Professional Documents
Culture Documents
MODULE- I
v Definition of Entrepreneurship
v Need for Entrepreneurship
v Factors Influencing Entrepreneurship
v Introduction
v Communities that promoted entrepreneurship in India
v Causes of slow growth of Entrepreneurship in India
Family Business in India
v Stages of Evolution of Entrepreneurship
Ø Characteristics of Entrepreneurship
v Qualities of Entrepreneurship
v Entrepreneurial functions
v Classification of Entrepreneurs
Ø Difference between
v Entrepreneur & Manager
v Entrepreneur and Entrepreneurship
v Entrepreneur and Enterprises
v Entrepreneur and Administrator
v Entrepreneur & Intrapreneurship
RAMB
-1-
ENTREPRENEURSHIP BMS SEM VI
INTRODUCTION
WHO IS AN ENTREPRENEUR?
The entrepreneur displays courage to take risk of putting his money into an
idea, courage to face the competition and courage to take a leap into unknown
future and create new enterprises/ business. This creative process is the life
blood of the strong enterprise that leads to the growth and contributes to the
national development.
The entrepreneur will always work towards the creation and enhancement of
entrepreneurial society.
RAMB
-2-
ENTREPRENEURSHIP BMS SEM VI
The best entrepreneur in any developing country is not the one who uses
much capital but an individual who knows how to organize the employment
and training of his employees.
A classic example is that of Mr. Dhirubhai Ambani because he had all the
dynamic qualities of a successful entrepreneur, as a result of which today, he
was the owner of the largest private company in India. All decisions which he
had taken to grow were instinct and no one had taught him to take decisions.
BASICS OF AN ENTREPRENEUR
Organization
Urge Innovation
Skill Risk
Vision Enterprise
Growth
Management
As per Peter Drucker- “An entrepreneur is one who always searches for
change, responds to it as an opportunity. Entrepreneurs innovate. Innovation
is a specific instrument of entrepreneurship”.
RAMB
-3-
ENTREPRENEURSHIP BMS SEM VI
As per Walker- “An entrepreneur is one who is endowed with more than
average capacities in the task of organizing and co-coordinating the various
factors of production. He should be a pioneer, a captain of industry.
ENTREPRENEURSHIP DEFINED:
Schumpeter
Entrepreneurship
INNOVATION
RISK- BEARING
RAMB
-5-
ENTREPRENEURSHIP BMS SEM VI
v EMPLOYMENT GENERATION:
Great dynamism is one of the qualities of the small and medium enterprises.
This quality of dynamism originates in the inherent nature of the small
business. The structure of small and medium enterprises is less complex than
RAMB
-6-
ENTREPRENEURSHIP BMS SEM VI
Small business promotion needs relatively low investment and therefore can
be easily undertaken in rural and semi-urban areas. This in turn creates
additional employment in these areas and prevents migration of people from
rural to urban areas. Since majority of the people are living in the rural areas,
therefore, more of our development efforts should be directed towards this
sector. Small enterprises use local resources and are best suited to rural and
underdeveloped sector. This in turn will also lead to dispersal of industries,
reduction in concentration of economic power and balanced regional
development.
v INNOVATIONS IN ENTERPRISES:
v FAMILY TRADITION:
Individuals who for some reason, initiate, establish maintain and expand new
enterprises generate entrepreneurship in society. It is observed that
entrepreneurs grow in the tradition of their families and society and accept
certain values and norms from these sources.
RAMB
-7-
ENTREPRENEURSHIP BMS SEM VI
Religious, social and cultural factors also influence the individual taking up
an entrepreneurial career, in some countries there is religious and cultural
belief that high profit is unethical. This type of belief inhibits growth of
entrepreneurship.
v PSYCHOLOGICAL FACTORS:
v POLITICAL FACTORS:
The political and also the political stability of country influence the growth of
entrepreneurship. The political system, which promotes free market,
individual freedom and private enterprise, will promote entrepreneurship.
v ECONOMIC POLICIES:
The economic policies of the government and other financial institutions and
the opportunities available in a society as a result of such policies play a
crucial role in exerting direct influence on entrepreneurship.
From times immemorial, the Indian society has been characterized by a kind
of stratification of religious and regional sections. The Hindu society projected
a type of hierarchy in which the caste groups were separated from each other
on the basis of function. Every member of the society followed the family
occupation. This caused immobility between occupations.
RAMB
-8-
ENTREPRENEURSHIP BMS SEM VI
The Bania was a caste that carried on the trading and money lending
business. They specialized in trade and commerce and came from urban
areas. In fact, because of their good financial, standing, their position was an
enviable one in the urban centers. However they ranked third in the caste-
hierarchy. The Brahmins ranked first and kshatriyas second.
The caste system was so rigid, that people were afraid of ostracisation .But in
places where the caste system was relatively loose and the trading caste were
missing, people from other castes, undertook commercial activities and were
also regarded as the members of the business community.
1. THE PARSIS:
The trading castes of South India were the chettis. They were dividing into
various groups such as the Telugu komatia, the Tamil, Nattukottai Chettis,
and Beri- Chettis etc. The Komatia were the chief traders not only in the
RAMB
-9-
ENTREPRENEURSHIP BMS SEM VI
Telugu districts but also in Mysore, Coimbatore, Canara and other places. The
chief financiers are bankers of South India were the Nattukottai Chettis.
Trading in drugs grain and cloth was done by the Beri-Chettis. In the early
19th century they were known to be respectable peddlers who traveled in
caravans. The communities that traded had trade relations with South- East
Asian countries like Burma, Ceylon, and Malaya, Singapore etc. The chettiars
established connections with reputed Indian business firms and also made
good investments in and property. They became important suppliers of rural
credit. The Nattukottai Chettiars were a well- known business community in
Burma. Their working funds invested abroad were mainly employed in
Burma.
When the monopoly of the East India Company ended in 1857, a period of
boom began for the Christians who prospered as merchants. They played the
role of private bankers. The Syrian and Chaldean Christians were active in
promoting Joint Stock Banks at the end of the 19th century.
This important and fairly developed business community came from Marwari
in Rajasthan. The trading and money lending cases got tremendous
development in Gujarat and Rajputana on account of the famous route from
Gujarat ports to the historical center of the Great Mughal state.
Rajputana was torn by feudal strife during the first half of the 19th century. It
was not the place for large scale trading and money lending operations.
Though the local trade was good, it provided a limited scope for
development. Trade remained fairly constant and it was because of this that
investment crossed the borders of Rajputana. Trade spread in towns
throughout the north, east and west of India, especially to the commercial
centers of Bombay and Calcutta.
With the rise of British commerce, these traders gradually replaced the
Bengalis who served as British agents in Calcutta. The Brahmins and the
Kayasthas of Bengal who operated as the British agents started tuning their
attention to investments in land. They even got into 9 professions and
administrative services. But the Subarna Banika, a Bengal trading community
filled the void created by such an occurrence. But Bengal soon became the
center for political revolution. The Britishers both rulers and traders did not
RAMB
- 10 -
ENTREPRENEURSHIP BMS SEM VI
1. Caste System: - This decided occupation for members from each caste.
The altitudes were restrictive and therefore there were no changes of
accumulating wealth and promoting production.
RAMB
- 11 -
ENTREPRENEURSHIP BMS SEM VI
9. Recognition by the society: - In earlier days, the heroes India were the
social reformers and the politicians. Now it is the era of sportsmen,
models and film stars. It is sad that successful or the struggling
entrepreneurs have never been recognized as heroes. Entrepreneurial
activity did not get due importance in the India society.
Entrepreneurship is not just a way to- increase the level of innovation and
productivity of organizations, although it will do it. More importantly, it is a
way of initiating vast business so that work becomes a joyful expression of
one’s contribution to society. The Indian entrepreneur, intrapreneur and/or
manger of the 90’s have to be molded in psycho- philosophy rooted in the
Indian context and values.
In August 1992, with their combined savings of Rs. 25,000, Alka and Anupam
Joshi launched premier clothing as an export- oriented unit. The premier
clothing has been licensed to market, for the first time, The Disney babies’
range of products in India.
for them. That’s clearly part of his philosophy of manufacturing for a ready-
made market. And, as in the case of the Disney babies’ line, to a ready- made
mindset, either ways, it’s a premier strategy.
Chandan Sumaya look plunge in 1985 armed with only” a passion for cars”
borrowing Rs 30,000 from his mother to float Kent. This name he chose
because it rhymed with rent and had an international ring- car. Apparently,
he fell in love with the business while helping his uncle run one. Working out
of his home in Bombay’s Nepean Sea Road, Sumaya installed a desk and a
telephone in the front half of his garage; the car took up the rest. Only by the
end of the second year could he afford to invest in two more Ambassadors
cars.
He has invested in a fleet of 136 cars and concentrates on the corporate sector,
where they are market leaders. Kent Cars is now poised to drive into the
national market place through the franchising route. Whether or not he does
as well in these cities as he is in Mumbai, Chandan Sumaya has driven a long
way from the home garage he started from. And that’s the spirit of Kent.
1. Hunting Stage: - The primary stage of the evolution of the economic life
of man was hunting stage. Wants were limited and very few in numbers.
The family members themselves satisfied problems of food, clothing and
shelter. Producers were the consumers also. Robinson Crusoe, living in
the deserted island, satisfying his own requirements had no knowledge of
business. People in some parts of Africa and India still lead this type of
life. In this stage problems of production and distribution were not
complexed since wants were simple and limited.
QUALITIES OF ENTREPRENEURSHIP
The qualities that contribute to the success of an entrepreneur are as follows: -
RAMB
- 15 -
ENTREPRENEURSHIP BMS SEM VI
RAMB
- 16 -
ENTREPRENEURSHIP BMS SEM VI
15. Patience: - Patience means ability to wait. Patience also means doing
the work and waiting for the result. A certain amount of patience is
necessary in any type of vocation. An entrepreneur should not wait for
actions but can certainly wait for result for his efforts.
16. Hard working and energetic: - Ability and willingness to work hard is
an important quality of an entrepreneur. A person having physical and
mental stamina to cope with the hard work and human relation is fit to
become a successful entrepreneur. By carrying out well- planned and
systematic work, success is always the end result.
ENTREPRENEURIAL FUNCTIONS
An entrepreneur is said to perform the following functions:
RAMB
- 18 -
ENTREPRENEURSHIP BMS SEM VI
Risk - Managing
Taking Enterprise
Entrepreneur
RAMB
- 19 -
ENTREPRENEURSHIP BMS SEM VI
CLASSIFICATION OF ENTREPRENEURS
The entrepreneurs have been broadly classified according to
v Types of business
v Use of professional skill
v Motivation
v Growth
v Stages of development
ENTREPRENEURS IN TECHNOLOGY
RAMB
- 20 -
ENTREPRENEURSHIP BMS SEM VI
v Non- technical entrepreneur are those who are not concerned with the
technical aspects of the product in which they deal. They are concerned
only with developing alternative marketing and distribution strategies
to promote their business.
DIFFERENCE BETWEEN
RAMB
- 22 -
ENTREPRENEURSHIP BMS SEM VI
4. The reward an entrepreneur gets A manger gets salary for the services
for baring risks involved in the rendered by him in the enterprise.
enterprise is profit which is
highly uncertain.
NO ENTREPRENEUR ENTREPRENEURSHIP
RAMB
- 23 -
ENTREPRENEURSHIP BMS SEM VI
ENTREPRENEUR
LAND
RAMB
- 24 -
ENTREPRENEURSHIP BMS SEM VI
END OF MODULE I
RAMB
- 25 -
ENTREPRENEURSHIP BMS SEM VI
MODULE – II
THEORIES OF ENTREPRENEURSHIP
Ø Schumpeter on Innovation
RAMB
- 26 -
ENTREPRENEURSHIP BMS SEM VI
But the consumer does not even contract for his goods in advance, generally
speaking. A part of the reason might be the consumer’s uncertainty as to his
ability to pay the end of the period, but this does not seem to be important in
fact. The main reason is that he does not know what he will want, and how
much, and how badly. Consequently, he leaves it to producers to create goods
and hold them ready for his decision when the time comes. The clue to the
apparent paradox is of course in the law of large numbers. The consolidation
of risks (or uncertainties). The consumer is to himself only one to the producer
he is a mere multitude in which individuality is lost. It turns out that an
outsider can foresee the wants of am multitude with more ease and accuracy
than an individual can attain with respect to his own. This phenomenon gives
us the most fundamental feature of the economic system, production for a
market.
RAMB
- 27 -
ENTREPRENEURSHIP BMS SEM VI
However, it does not follow that individuals with foresight will become self-
employed and make decisions on their own behalf. They may instead become
managers of a large firm. Knight argues that business uncertainty can be
reduced through ‘consolidation’. Consolidation is to uncertainty what
insurance is to risk: It is a method of reducing total uncertainty by pooling
individual instances and allowing each individual to hold a share of the pool.
It is widely recognized today that an individual’s exposure to uncertainty can
be reduced through portfolio diversification in the equity market. Knight
recognizes this possibility which he calls ‘diffusion’ but he does not accord it
much prominence as a vehicle for the reduction of uncertainty. He believes
that uncertainty is reduced mainly through the pooling of uncertainties by the
large firm.
Knight does not seem to anticipate that there will be much difficulty in
ensuring that managers with foresight exercise it properly on the stockholders
behalf. The moral hazard problem is negligible. Presumably, because close
supervision of the manager is possible. Much greater moral hazard arises
with the directors of the firm who recruit the managers and supervise them
on the stock holder’s behalf. The unavoidable moral hazard involved in
delegating direction means that directors cannot possibly be fully insured
against the consequences of their decisions. They must operate under profit
related incentives and so effectively they must become stock holders in the
firm. Thus, directors who make decisions under uncertainty also bear the
consequences of those decisions and are ipso facto recipients of pure profit.
Some people have good judgment of other people’s abilities and others do
not. But no one can be certain of his or her own judgment of other people’s
abilities. As a result, confidence in his own judgment is perhaps the most
important characteristic of the entrepreneur. This has to be coupled with a
low version to risk, as reflected in a disposition to back up his judgment with
his own capital. The elasticity of supply of self- confident people is, in
Knight’s view, the single- most important determinant of the level of profit
and of the number of entrepreneurs.
RAMB
- 28 -
ENTREPRENEURSHIP BMS SEM VI
SCHUMPETER ON INNOVATION
Schumpeter, perhaps more than any other writer, is very explicit about the
economic function of the entrepreneur. The entrepreneur is the prime mover
in economic development and his function is to innovate or to carry out new
combinations. Five types of innovation are distinguished the introduction of
new good (or an improvement in the quality of an existing good); the
introduction of anew method of production; the opening of an new market, in
particular, a export a market in a new territory the ‘conquest of a new source
of supply of raw materials or half- manufactured goods’ and the creation of
a new type of industrial organization, in particular, the formation of a trust or
some other type of monopoly.
RAMB
- 29 -
ENTREPRENEURSHIP BMS SEM VI
The carrying out of new combinations can no more be a vocation than the
making and execution of strategically decisions, although it is this function
and not his routine work that characterizes the military leader. Therefore, the
entrepreneur’s essential function must always appear mixed with other kinds
of activity which as a rule must be much more conspicuous than the essential
one. Hence, the Marshallian definition of the entrepreneur, which simply
treats the entrepreneurial function as ‘management’ in the widest meaning,
will naturally appeal to most of us. We do not accept it, simply because it
does not bring out what we consider to be the salient point and the only one
which specifically distinguishes entrepreneurial from other activities.
First of all there is the dream and the will to found a private kingdom usually
though not necessarily also a dynasty. The modern world really does not
know any such positions but what may be maintained by industrial or
commercial success is still the nearest approach to medieval lordship possible
to modern man. Its fascination is especially strong for people we have no
other chance of achieving social distinction.
Then there is the will to conquer- the impulse to fight, to prove one superior
to others, to succeed for the sake, not of the fruits of success itself. From this
aspect economic action becomes akin to sport- there are financial races, or
other boxing- matches.
RAMB
- 31 -
ENTREPRENEURSHIP BMS SEM VI
Schumpeter himself was very cautious about relying upon major innovation
and their consequent economies and spins off as an explanation for the
clustering of innovation observed during the business cycle. Basically, he
regarded wave of innovation and their creative destruction as a basic
phenomenon of capitalist economic development so much that he dated the
origin of capitalist from the first appearance of these waves. He recognized
that the waves could take different forms in different times and places. He
was concerned to offer analytical frame work for the interpretation of varied
historical experience rather than to formulate a narrow theory to which all
historical experience was alleged to conform.
Need for achievement is simply the desire to do well not so much for the sake
of social recognition or prestige but for the sake of an inner feeling of personal
accomplishment. It is the need for achievement that motivates people to take
risk. People with high need for achievement behave in an entrepreneurial
way. Need for achievement stimulates the behavior of a person to be an
entrepreneur.
1. Need for achievement through self- study, goal setting and inter-
personal support.
2. Keen interest in situations involving moderate risk.
3. Desire for taking responsibility.
RAMB
- 32 -
ENTREPRENEURSHIP BMS SEM VI
Some societies produce a large percentage of people with high need for
achievement. Entrepreneurship becomes the link between need achievement
and economic growth.
The criterion on n- factor rating was the inherent concern for achievement or
non- induced achievement motivation.
RAMB
- 33 -
ENTREPRENEURSHIP BMS SEM VI
Peter Drucker has aptly observed that, “Innovation is the specific tool of
entrepreneur’s, the means by which they exploit changes as an opportunity
for a different business or a different service. It is capable of being presented
as a discipline, capable of being learned and practiced. Entrepreneurs need to
search purposefully for the sources of innovation, the changes and their
symptoms that indicate opportunities for successful innovation. And they
need to know and apply the principles of successful innovation.”
The first three sources lie within the enterprise, whether it be a business or
a public service institution or within an industry or service sector. They
RAMB
- 34 -
ENTREPRENEURSHIP BMS SEM VI
END OF MODULE II
RAMB
- 35 -
ENTREPRENEURSHIP BMS SEM VI
MODULE –III
Ø Basic Components of a
Project.
RAMB
- 36 -
ENTREPRENEURSHIP BMS SEM VI
I. INTRODUCTORY PAGE
A. Product(s)
B. Service(s)
C. Size of business.
D. Office equipment and personnel.
E. Background of entrepreneurs.
RAMB
- 37 -
ENTREPRENEURSHIP BMS SEM VI
V. PRODUCTION PLAN
A. Pricing.
B. Distribution.
C. Promotion.
D. Product forecasts.
E. Controls.
A. Form of ownership.
B. Identification of partners or principal shareholders.
C. Authority of principals.
D. Management- team background.
E. Roles and responsibilities of members of organization.
A. Letters.
B. Market Research Data.
C. Leases or contracts.
D. Price lists from suppliers.
RAMB
- 38 -
ENTREPRENEURSHIP BMS SEM VI
The business plan can take more than 200 hours to prepare, depending on the
experience and knowledge of the entrepreneur as well as the purpose it is
intended to serve. It should be comprehensive enough to give any potential
investor a complete picture and understanding of the new venture and will
help the entrepreneur clarify his or her thinking about the business. Many
entrepreneurs incorrectly estimate the length of time that an effective plan
will take to prepare. Once the process has begun, however, the entrepreneur
will realize that it is invaluable in sorting out the business functions of a new
venture. Each of the items in the contents of the business plan is explained in
detail as follows.
INTRODUCTORY PAGE:
This is the title page or cover that provides a brief summary of the venture
and should include the following things:
EXECUTIVE SUMMARY:
This is prepared after total plan is written. This about 3 to 4pages in length,
this summary should stimulate the interest of the potential investor. This
highlight concise and convincing manner the key point in the business plan
stating the nature of the venture, financing needed, market potential, and
supports to why it will succeed.
INDUSTRIAL ANALYSIS:
RAMB
- 39 -
ENTREPRENEURSHIP BMS SEM VI
DESCRIPTION OF VENTURE:
PRODUCTION PLAN:
MARKETING PLAN:
The marketing plan represents a significant element in the business plan for a
new venture. Marketing planning should be an annual activity that focuses on
implementing decisions related to the marketing mix variables (product,
price, distribution, and promotion). Like the annual budgeting cycle, market
planning has also become an annual activity and should be incorporated by
all the entrepreneurs, regardless of the size or type of the business. These
marketing plans must be monitored frequently, especially in the early stages
of start up.
ORGANIZATIONAL PLAN:
The organizational plan describes the venture form of ownership i.e. whether
it is proprietorship, partnership or a corporation. If the venture is a
partnership, the term of partnership should be included, name of partners,
term of agreement, specimen signatures of the partners etc. If it is a
corporation venture than it is important to detail the shares of the stock
authorized, share options, names and address, resumes of the directors and
officers of the corporation. If it is an incorporation venture than it should state
the principal shareholders and shares owned by them; type and number of
shares stating voting or non-voting stocks have been issued, members of
board of directors, check signing authority or control. The plan also states
how many members are there in management team and their background,
their roles and responsibilities stating their salaries, bonuses or other forms of
RAMB
- 40 -
ENTREPRENEURSHIP BMS SEM VI
payment for each members of the management team. This is also helpful to
provide an organization chart indicating the line of authority and
responsibilities of the members of the organization. This information provides
the potential investor with a clear understanding of who controls the
organization and how other members will interact in performing their
management functions.
ASSESSMENT OF RISK:
All ventures face some potential hazards, given the particular industry and
competitive environment. An entrepreneur should make assessment of risk
and prepare an effective strategy to deal with them. Even if these factors
present no risks to the new venture, the business plan should discuss why
that is the case. Contingency plans and strategies illustrate to the potential
investor that the entrepreneur is sensitive to important risks and is prepared
should any occur.
FINANCIAL PLAN:
The financial plan should include proforma income statements, break -even
analysis, proforma cash flow, proforma balance sheet, and proforma sources
and uses of funds.
APPENDIX:
CONCLUSION
RAMB
- 41 -
ENTREPRENEURSHIP BMS SEM VI
Setting goals requires the entrepreneur to be well informed about the type of
business and the competitive environment. Goals should be specific and not
so mundane as to lack any basis of control. For example, the entrepreneur
may target a specific market share, units sold, or revenue. These goals are
measurable and be monitored overtime.
In addition, the entrepreneur and his or her family must make a total
commitment to the business in order to be able to meet the demands of a new
venture. For example, it is difficult to operate a new venture on a part- time
basis while still holding on to a full- time position. And it is difficult to
operate a business without an understanding from family members as to the
time and resources that will be needed. Lenders or investors will not be
favorably inclined toward a venture that does not have full- time
commitment. Moreover, lenders or investors will expect the entrepreneur to
make a significant financial commitment to the business even if it means a
second mortgage or a depletion of savings.
The entrepreneur should also document customer needs before preparing the
plan. Customer needs can be identified from direct experience, letters from
customers, or from marketing research. A clear understanding of these needs
and how the entrepreneur’s business will effectively meet them is vital to the
success of the new venture.
RAMB
- 42 -
ENTREPRENEURSHIP BMS SEM VI
PROJECT MANAGEMENT
The input characteristics define what the project requires such as raw
materials, energy, manpower, financial resources and organizational
structure.
The output characteristics define what the project will generate viz.
production of additional goods, provision of additional services etc. The
social cost benefit aspect affects the equilibrium of availabilities and non-
availabilities in an economy. Thus the benefits which will be accrued to the
society have to be carefully evaluated.
The project idea needs to be evaluated for its feasibility and the setting up of
an enterprise should be based on careful and sound evaluation. Project
appraisal brings credibility to a project and projects from in built weaknesses
and consequently a healthy and viable industry comes up.
Idea must not only be good for the market, but good for the project and good
for the entrepreneurs.
RAMB
- 43 -
ENTREPRENEURSHIP BMS SEM VI
In the idea stage, suggestions for new products are obtained from all possible
sources viz. customers, competitors, R&D, distributors and company
employees. Essentially the entrepreneur needs to scan the environment.
a. Family
b. Customers
c. Friends
d. Colleagues
e. Salesman
f. Social Contacts
g. Employees
a. Bankers
b. Business Consultants
a. Magazines
b. Journals
c. Books
d. Newsletter
e. Newspapers
f. Catalogues
a. Trade Shows
b. Seminars/ Workshops
c. Professional Organizations
d. Small Business Organizations
e. Suppliers/ Dealers
One should use as many resources as possible for the purpose of scanning the
environment.
RAMB
- 44 -
ENTREPRENEURSHIP BMS SEM VI
OBSERVATIONS
Ø Entrepreneurs get tempted to step into the field that profit potential
and is socially acceptable.
SELECTION OF A PRODUCT
Very essential for being success in business venture. The various factors that
influence the entrepreneur in selecting the right product are:
v Market for the product – if the product also has an export market, it
widens the scope of marketing and hence the success of the enterprise.
v Certain products are permitted for production only if the others belong
to de- licensed category. Hence a product belonging to licensed
RAMB
- 45 -
ENTREPRENEURSHIP BMS SEM VI
1. Awareness
2. Interest
3. Evaluation or mental trial
4. Trial- physical
Awareness:
Interest:
Evaluation:
The consumer tries to weigh the value of the new product in relation to the
benefits obtained from it i.e. conducts a mental trial of the new product.
RAMB
- 46 -
ENTREPRENEURSHIP BMS SEM VI
Trial:
The consumer is now ready to put the idea into practice. Competent
assistance may become necessary to put the innovation to use.
Adoption:
1. The consumer mow decides to adopt the new idea or a product for
continued use.
PRODUCT INNOVATION
Product Innovation takes place through the process of product planning and
development.
Covers search for new products and innovations as well as the improvement
of existing products.
PRODUCT INNOVATION
INTERNAL DEVELOPMENT
LICENSING
Securing right to produce the product from a patent holder i.e. contractual
arrangement e.g. coca cola.
ACQUISITION
Buying the firm that developed or patented the product- a costly means.
RAMB
- 47 -
ENTREPRENEURSHIP BMS SEM VI
CONCEPT OF PROJECT
a. Land development
b. Irrigation
c. Soil- conservation
d. Fertilizers, and
e. Seeds etc.
2. Research projects
RAMB
- 48 -
ENTREPRENEURSHIP BMS SEM VI
CLASSIFICATION OF PROJECTS
2. Sectoral Projects
In India planning commission has accepted the Sectoral basis as the criterion
for classification
RAMB
- 49 -
ENTREPRENEURSHIP BMS SEM VI
v Capital intensive
v Labour- intensive
v Large- scale.
v Medium- scale.
v Small- scale.
Techno- economic classification facilitates the process of project feasibility
appraisal.
All India and state financial institutions classify projects according to their
age, experience and the purpose.
v New projects
v Expansion projects
v Modernization projects
v Diversification projects
5. Services Projects
v Welfare projects
v Service projects
v Research and development projects
v Educational projects
RAMB
- 50 -
ENTREPRENEURSHIP BMS SEM VI
Objective
Internal rate of
Size
return
A Scheme
Social
Organization Benefits
RAMB
- 51 -
ENTREPRENEURSHIP BMS SEM VI
RAMB
- 52 -
ENTREPRENEURSHIP BMS SEM VI
MODULE- IV
WOMEN ENTREPRENEURSHIP
RAMB
- 53 -
ENTREPRENEURSHIP BMS SEM VI
Women entrepreneurs in India accounted for 9.01% of the total value 11.70
million entrepreneurs during 1988-89.
In India, women entry into business is a new phenomenon. Women entry into
business, or say, entrepreneurship is traced out as an extension of their
kitchen activities mainly to 3 Ps viz, pickles, powder and pappad. Women in
India plugged into business for both pull and push factors. Pull factors imply
the factors, which encourage women to start an occupation or venture with an
urge to do something independently. Push factors refer to those factors,
which compel to take up their own business to tide over their economic
difficulties and responsibilities.
RAMB
- 54 -
ENTREPRENEURSHIP BMS SEM VI
RAMB
- 55 -
ENTREPRENEURSHIP BMS SEM VI
RAMB
- 57 -
ENTREPRENEURSHIP BMS SEM VI
than Rs. 24,000 p.a. for availing loan under this scheme, the candidate
has to make an application to District Industries Center.
6. Joint Loan Scheme: Under this scheme, the artisans living in rural
areas, where the populations is up to 5 lacs get the loans to purchase
instruments and working capital needs. Financial assistance is
available cent per up to Rs. 50,000 lacs with minimum rate of interest.
Loan granted is to repaid within a period of 8 years. There is no
restriction of age education qualification of the candidate.
RAMB
- 58 -
ENTREPRENEURSHIP BMS SEM VI
END OF MODULE IV
RAMB
- 59 -
ENTREPRENEURSHIP BMS SEM VI
MODULE- V
ANCILLARIZATION
Ø What is an ancillary unit?
Ø Franchising
RAMB
- 60 -
ENTREPRENEURSHIP BMS SEM VI
Recently there has been a growing trend towards ancillarisation due to the
series of rapid developments that have been taken place in the industrial
structure in the country.
RAMB
- 61 -
ENTREPRENEURSHIP BMS SEM VI
Ø It was more convenient for large scale manufactures to get the ancillary
units to produce certain items for them. With the growing complexity
of management, the large scale manufacturer can now concentrate on
the problems of organization, marketing etc, rather than concentrating
on availability of raw materials etc.
All these facts underscore the point that the development of ancillaries and
their growing popularity have been well supported by economic and
management considerations.
The small scale industrial sector raises term credit and working, capital
required by it from commercial banks, co- operative banks, regional rural
banks and state- financial corporations. The banking system provided mainly
working capital and the State Financial Corporations mainly provides
investment capital.
RAMB
- 62 -
ENTREPRENEURSHIP BMS SEM VI
The credit provided by banks to the small scale industrial sector is treated as
credit to the ‘priority sector’. The commercial banks are required to lend 40%
of their total loans to the ‘priority sector’, of which 15% to 16% are required to
be in the form of direct agricultural advances and the rest can be to small scale
industry, small business, small transport, operators etc.
In practice, large scale industries do not produce all goods on their own
instead they rely on small scale enterprises called sub- contractors for a great
deal of production. When the work assigned to small enterprises involves
manufacturing works, it is called Industrial Sub- contracting. In other cases, it
is known as commercial sub- contracting. It is not unusual for sub- contractors
to work for more than one contractor.
RAMB
- 63 -
ENTREPRENEURSHIP BMS SEM VI
ADVANTAGES
DISADVANTAGES
1. It does not ensure the regular and uninterrupted supply of goods to the
core firms, i.e. contractors that adversely affect the functioning of the
core firms.
2. Goods produced under sub- contracting system are often qualitatively
inferior.
3. Sub- contracting also delimits the expansion and the diversification of
the core firms.
4. Delays in payments, a common feature by the contractor to the sub-
contractor’s endanger the very survival of the latter.
FRANCHISING
RAMB
- 64 -
ENTREPRENEURSHIP BMS SEM VI
format in exchange for royalties or shares or profits. The buyer is called the
“franchisee” and the company that sells rights to its business concept is called
the “franchiser”.
1. Product Franchising
2. Manufacturing Franchising
3. Business- Format Franchising
PRODUCT FRANCHISING:
This is the earliest type of franchising. Under this dealers were given the right
to distribute goods for a manufacturer. For this right, the dealer pays a fee for
the right to sell the trademarked goods of the producer. The Singer
Corporation used product franchising perhaps for the first time during the
1800s to distribute its sewing machines. This practice subsequently became
popular in the petroleum and automobile machines also.
MANUFACTURING FRANCHISING:
Under this agreement, the franchiser (manufacturer) gives the dealer (bottler)
the exclusive right to produce and distribute the product in a particular area.
This type of franchising is commonly used in the soft- drink industry.
This is recent type of franchising and is the most popular one at present. This
is the type that most people today mean when they use the term franchising.
In the United States, this form accounts for nearly three- fourth of all
franchised outlets. Business- format wide range of services to the franchisee,
including marketing, advertising, strategic planning, training, production of
operations manuals and standards and quality – control guidance. The
International Franchise Association (IFA) of America has defined format
franchising as follows:
“A franchise operation is a contractual relationship between the franchiser
and franchisee in which the franchiser offers or is obligated to maintain a
continuing interest in the business of the franchisee in such areas as know
RAMB
- 65 -
ENTREPRENEURSHIP BMS SEM VI
how and training, wherein the franchisee operates under a common trade
name, format and or procedure owned or controlled by the franchiser and in
which the franchisee has or will make a substantial capital investment in his
business from his own resources”.
ADVANTAGES
Franchising agreement is a symbolic one for the franchiser and the franchisee.
Following are the advantages that franchising provides to the franchisee.
7) The prospects of obtaining loan facilities from the bank are also
improved.
DISADVANTAGES
1) Unlike entrepreneurs who start their own business, the franchisees find
no room or scope for enjoying their creativity. They have to work as
per the given format. One classic example of regimentation in
franchising can be found in the Mc Donald’s restaurant organization. A
Mc Donald’s franchise is given very little operational latitude, indeed
the operations manual attends to such minor details as when to boil the
bearings on the potato slicer. The purpose of these restrictions is not to
frustrate the franchises, but to ensure that each outlet is run in a
uniform correct manner.
3) Franchisees usually do not have the right to sell their business to the
highest bidder or to leave it to a member of their family without
approval from the franchiser.
4) Though the franchisee can build up goodwill for his or her business by
his or her efforts goodwill still remains the property of the franchiser.
5) The franchisee may become subject to fail with the failure of the
franchiser, another disadvantage facing franchisees is that franchisers
generally reserve the option to buy back an outlet upon termination of
the contract. Many franchisees become vulnerable to this option. As
such, they operate under the constant fear of non- renewal of the
franchise agreements.
END OF MODULE V
RAMB
- 67 -
ENTREPRENEURSHIP BMS SEM VI
MODULE-VI
ENVIRONMENTAL SCANNING
AND SECTORAL STUDIES
Ø Swot Analysis
Ø Entrepreneurial Environment
Ø Environmental Analysis
RAMB
- 68 -
ENTREPRENEURSHIP BMS SEM VI
SWOT ANALYSIS
S- Strengths.
W- Weaknesses.
O- Opportunities.
T- Threats.
Strengths and weakness analysis is a real test for management. The strength
and weaknesses would decide whether a company should continue in a
business, take up new lines of business, as well as the strategy to be employed
in doing so.
For e.g. in case of some products, small scale units have definite advantage
over large- scale units in costs. If a large scale unit were not able to compete
with the small- scale units, in such a case, it would be wise on the part of the
large unit to give up the business of such products.
RAMB
- 69 -
ENTREPRENEURSHIP BMS SEM VI
For e.g. the new industrial policy of India has brought about enormous new
business opportunities but at the same time it poses new threats or challenges
to many existing firms because of the increase in competition. The existing
firms should therefore, frame strategies to effectively fight the increasing
competition.
ENTREPRENEURIAL ENVIRONMENT
RAMB
- 70 -
ENTREPRENEURSHIP BMS SEM VI
LEGAL
SOCIO- ENVIRONMENT
CULTURAL
ENVIRONMENT
PRODUCT
P
R
P O
R
COMPANY M
I
O
C
T
E ECONOMIC
I
O ENVIRONMENT
PLACE N
POLITICAL
ENVIRONMENT
TECHNOLOGICAL
ENVIRONMENT
A) PRODUCT:
The business has to produce a product that people want to buy. They
have to decide which ‘market segment’ they are aiming at – age, income,
geographical location etc. They then have to differentiate their product so that
it is slightly different from what is on offer at present so that people can be
persuaded to ‘give them a try’.
In other words product is a bundle of satisfaction that a costumer buys. It
represent solution to a customer’s problem .It is in this context that
marketing definition of a product is more than just what the manufacturer
understand it.
B) PRICE:
The price must be high enough to cover costs and make a profit but low
enough to attract customers. There are a number of possible pricing strategies.
The most commonly used are:
RAMB
- 71 -
ENTREPRENEURSHIP BMS SEM VI
C) PLACE:
The business must have a location that it can afford, and that is convenient
and suitable for customers and any supplier.
D) PROMOTION:
Promotion means moving from one end to another. Promotion means all
those tools that a marketer uses to take his product from the factory to the
customer and hence involves advertising, sales promotion, personal selling,
public relations publicity and merchandising.
External Environment:
Economic Environment:
RAMB
- 72 -
ENTREPRENEURSHIP BMS SEM VI
level of income, the distribution of income and assets etc. are among very
important determinants of business strategies.
Technological Environment:
Technology is the most dramatic force shaping people’s lives. Factors such as
–technological development, stages of development, change and rate of
change in technology and research and development affect marketing
strategies. Also the cost of technology acquisition, impact of technology on
human beings and the environmental effects of technology affect marketing
decisions.
Political environment:
Socio-cultural environment:
The basic beliefs, values and norms shape the society and its people. Even
when people of different cultures use the same basic product, the mode of
consumption, condition of use, purpose of use or the perception of the
product attributes may vary so much so that the product attributes, method of
promoting the product may have to be varied to suit the characteristics of
different markets. Even the value and beliefs associated with colour vary
significantly between different cultures.
Legal environment:
Government all over the world are an important aspects of their economy and
even in the so called free economy, viz.US, government intervention in
industry is a reality. The extent of intervention varies .while in US this is
relatively low; in developing countries this is quite high. India ,for example
,has had a history of a controlled economy with the government deciding the
rules of the game ,be it the extent of foreign private investment ,or goods to be
exported or imported or even whether a unit can be allowed to produce a
product Regulation in advertising ,like ban on advertising a specific product
like cigarettes, pan masala, liquor and distribution of goods as in the case of
kerosene and earlier in case of food product too, is the reality of Indian
scenario.
RAMB
- 73 -
ENTREPRENEURSHIP BMS SEM VI
ENVIRONMENTAL ANALYSIS
In short, most of the studies fail to disconcern the real issues of growth in the
target area and fail to identify the concrete and specific needs of these
endowments like resource skill etc. to flourish. Enunciation of general
objectives, generic beneficiaries tend to blur the distinct contours of one
homogeneous group from the other. Also, the extension of certain standard
facilities or services does not serve their actual needs. All this possibly
happens because in such basic studies we fail to identify clearly the target-
groups and their specific problems, and make theoretical studies on resources
and demand in an impersonal manner, as a result of which even the schemes
devised on the basis of such studies tend to become too impersonal and rigid.
Sometimes, the scheme become so flexible on account of a standardized
petrified approach that in some most genuine cases demanding a certain
departure from the fixed framework, the scheme is incapable of giving
requisite help. It is therefore, absolutely necessary that any action plan for a
backward area must first identify the target- group, identify the specific
RAMB
- 74 -
ENTREPRENEURSHIP BMS SEM VI
services they need for monitoring their enterprises and devise an appropriate
structural support for comprehensive coverage of their needs.
Small- scale business provides good scope for the growth of entrepreneurial
activities .An entrepreneur has good opportunity and vast scope in selling
service rather than manufacturing a product. The entrepreneur can achieve
better results if the size of the business is small. It is for this reason that small
firms have higher productivity, greater efficiency and low labour turnover.
The scope for entrepreneurial activities in small business sector can broadly
be classified into:
1. Industrial sector
2. Agricultural and allied industrial sector
3. Service sector
Ø INDUSTRIAL SECTOR
Small scale industries occupy an important place in the industrial sector. They
have contributed over 40% in the gross industrial production in 1998.
RAMB
- 75 -
ENTREPRENEURSHIP BMS SEM VI
Ø SERVICE SECTOR
The service sector has gained importance for the entrepreneurs because of its
rapid expansion. Service sector includes all kinds of business and provides
opportunities to the entrepreneurs in business such as hotels, tourist services,
personal services such as dry cleaning, beauty shops, photographic studies,
auto repair, electric repair shops, wielding repair etc.
Transport: They provide time and place utilities in urban and rural areas to
both men and material. The different modes or transport are of immense
importance in the areas, which are not served by roads and railways. There is
a scope for entrepreneur to design prototypes of new carts with the
application of indigenous technology so that they may have better mobility
and greater carrying capacity. The primary need in the rural area is an
efficient system of road transport.
RAMB
- 76 -
ENTREPRENEURSHIP BMS SEM VI
Technology is perhaps the most important resource for any nation. Invention,
innovation, adoption of new technologies, processes and their
commercialization are the major factors in wealth creation and making the
country technologically superior, which in turn, leads to economic
supremacy. India has a large reservoir of qualified science and technology
RAMB
- 77 -
ENTREPRENEURSHIP BMS SEM VI
RAMB
- 78 -
ENTREPRENEURSHIP BMS SEM VI
inherent strength and therefore show better result in a shorter period of time.
Indian human resource based is one of the greatest core competencies.
India has the core strength of its natural resources. It is abundant supplies of
most of them; it has a vast coast line, which stores resource and energy
supply. The can become our future strength if entrepreneurs, exploit them
and put them to productive use. Entrepreneur’s role is even called upon to
explore undersea resources.
Entrepreneurs are supposed to visualize and utilize the opportunities that are
going to occur. The world trade is going to open doors to new challenges.
RAMB
- 80 -
ENTREPRENEURSHIP BMS SEM VI
New and changed approaches will have to be adopted for meeting these
challenges successfully. As a catalyst an entrepreneur will have to:-
v Bring about an attitudinal change in the minds of the people and the
society in general. A conservative and religious society or a society that
is bound by customs and traditions cannot take full advantage of
entrepreneurial opportunities. An entrepreneur may have to strive to
convert the society into a dynamic, rational and a progressive one. He
may have to influence the government into bringing about economic
reforms of various types for exploiting global opportunities.
v Exploit change and use it not only for his and for the benefit of his
organization but also for the benefit of his economy.
CREATIVITY
RAMB
- 81 -
ENTREPRENEURSHIP BMS SEM VI
same time with no contact between the individuals involved. Newton and
Leibritz created the mathematics of calculus in the seventeenth century quite
independently of each other, despite their allegations of plagiarism.
One thing that seems common to all forms of creativity is joy. Einstein
comments that the idea that the gravitational field has only a relative
existence was the happiest thought of my life. His creative genius had come
up with the idea of relativity and it made him happy. There is an intense
personal satisfaction in having come up with something new and novel. This
is one reason why entrepreneurs see their activities as fun. There is the joy of
creativity all around them. For the entrepreneur, creativity is both the starting
point and the reason for continued success. It is the secret formula by which
he or she overcomes obstacles and outsmarts the competition. Arguably every
one of us has the ability to be creative but do we all use and exploit this
ability? Many of us simply do not act creatively much of the time.
Many people have the ability to play a musical instrument. They have a skill
and possibly natural talent and they can be taught more skills and techniques
whilst they are willing to persevere and practice. Furthermore, some people
who play music naturally appreciate the meaning the composer was trying to
convey when the work was written. Others have to be taught this
interpretation. Some people simply see things that others cannot until they are
given a detailed explanation. The same implies to opportunity spotting.
RAMB
- 82 -
ENTREPRENEURSHIP BMS SEM VI
People who miss the valuable opportunities that others see first often have
access to the same information but it means something different to them.
Discovery consists of looking at the same thing as everyone else and thinking
something different. In just the same way many young people can dribble,
head and pass a football, and their skills can be improved with coaching. But
when they watch a football match or play in one are they able to see the whole
game? Can they spot goal scoring opportunities and positions and get there
ahead of a defender? Most people who watch team sports such as football
simply follow the movement of the ball exactly as the television camera tends
to do. They ignore or miss the emerging patterns as the other player’s move of
the ball in search of good positions. This partially explains why we do not all
seem to see the same game evolve, even though we are present at the same
match.
INNOVATION
There are the basic approaches with innovation, which are not mutually
exclusive, and we have seen illustrated in the stories in part two. First, it is
possible to have a problem and to be seeking solution, or at least a resolution.
Edwin Land invented Polaroid camera because his young daughter could not
understand why she had to wait for the pictures to be printed when he took
her photograph. Second, we might have an idea in effect a solution and be
searching for a problem to which it can be applied 3Ms. Post- it notes
happened when a 3m employee created a glue with only loose sticking
properties, and a college applied it to a need he had for making page in a
manuscript. Third, we might identify a need and design something that fits.
James Dyson’s dual cyclone cleaner came about because of his frustration
RAMB
- 83 -
ENTREPRENEURSHIP BMS SEM VI
with his existing machine, which was providing inadequate for cleaning up
the dirt and dust he generated when he converted an old property.
Crucially the person with the initial idea may not be the person who realizes
where the real opportunity lies. An inventor is not always an opportunity-
spotter and often not a natural project champion. Picasso claimed that great
people steal ideas and create opportunities where others cannot see the
potential. Creativity is the talent of the inventor and innovation is the talent of
the project champion who turns ideas into reality. Entrepreneurs do both
these things but they do more. They do not just complete the successful
application of an idea; they build something of value in the process.
This endeavors to pull the stand together. Creativity (the idea) is the starting
point whether it is associated with invention or opportunity spotting. This
creativity is turned to a practical reality (a product, for example) through
innovation. Entrepreneurship then sets that innovation in the context of an
enterprise (the actual business), which is something of recognized value.
ramkishen123@rediffmail.com
...THE END…
RAMB
- 85 -