled research studies on entrepreneurship are very few. Entrepreneurship is a role played by or the task performed by the entrepreneur. The central task of the entrepreneur is to take the moderate risk and invest the money to earn profit by the exploiting an opportunity. For this he must posses far sight6edness to perceive an opportunity so that he can exploit it well in time.

Entrepreneurship can be defined as the propensity of mind to take calculated risk with confidence to achieve a pre determined business or industrial objectives. The word ‘entrepreneurship’ typically means to undertake. Recently in the west, the entrepreneurship is mainly an attribute of an efficient manager. But the success achived by entrepreneurs in developing countries demolish the contention thet entrepreneur is a rare animal and an elusive character. Incidentally entrepreneurship has engaged the attention of sociologist, psychologists and economist. Sociologist analysis the characteristics of an entrepreneurs in terms of caste, family, social status etc. Psychologists analysis the attribute on the basis of their personality traits such a need of achievement, affiliation and power, risk taking, decision making, creativity and leadership etc. the economist analyses them on the bases of occupational background, access to capital, business to technical experience.


According to HIGGINS “Entrepreneurship is meant the function of seeing investment and production opportunity, organizing an enterprises to undertaken a new production process, raising capital, hiring labour arranging for supply of raw material and selecting top managers for the day to day operation of the enterprise” According to Josepf. A. Schumpeter Entrepreneurship is essentially a creative activity or it is a innovation function. The process of innovation may be in the form of

Introduction of a new product. Use of a new method of production. Opening of a new market. The conquest of new sources of supplying raw material A new form of organization

According to H.N.Pathak Entrepreneurship involves the wide range of area on which series of decision are requiredwhich can be grouped into 3 categories

Perception of an opportunity Organizing an industrial unit Running the industrial unit as a profitable, growing and going concern

CHARACTERISTICS OF ENTREPRENEURSHIP

1) Calculated risk taker:- a risk situation occurs when one required to make a choice between two or more alternatives whose potential outcome are not known and must be subjectively evaluated. A Risk situation involve potential gain or loss. The greater the possible loss, the greater the risk is involved. An entrepreneur is a calculated


risk taker. An entrepreneur likes to take a realistic risk because he want to be successful.

2) Innovator:- innovation may occur in the following forms:- Introduction of a new product. Use of a new method of production. Opening of a new market. The conquest of new sources of supplying raw material A new form of organization.

Beside this an innovator must have following qualities More educated. Higher in social standing. Better equipped to deal with abstraction More receptive to risk in general Higher in achievement motivation Higher in social participation A more active information seeker An opinion leader More in contact with person outside the social system

3) Organizer:- An entrepreneur has to bring together various factors of production, minimize losses and reduce the cost of production. Initially, he may take all the decisions but as the enterprise grows, he starts delegating the authority. He produce the best result as an organizer. He select the best person, financer and make their employees to work with their loyalty and dedication. An enterprising entrepreneur should be energetic, resourceful, alert to new opportunities and able to adjust the changing condition.

4) Creative:- creativity as a field knowledge, seeks to explain how human, either individually or collectively, reach solution that are both novel and useful. Innovation means the efforts to create purposeful ventures


5) Achievement Motivated: Achievement motivation is a drive to overcome challenges to advance and to grow. An entrepreneur is achievement oriented person not ‘money hungry’. He works for his desire for challenge, accomplishment and services to other.

6) Technically Competent: success of an entrepreneur depends largely upon his ability to adopt latest technology. Technical knowledge implies his ability to device and use new and better ways of producing and marketing goods and services. An entrepreneur must have a reasonable level of technical knowledge. A dynamic entrepreneur must also be interested in changing the pattern of production to suit the requirement.

7) Self confident: Entrepreneur must be self confident. He should have faith in himself, only then he can trust others.

8) Socially responsible: in the context of the universal urge for the social change and economic development, the old concept of an entrepreneur seeking certain advantages for himself is no longer acceptable. The changing environment calls for the socially conscious entrepreneur who is not threatened by the progress of others.

9) Optimistic: an entrepreneur should approach his task with a hope of success and optimistic attitude. He attempts any task with the hope that he will succeed rather than with a fear of failure. Such a hope of success enhances his confidence and drives him towards success.

10) Equipped with capability to drive: drive is a person’s motivation towards a task. It comprises of such personality traits as responsibility, vigor, initiative, persistence and ambition. An


entrepreneur must exert considerable efforts in establishing and managing his business.

11) Blessed with mental ability: this consist of overall intelligence .i.e. IQ, creative thinking ability and analytical thinking ability and analytical thinking ability.

12) Human relation ability: personality factors such as emotional stability, personal relations, sociability, consideration and tactfulness are important contributors to entrepreneur’s success.

13) Communication ability: An entrepreneur must possess the quality of communicating effectively in written and oral communication. Good communication also means that both the sender and receiver understand and are being understood.

14) Decision making: He must possess ability to take decision effectively. Decisions taken should be based on quantitative facts.


CONCEPTUAL MODEL OF ENTREPRENEURSHIP


In the initial stage of economic development , entrepreneurs tend to be the shy and humble but as the development process pick up the speed, they tend to more enthusiastic and confident. They help to make the business environment healthy and development oriented. These kind of entrepreneur exist in developed countries only as their economic development and technology level reached at a certain level. Imitative entrepreneurs are more successful.

However various types of entrepreneur are classified as under:-

1) According to the type of business:-

Notes By: Guljinder Randhawa

ENTREPRENEURIAL PERSONALITY

ORGANISATIONAL CONTEXT

ENTREPRENEURIAL ENVIRONMENT

ENTREPRENEURIAL

TASK

ENTREPRENEURSHIP

8

Trading entrepreneur: They are related to trading activities not a manufacturing. This means buying goods from other producer and selling the goods to consumers

Industrial entrepreneur : one who set up industrial units. He complies with necessary formalities of getting license, power connection, pollution control clearance etc

Business entrepreneur : who gave new idea of a new product and services and then translate their idea into reality.

Corporate entrepreneur : Who plans, develops and manages a corporate body. He is promoter, an essential part of board of director, an owner as well as entrepreneur.

Agriculture entrepreneur : one who engaged in agriculture activities.

2) According to motivation:

Pure entrepreneur : who may or may not possess an aptitude for entrepreneurship but it is tempted by the monetary rewards.

Induced entrepreneur : attracted by the various subsidies, facilities and incentives offered by the government.

3) According to the uses of technology:

Technical entrepreneur : He concentrate more on production than the marketing.

Non – Technical entrepreneur : Developing alternative strategies for the different marketing and distribution to promote his business activity.

Professional entrepreneur : Who is interested to float a business but not ready to manage or operate it.

4) According to stages of development:-


First Generation entrepreneur : who do not possess any entrepreneurial background

Second Generation entrepreneur : who inherit the family business firms and pass it generation to another

Classical Generation entrepreneur : Who want to maximize the profit at consistant level.

5) According to Capital Ownership:

Private entrepreneur: when a individual and group of individuals setup an enterprises, arrange finance, bears the risk and adopt the latest techniques in the business with the intention to earn profit, he or the group is called as private entrepreneur. State entrepreneur: State entrepreneur means the trading and industrial venture undertaken by the state or the government itself. Joint entrepreneur: Joint entrepreneur means the combination of private entrepreneur and state entrepreneur who join hands.

6) According to gender and age

Man entrepreneurWoman entrepreneurYoung entrepreneurOld entrepreneurMiddle –aged entrepreneur

7) According to area

Urban entrepreneurRural entrepreneur

8) According to scale


Large scale industry entrepreneurMedium scale industry entrepreneurSmall scale industry entrepreneurTiny industry entrepreneur

SOCIO – ECONOMIC ORIGIN Of ENTREPRENEURSHIP

Entrepreneurial environment constitutes both internal and external factors. Environment refers to all external factors which has an impact on the working of the firm. It refers to those aspect of the surrounding of the business enterprises and circumstances of business unit which affect or influence its activities and operations and decide its effectiveness.

A) ECONOMIC ORIGIN

Economic environment influences the entrepreneurship to a great extent. The business sectors has economic relation with the govt, capital market, household and with global sector. The success of any enterprises are decided by the economic environment. The important external factors that affect the economic environment of the business are as follow:

Economic Conditions: the general economic conditions prevailing in the country .i.e. national income, per capita income, economic resources, distribution of income and assets etc. are important determinants of the entrepreneurship environment. Business cycles and economic growth of the economy are important factors of economic development. Economic System: the economic system of a country may be capitalistic , socialistic, communist or mixed. Government regulation of


economic activities depends upon on the nature of the economic systemEconomic Planning: economic planning deals with systematic and co-ordinated efforts on the part of the political authority to improve the effectiveness of the economy. Economic infrastructure: economic infrasturture consist of the provision of roads and railways, hydroelectric works, etc, some attempts have been made to involve the private sector is some areas of the infrastructures power generation , roads constructions, building highways, and telecommunication but responsibility of infrastructure is with government sector. . Availability of capital facilities: capital requirement is one of thye basic factor for any business . increase in capital investment leads higher output. Labour: division of labour is very important factor for the development of the any business. Per capita income: with help of more private entrepreneurs there can be higher level of per capita income.

B) SOCIO ORIGIN

Social environment is very comprehensive because it may include the total social factors with in which an business enterprises operates. Social environment includes people attitude, family background, religion, education etc. The factors are

Rural society: about 70% of the Indian people live in villages and Indian villages continue to be under developed even backward. Urban – rural gap is a reality of our society. The ruraliti4sfeels that though agriculture accounts for the major part’s of India’s national income. Poverty: poverty of the masses ia an important features of the Indian social system. Despite the fact of having made considerable progress


in the fields of agriculture and industrialization. A large number of population lives below poverty line. Illiteracy and ignorance: illiterates constitute a major part of the Indian social system. Nearly 64% of the population continues to be illiterate. The faculty system of education has compounded the evil of illiteracy. The need is for more determined governmental action and strong social support in this respect. Linguistic diversity: on the basis of language, Indian society stands divided into linguistic groups. The constitution of India recognize as many as 15 languages. Caste and casteism: Communalism: the presence of communal tension and the periodic outbreak of communal riots have been the bone of the Indian social system. Occupational Background.Regionalism.TraditionsProblems of social communication.

TRIATS OF A GOOD ENTREPRENEURThe term ‘competence’ implies a person’s underlying characteristics leading to his/ her superior performance. It is good combination of various qualities


and traits required to perform the job effectively. Entrepreneurs who possess the necessary competencies succeeds while those deficient in these competencies fail in their ventures. Some people believe that entrepreneurs are born not made. In other words, business family background is essential to success for entrepreneurs. Other people believe that entrepreneurs are not made born. According to some people, person which proper knowledge and skills acquired through education and experience can become successful entrepreneur. In other words resolve the controversy on what successful entrepreneurs, the Entrepreneurship development Institute of India (EDI). Following are the traits or good qualities of the entrepreneur:-

Initiation: given the demand of the situation, entrepreneur takes initiation to start an industry .Watching for opportunity and take necessary action.Persistence: - he should go for extreme efforts to get rid of the problem.Information seeker:- ready to learn from his experienceQuality conscious: - Always put effort to excel better than the existing standard of performance.Commitment to work: - Accord upmost priority to accomplish the work.Efficiency lover: - tries to do things at the faster pace incurring minimum cost.Proper planning: - frames realistic business plans and follow them effectively.Self confidence: - A strong believer in his strengths and weakness.Assertiveness: - able to assert his issues.Persuasion:- succeeds in persuading other to do what he wantsEfficient monitoring: - personally supervises the work to ensure that the work is accomplished.Concern of employees and take proper action to improve the welfare of employees working in his enterprises.

Several other research studies have tried to identify the qualities and traits of successful entrepreneurs. In the study of entrepreneurial development in


Madras city of India, J. Berna has stressed the following qualities of a good entrepreneur.

He is an enterprising individual. He is energetic, hardworking, resourceful, very alert to new opportunities, able enough to adopt to the changing condition.He is also interested in expanding the scale of his operation by way of ploughing back his profit. He welcome advanced technology.He well visualize the likely changes and ready to adapt them

According to McClelland the successful entrepreneurs are characterized by the 3 qualities:

He is endowed with an unusual creativeness.He is enriched by high propensity.He has a strong need for achievement.

Having gone through the foregoing qualities of a successful entrepreneur, an integrated view of the qualities of a successful entrepreneur can be listed as follows:-

Capacity and willingness to assume risk.Willingness to hardwork and be always tenacious.Vision and forsightedness.Creative and imaginative thinking.High need achievement. Innovativeness and willingness to adapt change.Ability to utilize resources properly.Total commitment, determination and perseverance.High degree of ambition.


DIFFERENCE BETWEEEN ENTREPRENEURS AND MANAGER

BASIC MANAGER ENTREPRENEURS

Primary MotivesMangers want promotion and traditional corporate reward

Entrepreneurs want freedom, a goal oriented self– reliant and self motivated

Time Orientation

Manager respond to quotas and budgets, weekly, monthly and yearly,

Entrepreneurs end goals of 5 to 10 year growth of business in view as guides

Skills Mangers are business schools trained

He knows business intimately. He learns through experience.

Attention

Attention of managers are primary on event inside corporation

The attention of entrepreneur is primarily on


technology and market place.

RiskManagers are very careful

Entrepreneur like calculated risk

Status Managers are the employees

Entrepreneur are the owner.

Educational Level Highly educated. Less well educated.

FACTORS EFFECTING ENTREPRENEURSHIP

Entrepreneurship does not emerge and grow spontaneously. Rather it is dependent rather it is dependent upon several economic, social political and psychological factors. These environmental factors may have both positive and negative influences on the growth of entrepreneurship. Various environmental factors inhibiting the emergence of entrepreneurship are given below.

ECONOMIC CONDITION: Economic environment exercise perhaps the most direct and immediate influence on entrepreneurship. Capital, labour, raw materials and markets are main economic factors. enterprise. Availability of capital facilities the entrepreneur to bring together the labour of one,


machine of another and raw material yet of another to combine them to produce goods. Capital is regarded lubricant in the production process. With an increase in investment, capital – labour ratio tends to increase. This results in increase in profit which ultimately goes to a capital formation. This suggest that capital supply increases, entrepreneurship increases entrepreneurship. As the given labour is more efficient it increases the quality as well as production. Which help to increase the level of profit and encourage more entrepreneurship. If labour supply is unlimited even then entrepreneur can use labour intensive technology. Which reduce the cost of production and remove the problem of unemployment from the economy.

Material: The necessity of the raw material hardly needs any emphasis for establishing any industrial activity, therefore it influence in the emergence of entrepreneurship. In the absence of raw material there is no production which leads to no entrepreneurship.

Determinant of probable rewards for the entrepreneurial function. The size and composition of market both influence entrepreneurship in their own way.

A. SOCIAL FACTORS: social environment in a country exercise s significant impact on the emergence of entrepreneurship. The main component of social environment are as follows

Legitimacy of entrepreneurship: The proponents of non – economic factors give emphasis to the relevance of the system of norms and value with a socio – cultural setting for the emergence of the entrepreneurship. In a professional vocabulary, such system is referred to as legitimacy of entrepreneurship in which the degree of approval or disapproval of granted entrepreneurial behavior influence its emergence and its characteristics if it does emerge. While


Schumpeter recognize the importance of such Legitimacy in the terms of appropriate social climate for entrepreneurship.Social Mobility: Social mobility involves degree of mobility, both the social and geographical, and the nature of the mobility channels with in the system. Some hold the view that a high degree of mobility is conductive to entrepreneurship. Both the needs for “openness” of a system and need for “flexibility” in role relations imply the need for the possibility of mobility within the system for entrepreneurship development. But this is believe that system should not be to rigid nor to flexible. If it is to flexible than the individual will gravitate toward other roles. If it is too rigid , entrepreneurship will be restricted along with other activities.

The two preceding factors - Legitimacy of entrepreneurship and Social Mobility largely determine the influence of marginality on entrepreneurship. In situation in which entrepreneurial Legitimacy is low, mainstream individual will be diverted to non entrepreneurial role and entrepreneurial role will be relegated to the marginals. On the contrary in the case of the high Legitimacy of entrepreneurship, mainstreams individual will assume the entrepreneurship and marginal will have to find other role as mean of mobility.

Security: Several scholars have advocated entrepreneurial security as an important facilitor of entrepreneurial behavior. Yet, scholars are not consensus on the amount of security that is needed. While McClelland speaks of moderate certainty. Security is also regarded as a significant factor for entrepreneurship development. This is reasonable too because if individuals are fearful of losing their economic assets or being subjected to various negative sanction, they will not to be inclined to increase their insecurity by behaving entrepreneurially.

B. PSYCOHOLOGICAL FACTORS: Many entrepreneurial theorists have propounded theories of entrepreneurship that concentrate specifically upon psychological factors.


Need Achievement: Withdrawal of status respect

C. Government Influence: the govt by its action or its failures to act does influence both the economic and non economic conditions for entrepreneurship. Any interested government in economic development can help, through clearly expressed industrial policy, promote entrepreneurship in one way or other. Bu creating basic facilities, utilities and services and by providing incentives and concessions, the govt can provide the prospective entrepreneur a facilitative socio economic setting.

FACILITATING FACTORS BARRIERS

1 Technical knowledge Lack of Technical skills

2 Entrepreneurial training Lack of market knowledge

3 Market Contacts Lack of seed capital

4 Family business Lack of business knowledge

5 Availability of capital Social stigma

6 Successful role models Time presures


7 Local manpower Legal and bureaucratic constraints

8 Capable advisors and supporters Political Instability

9 supplier assistance Political instability

10 government and institutional support Non cooperative attitude of banks and

other institutions

MOTIVATION Entrepreneurial behavior is the result of entrepreneurial motivation. Motivation refer to the inner urge that ignites and sustain behavior to satisfy need. Motivation has been derived from the word ‘motive’ which implies the


inner state of mind that activates provokes and direct our behavior toward the goal. According to McFarland “Motivation refer to the may in which urges, drives, desires, striving, aspiration or needs direct control or explain the behavior of human being.” Thus motivation may be defined as the process that motivate a person into action and induces him to follow the course of action till the goals are finally achieved. Motivation includes motives, behavior and goal.

MEANING OF MOTIVATIONMotivation implies an inner state that cause a person to act toward the attainment of goals. It is an inspirational process of steering an individual’s inner drive and action toward goals. It causes a chain reaction. Motivation can be both positive and negative. Positive occurs when a person is inspired to act for earning some rewards and benefits. On the other hand negative motivation arises from fear or failure or frustration. It causes a person to seek protection.


GOALS MOTIVES BEHAVIOUR

FACTORS OF MOTIVATION

Several studies have been undertaken to identify the factor that motivate people to sart their enterprises. P.N .Sharma has identified nine motivating factors which are as under.

1. Internal FactorsEducational BackgroundOccupational ExperienceDesire to work.Desire to branch out manufacturing.Family background.

2. External FactorsAssistance from government.Assistance from financial institution.Availability of technology/ raw materialOther factors demand of a particular product, utilization of excess money earned from contractual estate business, started manufacturing to facilitate trading distribution system, government policies and many other factors.

The Internal factors constitute the personality of the entrepreneur and there by generate an inclination to adopt entrepreneurial activity. The presence of these factors is essential for the entrepreneurial activity to take place. The presence of internal factors is necessary condition for the entrepreneurial activity to take place. But the entrepreneurial idea cannot fructify or take real shape without a proper or conducive environment which provides support in terms of financial assistance, technology and raw material and infrastructural facilities. Among the internal motivation , the desire to do something creative was important. According to the stidy of P.N.Sharma revealed occupational experience as the most significant internal motivating factor. This experience was accumulated by the entrepreneurs either as a business executive in industrial concern or as a trader, consultant in the related field. Notes By: Guljinder Randhawa 23

Technically and professionally qualified entrepreneur had establish an enterprises in the field of their specialization which amply proves that they were prompted by their qualification or specialization to initiate industrial activity. Among the external factors, assistance from the financial and other governmental institutions was rated, the strongest motivator. Other factors includes availability of surplus funds, sick unit available at a cheap price, success stories of first generation entreprenures, support of friends and relatives.

Prof R.A.Sharma has classified the factors which prompted entrepreneursA. Factors internal to the entrepreneur.

Strong desire to do something independent in lifeTechnical knowledge and/ or manufacturing experience.Business experience in the same line.

B. Factors external to the entrepreneurAccommodation in industrial estates.Financial assistance.Machinery on hire purchase.Attitude of the government to help new units.Financial assistance from non government sources.Encouragement from big businessHeavy demandProfit margin.Unsounded unit at a cheap prices


ENTREPRENEURIAL AMBITIONAnother study on entrepreneurial motivation by M Chandra sekhar and M Gandhara Rao have classified the factors behind entrepreneurial growth into 3 categories. And Ambition of Entrepreneur is one of themMain Ambitions of Entrepreneur are

To make money: to earn as much profit they can.To continue family business.To secure self employment/ independent living.To fulfill desire of self/wife/parents.To gain social prestige.Making of decent living.Self employment of children.Provide employment to other.Raise the level of economic development.Make use of idle time.


ACHIEVEMENT MOTIVATION THEORY

According to McClelland, executives generally have a higher need for the achievement than the men in other profession. He considers the need for the achievement to be most critical to a nation’s economic development. He believed that achievement motivation was lower among the underdeveloped countries as compare to developed nations. Overall better results can be definitely be achieved by making people achievement oriented. According to McClelland achievement motivation can be developed through training and experience. Ambition is a level of motives and nourishes achievement motivation. McClelland conducted Kakinada experiment in Kakinada town of Andhra Pradesh. 52 persons from business and industrial community from the Kakinada town were selected. They participated in an orientation programme conducted by the Small Industry Extension Training Institute (SIETI), Hyderabad. The experiment was design to stimulate the imagination and encourage introspection into personal motivation and community goals. The achievement development programme consisted of the following steps:


a) The individual strived to attain concrete and frequent feedback.b) The participation sought model of achievement i.e watched those who

have performed well and try to emulate them.c) The participants imagined themselves in need of success and

challenge. They set carefully planned and realistic goals.d) The trainees were asked to control day dreaming by thinking and

taking to themselves in a positive term.After 2 years the trainees were observed. It was observed that they performed better than those who did not attend the programme. McClelland concluded that the participant displayed the more active business behavior and worked for the longer hours. McClelland explain that the people with low achievement motivation are prepared to work hard for money or other such incentives but the people with higher achievement motivation work for status.

He argue that people with high need for achievement possess the following attributes:

Prefer personal responsibility for decision. Are moderate risk taker. Possess interest in concrete knowledge of the result of decisions.

ESTABLISHMENT OF ENTREPRENEURIAL SYSTEMS

An entrepreneur, after making appraisal of the resources at his command, perceives a business opportunity for producing and marketing a product or services. After establishing an enterprises an entrepreneur is required to look after the operation of this enterprises over a period of time. An entrepreneur is expected to undertaken the following steps in his pursuit of setting up an enterprise


1) Searching for prospective business ideas or opportunities.2) Processing of these ideas and selecting the best idea.3) Collecting the required resources and setting up the enterprises.

1) Searching for prospective business ideas or opportunities: Promotional activities commence with search for prospective business idea and opportunities. The promoter is required to employ his imagination and foresight in preparing list of business ideas. Business idea may come to his mind at his own or he may depend on various sources like success stories of other entrepreneurs, excess demand for any product, producing import substitute product, study of project reports assistance from governmental agencies, visit to trade fair. Idea should be sound and practicable may relate to starting a new business or takeover of an existing enterprise. The idea must be viable and should ensure adequate return on investment. The business idea may originate from the following sources:

Market Observation: relevant knowledge, about various products, can be obtained with the help of market surveys. Based on the information collected, an assessment can be made about the Demand – Supply position of different products.Expert advice of salesmen, dealer, advertising agencies and commercial consultant may be considered while anticipating demand for the product.Consumer Survey: the success or failure of any venture depends upon prospective consumers. Through surveys detailed information regarding taste, fashion, liking, disliking, when they will buy, where they will buy, where they will buy, from, at what prices they will buy etc is collected. Thus a product can be devised in such a manner so that it fits exactly into the requirement of the prospective buyer. Keeping Track of the development: A prospective entrepreneur must keep his eyes and ear open. He should keep in touch with whatever is happening around especially concerning business idea, new products, changes in technology etc. in order to


successful he must acquire whatever best that is available from anywhere. Sometime useful business ideas can be discovered by keeping in touch with the developments taking place in developed countries.

Assessing the market trends in terms of demand.Providing plate form for the meeting of large number of buyers.Assessing the attitude of competitor in a particular productComparing the quality and prices of competing products.Establishing personal contact with the dealer.Promoting new ideas for increasing sales.

Scrutinizing Project Profiles: Various agencies, both government and private provide profiles of various project and industries. Through these profiles an entrepreneur can assess the technical, financial, managerial and market requirement of various projects

2) Processing of these ideas and selecting the best idea: under this head detailed investigation of the potential idea is carried on. This investigation can cover technical and commercial facilities.

Technical Feasibility: it is ascertained as to what extent it is possible to technically produce the product, conceived through the idea. Technical feasibility cover detail study with regard to the availability of the requisite technology and other input requirementCommercial Feasibility: detailed study is carried on to know about the profitability of different ideas. This investigation includes projections about the probable idea about the demand, sales volume, cost of production, breakeven point and profitability expected under different business proposition. The idea selection for the product may be influenced by the following consideration:

Demand supply gap or the extent up to which demand exceeds supply.Product where profitability is more.


Product where entrepreneur possesses marketing or manufacturing experience.Product are to be used by the parent company for the assembly of final productProduct whose imports are discouraged by the government.Product which have got more export potential.Product enjoying various types of concession in the shape of subsidies and incentives

3) Collecting the required resources and setting up the enterprises: an entrepreneur in order to be successful is required to remain in touch with what is happening around. He is required to develop a sound and efficient system of collecting, recording and analyzing of market information. This system ensures availability of a right information at a right time to a right person. Entrepreneur as a decision maker is required to perform the following function:

The determination of objective of the enterprise.The development of organization.Secure adequate financial resources.The requisition of efficient technology.The development of the market for the product and devising of a new product.The maintenance of good relations with public authorities and with society at large.

All the above stated function is important but the function regarding finance, manpower and marketing, demands more attention of entrepreneur.


SMALL SCALE BUSINESSINTRODUCTION:- Small sector occupies an important position in the industrial structure of our country. In a country like, India, wherein on one hand there is the acute problem of unemployment and on the other hand scarcity of capital, it is only the small sector which is best suited under these conditions. Indian economy is characterized by the huge size of population, availability of wide variety of abundant natural resources, ever growing size of market and shortage of capital. Over a year small sector has acquired greater importance in Indian economy. In terms of employment this sector is next to


agriculture. The role of small scale industries is one of the important features of the planned economic development of India. In India this sector has been assigned with significant role in the industrialization and economic development of the country, as an effective tool in subserving the national objective of growth with justices.

DEFINITION OF SMALL SCALE UNIT:-

The definition of small scale sector unit can be categorized in different ways depending on the country’s pattern and stage of development, policy aims and administrative set up. There can be 2 basis for defining small business and these are:

1) SCALE OF BUSINESS : The size or scale of business can be measured in various ways of like:

Investment on plant and machinery.Employment generation.Investment and employment.Volume and/or value of production.Volume and/or values of sales.

2) QUALITATIVE ASPECTS : These can beOwnership of small business is in hand of individual or a few individual.Mgt and control in SSI unit is normally labour intensive.Small scale business is normally carried on in a limited or local area

CHARACTERISTICS OR FEATURES OF SMALL SCALE INDUSTRIESA. Ownership: Ownership of SSI is with one individual in sole

proprietorship or it can be with a few individual in partnership.


B. Management and control: SSI is normally a one man show and even in case of partnership the activities are mainly carried out by the active partner and the rest are generally sleeping partners

C. Gestation period: Gestation period is that period after which teething problem are over and return on investment starts.

D. Area of operation. The area of operation of SSI generally localized catering to the local or regional demand. The overall resources at the disposal of a SSI are limited and as result of this, it is forced to confirm its activity to the local level.

E. Technology: SSI are fairly labour intensive with comparatively smaller capital investment than the large unit.

F. Resources: SSI uses local resources and as such can be located anywhere subjected to availability of resources

G. Dispersal of unit. SSI use local resources and can disperse over a wide territory. The development of the more SSI unit in rural or backwards state promotes balanced regional development.

H. Flexibility: SSI as compare to LSI are more change susceptible and highly reactive and responsive to social economic condition. They are flexible to adopt new changes.

ADVANTAGES OR IMPORTANCE OF SMALL SCALE UNITS :

SSI play a very important role in economic development of our country. The soico- economic development of India depends upon the development of the SSI. This sector is contributing a lot towards the different sectors of the country.

A.A. Generation of employment opportunities.B.B. Balanced regional developmentC.C. Mobilization of capital.D.D. Mobilization of entrepreneurial skillsE.E. Regional dispersal of industries.F.F. Use of local resources


G.G. Self employment.H.H. Optimum use of capital.

I.I. Conservation of foreign exchange.J.J. Equitable spread of income and wealth.K.K. Supporting large scale industries.L.L. Contribution towards national economy.


ROLE OF SSIA. Number of units.B. Employment generationC. InvestmentD. OutputE. Contribution of exportsF. Equitable distribution of income.G. Mobilization of capitalH. Regional dispersal of industriesI. Better industrial relations

PROBLEMS OF SMALL SCALE SECTOR:A) Marketing problem of small business

Poor product quality Scale of production Poor sales promotion Lack ok knowledge of marketing Lack of marketing opportunities Absence of suitable marketing channel

B) Production problem of small scale industries Maintenance of delivery schedules Shortage of raw material Ignorance of scientific methods of production Under utilization of production capacity Import restriction Gestation period Diversification of the products


Qualtuy control Product cost Electricity

C) Problem related to finance Requireemnt of capital and vredit Problem of procuring working Inappropriate financial structure Hurdles in getting loans sanctioned Pattern of repayment of loans Structure of interest rates Wrong financial planning Improper utilization of funds

D) Problem of human resources Non availability of skilled manpower Labour problem

E) Other Problem Technological changes Land and building Infrastructural facilities Faculty planning License system Managerial inadequacies Analysis of business environment Machinery and other equipment Lack of technological upgradation


STEPS FOR STARTING A SMALL INDUSTRY

Setting up of business enterprises is a very challenging and rewarding task. Several problems are involved in task. Right from the conception of the business idea up to the start of production , numerous decisions have to be taken. In order to succeed in this task. An entrepreneur must correctly perceive the nature and intensity of problem o be faced and implement appropriate plans. A potential entrepreneur has to pass through various stages for his setting up his small scale units and these are as under:

A.A. Decision to be self employed: An educated person has to decide between 2 options either to work for others as an employee or to work for himself as entrepreneur. In case he possess the right type of knowledge, skill, experience and aptitude that the best option for him is setup his own enterprises. After setting up his own business he is a manager, owner, controller of all the affairs of his enterprises. This is a way they are generating their self employment and also employment to other. There may be certain other contributory factors like facilities and incentives provided by the government, lesser legal formalities, lower investment etc which may tempt an individual to become independent and set up his own enterprises.

B.B. Identification of opportunities: A small scale enterprises originate and operate within the business environment. An enterprise has to remain in touch with the business environment for the sake of its existence, success and future. The interaction between an enterprise and environment help in the understanding of the business which facilitate taking of various strategic and operational decision helping in the growth and success of venture. Various economic, social political, technological and psychological factors effect the emergence and growth of entrepreneurship. An entrepreneur should understand the


behavior of the key environmental factors that are going to affect the present and future operation in the enterprise.

C.C. Selection of the product: An entrepreneur has to identify or select the product based on marketing research. He has to identify both short term and long term potentials or prospects of the product. Any country where level of development has not been upto the desired extent is not fit for innovative entrepreneur . the imitative nature of the entrepreneurs is mainly the result of inherent deficiencies in an underdeveloped economy. Lack of adequate and appropriate training facilities and less emphasis on R&D. an entrepreneur would select the product based on his own knowledge, skill. Experience and motivation. An innovative entrepreneur having urge to do something new, design the product himself and create the new market for his product whereas imitative entrepreneur may improve upon an existing product implies taking steps for improving usefulness of the product or affecting saving in cost. An entrepreneur before deciding about the product should find the answers for the following important questions.

Who will buy the product?When they will buy?How much they will buy?From where they will buy?What are their expectation from our product?Who are our competitors and how they are performing?How to advertise and sell?

Economic viability of the product can be ascertained by considering the following aspects

Assessing the existing demand in the domestic and exort market.Assessing the potential demand.Availability of substitutes in the market and their performance.Expected demand from big unit of ancillary product

Small scale entrepreneur in our country produce as many as 7500 items ranging from ordinary to highly sophisticated products.


D.D. Selection of ownership Form: the form of ownership for small scale unit can be sole proprietorship, partnership family ownership and private limited company. The role proprietorship and family ownership are difficult to differentiated as these 2 categories are practically family concerns by the virtue of ownership and management.

E.E. Location of the unit: Decision about the location of the unit is very important and can have bearing on the working or the future of the enterprise. In his pursuit of the good location an entrepreneur should carefully study the following factors:

Location is in home land.Availability of governmental incentives.Nearness to market and sources of raw material.Availability of labour and other infrastructural facilities like transportation, water, banking.Existence of culture of quality industrial production.Pollution level in the area.

F.F. Designing financing scheme: After deciding about the location the next important consideration is financing. An entrepreneur is to properly assess his financial requirement and take necessary steps for raising the requisite financial resources. An entrepreneur can depend on various sources for financing his enterprises and these are:

Own funds.Borrowing from the friends and relatives.Loan from the commercial banks for the working capital.Term loans from the financial institution and state Finance Corporation.

There are many hurdles in financing small scale units and risk involved is more because of the following factors

Limited managerial expertise.More vulnerability to business environmental pressure Insufficient collateral to comply with the term and conditions of lending institution.Organizational constraints.


Limited saving.

G.G. Acquiring manufacturing know- how: there are certain projects where in sophisticated manufacturing know – how is required. Many institutions of the government, research laboratories, research and development division of the giant industries and certain consultancy agencies provide the manufacturing know – how. In case of the ancillary unit this know – how can be provided by the major unit for which it is working. Suppliers of plant and machinery can impart the necessary expertise through training.

H.H. Preparation of Project Reports

GUIDELINES FOR PROJECT REPORT

Project reports is a proposal for creation of productive capacities for manufacturing goods or providing services. Project report is written statement of what an entrepreneur proposes to take up. Preparation of the


project report clarifies to the entrepreneur various processes which is necessary for setting up and managing a new business venture. This reports helps entrepreneur to have disciplined thinking and advanced planning. It is not mearly a document covering precise details in respect of financial and economic viability rather it is a projection of performance based on certain assumption. A project report contain the information starting from very general issues to detailed examination of specific issue relating to entrepreneur’s qualification, particular of his unit, market demand sources of supply of raw material, capacity of a plant, means of financing, marketing and selling arrangement, cost and profitability of the project. The project report appraisal by the financial institute cover the following.

1. The information contained in the project report about the promoters themselves reveal their managerial and entrepreneurial capabilities.

2. Every small unit come into existence for promotion of certain socio – economic benefits like providing employment opportunities, reducing regional imbalance etc. financial institutions finace only those unit which are more important in terms of socio- economic benefits.

3. The project report contain the information about the market potential of the product and projection of short and long term demand of the proposed product.

4. The project reports contain the information about technical feasibility of the product. Various queries or aspect scanned under this head are technical viability, breakeven point, alternative technologies available etc. if the response to the above queries is positive in the project report the project is considered feasible.

5. Finicial institution are equally concerned with the financial viability of the project. The project report should highlight the financial viability. Project report also shoe the repayment capacity.

Project report of small scale enterprises is not so sophisticated as in the case of project report of a large units. Project report of one small unit is different from other small unit’s project report.


Mr. Vinod Gupta in his study on ‘ formulation of a project report’ divides the process of project development into 9 stages:

1. General Information: Consist of Bio data of promoter, industry profile, constitution and organistion covering and product details

2. Project Description: Consist of location of industry, physical infrastructure, supply of raw material and labour, water and electricity supply etc.

3. Market potential: Consist of demand and supply positions

4. Capital cost and source of finance: Consist of components of capital like land and capital, plant and machinery, margin of working capital.

5. Assessment of working capital: Consist of its sources of supply, length of working capital cycle should be estimated.

6. Other – Financial Aspects: Consist of judging profitability of the project a projected profit and loss account indicating sale revenue, cost of production, allied cost and profit should be prepared.

7. Economic and social valuable: various socio economic benefits expected from the project should be included in the project report.

8. Project implementation: the time table for implementation of the project delay resulting in cost over run should be avoided. Delay in project can affected financial availability of the project.

9. Registration: The next step is to get the unit registered with the department of industries on provisional basis. The provisional registration can be issued to the entrepreneur to:

Apply for shed in industrial estate.


Apply for corporation , municipal or other local authorities fpr permission to construct the shed for establishing the unit.Apply for power connection.Apply to SSIS for procuring machinery on hire purchases basis.Obtain sales tax, excise registration etc.Apply for telephone connection.Import license for capital good/ raw material.


1260.Full Notes of Entrepreneurship

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