An entrepreneur is a person who starts an enterprise. He searches for change and responds to it.
Entrepreneur has traditionally been defined as a person who initiates the process of designing, launching and running a new business, which typically begins as a small business such as Startup Company, offering a product, process or service for sale or hire.
Learn about:- 1. Definitions of Entrepreneur 2. Concept of Entrepreneur 3. Characteristics 4. Classification 5. Decisions taken by Entrepreneurs 6. Charms 7. Functions 8. Skills Required
9. Factors Motivating the Growth of Entrepreneurs 10. Entrepreneurial Vision 11. Entrepreneurial Mission 12. Types of Entrepreneurial Environment 13. Ways of Developing Entrepreneurial Competencies
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14. Role of Entrepreneurs in Economic Development 15. Institutions Supporting 16. Qualities 17. Rewards 18. Current Scenario of Entrepreneurship in India.
Entrepreneur: Definitions, Characteristics, Classification, Decisions, Competencies, Role, Qualities and Rewards
Contents:
- Definitions of Entrepreneur
- Concept of Entrepreneur
- Characteristics of an Entrepreneur
- Classification of Entrepreneurs
- Decisions taken by Entrepreneurs to Establish a New Business Enterprise
- Charms of being an Entrepreneur
- Functions of an Entrepreneur
- Skills Required by an Entrepreneur
- Factors Motivating the Growth of Entrepreneurs
- Entrepreneurial Vision
- Entrepreneurial Mission
- Types of Entrepreneurial Environment
- Ways of Developing Entrepreneurial Competencies
- Role of Entrepreneurs in Economic Development
- Institutions Supporting Entrepreneurs
- Qualities that make an Entrepreneur Successful
- Rewards of Being an Entrepreneur
- Current Scenario of Entrepreneurship in India
Entrepreneur – Definitions of Entrepreneur
An entrepreneur is a person who starts an enterprise. He searches for change and responds to it.
Entrepreneur has traditionally been defined as a person who initiates the process of designing, launching and running a new business, which typically begins as a small business such as Startup Company, offering a product, process or service for sale or hire.
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The economists view him as the fourth factor of production along with land, labour and capital.
The sociologists feel that certain communities and cultures promote entrepreneur- ship more successfully. For example in India, we say that Gujaratis and Sindhis are very enterprising.
Still others feel that the entrepreneurs are innovators who come up with new ideas for products, markets or techniques.
To put it very simply an entrepreneur is someone who perceives opportunity, organize resources needed for exploiting that opportunity and exploits it.
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Computers, mobile phones, washing machines, ATMs, credit cards, courier service and ready to eat foods are all examples of entrepreneurial ideas that got converted into products or services.
Some definitions of an entrepreneur are listed below-
It is originated from the French word ‘entrependure’ which means one who undertakes.
“An entrepreneur is a person who pays a certain price for a product to resell it at an uncertain price, thereby making decisions about obtaining and using the resources while consequently admitting the risk of enterprise.”-RICHARD CANTILLON
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“An entrepreneur is an economic agent who unites all means of production-land of one, the labour of another and the capital of yet another and thus produces a product. By selling the product in the market he pays rent of land, wages to labour, interest on capital and what remains is his profit. He shifts economic resources out of an area of lower and into an area of higher productivity and greater yield.” —J. B. SAY
“Entrepreneurs are innovators who use a process of shattering the status quo of the existing products and services, to set up new products, new services.”-SCHUMPETER
After studying the above definitions which are given by other experts, we conclude that “entrepreneur is an individual (or group of individuals) who establishes, organizes, operates and assumes the risk for new business enterprise.”
Entrepreneur – Concept
The term entrepreneur, in French, if literally translated, means “go-between” and has been used since the 12th Century. An earliest example of an entrepreneur as go- between is Marco Polo, who attempted to establish trade routes to Far East. As a go between, Marco Polo would sign a common contract with a capital provider (capitalist) to sell his goods, which provided loan to the merchant-adventurer at a high interest rate, including insurance.
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The capitalist, being the passive risk bearer, and the merchant, bearing the physical and emotional risk used to trade the goods. After the merchant completely sold off the good, the profits were divided between both with capitalist taking around 70-75 percent, while the merchant- adventurer getting the remaining 25-30 percent. In the middle ages, the feudal system dominating in Europe hampered the development of and entrepreneurship.
During seventeenth century, the term entrepreneur was used for a person who entered into a contractual arrangement with the government to perform a services or supply stipulated products since the contract price was fixed , any resulting profits or losses belonged to the entrepreneurs, thereby assuming the risk arising out of his expedition.
Richard Cantillon, a noted French economist during 17th century, developed one the early theories of entrepreneur and is credited as the founder of the term. He viewed the entrepreneur as a risk taker, observing the discrepancies between supply and demand and options for buying cheaply and selling at a higher price. He defined an entrepreneur as a merchant or farmer “who buys at certain price and sells at an uncertain price, and bears the operating risk”.
By the eighteenth century feudalism was eliminated and legal and institutional conditions had changed with the emergence of the joint stock company. During this period, the person with capital was differentiated from the one who needed capital. In other words, entrepreneur was distinguished from the capital provider.
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One of the reasons for this differentiation was the industrialization occurring throughout the world. Many of the inventions developed during this time were reactions to the changing world.
It was only during nineteenth century, entrepreneurs were viewed from an economic perspective. The entrepreneur organizes and operates enterprise for personal gain. He pays current prices for the materials consumed in the business, for the use of land, for personal services he employs and for the capital he requires.
He contributes his own initiative, skills and ingenuity in planning, organizing, and administering the enterprises. He also assumes the chance of loss and gain consequent to unforeseen and uncontrollable circumstances.
The net residue of the annual receipts of the enterprises after all costs have been paid, he retains for himself. In the middle of twentieth Century, the first economist, to focus on the role of entrepreneurship in economic development through innovations was Joseph A. Schumpeter.
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In his words, The function of the entrepreneur is to reform or revolutionize the patter on of production by exploiting an invention or, more generally, an untried technological method of producing a new commodity or producing an old one in a new way, opening a new source of supply of materials or new outlet for products, by organizing a new industry.
Entrepreneur – 12 Principal Characteristics of a Successful Entrepreneur
The principal characteristics of a successful entrepreneur are explained below:
1. Willingness to work hard – Willingness to work hard is one of the important qualities of a successful entrepreneur. A successful entrepreneur work hard in his enterprise to achieve the desired goal. He work endlessly, especially in the beginning and continue the same trend throughout his whole life.
2. Desire for high achievements – The entrepreneurs is self-determined to achieve high goals in their venture. This achievement desire strengthened them to overcome obstacles (or impediments) suppress anxieties, repair misfortunes and desire expedients to run a successful enterprise.
3. To work Independent – To work independently is the other characteristic of any successful entrepreneur. He always likes to be independent in his mission. He does not like the interference of others when he is at work. He desire to act according to his own thinking.
4. Highly optimistic – Successful entrepreneurs are not disturbed by the present problems around them. They are highly optimistic and expect that the future will be favourable to their action. With this optimism, they are able to run their venture successfully.
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5. Good Foresight – The successful entrepreneurs should possess a good foresight to know about future business environment. Business environment has a dynamic character. It changes every day with a change in consumers’ taste, fashion, preference etc. Therefore, an entrepreneur should have the capacity to forecast all such changes well in advance.
6. Good organizer – The successful entrepreneurs should possess the ability to organize all factors of production necessary for setting up an enterprise.
7. Innovative character – An entrepreneur should possess the innovative character. An entrepreneur without this feature cannot survive any longer. An enterprise started by him is meant for the benefit of customers. Customers’ requirements have to be carefully monitored and changes should be effected accordingly.
8. Risk Taking – The entrepreneurs are not gamblers. They should be ready to assume risk arise while carrying on entrepreneurial activities.
9. Secrecy Maintenance – Secrecy maintenance is also one of the chief characteristics of a successful entrepreneur. He should safeguard all business secrets so that his competitors cannot understand them. Leakage of business secrets to his competitors will lead to down fall of business. Therefore he should be very cautious while selecting his subordinates and staff.
10. Communication skill – A successful entrepreneur should possess excellent communication skill. It is an invaluable and intangible asset. Many entrepreneurs have succeeded in their mission due to the top level communication skill they had.
11. Opportunity Explorer – An entrepreneur should possess the feature of exploring the best possible opportunity. Always he identifies opportunities and seizes best and converts it into realistic achievable goals.
12. Motivator – A successful entrepreneur is one who motivates the efforts of others who work with him. He influence and initiate people to think in his way and act accordingly.
Entrepreneur – Classification of Entrepreneurs
Entrepreneurs have been classified differently on different basis:
I) Clarence Danhof’s Classification:
In a study of American agriculture, Clarence Danhof classified entrepreneurs on the basis of economic development. In the initial stages of economic development, entrepreneurs tend to have less initiative, inactive and drive but as economic development proceeds, they become enthusiastic and innovating.
In the same way, when the entrepreneurs are inactive, shy and humble, the business environment remains underdeveloped. However, it becomes active, healthy and developed when entrepreneurs start making innovations.
On the basis of such development, he classified entrepreneurs into four categories:
1) Innovating Entrepreneurs
2) Adoptive or Imitative Entrepreneurs
3) Fabian Entrepreneurs and
4) Drone Entrepreneurs.
1) Innovating Entrepreneurs:
Innovative entrepreneurship is characterised by aggressive of information and analysis of results derived from a novel combination of factors. Persons of this type are generally aggressive in experimentation and they cleverly put attractive possibilities into practice. An innovating entrepreneur is one who introduces new products, inaugurates new methods of production, discovers new markets and reorganises his enterprise.
Schumpeter’s’ entrepreneur was of this type. It may be noted that such entrepreneurs can work only when a certain level of economic development has already taken place and the people always look forward to change and improvement.
Innovating entrepreneurs are most commonly found in developed countries but there is a scarcity of such entrepreneurs in underdeveloped countries. There is a close relationship between industrial development and innovating entrepreneur ship. When there is no industrial development, there is no entrepreneurship development. Innovating entrepreneurs play a key role in the development of modern capitalism, through their enterprising spirits, ability to recognise and exploit opportunities, strong desire for money-making etc.
2) Adoptive or Imitative Entrepreneurs:
Adoptive or imitative entrepreneurs are those who are always ready to adopt successful innovations created by innovative entrepreneurs. Instead of innovating changes themselves, they just imitate the technology and techniques innovated by others.
Such imitative entrepreneurs are particularly suitable for the underdeveloped countries of the world, because they contribute considerably to the economic development of these countries. They are most important to the underdeveloped countries because in such countries, people prefer to imitate the technology, technical skill and knowledge which are already available in advanced countries.
There is a great scarcity of imitative entrepreneurs in highly backward countries. There is a great need for people who can imitate the techniques and technologies and the products suitable to the conditions prevailing in these countries.
Sometimes, there is a need in developing countries for imitating entrepreneurs who can adjust and adopt the new technologies to the special conditions in such countries. Such entrepreneurs help to transform the system with the limited resources available there. But these entrepreneurs face lesser risks and uncertainties than the innovative entrepreneurs. While the innovative entrepreneurs are creative, the imaginative entrepreneurs are adoptive.
It is to be observed that the imitative entrepreneurs are also revolutionary and important. When compared to Western standards, an imitative entrepreneur is more an organiser of factors of production than a creator of innovations. In a poor but developing country, attempting to achieve rapid industrial development, an imitating entrepreneur is never-the less a potent change-producing person. He can set in motion the ‘chain reaction’ which leads to cumulative progress.
The imitating entrepreneurs are important in developing countries for another reason. These countries are placing great emphasis on small scale industries and on decentralised industrial structure. But the restrictions imposed on international trade and property rights by the (W.T.O.) World Trade Organisation have limited the scope of imitating entrepreneurs. Therefore, there has been a great pressure on the imitative entrepreneurs to grow into innovative entrepreneurs.
3) Fabian Entrepreneurs:
Fabian entrepreneurs are those who are very cautious and skeptical in experimenting with any change in their enterprise. They have neither the will to introduce new changes nor the desire to adopt new methods innovated by the most enterprising entrepreneurs. Such entrepreneurs are shy and lazy.
Their dealings are determined by custom, religion, tradition and past practices. They are not much interested in taking risk. They prefer to follow the foot-steps of their predecessors. They imitate only when it becomes perfectly clear that failure to imitate would result in loss of the relative position in the enterprises.
4) Drone Entrepreneurs:
Drone entrepreneurs are those who refuse to adopt and use opportunities to make changes in production formulae even at the cost of severely reduced returns relative to other like producers. In other words, such entrepreneurs may even suffer losses but they are not ready to make changes in their existing products or production methods. They struggle to exist but not to grow.
Thus, they are laggards and shy. They prefer to continue their operations in their traditional way and resist any changes. When their product loses marketability and their operations become uneconomical, they are pushed out of the market. They are conventional in the sense that they stick to conventional products and ideas.
II) Classification on the Basis of Motivation:
Motivation is a great force which influences the entrepreneur to make every effort to achieve his objectives by showing his excellence in his business performance. There are four types of entrepreneurs based on motivation.
They are:
1) Pure entrepreneur,
2) Induced entrepreneurs,
3) Motivated entrepreneurs and Spontaneous entrepreneurs.
1) Pure Entrepreneur:
A pure entrepreneur is a person who is motivated by psychological and economic rewards. He undertakes the entrepreneurial work for his personal satisfaction in his work, ego or status.
2) Induced Entrepreneur:
An induced entrepreneur is an individual who is induced to take up an entrepreneurial task due to the policy measures of the government that provides assistance, incentives, concessions, and necessary overhead facilities to start a venture. Most of the entrepreneurs are induced entrepreneurs who enter business due to financial, technical, and several other facilities provided to them by the state agencies to promote entrepreneurship among the young and energetic people.
A person, with a sound project, is provided with a package assistance to his project. To-day, many young and adventurous persons are being induced to small business units by the State through import restrictions and allocation of production quotas.
3) Motivated Entrepreneurs:
Motivated entrepreneurs are those who are motivated by the desire for self-fulfillment. They undertake business because of the possibility of making and marketing some new products for the use of consumers. In case the product is developed and received well by the consumers, the entrepreneurs may be further motivated by reward in terms of profit.
4) Spontaneous Entrepreneur:
A spontaneous entrepreneur is one who starts his business out of his natural talent. He is a person possessing initiative, boldness and confidence in his ability that motivate him to undertake entrepreneurial work. Such an entrepreneur has a strong conviction and confidence in his ability.
III) Classification on the Basis of Use of Technology:
Entrepreneurs can also be classified on the basis of use of technology since, in modern days, application of new technology in different sectors of the economy, has become quite essential.
These entrepreneurs can be classified into three categories as:
1) Technical,
2) Non-technical and
3) Professional.
1) Technical Entrepreneurs:
A technical entrepreneur is one who is essentially a man of craftsmanship. He develops new and improved quality of goods due to his craftsmanship. He concentrates more on production than on marketing. He demonstrates his innovative capabilities in matters of production of quality and artistic goods. The greatest strength of a technical entrepreneur lies in his skill in production techniques.
2) Non-Technical Entrepreneur:
A non-technical entrepreneur is an ordinary entrepreneur who is not concerned with the technical aspects of the product in which he deals. He is concerned only with developing alternatively marketing and distribution strategies to promote his business.
3) Professional Entrepreneur:
A professional entrepreneur is one who is interested in establishing a business but who has no interest in managing or operating it, once it is established. Once the business is established, he sells out that business enterprise and takes up steps to establish another new business enterprise. Such an entrepreneur is dynamic as he always conceives new ideas to develop new and alternative projects.
IV) Classification on the Basis of Types of Business:
Entrepreneurs are found in different types of business occupations of different sizes.
On this basis, they are classified as follows:
1) Business Entrepreneurs
2) Trading Entrepreneurs
3) Industrial Entrepreneurs
4) Corporate Entrepreneurs and
5) Agricultural Entrepreneurs.
1) Business Entrepreneurs:
A business entrepreneur is one who conceives an idea of a new product or service and then he creates a business to materialise his idea into reality. He taps both production and marketing resources in his search to develop a new business opportunity. He may set up a small business unit or a big business unit, depending upon his capacity to collect the required resources. In many cases, many new entrepreneurs are found in small enterprises, but in due course, they may grow into large business units.
2) Trading Entrepreneurs:
A trading entrepreneur is one who undertakes trading activities and who is not concerned with the manufacturing work. He purchases the finished products directly from the manufacturers or from the wholesales and sell, them directly to consumers or other retailers.
He identifies potential market, stimulates demand for his products and creates a demand for them. He is engaged in both domestic and overseas trade. Such trade has been developed by Britain since it has geographically limited market. Such trading entrepreneurs are found in demonstrating their ability in pushing many ideas ahead for promoting their business.
3) Industrial Entrepreneurs:
An industrial entrepreneur is one who is essentially a manufacturer who has setup his manufacturing unit. He identifies the potential needs of customers and manufactures products according to their tastes and needs. He is generally a product-oriented man who perceives the opportunity of manufacturing some new products to meet the diversified needs of the customers. He has the ability to convert the economic resources and technology into a significantly profitable venture. He is generally found in electronic industry, textile mills, machine tools factories etc.
4) Corporate Entrepreneur:
A corporate entrepreneur is a person who demonstrates his innovative skill in organising and managing a corporate undertaking. It is to be noted that a corporate undertaking is a form of business organisation which is registered under some Act which gives it a separate legal entity. He is a promoter of such a business enterprise and he plans, develops and manages it.
5) Agricultural Entrepreneur:
An agricultural entrepreneur is one who conducts agricultural activities like raising and marketing of crops, fertilizers and other inputs of agriculture. He uses modern agricultural implements and machinery, irrigation facilities, technologies etc. to increase the agricultural output. He may also undertake in addition to forming other allied occupations.
V) Classification on the Basis of the Stages of Economic Development:
Entrepreneurs can also be classified on the basis of the stages of economic development as follows:
1) First Generation Entrepreneurs,
2) Modern Entrepreneur and
3) Classical Entrepreneurs.
1) First Generation Entrepreneurs:
A first generation entrepreneur is one who starts an industrial unit by means of an innovative skill. He is essentially an innovator, combining different technologies to produce a marketable product or service. But it should be noted that he has no entrepreneurial background.
2) Modern Entrepreneurs:
A modern entrepreneur is one who undertakes such ventures that go well along with the changing demand in the market. Such entrepreneurs undertake such ventures which suit the current needs of the market.
3) Classical Entrepreneurs:
A classical entrepreneur is one who is stereotyped and whose aim is to maximise his economic returns at a level consistent with the survival of his business with or without an element of growth.
VI) Classification on the Basis of the Growth of the Business Units:
Entrepreneurs can be classified on the basis of the growth of their business units as follows:
1) Growth Entrepreneurs
2) Super Growth Entrepreneurs
1) Growth Entrepreneurs:
Growth entrepreneurs are those who necessarily take up a high growing industry. Such entrepreneurs usually select such an industry which has shown a sustained growth prospects.
2) Super Growth Entrepreneurs:
Super-growth entrepreneurs are those who have shown tremendous growth of performance in their business. Their growth performance is identified by the great liquidity of funds.
VII) Classification on the Basis of Ownership:
Entrepreneurs can be classified on the basis of ownership of the business enterprises as follows:
1) Private Entrepreneurs
2) State or Government Entrepreneurs and
3) Joint Entrepreneurs.
1) Private Entrepreneurs:
Private entrepreneurs are those who have invested their own capital in the business venture, who bear the risk and who adopt modern techniques of production in order to earn more profits.
2) State Entrepreneurs or Government Entrepreneurs:
The enterprises in which the capital is invested by the state and which are run by the officials of the government are known as state enterprises and in such cases, the government itself is an entrepreneur.
3) Joint Entrepreneurs:
The enterprises which are jointly owned and managed by the private individuals and the public authorities are known as joint enterprises. The individuals who run and manage such enterprises are called joint entrepreneurs.
VIII) Classification on the Basis of Gender:
Entrepreneurs can also be classified on the basis of gender as male entrepreneurs and female entrepreneurs as explained below:
1) Male Entrepreneurs and
2) Female Entrepreneurs.
1) Male Entrepreneurs:
Male entrepreneurs are the male members of the society who run and manage the business enterprises.
2) Female Entrepreneurs:
Female or women entrepreneurs are the entrepreneurs who belong to the fair sex of the society and who own and manage business ventures.
IX) Classification on the Basis of Scale of Operations:
Entrepreneurs can be classified on the basis of the size of their business enterprises or the scale of the operations of their business:
1) Large Scale Entrepreneurs
2) Medium Scale Entrepreneurs and
3) Small Scale Entrepreneurs.
1) Large Scale Entrepreneurs:
Such entrepreneurs are characterised by (i) large size of the industrial unit, (ii) Large capital investment, (iii) large number of workers, (iv) use of power in production (v) large scale turnover and (vi) large organisation.
2) Medium Scale Entrepreneurs:
Such entrepreneurs are those who are running medium scale industries.
3) Small Scale Entrepreneurs:
Such entrepreneurs are those who are running small scale industrial units.
X) Classification on the Basis of the Area:
Entrepreneurs can also classified on the basis of the area they serve:
1) Rural Entrepreneurs and
2) Urban Entrepreneurs.
1) Rural Entrepreneurs:
Rural entrepreneurs are the persons who have setup their business in rural areas.
2) Urban Entrepreneurs:
Urban entrepreneurs are the personal who have setup their business in urban areas.
Entrepreneur – Decisions Taken by an Entrepreneur to Establish a New Business Enterprise
An entrepreneur has to take several decisions in order to establish an enterprise. Such decisions are known as entrepreneurial decisions. Entrepreneurial decisions are required to tackle the problems of launching a new enterprise.
A promoter or entrepreneur who wants to establish a new business enterprise has to take the following decisions:
1. Selection of Line of Business:
The first procedural decision involved in setting up of a new enterprise is to select the nature and type of business. The entrepreneur has to decide the type of business in terms of industrial, trading or service. Then he has to select the types of goods and services he will produce or distribute. He has to consider several factors, e.g., nature and source of raw materials, type of technology to be used, source of supply, distribution policy, etc.
After deciding the nature of business activity, the promoter has to analyse and forecast the profitability of the proposed business on the basis of probable operating costs and sales revenues. Operating costs imply cost of procuring different inputs while sales revenue depends upon the size of the market, probable market share of the proposed undertaking, expected growth of total market, sales efforts and policies etc.
A market survey may be carried out to estimate these factors. Marketing research may be carried out to ascertain the number, location needs, etc. of consumers. Then a product analysis is made to determine the design, quality and style of the product to be manufactured. Decisions regarding product design, pricing policy, distribution channel and publicity should be made from the viewpoint of prospective customers.
While selecting the line of business, a number of criteria or factors must be kept in view. First, the expected rate of return must be fair keeping in view the risks involved and the amount of investment required in the enterprise. Secondly, the degree of risk involved should be such that the entrepreneur is willing and able to undertake.
Thirdly, line of business chosen must be technically feasible, i.e., the requirements of finance, technology, skills, labour and materials should be within the reach of the promoter. The promoter may prepare a comprehensive report containing the conclusions of all his analysis. Such a report is called project report or feasibility report.
2. Size of the Unit:
Determination of the size of the firm or scale of operations is an important decision in the establishment of a new enterprise. An attempt should be made to achieve the size at which the average cost per unit is minimum. In other words, the entrepreneur should aim at the optimum size keeping in view the extent of market, technique of production, nature of the product, availability of finance, competence of management, etc. Large scale operations offer several economies of scale but require huge capital investment and expert managerial skills.
Where the risk involved are high or a new idea to be tried, it is often preferable to start with a small size and to expand the firm gradually. According to Shubin, “The initial size of the establishment must be based on judicious sales estimates. With accurate sales estimates the firm can avoid investing in an establishment that is too large and expensive to be profitable at the outset but can select a size sufficiently large to take care of the initial sales and their expected increase during the years immediately ahead.”
However, the initial size of the enterprise can be large provided the entrepreneur is able and willing to afford the capital required and the risks involved. A careful analysis and reconciliation of technical, managerial, financial, market and such other factors should be made to determine the size of the firm.
3. Location of Business:
The location of a business firm is an important decision as it influences the costs, profitability and growth of the enterprise. Moreover, once the site is selected, it is very difficult to change it. An unfavourable location may restrict the growth of the firm in addition to higher costs. The objective of location decision is to find out the optimum location so that the per unit costs of production and distribution are the lowest possible.
Location is a three – stage process as it involves not only the selection of the region, but choice of locality and selection of the site. Region is selected on the basis of access to raw materials and markets, availability of labour, transportation, and banking facilities. Choice of locality or community is governed by local attitudes, managerial preferences, public facilities, climate, availability of site, financial inducements, etc. Selection of the site depends on cost of land, soil and surface, development costs, etc.
4. Choice of Form of Ownership:
The choice of the form of ownership determines the division of profits, authority and liability of owner(s), continuity of business, transferability of interest, etc. A business enterprise may be organized in three forms, namely, sole proprietorship, partnership and Joint Stock Company.
The choice of the form of ownership depends on several factors such as the nature and size of the business, degree of risk or liability, continuity of business, capital and managerial requirements, tax burden, legal formalities, etc. A good form of ownership should be easy to form, simple to operate, durable, flexible, free from heavy taxation and legal requirements, etc. In some cases, the form of ownership may be prescribed by law. For instance, banking and insurance business can be carried on only in the form of a joint stock company.
Prescribed legal formalities must be completed such as industrial license, import license, incorporation of company, certificate of commencement of business, etc.
5. Financial Planning:
Proper planning and control of finances is essential to success in business. Adequate funds must be provided at the right time for the start and continuity.
Financial planning involves advance decisions in the following area of business finance:
(a) Determination of the total amount of capital required for the business, keeping in view the cost of establishing the business (promotional expenses); costs of fixed assets like land, building, plant, machinery, furniture and fixture etc. (fixed capital); cost of current assets like stock of raw materials, cash, debtors, inventory, etc. (working capital) and other operating costs. While estimating capital requirements, the represent as well as future needs for expansion, modernization, diversification, etc. should be considered. A proper amount of capitalization should be fixed.
(b) Deciding the form and composition of the securities which are to be issued to raise the estimated capital. The sources of finance have to be settled in terms of ownership securities creditor ship securities. This is the problem of deciding an appropriate capital structure.
(c) Deciding the time, price and method of marketing securities.
(d) Administration of funds.
6. Provision of Physical Facilities:
An important decision in launching a new enterprise is the selection of machines, equipments, plant, buildings, and other physical facilities. The nature and quantum of physical facilities depend upon the size of the firm (large, medium and small), nature of the business (manufacturing, trading or service), process of production (capital-intensive or labour – intensive), the availability of funds, etc.
In the selection of a particular machine or equipment the relative cost and productivity, availability of repairs and maintenance services and spare parts, skills of workers, etc. should also be kept in view. Investment in a particular machine or equipment should be made to improve productivity and to reduce costs rather than in the name of modernity alone. The alternative source of supply of physical facilities should be considered.
7. Plant Layout:
After selecting machinery and equipment, it is necessary to arrange them in an efficient manner. Arrangement of physical facilities in the plant is known as plant layout. Good layout is essential for efficient and economical operations. An efficient layout helps to reduce the costs of material handling, inventory, space, etc. The layout should be such that it results in the optimum utilization of machine equipment, work force and space.
Machinery and equipment should be placed in a proper sequence so as to permit a smooth flow of material through the necessary operations and in the most direct way possible. The layout should be flexible enough to adapt itself to changing conditions of business. Back- handling of materials and other bottlenecks and delays in production process must be kept to minimum. The type or pattern of plant layout depends upon the nature of production system, space available, volume of output, types of equipment etc.
8. Internal Organization:
Another important managerial decision in the establishment of a new business enterprise is the creation and development of an internal structure. Work is divided among departments like production, marketing, finance, personnel, etc. And arrangements are made for co-ordination among these various departments. An efficient network of authority responsibility relationships need to be created for successful operations. Internal organization is a structural framework consisting of authority responsibility relationships among the members of the enterprise.
It defines the official channels of communication and reporting relationships, i.e., who is responsible to whom. In a large enterprise, the authority – responsibility relationships are depicted formally on an ‘organization chart.’ A sound internal organization facilitates efficient operations, avoids duplication of work, promotes mutual co-operation and co-ordination, and facilitates expansion and growth of business.
It provides the arteries and nerves through which the organisation members communicate with one another. Creation of a sound internal structure involves problems like departmentation, delegation, decentralisation, span of control etc.
9. Personnel:
The next step is to estimate the needs of people or employees to perform different jobs in the internal organisation structure. The forecasting of the number and type of employees is known as manpower planning or human resource planning. After this, the procurement, development and motivation of the required managers and workers become necessary. Persons with required skills, aptitude and experience must be recruited and selected.
Once the personnel are employed and placed on jobs, they must be motivated (through proper compensation and non-financial incentives) to make their best possible contribution towards the accomplishment of organization objectives. Plans are prepared for all these activities at this stage.
10. Launching the Enterprise:
The completion of physical, organisational and financial aspects leads ultimately to the actual launching of the enterprise. Acquisition of land and building, plant and machinery and employees and start of production are the main activities performed in this stage.
Entrepreneur – Charms of being an Entrepreneur
In terms of career choices an individual has three options – to work for someone else, be self-employed in a profession, or be an entrepreneur.
Let us look at the first option. It is fine to work for someone, provided you can land a good job, and if you do not mind taking orders from someone else. In these days of unemployment it is not easy to get jobs, especially good jobs, if you do not have specialized academic qualifications. Graduates as well as post-graduates in humanities and even the sciences do not stand a chance. And if you do get a job, how much scope do you have for doing as and how you please?
Who is an entrepreneur? An entrepreneur can be defined as one who initiates and establishes an economic activity. As an entrepreneur you establish your enterprise, work for yourself, set high targets or goals and achieve them.
In entrepreneurship, the individual is the most important element. It is he/she who takes the decision to start an enterprise, and strives to make it a success. Three main factors influence his/her behaviour—knowledge, skill and motivation. Entrepreneurship is not limited to any class, community or religion. There is no age bar, for any person who possesses certain behavioural traits and attitudes can work to become an entrepreneur.
The Charms of being an Entrepreneur are many:
1. An entrepreneur is an independent being; entrepreneurship provides an opportunity for self-expression and the realization of one’s passion for doing something new and different—a scope for innovation
2. There are numerous opportunities for self-development
3. An entrepreneur makes his/her own decisions and acts on them
4. Working on one’s own and thus getting rewards yields immense satisfaction and pleasure for more than what one can get in a job
5. Monetary rewards can be more than commensurate with one’s capacity and capabilities
6. An entrepreneur with a science and technology background can introduce new technologies, develop substitutes for imported components
7. An entrepreneur generates employment for others
8. An entrepreneur can make significant contributions to the development of the country
9. An entrepreneur can be doubly fulfilled. He/she realizes both goals, that of individual status as well as of contribution to society, benefiting from one’s own competence and experience
10. Above all he/she can be an achiever, realize his/her goals and prove one’s achievements to the world.
Entrepreneur – Functions of an Entrepreneur: Innovation, Risk Taking and Organisation Building
The main functions of an entrepreneur are as follows:
Function # 1. Innovation:
An entrepreneur is an agent of change. He introduces new combinations in any branch of economic activity. Innovation implies doing new things or doing things that are already being done in new ways.
It may occur in the following forms:
(i) Introduction of a new product or new quality of an existing product.
(ii) Introduction of new methods of production or distribution.
(iii) Opening of a new market.
(iv) Conquest of a new source of raw materials.
(v) New form of organisation of industry.
Invention and Innovation:
Though both invention and innovation involve a tremendous amount of creativity, they are entirely different processes. Innovation is the discovery of something new. The resulting product of an inventor did not exist before. For example, mathematical calculators and microelectronics were inventions. On the other hand, innovation is a new combination of natural elements that results in a useful and commercially viable product. For example, micro-computer is an innovation made by combining the inventions. Similarly, gasoline is an innovation, a derivative on a natural resource.
Function # 2. Risk-Taking:
An entrepreneur assumes the responsibility for loss that may arise due to unforeseen contingencies in future. He guarantees interest to creditors, wages to labour and rent to the landlord. After making payment to these persons little or nothing may be left for him. Entrepreneurs take calculated risks. They are not gamblers.
Function # 3. Organisation Building:
An entrepreneur brings together various factors of production, (resources), organises them properly and performs the decision-making function of administration. He determines the line of business, expansion and growth of the enterprise. As an organisation builder, an entrepreneur performs planning, coordination and control functions.
Peter Kilby has identified the following functions of an entrepreneur:
(i) Perceiving market opportunities
(ii) Gaining command over scarce resources
(iii) Purchasing inputs
(iv) Marketing the products
(v) Dealing with bureaucrats
(vi) Managing human relations within the firm
(vii) Managing customer and supplier relations
(viii) Managing finance
(ix) Managing production
(x) Acquiring and overseeing assembly of the factory
(xi) Industrial engineering (minimising inputs with a given production process)
(xii) Upgrading process and product
(xiii) Introducing new production techniques and products.
Entrepreneur – Skills Required by an Entrepreneur
The skills of an entrepreneur make him or her ideally suited to spot opportunities. As an entrepreneur, one has to strive for excellence. However, few entrepreneurs have the wisdom of excellence versus perfectionism, that is, the ability to judge when striving for excellence. It is based on the principles of “If you want something done right, you have to do it yourself.”
Following are the variety of skills required by an entrepreneur-
E – Enthusiastic:
Entrepreneurs should be enthusiastic and interested in various activities, thereby being able to gather knowledge and experience from various walks of life. The built in and learned passion is the main thing that helps him to stand ahead of the crowd.
N – Nurturing:
No entrepreneur becomes successful overnight. Their success stories are the product of hope and believe that they carry with themselves. When paired with sustainable growth, developmental steps taken by them over the years towards creativity, it leaves behind a beautiful creation that is looked up to in the years to come.
T – Tactful:
The work of an entrepreneur is no less than a business tycoon. They have to be skillful and master the art of sensitively dealing with each stakeholder who are associated either directly or indirectly with their business by taking into consideration the long time perspective of their organizations survival.
R – Righteous:
Entrepreneurs are expected to be ethical, morally right and justifiable towards their work and their associates. By being righteous the entrepreneur will be able to keep the motivation of all associates high and at the same time boost them to engage in the wellbeing of his business.
E – Exceptional:
Entrepreneurs are the ones who have an exceptional approach towards business. Their thoughts are often quite distinct from the ones existing, likewise is their way of working as well. It is because of this exceptional quality that they are able to attract a large number of people and engage them either directly or indirectly in their endeavour.
P – Productive:
The productivity of the entrepreneurs should be visible in their actions and not just merely be restricted to their thoughts. Without achieving the targets it would be very difficult for the entrepreneur to sustain himself and be able to win the trust of the people, because at the end all people are merely interested in the results.
R – Revolutionary:
Entrepreneurs should be able to bring about complete changes. Changes initiated towards the welfare of all is the key to all success as this would be able to bring about differences. Men today looks for changes, craves for betterment and seeks well-being.
E – Efficient:
Hardwork is the key to all success. The entrepreneurs should be able to work productively with no wastage of money, efforts and resources. This efficiency should be limited to not just to self but lined up and demanded from all stakeholders for healthy growth.
N – Novelty:
The quality of being new and unusual is what makes an entrepreneur different from common man. There are plenty of areas that are to be rebuilt and this requires the efforts of a person who is novel in their approach to make the situations better for a lot more people.
E – Exemplary:
Entrepreneurs are the best of their kind. They give others a reason to live, a reason to be happy and tension free. Their innovative steps are truly commendable as they in their own way are able to eradicate, if not all but a few problems of mankind.
U – Utilitarianistic:
It requires immense dare to do something different in the world. The entrepreneurs are able to fulfil their dreams only because they believe that the greatest happiness of the majority is the guiding principle that guides their behaviour.
R – Rejuvenating:
The realistic dreams that are set out by the entrepreneurs makes life more lively and youthful. The fact that the entrepreneurs are successful is because their dreams, beliefs and hopes find place in the world of a lot many who are not as daring as them to take the bold steps but, are happy to be a part of it.
S – Self-Reliant:
Successful entrepreneurs are proactive people, who set goals and always try to take full responsibility for their actions. They know the difference between what they are today and what they are going to be tomorrow. Everything depends upon their own choices and decisions.
H – Humanitarian:
All entrepreneurs concentrate a lot in the human welfare. They are highly social able people and the steps that they take engages a large number of people. Their sociable approach is greatly appreciated as they are allowed to operate in the society and not in isolation.
I – Irrepressible:
It is very difficult to restrain any entrepreneur from taking different steps. The way in which entrepreneurs analyses and interprets a situation is very different. It is this characteristic of the entrepreneurs that help them to compete and survive in the competitive and ever changing world.
P – Practical:
Entrepreneurs believe more in actually doing something rather than just being restricted to theory.
Entrepreneur – Factors Motivating the Growth of Entrepreneurs
Entrepreneurs play an important role in the development of the society. The entrepreneurial qualities are to some extent innate and some others are enhanced by experience and training for example the foresight, analytical ability computational skills etc., are enhanced by the day to day experiences.
An entrepreneur takes the whole responsibility of the business and has high capacity to take calculated risks and has faith in his own capabilities. Entrepreneur is a person who crates new ideas, exploits new opportunities, bears risks and ultimately runs the business successfully.
There are several factors that motivates entrepreneurs. Desire to earn money is an important motivating factor but just earning profits is not the only factor that motivates them.
P.N. Sharma conducted a research and have found out certain internal and external motivating factors. Internal factors include, educational background, occupational/technical knowledge, desire to work independently in manufacturing line, desire to branch out to manufacturing and family background. Some of the external factors identified include, Assistance from Government.
Assistance from financial institutions Availability of technology or raw-materials, other factors such as demand of the particular product, utilisation of excess money earned from contractual estate business, unstable policy of the foreign Government for non-residents, no chance for further promotions.
Cooper conducted different studies on technical and new entrepreneurship and found three main groups of factors which influence an entrepreneur.
i. The family, education, age, occupational experience etc.
ii. Ideas leading towards entrepreneurship, availability of venture capital, collective attitudes and perceptions leading to entrepreneurship, accessibility to suppliers, personnel and markets.
iii. The Organisation for which he/she had been working earlier might be termed as the incubator organisation.
Another study was conducted on entrepreneurial factors motivating the growth of entrepreneurs and came out with three important categories.
1. Entrepreneurial Ambitions:
i. To continue family business.
ii. To make Money.
iii. To secure self-employment.
iv. To fulfill desires of parent/family members.
v. To gain social prestige.
vi. Desire to do something creative.
vii. Desire to provide employment opportunities to others.
2. Facilitating Factors:
i. Inspired by success stories of entrepreneurs.
ii. Previous experience in the same or similar are.
iii. Advice and encouragement from family, friends or relatives.
iv. Getting associated as sleeping partners.
3. Compelling Reasons:
i. Dis-satisfied with the present job.
ii. Unemployment.
iii. Maintenance of family.
iv. Usage of ideal funds.
v. Make proper use of technical and professional skills.
AD MoCrory conducted a research and observed that the dream of the entrepreneurs was not to “get rich” but to “get big”.
Entrepreneur – Entrepreneurial Vision
Entrepreneurs are typically strong in their vision. Vision exists between ‘what is’ and ‘what might be’. A vision is a mental image which is created out of possibilities and not out of certainties. It defines where the entrepreneur wants to go, illuminates why he or she wants to be there and provides signposts for how they might get there.
Vision is first and foremost, a communication with oneself. It is constructed personally and will vary from entrepreneur to entrepreneur. It is a starting point for giving a shape and direction to a venture.
An entrepreneur motivates to make their vision into reality. It specifies a destination rather than a route to get there. It is a picture into which the entrepreneur fits an understanding of why people will be better off, the source of the new value that will be created and relationships that will exist.
Effective entrepreneurs understand how their vision can be used to motivate others as much as it can be used to motivate themselves. An entrepreneur must learn to challenge vision, it must be defined and shaped so that it is appropriate, viable and achievable, before it can be put to use.
Vision includes the following:
(i) Helps an entrepreneur to define his/her goals.
(ii) Provides a sense of warmth and encouragement
(iii) Supports communication and leadership strategy
(iv) Provides a sense of direction
Entrepreneur – Entrepreneurial Mission
A mission is a formal statement which defines the purpose of the venture. It is a powerful communication tool which offers entrepreneurs a chance to articulate and give a form to their vision. Mission statement has two components i.e., strategic and philosophical. As a strategic statement, it aims to clarify – what the business aims at and as a philosophical statement it aims to clarify what value it will uphold.
It is a powerful management tool which:
(i) Articulates the Entrepreneur’s Vision:
Developing a mission offers entrepreneurs a chance to articulate and give form to their vision. This helps them to refine and shape their vision, and it facilitates communication of the vision to the venture’s stakeholders.
(ii) Encourages Analysis of the Venture:
The purpose of developing a mission that entrepreneur and those that work with them stand back and think about their venture in some detail. If the mission is to be meaningful, then that analysis must be made in a detached way. Entrepreneurs must be able to subject their own vision to impartial scrutiny and consider how realistic and achievable it is.
(iii) Defines the Scope of the Business:
An entrepreneurial venture exists to exploit some opportunity. Opportunities are most successfully exploited if resources are dedicated to them and brought to bear in a focused way. This demands that the opportunity be defined in a precise way.
(iv) Provides a Guide for Setting Objectives:
A mission is usually qualitative. It does not dictate specific qualitative outcomes. This is the role of objectives. The mission provides a starting point for defining specific objectives, for testing their suitability for the venture and for ordering of their priorities.
(v) Clarifies Strategic Options:
A mission defines what the venture aims to achieve. In this it offers guidance on what paths might be taken. The mission provides a starting point for developing strategic options, for evaluating their consistency in delivering objectives and for judging their resource demands.
Entrepreneur – Types of Entrepreneurial Environment
In general, entrepreneurs are required to consider how the environment affect their entrepreneurial decisions so that they will be able to react to potential business opportunities, potential threats and plan for the future. “The term environment refers to institutions or forces that are outside the enterprise and potentially affect’ the enterprise’s performance.”
The environment is composed of internal environment and external environment. Internal environment consists of forces inside the enterprise that can influence the enterprise and its performance. External environment contains all the forces outside the enterprise.
General environment is that part of the external environment which is composed of forces that have a general influence on the enterprise behaviour. Entrepreneurial environment is directly concerned with general environment and it is the general environment which affects the level of entrepreneurship. These include political, legal, economic, technological, sociological, cultural and international forces.
These factors affect the level of entrepreneurship and entrepreneurs are supposed to undertake environmental analysis for interpreting their potential and real impacts on performance of the firm.
1. Political Environment:
Political environment is concerned with general stability of the country in which an enterprise is expected to perform and the political philosophy of party in power towards business. Political forces define the business climate by the constraints they impose and by the activities they permit.
They also affect the way business enterprises protect their inventions and patents etc. If political parties believe in wellbeing of the country and society then there will be no problem in maintaining political stability. Political stability ensures effective planning and implementation of economic programmes.
Political philosophy of party in power, general political conditions, leadership qualities are the important factors which create political environment.
Main factors related with political environment are as follows:
(i) Political Philosophy:
Political parties have their own political philosophies. Capitalism, communism, socialism, mixed economy are the economic systems by which political parties are required to explain their stand or opinion. They are also expected to implement their economic agenda in the development of the country.
Economic agenda decides the techniques and priorities of economic development. In this way different political philosophy determine the role and forms of entrepreneurial activities.
(ii) Political Atmosphere:
Favourable political conditions are necessary for the economic development of the country. Political instability creates uncertainty while entrepreneurial activities need a clear, certain and comparatively stable government policy. Political instability, public movement etc. are the result of power conflict of political parties of the country.
In this situation, entrepreneurs are unable to take a sound business decisions as they need a clear-cut Government policy. Political instability increases the level of risk. So entrepreneurs are required to keep a watch on the possibilities of stability in political activities before involving themselves in entrepreneurial activities.
(iii) Quality of Leadership:
In modern scenario, political parties rule the country and thus, leadership of party in power decides the destiny of the country. Matured, decisive, competent and efficient leadership enables the country to have an effective economic growth strategies. Accelerated economic development ensures the well-being of the country. So it is for the political leadership to provide sufficient incentive and protection to entrepreneurial activities at the Government level.
2. Legal Environment:
In practice, Government regulates all important components of the economy. Government generally try to control the entry, working, selection of resources and their uses in business situations. On these lines, government prepares legal environment of the business.
However, it is duty of the government to develop regulatory framework in such a way which creates conducive environment necessary for business activities. Conducive environment encourages entrepreneurial activities in satisfactory way.
Factors related with legal environment are as follows:
(i) Determining Areas:
Government determines all those areas and conditions under which entrepreneurs undertake their entrepreneurial activities. Under this arrangement, entrepreneurs may be required to take permission or licence from the Government before moving into entrepreneurial activities.
Similarly, they are also supposed to take prior permission in availing public facilities and resources. Simple permission/approval arrangement encourages entrepreneurs to opt for more entrepreneurial activities.
(ii) Regulation of Entrepreneurial Functions:
Whenever entrepreneurs start their work or their business units or got admitted in the business then Government helps them in accelerating the pace of operations and also regulates the operations as per requirements. In this system, we include all those controls which prohibit the general functions, efforts and performance. So, the Government from time to time directs and regulates the managerial functions of the entrepreneurs.
(iii) Regulating Results of Entrepreneurial Activities:
Public regulations are also applicable on all entrepreneurial activities. Regulations with regard to volume of profit, disposal of profit, exhaustion of excess payments etc. are also helpful in creating legal environment. If these regulate us are flexible and simple, entrepreneurs may find themselves in more active situation in their entrepreneurial behaviour.
(iv) Regulating Relationship among Various Segments of Economy:
. It helps in avoiding confGovernment formulates rules, regulations and enactment of separate Acts for regulating the mutual relationship among the different components of the economylicts in entrepreneurial interests or concentrating economic powers in few hands.
For example, certain restrictions on appointment of directors on the Board of Directors, abolition of different types of holding companies, regulation of labour laws or takeover codes or corporate governance etc.
3. Economic Environment:
Economic environment is of multidimensional nature. It includes all those actions which make the economic activities possible in the country. Economic resources, economic conditions, economic policies, trade policy, labour arrangement, incentives and subsidies are some of the important factors which constitute economic environment.
These are discussed below:
(i) Availability of Economic Resources:
Availability of adequate quantity of natural and physical resources encourages entrepreneurs to undertake more entrepreneurial activities. Effective utilisation of these resources is possible only through entrepreneurship. It will help the entrepreneurs to earn more profit and retain the profit for further expansion programme.
(ii) Economic Conditions:
Economic conditions govern the enterprise ability to remain viable. Inflation, interest rates, unemployment, per capita income, consumer purchasing power, exchange rates are some of the important factors which provide sufficient symptoms about the conditions prevailing in the economy as a whole.
For example, when inflation rates are high entrepreneurs pay more for supplies and may raise their prices to cover these costs. In case of high inflation rate Government may be forced to initiate regulation of price and wage structure through guidelines etc.
(iii) Economic Policies:
Economic policies determine the direction and volume of the business. For example in socialist economies decisions with regard to what to produce, how to produce, for whom to produce and how much to produce are to be taken by the Government or central planning system like Indian Planning Commission.
Government is responsible for formulating these economic policies to regulate the level of production and consumption. In free economic- system, it is for the market forces to decide all these things and Government regulatory role is restricted to a nominal level.
(iv) Labour Policies:
Labour is an important and active factor for production or service process. Volume of production and costs are governed by the productivity of labour to a large extent. So in practice, the Government should formulate such policy which will ensure timely payment of sufficient wages, strengthen the social security system and improve labour productivity.
If entrepreneurs think that labour policy is favourable then they will be motivated to undertake entrepreneurial activity. Current labour environment also enables the entrepreneurs to take necessary decisions. If lockouts and strikes are the game of the day, then it would be very difficult for entrepreneurs to assume risks.
Similarly, disciplined labour environment makes the entrepreneurs more active in taking entrepreneurial decisions.
(v) Trade Policy:
The major objectives of trade policy are to ensure sufficient supply of goods and services in the country and controlling the adverse balance of payments. Entrepreneurs will be motivated to install new plant or initiate action for expansion if trade policy formulated by the Government is going to increase the supply as per the demand available in the market.
Export promotion and import substitution measures also encourage entrepreneurs to opt for more expansion. Establishment of export oriented units (EOU) is a major step in this direction.
(vi) Tariff Policy:
Effective tariff policy provides a base for entrepreneurs to undertake more entrepreneurial activities. High tariff rates affect demand level as well as margin available to the entrepreneurs. Determination of tariff structure is to be made to avoid unnecessary reduction in consumer’s purchasing power.
Neither potential entrepreneurs would like to establish new entrepreneurs nor will existing entrepreneurs believe in expansion process. So, tariff policy should be development oriented enabling the entrepreneurs to undertake more entrepreneurial activities.
(vii) Incentives:
Incentives are necessary to encourage entrepreneurial activities in the country. It will ensure a high margin at low risk. Interest free loan, exemption from wealth tax, rebate to NRI’s, rebate to women entrepreneurs, tax holiday, conversion of sales tax into interest free loan, allotment of land and production sheds at concessional rates, rebate on stamp duty, provision for seed capital, supply of raw materials at concessional rates are some of the important incentives which help in creating conducive environment for entrepreneurship.
(viii) Subsidies:
Under this scheme. Government creates favourable environment by participating in terms of economic assistance in economic activities already undertaken by the entrepreneurs. There are some activities to which entrepreneurs do not want to undertake or they are not profitable in the short run.
Under these conditions, entrepreneurs should be given financial support and assistance to undertake that entrepreneurial activity. Export Import Assistance and subsidy for Research and Development, transport subsidy, subsidy for full efficient plant, subsidy for good testing tools, subsidy for industrial colonies, subsidy for technical consultancy, subsidy for market survey etc. constitute the subsidy programme of the Government and they encourage entrepreneur to undertake more entrepreneurial activities.
4. Technological Environment:
Technological forces constitute the technological environment. These forces include the expertise, procedures, and systems used by enterprises to make profound changes in the transformation process and in goods and services. “Fuelled by scientific research and industrial breakthrough technological forces define new industries and provide enterprises with tools and opportunities to compete more effectively.”
These factors are as follows:
(i) Better Utilisation of Productive Resources:
Latest technology encourages better utilisation of materials and labour. Scientific and technological skills of labour can be improved with the help of technology. Innovation develops technological bases which in turn create more demand for products in the market. Ultimately entrepreneurial possibilities are increased to meet out growing demand for the product.
(ii) Increase in Competition Capacity:
Scientific and technological development encourages innovation which ultimately improves product marketability. Cost reduction programme is also possible with science and technology. Use of out-dated technology reduces the market potentiality of the product as well as scope for entrepreneurship.
(iii) Risk Efficiency:
Technological environment helps in creation of new production techniques. Initially risk is the prime factor of production process but at later stage market absorbs the product risk and stable market is available to the entrepreneurs. Technological development increases the capacity of entrepreneurs to assume more risk in the long run.
(iv) Improvement in Productivity:
Wastages of productive resources increase the cost of production. But science and technology help in controlling the wastages of resources and ensure their proper utilisation. New inventions evident the scope of resource utilisation and every resource has its demand in the market.
(v) Improvement in Profitability:
Better technological environment ensures better utilisation of resources by controlling the wastages and improving the margins of entrepreneurs. Cost control programme can be implemented successfully with the help of new technology. Thus, technological environment widens the positive gap between price and cost which ultimately increases the profit base. Side by side, it also improves the profitability of the enterprise.
5. Social Environment:
Social environment prepares background for entrepreneurial activities. Today business is regarded as a social institution. It forms an integral part of the social organisation having responsibilities to a wider circle of individuals like entrepreneurs, workers and consumers etc. who participate in the business activities.
Social structure, social values and conventions, consumerism, labour attitude etc. constitute the social environment. Since an entrepreneur is a part of the society, he is governed by the social values and conventions. An effective but favourable social environment is necessary for entrepreneurship.
Factors guiding the social environment are as follows:
(i) Social Structure:
Functional division of community in the social structure determines the level of entrepreneurial activities. In India VARNA arrangement is guided by functional distribution of duties like Brahmins, Kshatriyas, Vaisyas and Sudra. In practice, Varna distribution affects the forms of entrepreneurial behaviour.
Vaisyas think that their duties lie only in business activities. Marwaries and Gujaratis Vaisyas are proved to be more risk-taking communities. But in recent years there is a dramatic change in the social behaviour. Improvement in level of education, government incentives and subsidies etc. have motivated other varnas of the society to undertake entrepreneurial activities.
(ii) Social Values and Conventions:
The values are the belief that shape individual and groups attitudes. Values and attitudes mould people’s behaviour and influence the needs and wants that they seek to fulfil through interaction with business enterprises. Generally, individuals try their level best to protect their social values and conventions.
Production of public goods, avoidance of unethical behaviour and fulfilment of social obligations are being treated as part of the social behaviour and entrepreneurs cannot avoid them in their entrepreneurial behaviour.
(iii) Consumer’s Opinion:
Consumer’s opinion with regard to consumption of goods and services also affects the form of entrepreneurial activities. Economic condition of the consumer, taste, habit, fashion etc. regulate the volume and form of production. A product having more demand due to change in fashion, taste, habit etc. motivates the entrepreneur to undertake production of that product in most of the cases.
(iv) Labour Motives:
Labour mentality towards production process also plays an important role in shaping the form of social environment. Generally, there is conflict of interest between the two—employer and employee. There will be more conflict if labour think that employer is their competitor and exploiter, then volume of entrepreneurial activity will be slashed.
6. Cultural Environment:
General perception about entrepreneurship development is that it is based on cultural and ethical values. People generally believe that success or failure of an individual or an enterprise is totally governed by the mercy and pleasure of some special God. It is also believed that status is inherited, it is not earned.
It is considered that casteism and certain occupations are meant for members of a particular caste, religion or sex. All this results in considerable immobility and inflexibility and thus, labour wasted as the customs are still very powerful in such conditions. In this context, cultural structure and cultural aspirations are important parts of the entrepreneurial environment.
(i) Cultural Structure:
Supply of entrepreneurs is determined by the cultural structure. Demographic characteristics also describe the population and its behaviour in regions where an enterprise is located. Family background, level of education, economic conditions of the family etc. also affect the supply of entrepreneurs.
(ii) Cultural Aspirations:
Regulation of entrepreneurial trend is also possible through cultural aspirations. If social constraints are being removed it means there is no entry barrier for other castes to enter the business field and supply of entrepreneurs is possible from any source. Change in value system ensures change in the cultural expectations. Now it is possible due to change in the cultural heritage of the country that any person from any caste can enter the field of entrepreneurship.
7. International Environment:
International business environment deals with the forces which originate outside the home country in which an enterprise is working or expected to work. These forces like multinational corporations, exchange rates, level of competition from foreign market, position of international capital market etc. influence interactions with people and enterprises.
In recent years, globalisation has been identified as an important development affecting the working of business enterprises. As part of the external environment, entrepreneurs are being challenged by an increasing number of global competitors in the consumer’s market. These factors include MNC’s, globalisation process, GATT/WTO, development of international capital market, etc. constitute an international environment.
These are discussed below:
(i) Development of Multinational Corporations:
International business scenario has created favourable conditions for the development of MNCs in home country. These MNCs have a direct investment abroad and direct interest in the business environment in which they have such investment.
Flexibility in direct foreign investment on the part of Government discourages domestic entrepreneurs to establish new enterprises in the home country. MNCs generally have good product image, updated technology, quality control and effective marketing strategies and it is difficult task before the entrepreneurs to compete with them.
(ii) Globalisation:
In the era of globalization, Government itself is interested to force the home enterprises to improve their competitive strength in fighting for consumer market in international environment. The globalisation throws both opportunities and challenges to the Indian entrepreneurs.
With the opening up of the economy, entrepreneurs are facing tough competition from MNCs. Now they have been forced to reorient their strategies to reduce costs, improve the quality of their products and thereby making survival possible in the competitive market.
(iii) GATT/WTO:
They have set in motion for expanded multilateral trading system. They place special emphasis on the removal of non-tariff trade barriers and low level of tariffs. The reduction in tariffs and removal of trade restrictions have exposed the Indian entrepreneurs to unexpected challenges.
India has ratified the agreement for the establishment of the WTO as a logical step of its endorsement of the Uruguay round of negotiations relating to GATT. Under these situations. Indian entrepreneurs are being forced to change their strategies as there is no option for them except to improve their competitive strength.
(iv) International Capital Market:
In recent years, globalisation process enables the joint stock companies to approach the international capital market for their funding programme. It is quite true that Indian entrepreneurs are being compelled to adopt international accounting and reporting norms but they are quite successful in launching their GDRs and ADRs in global market. Even now they are trying for listing their instruments in leading international stock exchanges like NASDAQ.
Thus, entrepreneurial environment affects the growth of entrepreneurship in the country. Government should try to create favourable environment for the development of an effective entrepreneurship.
Entrepreneur – Ways of Developing Entrepreneurial Competencies
Entrepreneurial success depends upon entrepreneur’s qualities or competencies. There are certain inborn qualities while certain others can be acquired through education and training. This fact has been amply demonstrated in Kakinda Experiments conducted by Prof. Davis C. McClelland. Competencies have direct bearing on human behaviour and performance.
Various competencies can be cultivated or developed in the following ways:
1. Gaining First-Hand Knowledge about Competencies:
Various competencies cannot be cultivated without clearly understanding their meaning, significance and relevance. An earnest attempt must be made to understand at length the various competencies which are required for the efficient performance of the assigned task.
2. Competency Recognition:
An individual’s behaviour or performance depends upon the competencies he possesses. Therefore in order to get desired behaviour we should be in a position to know as to what are the competencies required in the individuals to perform in a particular manner. Under this step an effort is made to recognise the competencies.
3. Self-Assessment:
After getting clear cut idea about the competencies required for a particular type of behaviour, it is for the entrepreneur to see as to what extent he possesses these competencies and to what extent he is employing these competencies for achieving the desired goal.
4. Comparison of Competencies:
The next step is to compare individual competencies with the competencies required for the desired performance. Wherever we find deficiencies an earnest attempt is made to find out the reasons for the same.
5. Developing Competencies and Feedback:
Once it is realised that an individual does not possess a particular competency required for a particular type of behaviour, the next step will be to develop this competency. Assistance from various behavioural scientists may be taken for devising out ways and means for developing the required competency. In order to ensure that the required competency becomes part of the individual’s behaviour, he is asked to practice the needed competency repeatedly.
Lastly an attempt is made to know as to what extent change in individual behaviour has taken place due to acquiring of the requisite competency and to what extent it has been useful. It is through continuous application that one can ensure that the desired competency becomes part of his habit or personality.
6. Motivation:
If the entrepreneur is to succeed and build an effective organisation to excel in global competitiveness, he should be motivated as well as motivate the team. “The ability to keep yourself and your team motivated is very important because it has a direct impact on individual and organisational productivity,” says Edsil Coutinho who runs a logistical supply company and manages about 1000 people.
“For example, there are times when you need people to put in long hours, often without the promise of a reward. During such times, it is important to keep them motivated. Even if the situation is bleak, the leader should take it upon oneself to motivate others and see the bright side of the problem.”
There are several motivational practices available at the hands of entrepreneurs:
i. Most powerful motivators are rewards which in themselves include four types: membership and seniority, job status, competency and performance.
ii. Job design — the process of assigning tasks to a job — can be an effective tool to motivate employees. There are six approaches to job design: job rotation, job enlargement, job enrichment, social technical systems and ergonomics.
iii. DB Mod is based on the principle of law of effect. The principle states that repetition of a behaviour depends upon its earlier consequences.
iv. If consequences of the previous action are positive, the behaviour tends to get repeated. Being based on the principle of law of effect, DB Mod acts as a powerful motivator.
v. Empowerment is another motivational practice. Empowerment makes employees believe that they own the jobs.
vi. Goal setting too is a powerful motivational practice. Performance goals, if properly set, will motivate: employees considerably.
vii. Problem employees need to be given one more chance, probably by shifting them to a new work environment. If they fail to respond, suspension of workers and firing of managers need to be resorted to.
viii. Flexi time, MBO, flexible benefits and other such practices also help motivate employees.
Entrepreneur – Role of Entrepreneurs in Economic Development
Economic development is a wider concept as compared to economic growth. Economic development is a more comprehensive concept which includes economic growth and the progressive changes in the economic, social, political, and cultural realms.
Prof Kindle Berger opines that economic growth means more production but economic development includes more production as well as those technical and institutional changes which make more production possible.
The process of economic development is influenced by many factors. In this article we would like to understand whether entrepreneurship profoundly influences the process of economic development. In other words, is there any significance of entrepreneurship for economic development?
As we know, entrepreneurs are the persons who create new businesses, which help creation of fresh jobs for people and remove the problems like unemployment and poverty. With the help of technology and innovative ideas they increase productivity and thus contribute to the development of the country.
Different economists and thinkers have varied views regarding the relationship between entrepreneurship and economic development. There are few who do not attach much importance to this relationship. On the other hand there are some who advocate this relationship.
In the classical theories of economic development, there is no room for entrepreneurship Adam Smith; Father of Economics didn’t assign any significance to entrepreneurial role in bringing about economic development. He always advocated the policy of laissez-faire in economic affairs. Even David Ricardo didn’t really feel entrepreneurs vital for economic development.
Joshep Schumpeter visualised the entrepreneur to play a key role in economic development. He entrusts the entrepreneur the vital role of innovation.
Parson and Smelser (1956) described entrepreneurship as one of the two necessary conditions for economic development, the other being the increased output of capital.
The role of entrepreneurship in economic development differs from country to country depending upon the material resources available, industrial climate and the responsiveness of the political and legal system to the entrepreneurial function.
Entrepreneurs of developing countries need not be an “innovator” but could be an “imitator” who would copy the innovations introduced by the “innovative” entrepreneurs of the developed countries and ultimately contribute to the process of economic development.
The key responsibility of an entrepreneur in the economic development of a country includes the following functions of the entrepreneur:
1. Entrepreneurs create employment opportunities:
Entrepreneurs generate employment opportunities to the unemployed. In developing countries they provide yeoman service in creating job opportunities and thereby reducing the problems of unemployment and poverty and directly contributing for the economic development of the country.
2. Entrepreneurial initiatives contribute to higher gross national product and per capita income:
Entrepreneurial activities lead to effective mobilization and utilization of capital, resources and services in an economy. The increased economic activities enhance the level of gross national product as well as per capita income of the people in a country leading to the economic development of the economy.
3. Entrepreneurs promote capital formation:
Entrepreneurs play an important role in promoting capital formation in the economy by mobilising the idle savings of public. Entrepreneurs utilize their own as well as resources borrowed from the public for setting up their enterprises. These entrepreneurial activities results creation of wealth and value addition, which is imperative for the economic development of the country.
4. Entrepreneurs can significantly influence the standard of living:
Entrepreneurs play a vital role in enhancing the standard of living of the people by adopting latest innovations in the production of wide variety of goods and services. They can make available the best quality products and services in possible cheapest cost. This gesture of the entrepreneurs can result in the improvement of standard of living of the people of the country. Increase in the standard of living of the people reflects economic development of the country.
5. Entrepreneurs endeavour to promote balanced regional development:
Entrepreneurs who are conscious about their role can play a vital role in removing regional disparities by setting up of industries in less developed and backward areas. The growth of industries and business in backward areas would lead to a large number of benefits for the public like road transport, health, education, etc. If a conducive political and legal environment prevails, the entrepreneurs can contribute by deliberately setting by more and more industries in backward regions in order to remove the disparity.
6. Entrepreneurial activities would lead to wealth creation and distribution:
Entrepreneurial activities guided by national interest would lead to generation of greater wealth as well as its distribution. Entrepreneurial initiatives would bring equitable redistribution of wealth and income in the interest of the country to more people and geographic areas, thus giving benefit to larger sections of the society.
7. Entrepreneurial initiatives can help in skill development:
Skill development is necessary pre condition for the people of a country to be employed. The entrepreneurs can play a vital role in skill development and thereby contribute to the process of job creation and development of the economy.
8. Entrepreneurs can increase the country’s share in global export trade:
Entrepreneurs can increase the global competitiveness of the products and services of a country. With the increased competitiveness entrepreneurs help in promoting a country’s export-trade. Increased exports can bring in foreign exchanges necessary for an economy. Import substitution and export promotion leads to economic independence and development.
9. Entrepreneurs ensure overall development of an economy:
The activities and initiatives of the entrepreneurial class influences all the sections of the economy. They play the role of a catalyst for change. Money begets money and thus the generation develops. The entrepreneurial class also creates an atmosphere of trust and happiness. Their activities generate enthusiasm among the followers. A new level of development is dreamt by the entire economy and the entrepreneurial class leads the country towards the coveted goal of development.
Scholars like Kielbach, Audretsch, and Kirzner opine that entrepreneurship is caused by the ability of people to perceive and act on these opportunities innovatively. The level of entrepreneurship in an economy is caused by both the extent to which individuals in that economy discern and utilize previously undetected opportunities for profit and the levels of some of the traditional factors of economic growth present in that economy.
The fascinating interaction of entrepreneurship and economic development has many lessons for policy makers, academia, business owners, and the government. If the benefits and loopholes are properly understood, a balanced approach to nurture entrepreneurship will definitely contribute to economic development.
Entrepreneur – Institutions Supporting Entrepreneurs
A business enterprise or an industrial unit cannot be established easily. It needs the support of various kinds of resources. In the case of small scale business enterprises it is difficult to mobilise the resource needed to setup them. Small enterprises lack all kinds of resources. Therefore, it is a difficult task to start a small business enterprise. Recognising this aspect, the Central and State Governments evolved various measures.
Among such measures, Institutional support, financial assistance, marketing assistance, conducting feasibility studies on project, product or services, offering incentives and concessional (taxation benefits, subsidies, interest free loans, subsidised interest loan etc.), building industrial estates, conducting training programmes, etc. are important. Provision of this kind of support helps a small business enterprise to come up and function more effectively.
I. District Industries Centres (DICs)
The District Industries Centres Programme was started on May 8, 1978 by the Government of India. The main objective of this programme is to ensure an integrated administrative framework at the district level to promote small scale industries in rural areas. DICs have been offering services and supporting small entrepreneurs under a single roof. The programmes and schemes of central and state Governments are implementing through DICs. Registration of small scale units is done at the DICs. DICs lay more emphasis on generating employment opportunities and bringing down the unemployment rate.
The DIC consists of one General Manager (GM), four Functional Managers and three project managers. The General Manager is the chief of the center. He is assisted by Functional Managers and Project Managers. Each Functional Manager is vested with a specific function to perform and sufficient staff members will work as a unit to perform the task. Project Managers are technical personnel appointed by the State Government to offer technical service in the related areas. Till 1993-94, a fund for DIC schemes was sponsored by the Central Government. At present, DICs operate under respective state budgetary provisions.
Objectives of District Industries Centre:
A District Industries Centre has the following objectives:
1. To survey existing, traditional and new industries, raw materials and human resources.
2. To identify schemes and give a market forecast for different items and to prepare sample schemes.
3. To offer economic feasibility reports and offer invaluable advice to entrepreneurs.
4. To assess the requirement of machinery and equipment for various types of small scale, tiny and village industries.
5. To assess sources of availability of machinery and equipment for different units s to advice entrepreneurs
6. To liaise with research institutions regarding R and D (research and development)
7. To arrange for training courses for entrepreneurs of small and tiny units and liaise with SISI, SIET and other institutions.
8. To keep abreast of research and development in selected product lines and quality control method.
9. To ascertain raw material requirement of various units, their sources and price and arrange bulk purchases of raw materials and their distribution to the entrepreneurs.
10. To liaise with lead banks and other financial institutions, appraise plans, monitor flow of industrial Credit in the districts and to arrange for financial assistance to entrepreneurs
11. To organize marketing outlets to liaise with government procurement agencies, convey market intelligence to entrepreneurs.
12. To organize market surveys, market development programmes etc.
13. To give particular attention to development of Khadi and village industries including cottage industries to liaise with state Khadi Board
14. To organize rural artisan programme of training
Functions of DICs:
The DICs role is mainly promotional and developmental.
To serve this end, they undertake the following main functions:
1. To conduct techno-economic surveys and identify product lines.
2. To provide investment advice to entrepreneurs.
3. To prepare an action plan to implement the schemes identified
4. To provide advice to entrepreneurs on matters relating to –
a. The sources of availability of machinery
b. The sources of availability of raw materials
c. The procedure for procurement, etc.
5. To appraise the worthiness of the various proposals received from entrepreneurs
6. To help the entrepreneurs in locating the market
7. To explore the possibilities of export and advising about the overseas market
8. To conduct artisan training programmes
9. To supply strategic raw material and locating its source
10. To arrange for credit facilities
11. To help entrepreneurs for availing land, shed, equipment, tools, furniture and fixtures.
12. To assist the entrepreneurs in obtaining the required license, clearance from appropriate authorities.
13. To assist the entrepreneurs in marketing their products.
14. To assist the entrepreneurs in clearing their doubts relating to operation of bank accounts, submission of monthly returns, quarterly returns and annual returns to government departments.
15. To conduct artisan and craftsmen training programme.
16. To act as nodal agency in implementing Prime Minister Rojgar Yojana Programme.
17. To act as the technical consultant in administering IRDP and TRYSEM programmes.
18. To assist various specialized training institutions to conduct entrepreneurship development programmes.
At the time of withdrawal of sponsorship by the Central Government (i.e. during 1993-94) there were 430 centrally approved DICs in the country.
II. National Institute of Small Industries Extension Training (NISIET)
On the recommendation of the Working Group on the Third Five Year Plan for Small Scale Industries, the Government of India decided to establish an institution. Accordingly, Under the Ministry of Commerce and Industry, “Central Industrial Extension Training Institute” was created at Delhi in October 1960. The main objective of establishment was to provide training to the personnel of the Central Industries Organisation and to the Department of Industries of the state Government.
Later in the year 1962, it was converted into an autonomous society under the Hyderabad Societies Registration Act and renamed as “Small Industry Extension Training Institute” Hyderabad.
After a few years, i.e., in the year 1984, the Government of India changed the name of the Institute from “Small Industry Extension Training Institute (SIET) to “National Institute of Small Industry Extension Training (NISIET).
Objectives and Functions of NISIET:
The main objectives and functions of NISIET are:
1. To promote, develop and modernise small and medium enterprises in industrial and service sectors.
2. To spread knowledge about technologies and approaches to the development of small and medium enterprises.
3. To develop human resources and organisation development.
4. To develop entrepreneurship
5. To develop managerial skills
6. To develop technical skills.
7. To develop marketing skills
8. To formulate policies of industrial development and to spread implement and review policies.
9. To promote industrial partnership by developing new linkages with chambers of commerce, development organisation and Government of India.
10. To offer training programs for the personnel of small and medium enterprise sector.
11. To offer certificates and degree courses relating to small business management
12. To offer training programs to the personnel of SISIs.
13. To provide industrial information on services to small and medium enterprises relating to –
a. New business opportunities
b. New products and services
c. Investment opportunities
d. New technologies.
e. Skill upgradation
f. Marketing of products
g. New innovations
h. Business restructuring
III. Small Industries Development Bank of India (SIDBI):
The Small Industries Development Bank of India (SIDBI) was setup in April, 1990 under an Act of Parliament as the principal financial institution to promote, finance and develop small scale sector.
SIDBI started its operations from April 2, 1990. Its head quarter is situated in Lucknow (U.P.). It has 5 regional and 21 branch offices spread across the country. All duties which were performed by IDBI have been transferred to SIDBI. Besides its share capital, it can borrow from Government of India and RBI. It can also raise funds from capital market, foreign institutions etc.
The SIDBI’s assistance to small scale industrial sector is considerable. Since its incorporation, it has been assigning the entire gamut of SSI sector. Various schemes of assistance have been tailored to suit the needs of both the existing and new units. Units that need expansion, diversification, modernization and rehabilitation have separate schemes.
Forms of Assistance:
SIDBI’s assistance to small scale sector includes the following three forms:
1. Indirect Assistance
2. Direct Assistance
3. Development and support services
1. Indirect Assistance:
SIDBI’s schemes of indirect assistance include credit to small scale sector through prime lending institutions (PLI) spread across the country.
It provides assistance to SSI sector through other institutions such as commercial bank, State Industrial Development corporations etc.
The nature of assistance includes refinance, bill discounting, soft loan etc. There are about 913 prime lending institutions with a branch network of over 65,000 spread across the country.
2. Direct Assistance:
In addition to indirect assistance, SIDBI renders direct assistance through its various schemes. The main objective of this programme is to supplement the efforts of prime lending institutions (PLI) by locating the gaps in the existing credit delivery mechanism to SSIs. This programme is carried out through SIDBI’s regional or branch offices spread across the country.
3. Development and Support Services:
The SIDBI has launched various developmental and supportive services for the benefit of small scale industries. It grants loans and advances through different agencies working for the promotion of small scale industries. Over the years, it has brought out various developmental activities to brighten the future of SSIs including tiny industries.
Such activities have been presented below:
a. More emphasis on rural industrialisation to promote entrepreneurship
b. Human resource development to suit the SSI sector requirement
c. Technology modernistaion, upgradation
d. Quality improvement
e. Concern for environmental aspects
f. Marketing and promotion
g. Information dissemination
h. Promoting employment oriented industries especially in rural and semi-urban areas
i. Extending financial support to SSIDC and NSIC
j. Extending risk capital, etc.
SIDBI and EDPs:
SIDBI has a planned programme of activities to develop entrepreneurship in India. Entrepreneurship Development Programmes (EDPs) are successfully conducted with the help of specialised agencies to fulfill this dream. Entrepreneurship Development Institute of India (EDII), Institute of Entrepreneurship Development (IED), Centre for Entrepreneurship Development (CED), Technical Consultancy Organisations (TCOs) and Non-Governmental organizations (NGOs) are the important agencies with whose association EDPs are conducted by it.
Main Schemes of SIDBI:
a. National Equity Fund Scheme which provides equity support to small entrepreneurs setting up projects in Tiny Sector.
b. Technology Development and Modernisation Fund Scheme for providing finance to existing SSI units for technology upgradation/modernization.
c. Single Window Scheme to provide both term loan for fixed assets and loan for working capital through the same agency.
d. Composite Loan Scheme for equipment and/or working capital and also for work sheds to artisans, village and cottage industries in Tiny Sector.
e. Mahila Udyam Nidhi (MUN) Scheme provides equity support to women entrepreneurs for setting up projects in Tiny Sector.
f. Scheme for financing activities relating to marketing of SSI products which provides assistance for undertaking various marketing related activities such as marketing research, R&D, product upgradation, participation in trade fairs and exhibitions, advertising, branding, establishing distributions networks including show room, retail outlet, ware-housing facility, etc.
g. Equipment Finance Scheme for acquisition of machinery/equipment including Diesel Generator Sets which are not related to any specific project.
h. Venture Capital Scheme to encourage SSI ventures/sub-contracting units to acquire capital equipment, as also requisite technology for building up of export capabilities/import substitution including cost of total quality management and acquisitions of ISO-9000 certification and for expansion of capacity.
i. ISO-9000 Scheme to meet the expenses on consultancy, documentation, audit, certification fee, equipment and calibrating instruments required for obtaining ISO 9000 certification.
j. Micro Credit Scheme to meet the requirement of well managed Voluntary Agencies that are in existence for at least 5 years, have a good track record and have established network and experience in small savings-cum-credit programmes with Self Help Groups (SHGs) individuals.
k. New Schemes –
i. To enhance the export capabilities of SSI units
ii. Scheme for Marketing Assistance
iii. Infrastructure Development Scheme
iv. Scheme for acquisition of ISO 9000 certification
v. Factoring Services and
vi. Bills Re-discounting Scheme against inland supply bills of SSIs
Major Schemes:
a. Technology Development & Modernisation Fund:
SIDBI has set up Technology Development & Modernisation Fund (TDMF) scheme for direct assistance of small scale industries to encourage existing industrial units in the sector, to modernize their production facilities and adopt improved and updated technology so as to strengthen their export capabilities. Assistance under the scheme is available for meeting the expenditure on purchase of capital equipment acquisition of technical know-how, upgradation of process technology and products with thrust on quality improvement, improvement in packaging and cost of TQM and acquisition of ISO-9000 series certification.
SIDBI in July 1996 had permitted SFCs and promotional banks to grant loans for modernization projects costing upto Rs.50 lakhs. The Coverage of the TDMF scheme has been enlarged w.e.f. 01.09.1997. Non-exporting units and units which are graduating out of SSI sector are now eligible to avail assistance under this scheme.
b. National Equity Fund:
National Equity fund (NEF) under Small Industries Development Bank of India (SIDBI) provides equity type assistance to SSI units, tiny units at one per cent service charges. The scope of this scheme was widened in 1995-96 to cover all areas excepting Metropolitan areas, raising the limit of loan from Rs. 1.5 lakhs to Rs. 2.5 lakhs and covering both existing as well as new units.
The following are eligible for assistance under the scheme:
i. New projects in tiny and small scale sectors for manufacture, preservation or processing of goods irrespective of the location (except for the units in Metropolitan areas)
ii. Existing tiny and small scale industrial units and service enterprises as mentioned above (including those which have availed of NEF assistance earlier), undertaking expansion, modernization, technology upgradation and diversification irrespective of location (except in Metropolitan areas)
iii. Sick units in the tiny and small scale sectors including service enterprises as mentioned above, which are considered potentially viable, irrespective of the location of the units (except for the units in Metropolitan areas)
iv. All industrial activities and service activities (except Road Transport Operators)
Project cost (including margin money for working capital) should not exceed Rs. 10 lakhs in the case of new projects in the case of existing units and service enterprises, the outlay on expansion/modernization/technology upgradation or diversification or rehabilitation should not exceed Rs. 10 lakhs per project.
There is no change in the existing level of promoter’s contribution at 10% of the project cost. However, the ceiling on soft loan assistance under the Scheme has been enhanced from the present level of 15% per project to 25% of the project cost subject to a maximum of Rs. 2.5 lakh per project
IV. National Small Industries Corporation Limited (NSIC):
The National Small Industries Corporation Limited was established in 1955 by the Government of India. The main objective of it is to promote, aid and foster growth of small scale industries in the country. It renders wide range of services. Such services are predominantly promotional in nature.
Functions of NSIC:
Some of the main functions of NSIC Limited are given below:
1. To supply indigenous and imported machinery on easy financial terms.
2. To assist women entrepreneurs, weaker sections, handicapped, ex-servicemen and scheduled caste and schedule tribe entrepreneurs.
3. To provide composite loan for acquiring land and building, plant and machinery, working capital under one roof to tiny sector.
4. To provide working capital to viable and well managed units to purchase consumable stores, spare parts, payment of electric bills, statutory dues etc.
5. To supply scarce raw material either through domestic market or by importing.
6. To provide the benefits of Government stores purchase programme to units registered with it.
7. To assist entrepreneurs to establish their units in Software Technology parks established by it.
8. To provide complete package of export assistance, testing facilities, pre-shipment credit facility, export incentives etc. apart from promoting the products in trade fairs, buyer-seller meets etc.
9. To provide machinery and equipment on lease scheme. 100% finance is provided to SSIs to facilitate the diversification and technology upgradation activities.
10. To provide marketing assistance. The objectives of marketing assistance include –
a. To ensure fair margin to producers of goods
b. To ensure standardisation and quality control
c. To provide publicity to goods of SSIs
11. To develop proto type of machines and equipments to pass on to SSIs for commercial production
12. To help in development and upgradation of technology and implementation of modernization programmes of SSIs.
The NSIC offers various services under this programme. They are-
a. Spreading of information on technology business and investment’ opportunities.
b. Undertaking technology transfer programmes
c. Searching of technology at the global level
d. Setting up a network to access data base
e. Providing for a reference library publications
13. To impart training in various industrial trades
14. To setup small scale industries in other developing countries on turn-key basis
15. To setup industrial estates at different regions to help SSIs.
16. Developing small scale industries as ancillaries to large industries
17. Importing and distributing strategic components and spare parts among actual users in the small scale industries.
Package of Assistance Provided by NSIC:
National Small Industries Corporation offers a package of assistance to promote small scale industries.
They are as follows:
1. Single point registration – In order to enable small scale industries to participate in government and public sector undertaking tenders, NSIC has introduced single point registration facility scheme.
2. Latest information service – NSIC gets updated with the latest developments in the field of business, technology and government policies. This information is made available to small scale industrial units on need basis.
3. Raw material assistance – NSIC has built up a scheme to provide raw materials on convenient and flexible terms to small scale industrial units.
4. Credit requirements of SSI – NSIC facilitate sanctions of term loans and working capital credit limit of small scale enterprises from financial institutions.
5. Credit rating – In order to secure better credit terms from banks and from foreign buyers, NSIC offers credit rating also.
6. Marketing assistance programme – On behalf of small scale industrial units, NSIC participate in government tenders to procure orders for them.
V. Small Industries Service Institutes (SISIs):
The Small Industries Service Institutes (SISIs) are established to provide consultancy and training to small entrepreneurs. Both prospective as well as existing entrepreneurs’ need for consultancy and training are served by these institutes. The Industrial Management Training Division of the DCSSI’s office co-ordinates the activities of Small Industries Service Institutes. There are about 28 SISIs and 30 Branch SISIs are setup in state capital and other places across the country.
Functions of SISIs:
The main functions of SISIs include the following:
1. To provide technical and managerial counseling to existing and prospective entrepreneurs.
2. To conduct entrepreneurship development programmes all over the country.
3. To act as interface between central and state governments.
4. To provide technical support to entrepreneurs.
5. To help in testing of raw-materials and products of small scale enterprises, their inspection and quality control.
6. To supply current market information to entrepreneurs.
7. To assist SSIs in obtaining finance from banks.
8. To enlist entrepreneurs for participation in government stores purchase programme.
9. To conduct techno-economic survey and prepare reports relating to it for the selected entrepreneurs.
10. To provide export promotion and liaison activities.
11. To organise seminars, workshops, industry fairs for the benefit of entrepreneurs.
12. To organise EDP programmes for educated unemployed youth, ex-servicemen
13. Ancillary Services – In addition to the above functions, the SISIs render assistance in different areas.
They are-
a. Economic consultancy Services
b. EDP Consultancy Services
c. Trade and Market Information Services
d. Provision of Project Profiles to entrepreneurs
e. Provision of State Industrial Potential Surveys
f. Provision of District Industrial Potential Services
g. Undertaking modernisation and in plant studies
h. Providing workshop facilities
i. Training in various activities
SISIs prepare reports for the benefit of small scale enterprises. The reports prepared to emphasise the implementation of various programmes such as modernisation, energy conservation, quality control, pollution control, etc.
Sub-contract Exchanges of SISIs – There are many subcontract exchanges of SISIs. They are established in different parts of the country. The main objective of these centers is to carryout ancillarisation on behalf of SISIs.
Functions:
The major functions of sub-contract exchanges are listed below:
a. To register spare capacities available in SSI and tiny units.
b. To identify the items required on a regular basis and match this with spare capacity existing
c. To promote interaction between small and large units
d. To organise vendor development organizations, exhibitions, promotional programmes etc.
e. To provide and establish network facilities.
VI. State Small Industries Development Corporation (SSIDCs):
The State Small Industries Development Corporations were setup under the Companies Act of 1956, as wholly owned State Government undertakings in various states. The main objective of their setup was to cater to the needs of the small, tiny and village industries in their respective State or Union Territories. They enjoy operational flexibility and undertake variety of services for the benefit of small scale sector.
At present there are 26 SIDCs are working across the country.
The main objectives are listed below:
a. To develop industrial areas across the nation.
b. To ensure market facilities to sell the output of small industries.
c. To establish new development centres.
Functions:
The important functions undertaken by SSIDCs include the following:
a. To procure and distribute scarce raw materials
b. To supply machinery to SSIs on hire purchase basis
c. To assist SSIs in marketing their products
d. To construct industrial estates/sheds and providing allied infrastructure facilities and their maintenance
e. To extend seed capital assistance on behalf of the state government concerned
f. To provide managerial assistance to small scale industrial units
VII. Commercial Banks:
Commercial Banks are pioneers in extending credit facilities to small scale enterprises. SSI units require two types of credit viz., long term and short term. Commercial banks have strong network of branches operating nationwide. With the support of this chain link, commercial banks are able to provide financial assistance to them.
Commercial banks have been obligated to lend a defined percentage of their overall lending to priority sectors notified by the RBI. These sectors include small scale sector, agriculture, artisans, landless labourers, export etc. The inclusion of small scale sector in this list entitled them to claim the earmarked credit.
In order to support SSI sector, the RBI setup a committee under the chairmanship of Shri P.R. Nayak. Based on this committee’s recommendations, RBI introduced special package of measures to increase credit flow to SSI sector.
In addition to this, the other measures of RBI are given below:
1. Credit for tiny sector has been earmarked within overall lending to SSI sector.
2. Public sector banks have been advised to operationalise more specialized SSI branches at places where there is potential for investments in SSI sectors.
3. In order to meet the requirements of SSI’s both short and long term credit, single window scheme was extended to all districts.
4. Laghu Udyami Credit Card (LUCC) scheme was launched by public sector banks to provide simplified and borrower friendly credit facilities. The benefit of this scheme was extended to include tiny enterprises, retail traders and artisans in addition to SSI units.
5. Composite loan limit was enhanced by commercial banks in order to supply more credit.
6. Limit on collateral free loans was increased in deserving cases.
Entrepreneur – Qualities that make an Entrepreneur Successful
Mere starting a business is not enough to an entrepreneur. He should think big and dream to succeed in it. Many successful entrepreneurs had a similar way of thinking and possessed several Key personal qualities and attained success. Successful entrepreneurs are more concerned with ambitions, rather than having a technical or management degree from a university.
Qualities that make an entrepreneur successful are:
1. Dreaming
2. Ambitions
3. Innovation
4. Organising ability
5. Passionate
6. Risk Taker
7. Decision Making
8. Continuous learning
9. Openness to new changes
1. Dreaming – A successful entrepreneur should be a dreamer always. He should dream a big idea and concentrate his efforts to realise it. He should always search for a better and a wholly different idea.
2. Ambitions – An entrepreneur should be a man of ambitions. Ambitions are inner drives that motivate him to take up a challenging task. An entrepreneur must set high goals and stay committed to achieve them regardless of obstacles that get in the way.
3. Innovation – Innovation is the attitude of searching new things. An entrepreneur should possess desire to do things better and apply continuous improvement. He should be creative, innovative and resourceful. These traits (qualities) lead to success.
4. Organising ability – An entrepreneur should be a good organizer. He should be able to organize various factors of production effectively. The success will depend on how economically resources are applied to bring his projects into reality. A successful entrepreneur tries his level best to organize all kinds of resources needed for his project and applied them very judiciously and intelligently.
5. Passionate – An entrepreneur should be a person with strong emotional binding towards his adventure (i.e. project). He should show an intensive enthusiasm for achievement in his endeavour.
6. Risk Taker – An entrepreneur should be ready to assume risk and uncertainties. Success depends on how efficiently risks and uncertainties are handled by an individual.
7. Decision Making – An entrepreneur has to take right decisions at a right time by showing his promptness. Timely and quick decisions are expected for success but hasty decisions should not be taken. Delayed decisions not only disrupt the working but also increase project cost and decreases profits.
8. Continuous learning – An entrepreneur should be a person with continuous learning. He should learn new and innovative things continuously without stoppage.
9. Openness to new changes – An entrepreneur should always invite changes taking place in the method of working. Adopting changes produce good results. A person having no openness to new changes may fail in his mission although he has other qualities of being a good entrepreneur.
Other Qualities:
The most critical and important factors that can make an entrepreneur to become successful in his mission are listed below:
1. Enthusiasm and integrity
2. Superior knowledge
3. Creativity and imaginative thinking
4. High need for achievement
5. Persistence, flexibility, patience
6. Ability for team work
7. Self-confidence
8. Great talent
9. Honesty
10. Managerial skills
11. Accessibility
12. Constant follow-up
Entrepreneur – Rewards of being an Entrepreneur
Having your own business presents a number of challenges and a number of rewards. Entrepreneurs who choose to go it alone face the prospect of years of hard work and dedication and often invest a great deal of their own money getting their venture off the ground. When a company is successfully established and operating, the personal and professional rewards can be significant.
The opportunity to work for yourself, rather than someone else, is a significant reward for launching your own business. Owning your own business means that you become the decision maker and you call the shots on everything from the type of people you hire to the types of products and services you offer. While this requires a significant amount of responsibility, many business owners find the benefits of being the boss significantly outweigh the necessary investment of time and financial resources.
While small business owners typically work far more hours in their own company than they would working a traditional job with an employer, one of the great rewards of being self-employed is the opportunity to set your own schedule. Having your own business means you are not beholden to anyone, and you don’t have to punch a time clock or account for your whereabouts. You can be as flexible in establishing your working hours as you like. The freedom of controlling your own hours holds great appeal for many entrepreneurs.
3. Controlling Your Own Earnings:
When you work for someone else, you likely have a set salary range. When you run your own business, your earning potential is limitless. Many small business owners are attracted to entrepreneurial pursuits because of the reward of controlling their own financial destiny. You have the opportunity to establish product pricing, set your own salary and that of your employees and make your own decisions about business investments, expansions and new revenue-generating tools.
While there are certainly rewards of having your own business, successful business pursuits are usually well planned and executed. For best results, write and regularly review a comprehensive business plan to keep you focused and your business on track.
This may very well be the first and most important reason. There is absolutely no point in living your life without passion Most of the people you probably know work from 9 a.m. to 5 p.m. and chances are they look up at the clock on the wall at least twice every hour. Why? Simple- they don’t love what they do (at least not entirely).
If your heart is not fully committed to your employment then you’re wasting your time and time, as we all know, is money. A great deal of your day is invested in work. You might as well enjoy it. “If you love what you do, you’ll never have to work a day in your life.” – Confucius
One of the most attractive aspects of being an entrepreneur is the flexibility factor. Being tied down to just one area holds you back from fulfilling all of your skills. Entrepreneurs carry a loaded agenda. You want to be able to complete every single task that you propose yourself and being flexible optimizes the chances of that happening. Flexibility also means that you’re not on a set schedule. Flexibility allows you to become a “jack of all trades and a master of none.”
When you’re an entrepreneur, most of the times you don’t have to worry about your employer because you are your own boss. You make the rules as you go along. You do, however, need to establish some sort of discipline in order to know how well you can work alone. “Being a boss is great. You get to choose which eighteen hours a day you work.”
We live in a world of uncertainty. As an entrepreneur, you have a vision that is embedded in your head. Regardless of what happens, you will forever see yourself making that dream happen. Entrepreneurship is all about embarking on a journey fuelled by gut instinct. If you trust that what you see inside your head is feasible then you should do everything within your power to make it a reality. “The best way to predict the future is to create it.”
Freedom is a constant in an entrepreneur’s life. If you’re free to roam around and be yourself twenty four hours a day and seven days a week, you won’t feel the urge to take time off in the form of a vacation. Entrepreneurs don’t hate Mondays. An entrepreneur doesn’t look forward to the weekend. Entrepreneurship is basically a perpetual vacation if you manage your time wisely and follow your own rules. Once you learn that – “the sky is the limit.”
10. You are Viewed as a Leader:
An entrepreneur is seen in the eyes of many as a figure that sets trends and innovates in their own right. These are just two of the qualities that separate a leader from a follower.
Leaders take risks and hustle. A follower simply goes with the flow of the river. A leader asks questions while a follower aimlessly looks for answers. Being a leader can be a double-edged sword. Yes, it can make or break you but the thrill of being in the driver’s seat on the road to life should be plenty of motivation to succeed.
“Things are impossible until somebody does what another believes can’t be done.” – Anthony Robbins.
Entrepreneur – Current Scenario of Entrepreneurship in India:
The growth and success of entrepreneurship, which denotes a merger of ideas, initiatives and opportunities depends, upon the facilitating and encouraging environment. The success of entrepreneurial endeavors has a significant impact on the economy of any country. It helps in fulfilling individual aspirations and achieving objectives like financial gains, self-fulfillment and social identification.
We, at India, are living in an epoch of entrepreneurial development, where the entrepreneurship is being promoted by education Institutions, government, society and other corporate bodies. The entrepreneurship development scenario in India has intensified in recent times, particularly with the rise in knowledge-intensive services. The number of budding young entrepreneurs, who do not have prior entrepreneurial experience, has been rising constantly.
Easy access to finance and other institutional support to ‘technopreneurs’ have helped improve the climate for entrepreneurship in India. In the Indian context, the more entrepreneurial developmental activities are confined to Micro, Small and Medium Enterprises (MSME) sector, which is often termed as the ‘engine of growth’. It is considered as the most dynamic and vibrant sector of Indian economy as it provides large number of employment to rural as well as urban segment.
The MSME sector, which is growing exponentially, contributes 37.54 percent to National GDP, 45 percent to total industrial production and 40 percent to total exports. Manufacturing segment within the MSME contributes to 7.09 percent of GDP. MSMEs also contribute to 30.50 percent of services.
The MSMEs of India are being referred to as the cradle for the “Make in India” vision. These are compared with a nursery where existing small businesses, properly nurtured, have the potential to become world renowned tomorrow. The larger players amongst the MSMEs would also be in a unique position to become global players attracting allies with technology and funds from abroad. The contribution of MSMEs in generating employment can be summed up in the Table 1.
A few recent surveys, undertaken by Goldman Sachs and Price Waterhouse Coopers (PWC), estimated that India has the potential to be among the world’s leading economies by 2050.
Further, they pointed out that India’s economy has potential to gain extensively from the country’s distinguishing characteristics i.e., a democratic open society and a strong technological base (with capacity for leapfrogging), unique diversity, vibrant capital markets, an increasingly young population (50 percent of the population in India is 25 years and younger), a sizeable market of a large number of customers with vast unmet needs as well as an environment of full and free competition in the private sector.
All these distinguished characteristics of India together make India a unique and fertile ground for the creation of wealth through the application of knowledge. Entrepreneurship and Innovation are the major tools for creating wealth through knowledge, supported primarily by the availability of skilled human resources, access to easy finance and the ability of the State to provide an enabling and encouraging environment.
A recent survey report by Amway India and Indices Analytics (2014), which aimed to showcase about the future readiness of India in context of entrepreneurial development to facilitate the growth of self-employment in the country, has ranked various states of the country on a uniquely designed Future Entrepreneurial Readiness Index (Table 2).
Various states in India have been ranked based on three parameters; enabling environment, a growth oriented economy and forward-looking governance. Key findings suggest that most of the economically-developed states figure at the top of the list, based on providing an enabling environment and a growth oriented economy.
Himachal Pradesh and Chhattisgarh, along with Gujarat and Delhi, are at the top in terms of forward-looking governance. States like Assam, Odisha, Bihar, Jharkhand, Chhattisgarh, along with Uttar Pradesh and Uttarakhand, again lag behind and figure at the bottom of the list.