SEMESTER – I - FOUNDATION COURSE

INTRODUCTION TO ENTREPRENEURSHIP
SUBJECT CODE : NME18ES

UNIT I - Nature of Entrepreneurship:

Introduction
The term Entrepreneur is a relatively new term and concept used in economic sphere.
Because of increasing relevance in economic sphere over the period, it has become the buzzword
in the economic literature. However it has been defined differently by different writers and
thinkers.
Entrepreneurships can be described as a creative and innovative response to the
environment and the process of giving birth to a new enterprise. Such response can take place in
any field of social Endeavour, business, agriculture, education, social work etc.
―Entrepreneurship is the attempt to create value through recognition of business
opportunity, the management of risk taking, and through the communicative and management
skills to mobilize human, financial, and material resources necessary to bring a project to
fruition.‖

What is an 'Entrepreneur'

An entrepreneur is an individual who, rather than working as an employee, founds and

runs a business, assuming all the risks and rewards of the venture. The entrepreneur is
commonly seen as an innovator, a source of new ideas, goods, services and business/or
procedures.
Meaning:
The word „entrepreneur has been taken from the French Language entreprendre
meaning ―to do something or to undertake ―.
A person who sets up a business or businesses, taking on financial risks in the hope of
profit.
What is an Entrepreneurship?
Entrepreneurship is the process of identifying opportunities in the market place, arranging
resources required to exploit the opportunities for long term gains. It is creating wealth by
bringing together resources in new way to start and operate and enterprise. It is process of
planning, organising, operating and assuming the risk of the business venture. It is the ability to
take risk independently to make more earnings in the market-oriented economy.
The capacity and willingness to develop organize and manage a business venture along
with any of its risks in order to make a profit. The most obvious example of entrepreneurship is
the starting of new businesses.
In economics, entrepreneurship combined with land, labor, natural resources and capital
can produce profit. Entrepreneurial spirit is characterized by innovation and risk-taking, and is an
essential part of a nation's ability to succeed in an ever changing and increasingly competitive
global marketplace
Entrepreneurship is a process of actions of an entrepreneur who is a person always in
search of something new and exploits such ideas into gainful opportunities by accepting the risk
and uncertainty with the enterprise. It is the process of starting a business, a startup company or
other organization. The entrepreneur develops a business plan, acquires the human and other
required resources, and is fully responsible for its success or failure. Entrepreneurship operates
within an entrepreneurship ecosystem.
The term „entrepreneurship‟ refers to the functions performed by an entrepreneur. It is
the process involving various actions to be undertaken by the entrepreneur in establishing a new
enterprise. In fact, what an entrepreneur does is regarded as entrepreneurship. Thus,
entrepreneurship can be viewed as a function of:
(i) Identifying and using the opportunities exist in the market;
(ii) Converting the ideas into action;
(iii) Undertaking promotional activities to launch an enterprise;
(iv) Striving for excellence in his/her field of work;
(v) Bearing the risk and uncertainties involved, and
(vi) Harmonizing
Entrepreneurship and Entrepreneur
The word ‗Entrepreneurship‘ is very often confused with the word Entrepreneur‘. They
look alike but carry different meanings. Entrepreneurship is nothing but all those activities which
are to be undertaken by an entrepreneur. The prevailing socio, political and economic activities
act as a propelling force for the aspiring personalities to become entrepreneurs. Entrepreneurship
development is the outcome of the entrepreneurs. In other words, the entrepreneurs give birth to
entrepreneurship.
Entrepreneurship is an activity whereas an entrepreneur is an individual.
Entrepreneurship is the process via which businesses are created to provide for society‘s needs in
a valuable manner, both in terms of product/service creation & employment generation.
An entrepreneur is the person who‘s vision creates the business. He brings together the necessary
resources and people to enable entrepreneurship.
Therefore, the entrepreneurship development is due to the innovative thoughts and
actions of the entrepreneurs. Thus the term entrepreneur and entrepreneurship are different and
complementary with each other.
Definitions
Peter Drucker
According to management Guru, Peter Drucker. entrepreunership is the function of
procuring and using resources. While in managerial role the resources are allocated to solve the
problems, in entrepreneurial role these resources are allocated to the opportunities.
In his words, entrepreneurship is about searching for change and responding to change by
exploiting it as an opportunity. Entrepreneurship means application of innovation and creativity
to find or create a resource and endowing economic value to it.
Adam Smith
The father of political economy, Adam Smith equates entrepreneurship with industrial
activity. According to Adam Smith, entrepreneurship is about establishing an organisation for
commercial purpose. It involves supplying of capital and managing the business by intervening
between labour and consumer. Entrepreneurship requires unusual foresight to recognize potential
demand of goods and services and brings a change by transforming demand into supply, thereby
requiring a high level of art and personal skill. All this carries an inherent economic risk.
Joseph Schumpeter
According to Schumpeter, an entrepreneur is willing and able to convert a new idea or
invention into a successful innovation. ... The idea that entrepreneurship leads to economic
growth is an interpretation of the residual in endogenous growth theory and as such continues to
be debated in academic economics.
Other definitions
According to A.H.Cole, ―Entrepreneurship is the purposeful activity of an individual or
a group of associated individual, undertaken to initiate, maintain or aggrandize profit by
production or distribution of economic goods and services‖.
According to J.A. Timmons, ―Entrepreneurship is the ability to create and build
something from practically nothing‖.
According to Musselman and Jackson, ―Entrepreneurship is the investing and risking
of time, money and effort to start a business and make it successful‖.
VARIOUS CONCEPTS OR VIEW POINTS ABOUT
ENTREPRENRUESHIP
The concept of entrepreneurship has become broad and dynamic. The sociologists,
economists, managers and businessmen observe entrepreneurship from different points of view.
These are as follows:
1. Risk Bearing Capacity: As viewed by economists, entrepreneurship involves taking of
risks and making the necessary investments under conditions of uncertainty. It is selling
goods at uncertain price in changing market. It is the ability of bearing various non-
insurable risks of business.
2. A Functions of Co-ordination of Productive Resources: According to some Experts,
entrepreneurship is the ability to discover an investment opportunity and to co-ordinate
the productive resources to organize an enterprise. J.B Say says, ―It is bringing together
of the factors of production, provision of capital and continuing management‖.
3. Managerial Skill: B.F. Hoeslitz recognizes entrepreneurship as a managerial skill of
direction. J.s. Mill says, ―It is the ability of superintendence, direction and control. It is
the ability to implement and manage a project to make profits from the successful
management of the enterprise. It is the ability to use resources in a creative and
productive way. It is the ability to build team work as a team. Vasant Desai writes, ―The
entrepreneur is the maestro of the business orchestra, wielding his baton to which the
band is played.‖
4. Introduction of Innovations: According to Schumpeter, entrepreneurship is a creative
and innovative response to the environment. It is introducing new combinations of means
of production such as new products, new designs, new quality, new methods of
 production, opening of new market, finding new source of supply of raw materials or
introducing new forms of organisation and management. Schumpeter says,
―Entrepreneurship is an innovative function. It is a leadership rather than ownership.
Peter F. Drucker writes, ―Maximization of opportunities is meaningful in business,
indeed a precise definition of the entrepreneurship job‖
5. Group level Reactiveness: Sociologists regard entrepreneurship as a tendency of
Reactiveness against the traditional values. It is the work and movement of ―activist
groups‖ to bring cultural changes at the community level.
6. Institutional Building Leadership: According to this view entrepreneurship is a trait of
dynamic leadership. It builds institution. It is creativity in business. It is the ability to
build a ‗great business‘ through excellence and leadership. Ted Nicholas says, ―It is
building top performance through trust and team work.‖ Joseph Sugarman writes, ―The
entrepreneur is truly the real hero in today‘s society. From innovation to job creation,
entrepreneurs have done more to shape the success of a country. And in my judgment the
key reason in entrepreneurial leadership. An entrepreneur is more a true leader and less
manager. ―He by nature is a visionary who builds an institution and nation.
7. Ability of High Achievement: According to McClelland, the entrepreneurship is the
ability to achieve something high. It is the urgent to satisfy achievement and power
needs. Entrepreneur has high n/ach. He thrives on Challenges. He prepares strategies. He
solves unstructured problems. He wants to exercise influence, control and domination.
8. Composite Skill: Entrepreneurship is the composite skill. It is the resultant of a mix of
many qualities and traits. It involves vision and imagination, readness to take risk, ability
to bring together and put to creative use the factors of production, and ability to innovate,
lead, manage and achieve high. It is the ability to mobilize resources, to create change
and to build the enterprise and society.
Need and Scope of Entrepreneurship Development
The entrepreneurs are considered ‗change agents‘ in the process of industrial and
economic development of an economy. The premium mobile role that entrepreneurs play in
promoting industrial and economic development of an economy is well adduced across the
countries. In a sense, entrepreneurs are the ‗spark plug ‗who transform the economic scene of an
economy. For example, Japan and United States are developed because of their entrepreneurial
development and Bangladesh and Nepal are underdeveloped because of lack of their
entrepreneurial development. Within India itself, Gujarat and Punjab are developed because of
their entrepreneurial development and Bihar and Odisha are backward or underdeveloped
because of the lack of entrepreneurial development. Thus, with entrepreneurs societies prosper,
without them they are poorer.
Also, If we see the major causes of unemployment we will find the lack of employment
opportunities, skill crisis, high growth of population, slow growth of industrialization,
seasonality of agricultural and allied sectors at the top. The rate of unemployment has grown
faster for people with little or no education than for those with some education. The
Government has been unable to provide enough job opportunities to all the unemployed and at
the same time the unemployed youth population has been increasing day by day. At all levels,
unemployment rates are higher in rural than urban areas and the rate of female unemployment
exceeded the rate of male unemployment.
In such scenario, there is a need for entrepreneurship in our country. India needs job
makers instead of job seekers. Instead of looking for jobs youth can try to find new
opportunities where they can start their own enterprises with their new ideas. It can be a
probable solution for our unemployment problem by creating employment for ones own self
and others. An entrepreneur is a person who collaborates all resources, takes the initiative to
start something new, takes risks, provides employment to many and fills the gaps (provides
solution for people‘s problems in the form of goods or services) to make lives easier. In short,
an entrepreneur helps a country in its overall economic development. In such a situation
promotion of entrepreneurship is very much needed in the country like India. Again, as India‘s a
greater part of population is young, it has potential for demographic dividend, which occurs
when the proportion of working people in the entire population is more than the rest. It signifies
that more citizens have the potential to work, be productive and contribute for the county‘s
economic development. If more young people choose to become entrepreneurs, then the
problem of unemployment can be reduced to a large extent.
Thus the needs for the entrepreneur are listed below:
 Entrepreneurs promote capital formation by mobilizing the idle saving of the people.
  They create immediate and large-0scale employment by establishing small scale
enterprises. Thus reduce the unemployment problem in the country ,i.e., the root cause of
all socio- economic problems.
 They promote balanced regional development by establishing ,small-scale enterprises in
rural ,remote and less developed regions.
 They help reduce the concentration of economic power.
 They promote the equitable redistribution of wealth, income and even political power in
the interest of the country.
 They encourage effective resource mobilization of capital and skill which might
otherwise remain unutilized and idle.
 They, by establishing industries, induce backward and forward linkages which stimulate
the process of economic development in the country.
 Last but no means the least; they also promote country‘s export business, i.e., an
important ingredient to economic development.
Characteristics of Entrepreneurship:
The characteristics of Entrepreneurship are as follows:
1. Economic and dynamic activity:
Entrepreneurship is an economic activity because it involves the creation and
operation of an enterprise with a view to creating value or wealth by ensuring optimum
utilisation of scarce resources. Since this value creation activity is performed
continuously in the midst of uncertain business environment, therefore, entrepreneurship
is regarded as a dynamic force.
2. Related to innovation:
Entrepreneurship involves a continuous search for new ideas. Entrepreneurship
compels an individual to continuously evaluate the existing modes of business operations
so that more efficient and effective systems can be evolved and adopted. In other words,
entrepreneurship is a continuous effort for synergy (optimization of performance) in
organizations.
3. Profit Potential
―Profit potential is the likely level of return or compensation to the entrepreneur
for taking on the risk of developing an idea into an actual business venture.‖ Without
 profit potential, the efforts of entrepreneurs would remain only an abstract and a
theoretical leisure activity.
4. Risk Bearing:
The essence of entrepreneurship is the ‗willingness to assume risk‘ arising out of
the creation and implementation of new ideas. New ideas are always tentative and their
results may not be instantaneous and positive. An entrepreneur has to have patience to
see his efforts bear fruit. In the intervening period (time gap between the conception and
implementation of an idea and its results), an entrepreneur has to assume risk. If an
entrepreneur does not have the willingness to assume risk, entrepreneurship would never
succeed.
5. Self –belief, Hardwork and Dedication:
Entrepreneurs believe in themselves and are confident and dedicated to their
project. Their intense focus on and faith in their idea may be misconstrued as
stubbornness, but it is this willingness to work hard and defy the odds that make them
successful.
6. Adaptable and Flexible:
Being passionate and dedicated is important, but being inflexible about client or
market needs will lead to failure. Remember, an entrepreneurial venture is not simply
about doing what you believe is good, but also making a successful business out of it.
Successful entrepreneurs welcome all suggestions for optimization or customization that
may enhance their offering and satisfy client and market needs.
7. Product and market Knowledge:
Entrepreneurs know their product inside and out. They also know the market.
Most become successful because they create something that didn't already exist or they
significantly improve an existing product after experiencing frustration with the way it
worked. Remaining unaware of changing market needs, competitor moves and other
external factors can cause even great products to fail.
8. Strong Money Management:
It takes time for any entrepreneurial venture to become profitable. Until then,
Capital is limited and needs to be utilized wisely. Successful entrepreneurs plan for
present and future financial obligations and set aside an emergency fund. Even after
 securing funding or going fully operational, a successful businessperson keeps a complete
handle on cashflow, as it is the most important aspect of any business.
9. Effective Planning Skills:
Entrepreneurship is about building a business from scratch while managing
limited resources (including time, money and personal relationships), which requires
planning. However, trying to plan for everything and having a ready solution in place for
all possible issues may prevent you from ever taking the first step. Successful
entrepreneurs have a business plan in place, but remain capable of dealing with
unforeseen possibilities.
10 . Creative Activity:
Entrepreneurship involves exploring new opportunities. It creates new jobs, new
tasks and new ventures in the society. It creates new economic values. It creates wealth
and capital in the country.
11. Business-Oriented Tendency:
It reflects the business and enterprising nature of person. It encourages people to
start business, to imagine new ventures and to set up units of production. It promotes
business and industries in the society.
12. Organizing Function:
It is the ability to bring together productive resources of society. Entrepreneur
harnesses land, labour, capital, technology, knowledge and managerial talents for the
benefit of mankind. He is an organization builder. He co-ordinates and controls the
productive energies of people.
13. Gap-Filling Function:
Entrepreneurship bridges the gap between the human wants and the available products.
An entrepreneur determines the needs of people and combines resources to produce
goods of requirements.
14. Result of changes:
Entrepreneurship is not an economic event. But it grows out of social, Political,
Technological or scientific changes taking place in the society. Peter Drucker Writes,
―The emergence of the entrepreneurial economy is as much a cultural and psychological
as it is an economic or technological event.‖
 15. Creation of Resources:
It is the entrepreneurship which transform raw materials into ‗productive resource ‘.
It adds economic value and wealth creating capacity to resources. Drucker says, ―until
entrepreneurial act, every plant is a weed and every mineral just another rock.‖
Entrepreneurship is a process of creating wealth and utility.
Importance of Entrepreneurship to the nation:
The entrepreneur who is a business leader looks for ideas and puts them into effect in
fostering economic growth and development. Entrepreneurship is one of the most important
input in the economic development of a country. Economic development of a country is the
outcome of purposeful human activity. The modern era is an era of changes. The globalization of
industry and commerce is bringing a vast change in various aspects of life. The entrepreneur acts
as a trigger head to give spark to economic activities by his entrepreneurial decisions. He plays a
pivotal role not only in the development of industrial sector of a country but also in the
development of farm and service sector.
A developing country needs entrepreneurs who are competent to perceive new
opportunities and are willing to incur the necessary risk in exploiting them. A developing
economy is required to be brought out of the vicious circle of low income and poverty.
Entrepreneur can break this vicious circle. Entrepreneurs and helping government can change a
developing economy in developed economy. The various important roles of entrepreneurship to
the nation are :
1. Wealth Creation and Sharing: By establishing the business entity, entrepreneurs invest their
own resources and attract capital (in the form of debt, equity, etc.) from investors, lenders and
the public. This mobilizes public wealth and allows people to benefit from the success of
entrepreneurs and growing businesses. This kind of pooled capital that results in wealth creation
and distribution is one of the basic imperatives and goals of economic development.
2. Create Jobs: Entrepreneurs are by nature and definition job creators, as opposed to job
seekers. The simple translation is that when you become an entrepreneur, there is one less job
seeker in the economy, and then you provide employment for multiple other job seekers. This
kind of job creation by new and existing businesses is again is one of the basic goals of economic
development. This is why the Govt. of India has launched initiatives such as StartupIndia to
promote and support new startups, and also others like the Make in India initiative to attract
foreign companies and their FDI into the Indian economy. All this in turn creates a lot of job
opportunities, and is helping in augmenting our standards to a global level.
3. Balanced Regional Development: Entrepreneurs setting up new businesses and industrial
units help with regional development by locating in less developed and backward areas. The
growth of industries and business in these areas leads to infrastructure improvements like better
roads and rail links, airports, stable electricity and water supply, schools, hospitals, shopping
malls and other public and private services that would not otherwise be available.
Every new business that locates in a less developed area will create both direct and indirect jobs,
helping lift regional economies in many different ways. The combined spending by all the new
employees of the new businesses and the supporting jobs in other businesses adds to the local
and regional economic output. Both central and state governments promote this kind of regional
development by providing registered MSME businesses various benefits and concessions.
4. GDP and Per Capita Income: India‘s MSME sector, comprised of 36 million units that
provide employment for more than 80 million people, now accounts for over 37% of the
country‘s GDP. Each new addition to these 36 million units makes use of even more resources
like land, labor and capital to develop products and services that add to the national income,
national product and per capita income of the country. This growth in GDP and per capita
income is again one of the essential goals of economic development.
5. Standard of Living: Increase in the standard of living of people in a community is yet another
key goal of economic development. Entrepreneurs again play a key role in increasing the
standard of living in a community. They do this not just by creating jobs, but also by developing
and adopting innovations that lead to improvements in the quality of life of their employees,
customers, and other stakeholders in the community. For example, automation that reduces
production costs and enables faster production will make a business unit more productive, while
also providing its customers with the same goods at lower prices.
6. Exports: Any growing business will eventually want to get started with exports to expand
their business to foreign markets. This is an important ingredient of economic development since
it provides access to bigger markets, and leads to currency inflows and access to the latest
cutting-edge technologies and processes being used in more developed foreign markets. Another
key benefit is that this expansion that leads to more stable business revenue during economic
downturns in the local economy.
7. Community Development: Economic development doesn‘t always translate into community
development. Community development requires infrastructure for education and training,
healthcare, and other public services. For example, you need highly educated and skilled workers
in a community to attract new businesses. If there are educational institutions, technical training
schools and internship opportunities, that will help build the pool of educated and skilled
workers.
A good example of how this kind of community development can be promoted is Azim Hashim
Premji, Chairman of Wipro Limited, who donated Rs. 27,514 crores for promoting education
through the Azim Premji Foundation. This foundation works with more than 350,000 schools in
eight states across India.
8. Innovations in Enterprises : Business enterprises need to be innovative for survival and
better performance. It is believed that smaller firms have a relatively higher necessity and
capability to innovate. The smaller firms do not face the constraints imposed by large investment
in existing technology. Thus they are both free and compelled to innovate.
Entrepreneurship development is accelerating the pace of small firm‘s growth in India.
An increased number of small firms are expected to result in more innovations and make the
Indian industry compete in the international market.
9. Self-Reliance : Entrepreneurs are the corner stores of national self-reliance. They help to
manufacture indigenous substitutes to imported products which reduce the dependence on
foreign countries. There is also a possibility of exporting goods and services to earn foreign
exchange for the country. Hence, the import substitution and export promotion ensure economic
independence and the country becomes self-reliance.
10. Promotes Capital Formation
Entrepreneurs mobilize the idle funds which lead to capital formation. The funds which
are used by entrepreneurs is a mix of their own and borrowed. This leads to creation of wealth
which is very essential for development of an economy.
11. Small Business Plan Dynamism
Great dynamism is one of the qualities of the small and medium enterprises. This quality of
dynamism originates in the inherent nature of the small business. The structure of small and
medium enterprises is less complex than that of large enterprises and therefore facilitates quicker
and smoother communication and decision- making. This allows for the greater flexibility and
mobility of small business management. Also, small enterprises, more often make it possible for
owners, who have a stronger entrepreneurial spirit than employed mangers, to undertake risk and
challenges.
12. Mobilization of Local Resources
Entrepreneurs help to mobilize and utilize local resources like small savings and talents
of relatives and friends, which might otherwise remain idle and unutilized. Thus they help in
effective utilization of resources.
13. Economic Integration
Entrepreneur reduces the concentration of power in a few hands by creating employment
opportunities and through equitable distribution of income. Entrepreneurs promote economic
integration in the country by adopting certain economic policies and laws framed by the
government. They help in removing the disparity between the rich and the poor by adopting the
rules and regulation framed by the government for the effective functioning of business in the
country.
14. Inflow of Foreign Capital
Entrepreneurs help to attract funds from individuals and institutions residing in foreign
countries for their businesses.
15. Facilitates Overall Development:
Entrepreneurs act as catalytic agent for change which results in chain reaction. Once an
enterprise is established, the process of industrialization is set in motion. This unit will generate
demand for various types of units required by it and there will be so many other units which
require the output of this unit. This leads to overall development of an area due to increase in
demand and setting up of more and more units. In this way, the entrepreneurs multiply their
entrepreneurial activities, thus creating an environment of enthusiasm and conveying an impetus
for overall development of the area.
Scope of Entrepreneurship in India
Scope for Entrepreneurs are huge in India in coming days. Our economy is growing at a
faster rate our GDP is also good. Beside this we have a huge potential in term of younger
generation who are thinking out of box. Gone are days when we were graduating to get jobs now
we are creating jobs. Also There are ample opportunities in small businesses in India and such
opportunities will transform India in the coming future. For such transformation to happen there
needs to be support both at the governmental and societal level. For the government it is
important to realize that the goal of small business owners will be to remain self-employed. Such
people may not need financial assistance but they will need marketing and legal assistance in
order to sustain themselves. Practical and cost effective programs need to be developed to
address their needs because self-employed people will represent an important segment in
economic revitalization. Efforts have been made for the success of new ventures not only by
policy-makers or government bodies but also by entrepreneurs themselves. Only then will our
country be able to reap the fruits of entrepreneurship.

Conclusion
Thus there is a growth in the number of individual opting for entrepreneurship as a
career.. In the coming years entrepreneurship will be seen as major source in developing the
economy. Our central govt as well as state government are encouraging people to do startups
because it not only help in development of the economy but also bring foreign currencies to the
nation . Our govt is also providing skill development courses through which we can know what
entrepreneurship is all about.. Definitely startups are the future of our country. Some steps taken
by our country are Start up India, Skill India ,Development of MSME sector etc.. Thus,
Entrepreneurship development is the key factor to fight against unemployment, poverty and to
prepare ourselves for globalization in order to achieve overall Indian economic progress.
References:
http://download.nos.org/srsec319new/319EL9.pdf
http://download.nos.org/srsec319new/319EL9.pdf
http://www.simplynotes.in/e-notes/mbabba/entrepreneurship-development/
https://www.entrepreneur.com/article/244210
https://iedunote.com/importance-of-entrepreneurship
Entrepreneurial Development- By S S Khanka
Entrepreneurship development- By Sangeeta Sharma
UNIT II : Role of Entrepreneur :

INTRODUCTION

Entrepreneurs are the seeds of industrial development and the fruits of industrial
development are greater employment opportunities to unemployed youth, increase in per capita
income, higher standard of living and increased individual saving, revenue to the government in
the form of income tax, sales tax, export duties, import duties, and balanced regional
development. Entrepreneurship is influenced by personality, infrastructural, technological and
environmental factors apart from few other factors. The functions of an entrepreneur helps in
wealth and job creation, balanced community development and increases the standard of living
of the people. Entrepreneurship could be successful in a society if certain barriers and few
disadvantages are overcome.

FACTORS INFLUENCING ENTREPRENEURSHIP

An individual‘s decision to pursue an entrepreneurial career is dependent on various factors.
These have been discussed below:
1. BACKGROUND FACTORS
a) Education, training and experience: The type of education, training and experience an
individual has acquired influences his choice of setting an enterprise. Technically qualified
persons normally set up their ventures in the field of their specialization, mainly because
working in one‘s area of specialization provides confidence and reduces the uncertainty
associated with the new venture.
b)Family, role model and association with similar type of individuals: If an individual has a
supportive family, has role models who have been successful or are in association with the same
or similar type of business activity the individual is engaged in, they add vigour to his desire to
set up a new venture.
c) Financial conditions: Both adverse and supporting financial conditions can motivate an
individual to set up a new venture. When an individual is unemployed or is not able to support
his family demands, or if he has surplus funds, he may start looking for a new business venture
where he can put in his time/money to achieve success and thus fulfill his demands.
2. MOTIVATIONAL FACTORS
a) Need for achievement: This has been identified as the most important reason for
entrepreneurial motivation by various researches. Need for achievement means the drive to
achieve a goal. Entrepreneurs have a compelling drive to succeed. They strive for personal
achievement rather than reward. They have the desire to do something better or more efficiently
than it has been done before.
b) Personal motives/expectations: This has been found to be one of the crucial factors
responsible for entrepreneurship amongst individuals. These individual have an internal locus of
control ie. they consider themselves responsible for their growth and development
c) Business environment: Supportive business environment like low rate of competition, high
profit margins, good economic condition of the region, high demand – all contribute towards
motivating an individual to set up a new venture.
3. ECONOMIC FACTORS
a) Supportive government policies: From time to time, the government keeps formulating
policies and programmes to promote entrepreneurs in different fields. Tax holidays for instance,
are such a policy measure. These policies and procedures go a long way towards catalyzing the
entrepreneurial motivation.
b) Availability of financial assistance from various funding bodies: An entrepreneur needs
funds to set up a business and many may not be having the required funds to support the
requirements of the business set up. In such a situation he/she can obtain assistance from
financial institutions. Hence, the financial institutions can facilitate the setting up of a new
venture by easing out the disbursement of funds to them.
c) Ancillary support: Ancillary support from suppliers, distributors, and retailers etc., even
bigger units can act as a encouragement to budding entrepreneurs.
d) Availability of technical factors like premises, electricity, labour: Feasibility with which
factors of production are available to the entrepreneurs will facilitate / obstruct an entrepreneur
making the final decision of setting up a business venture and even in the success of a business.
e) Recognition: Setting up of a new venture gives an entrepreneur an individuality, the outcome
of which is highly dependent on him. Since, the success of an enterprise is associated with the
efforts and success of an entrepreneur he/she gets enough recognition to enhance his/her self
esteem.
f) Social status: Entrepreneurship is the way to get large profit margins which a salaried
employee cannot ever think of. Hence, if the business runs successfully it automatically raises
the social status of an individual. Moreover, the idea of being for one‘s fate, employing a
number of individuals, taking important decisions, all go a long way in bestowing a higher social
status upon an individual.
FUNCTIONS OF AN ENTREPRENEUR
An entrepreneur performs all the necessary functions which are essential from the point
of view of operation and expansion of the enterprise. The main functions of an entrepreneur
are as follows:
A. Entrepreneurial functions
1. Innovation: Innovation is the basic function of entrepreneur. As an innovator, the
entrepreneur has to introduce new combination‘ a means of production new product, new
market for product and new sources of raw material. Entrepreneurs introduce something
new in any branch of economic activity. As an innovator, entrepreneur foresees the
potential profitable opportunity and tries to exploit it. Innovation refers to doing new
things or doing the things that are already being are done in a new way. It includes
introduction of new products, creation of new markets, application of new process of
production, discovery of new and better sources of raw materials and developing a new
and better form of industrial organization.
2. Risk – taking: Risk taking is also the fundamental function of an entrepreneur. It is the
specific function of an entrepreneur. Risk taking refers to take responsibility for loss that
may occur due top unforeseen contingencies of the future. An entrepreneur reduces
uncertainty in his plan of investment diversification of production and expansion of the
enterprise. He is an especially talented and motivated person who undertakes the risks of
an enterprise. An entrepreneur visualizes opportunities for introducing new ideas and
handles economic uncertainty. He is a self confident and highly optimistic person willing
to assume the risks involved in innovations, new ventures and expansion of an existing
venture.
3. Organization building: Organization and management of the enterprise is the main
function of an entrepreneur. It refers to bringing together the various factors of
production. All the decisions relating to the enterprise are taken by entrepreneurs. He
alone determines the lines of business to expand and capital to employ. Thus,
entrepreneur is the final judge in the conduct of his business. Organisation and
management of the enterprise is the main function of an entrepreneur. It implies bringing
 together the various factors of production. The purpose is to allocate the productive
resources in order to minimise losses and reduce cost in production. In the initial stage of
the establishment of the enterprise the entrepreneur may take all decisions by himself.
But as the enterprise grows and the work of decision making becomes more flexible, the
entrepreneur delegates authority to subordinate executives. However, the central function
of the entrepreneur remains the same. He alone determines what lines of business to
expand into and how much capital to employ. He determines the expansion and
contraction of the size of the total business and its various branches. Being at the helm of
affairs, the entrepreneur is the final stage in the conduct of his business.
B. PROMOTIONAL FUNCTIONS
1. Discovery of an idea: The first promotional function of enterprise is the conception
of a new idea. He visualizes that there are opportunities for a particular type of
business and it can be profitably run. The idea may be to exploit new areas of natural
resources or more profitable venture in an existing line of business. He develops this
idea with the help if technical experts in that field. If they are convinced that
profitable avenues are available in that line of business then the idea is taken forward
for exhaustive analysis.
2. Detailed investigation: The entrepreneur will estimate the total demand for the
product. There may be certain concerns based on the type of business and so he will
determine his share of demand. After determining the prospective demand for goods
he will think of arranging finances for the venture. The possible sources of finances
are discussed in detail. The availability of power, labour, raw materials and
machinery is also considered. The cost structure of the product is analyzed to find out
profitability from the venture. An expert opinion is sought of the viability of the
project. The work of estimation becomes more difficult if the proposed line of
business is new. The estimates should be based on proper analysis of different factors.
A guess work creates problems later on.
3. Assembling the requirements: After making sure that the proposition is practical
and profitable, the entrepreneur proceeds to assemble the requirement. He persuades
some more persons to join hands with him by becoming directors or founder
members. If he has invented something new, he should get it registered in his name.
 He may also acquire some patent rights. The entrepreneur selects the factory site,
decides about plant and machinery and contacts suppliers or raw materials, etc. He
does not purchases all these because it involves huge sums of money. Instead of
going for outright purchase he uses option methods. The contracts are finalized by
pay9ing option money and the ultimate purchase is done only when the company is
incorporated. It the company fails to come up, the entrepreneur only loses option
money.
4. Financing the proposition: the entrepreneur decides about the capital structure of
the enterprise. The requirements of finances are estimated first. The the sources from
which this money will come are determined. How much share capital will be issued
the type of the shares to be issued, and the nature of loans, whether debentures or
borrowing from financial institutions for a longer period all are finalized. Generally,
commercial banks are helpful only in financing working capital requirements. The
financial institution for a longer period. The financial requirements for short period
and long period are estimated separately.
C. MANAGERIAL FUNCTIONS
1. Planning: Planning is the basic managerial function undertaken by an
entrepreneur. Planning helps in determining the course for action to be followed for
achieving various entrepreneurial objectives. It is decision in advance, what to do, when to
do, how to do and who will do a particular task. Planning is a process which involves
‗thinking before doing‘. Planning is concerned with the mental state of entrepreneur.
Planning is a process of looking ahead. The primary object of planning is to achieve better
results. It involves the selection of objectives and developing policies, procedures,
programmes, budgets and strategies. Planning is a continuous process.
The process of planning involves a number of steps:
 Gathering information
 Laying down objectives
 Developing planning premises
 Examining alternative courses of action
 Evaluation of action patterns
 Reviewing limitations
  Implementation of plans.
2. Organizing: Every business enterprise needs the service of a number of persons
to look after its different aspects. The entrepreneur sets up the objectives or goals to be
achieved by its personnel. The energy of every individual is channelized to achieve the
enterprise objective. The function of organizing is to arrange guide, co-ordinate, direct
and control the activities of the factors of production, viz., men, material, money and
machine so as to accomplish the objectives of the enterprise.
The process of organization involves the following steps:
 To identifying the work to be performed
 To classify or group the work
 To assign these groups of activities or work to individuals
 To delegate authority and fix responsibility
 To co-ordinate these authority-responsibility relationships of various
activities.
3. Staffing: The function involves manning the positions created by organization
process. It is concerned with human resources of an enterprise.
Staffing consists of the following:
 Manpower planning i.e., assessing manpower requirements items of quantity
and quality.
 Requirement, selection and training.
 Placement of man power.
 Development, promotion, transfer and appraisal.
 Determination of employee‘s remuneration.
Every entrepreneur has to perform the staffing function in one form or the other,
in order to get things done through others. But, it is decidedly difficult managerial
function of entrepreneur as it concerns human beings whose behavior and actions cannot
be predicted, and that is why it has become a distinct and specialized branch of
management.
4. Directing: Directing is concerned with carrying out the desired plans. It initiates
organized and planned action and ensures effective performance by subordinate towards
the accomplishment of group activities.
5. Leadership: An entrepreneur has to issue orders and instructions and guide and counsel
his subordinates in their work with a view to improve their performance and achieve
enterprise objectives. Leadership is ‗the process by which an entrepreneur imaginatively
directs/guides and influences the work of others in choosing and attaining specified goals
by mediating between the individual and organization in such a manner that both will get
maximum satisfaction‘. Leadership is the ability to build-up confidence and zeal among
people and to create an urge in them, to be led. To be a successful leader, an entrepreneur
must, possess the qualities of foresight, drive, initiative, self-confidence and personal
integrity. Different situations may demand different types of leadership abilities and
qualities.
6. Communication: Communication constitutes a very important function of entrepreneur.
It is said to be the number one problem of entrepreneur today. It is established fact
that entrepreneur spends 75% to 90% of their working time in communicating with
others. Communication is the means by which the behavior of the subordinate is
modified and change is effected in their actions. Nothing happens in management till
communication takes place.
7. Motivation: The term motivation is derived from the ‗motive‘ which means a need or an
emotion that prompts an individual into action. Motivation is the psychological
process of creating urge among the subordinates to do certain things or behave in the
desired manner. It is a very important function of entrepreneur. The importance of
motivation can be realized from the fact that performance of a worker depends upon
his ability and the motivation.
8. Co-ordination: Coordination is one of the most important functions of entrepreneur. It
is essential to channelize the activities of various individuals in the organization
towards the achievement of common goals. It is left to the entrepreneur to see that
the work of different segment is going according to pre determined targets and
corrective measures have to be taken if there is any deviation. Co-ordination creates a
team spirit and helps in achieving goals through collective efforts. It is the orderly
arrangement of group effort to provide unity of action on the pursuit of common
objectives.
 9. Controlling: Controlling can be defined as ―determining what is being accomplished,
that is evaluating the performance, if necessary applying corrective measure so that
the performance takes place according to plans‖. Control is essential for achieving
objectives of an enterprise. The planning of various activities does not ensure
automatic implementation of policies. Control is the process which enables
entrepreneur to get its policies implemented and take corrective actions if
performance is not according to the pre determined standards. If planning is the
beginning of the controlling may be said to be the final stage. If planning is looking
ahead, controlling back. Control is not possible without planning is meaningless
without control.
 Establishing standards of performance
 Measuring actual performance
 Comparing the actual performance with the standard
 Finding variance or deviations, if any and
 Taking corrective action or measures.
D. COMMERCIAL FUNCTIONS
1. Production: Production function is a key function of an entrepreneur. The activities of
production are independent of the size of the undertaking. In a small concern one person may be
undertaking this function whereas in large organization this activity may be undertaken by
various individuals or separate teams.
Production is the creation of goods and services. In relation to goods, production is the
fabrication of a physical object through the use of men, materials and equipment; whereas, with
reference to services, production is the discharge of a function which has some utility.
Production function consists of manufacturing, ancillary and advisory activities. Manufacturing
activities is concerned with production of goods or making of products. It includes decisions
such as selection of factory site, its location, design and layout; type of products to be produced;
research, development and design of the product. Ancillary activity includes all those activities
which support production function. It is related to production planning and control,
maintenance, purchasing, store- keeping, materials handling, operational research and quality
control.
Production management covers the following major activities:
  Designing the products and packages
 Production administration
 Execution of plans, policies and decisions
 Dependent services.
The success of production function is linked with proper forecasting production planning
and control. Scientific planning of production will result in the enhanced productivity. Increase
in productivity will benefit all parties concerned with business.
2. Finance : Finance function is the important in all enterprises. It remains the focus of all
business activities. It is not possible to substitute or eliminate this function because the
enterprise fails in the absence of finance. The need for money is continuous. The funds will
have to be raised from various sources. The success of finance function will depend upon its
planning. Besides sourcing of finance, its utilization is more important. Finance function has a
wide scope. It deals with:
 Estimating financial requirements
 Deciding capital structure
 Selecting a source of finance
 Selecting a pattern of investment
 Proper cash management
 Implementing financial controls
 Proper use of surpluses.
3. Marketing: Marketing is primarily concerned with the movement of goods and services
from the producer to the ultimate consumer. It creates place; time and possession utilities.
Marketing is a concept, a point of view and a way of thinking. It is directed towards the
satisfaction of consumer wants. It begins and ends with customers. Marketing plays a
significant role in promoting the will-being of the business enterprise. In fact the success of any
organization depends upon its successful marketing. Marketing is necessary not only to a
producer of goods and services, but also for a customer, top a government and society at large.
Marketing is not confined to selling of goods and services. It includes functions like product
planning and development, standardisation and grading, buying and assembling, storage
transportation, market financing, risk bearing, etc.
4. Personnel: This function is concerned with people at work and with their relationship
with in an organisation. It aims to bring together and develop into an effective organization of
men and women who make up enterprise. This function is concerned with employment,
development and compensation of the personnel and the provision of working conditions and
welfare measures to maintain a good working for in the organization. The entrepreneur should
endeavour to make proper utilization of human resources. This will require an attractive wage
policy, incentive plans and motivational approach. The success of a business is directly related
to the effects of its man power.
5. Accounting: Accounting is defined as a systematic recording of transactions of an
enterprise and the financial position of enterprises. Proper accounting system should be
maintained up-to-date by taking into account all the expenditures and income so as to reflect the
true financial position of the company.
BARRIERS TO ENTREPRENEURSHIP
A Systematic study of the barriers will lead to a proper understanding of the fields or
areas in which it occurs. Once the barriers are clearly identified, the society, government and
other supporting agencies can develop effective programs to tackle the issues to create a
conductive entrepreneurial climate. An insight into the barriers will lead to insight into the
entrepreneur‘s personality that is so essential in the process of entrepreneurship.
The various barriers of entrepreneurship are as follows:
 Environmental Barriers
The environmental barriers are those relating to shortage of rawmaterials and labour,
outdated machinery,high cost of land and building and lack of infrastructure.
(a)Raw Material – Non availability of raw materials required for production during peak
seasons leads to increase in the price of raw materials.
(b) Labour – Lack of Skilled labour, lack of Committed and loyal employees and
quality and quantity of labour.
(c) Machinery – Machines are necessary but they are also costly and due to rapid change
in technology they become obsolete and require replacement which requires cash in hand.
It becomes very difficult for small business organization to keep updating its production
process.
 (d) Land and Building – Acquisition of land and construction of building at a prime
location require heavy expenditure. If the land is taken on rent, it becomes a fixed cost
and a constant concern for the entrepreneur.
(e) Infrastructure Support – Inadequate power,improper roads,inadequate water and
poor drainage facilities are few other barriers Hence there is less support from
development authorities due to red-tapism and corruption.
 Financial Barriers
Availability of funds is a major concern. Delay in the source of finance results in
delay in starting or running a business. Financial barriers could occur due to the
following :
 Personal wealth could not be accumulated under communism
 Financial markets are not active
 Lack of financial system to finance entrepreneurs
 Personal Barriers
These are caused by emotional blocks of an individual. It causes a mental obstruction.
They are
(a) Lack of Confidence – They think that they will never find a successful business idea
and would be unable to attract necessary resources. Therefore, they dismiss the thought
of being self-employed.
(b) Lack of dependability on others – They aim to gain their additional expertise
through trial and error and experience, rather than seeking further development or
personal assistance from others.
(c) Lack of Motivation – Lose interest and motivation when ideas don‘t work.
(d) Lack of Patience – When desire to achieve success in first attempt or to become rich
instantly are confronted with business challenges/problems they lose interest. They give
up at during initial losses.
(e) Inability to Dream – Sometimes they are short of vision or satisfied with what they
have achieved and lose interest in further expansion of business.
(f) Sense of Pride/Embarrassment – They are too proud or too embarrassed to take
help.
  Societal Barriers
The society might be a barrier as discussed in the following points.
 A Society placing premium on safety and security in matters of acquiring a
livelihood, such a value can become a strong social barrier to entrepreneurship.
 A society denying access to self-esteem will be placing hurdles in the path of an
entrepreneur.
 Social factors such as insistence on conformity, an excessive protective attitude
among children during their formative years, discouragement to mobility will
prevent essential values of entrepreneurship.
 Political Barriers
The Political environment can work against the interest of entrepreneurs in the following
ways
 A Political environment that is characterised by instability and insecurity will
discourage entrepreneurs.
 Political policies can retard the growth of entrepreneurial ventures in a country.
 Excessive interference in the form of controls, delays etc. from the government
can discourage prospective entrepreneurs.
These are some political factors affecting business environment of a country:
 Cultural Barriers
 Cultural barriers to entrepreneurship are due to the cultural values in the society
which is bound by Conventionalism, Status Quo, Rituals, Strong Cultural taboos.
For instance, in the past, some societies in India discouraged people from going
abroad believing that crossing the sea was a cultural taboo. Similarly certain field
of work was considered unsuitable for people of certain culture. Such strong
cultural dictates can act as barriers to entrepreneurship. All these cultural
hindrances to entrepreneurship may curb the entrepreneurial spirit.
PROS AND CONS OF ENTREPRENEURSHIP

Pros of entrepreneurship
The following are the advantages of entrepreneurship:
 Control: Entrepreneur has control over the work and that makes the most of their
strengths and skills. The result can be more job satisfaction.
  Excitement: Entrepreneurship can be exciting and many entrepreneurs consider their
work highly enjoyable. Each day is filled with new opportunities to challenge their
abilities, skills, and determination.
 Flexibility: Entrepreneurs can schedule their work hours around other commitments,
including spending quality time with their families.
 Freedom: Freedom to work whenever they want, wherever they want, and however they
want draws many to entrepreneurship. Most entrepreneurs don‘t consider their work
actual work because they are doing something they love.
 Rational Salary: As an entrepreneur, their income is directly related to their efforts and
the success of their business.
Cons of Entrepreneurship

 Administration: While making all the decisions can be a benefit, it can also be a burden.
Being an entrepreneur comes with a lot of paperwork that can take up time and energy.
 Competition: Staying competitive is critical as a small business owner. He/she will need
to differentiate the business from others, in order to build a solid customer base and be
profitable.
 Loneliness: It can be lonely and scary to be completely responsible for the success or
failure of one‘s business.
 No Regular Salary: Being an entrepreneur often means giving up the security of a
regular paycheck. If business slows down, the personal income can be at risk.
 Work Schedule: The work schedule of an entrepreneur can be unpredictable. A major
disadvantage to being an entrepreneur is that it requires more work and longer hours than
being an employee.
CONCLUSION

Entrepreneurs have much to give to society. Their contribution to the welfare of society is
of high order. A business person apart from making money for him or herself also helps the
society in many ways financially and socially. Business is essential for the progress of a nation.
A successful businessman or woman is an asset to the society. He or she can contribute to the
wellbeing of a society in several ways that improve the living conditions of the people.
Favourable factors influence the progress of the entrepreneurial ventures in the society.
References

 Introduction - http://www.yourarticlelibrary.com/entrepreneur/entrepreneurship-
characteristicsimportance-types-and-functions-of-entrepreneurship/5228

 Factors influencing Entrepreneurship - Entrepreneurial development by Madhurima

Lall & Shikha Sahai

 Functions of Entrepreneur - Entrepreneurial development by Dr.C.B.Gupta,

Dr.N.P.Srinivasan, Sultan Chand &Sons, Revised Edition, 2013
 Barriers in Entrepreneurship - Entrepreneurial development by Dr.C.B.Gupta,
Dr.N.P.Srinivasan, Sultan Chand &Sons, Revised Edition, 2013 , www.scribd.com and
http://pestleanalysis.com
 Pros and Cons
https://entrepreneurhandbook.co.uk/entrepreneurship/
https://en.wikipedia.org/wiki/Entrepreneurship
http://source.southuniversity.edu/pros-and-cons-of-being-an-entrepreneur-96101.aspx

 Conclusion - https://www.paggu.com/entrepreneurship/top-5-contributions-of-
entrepreneurship-in-society/
UNIT III : Business and Environment (4 hrs) :
Structure of Unit :

3.0 Objectives

3.1 Introduction

3.2 Types of Entrepreneur

3.3 Styles of Entrepreneurs

3.4 Business Ethics and Social Responsibility of Business

3.5 Indian Business Environment

3.6 Summary

3.7 Self Assessment Questions

3.8 References

3.0 OBJECTIVES
After completing this unit, you will be able to:
1. Classify different types of entrepreneurs on various bases.
2. Describe the various styles of entrepreneurs.
3. Understand business ethics and social responsibility of business.
4. Learn about Indian Business Environment.
3.1 INTRODUCTION

The role of entrepreneurs in economic development varies from economy to economy, country to
country, depending upon its material resources, industrial climate and more importantly, the
responsiveness of the political system to the growth of entrepreneurs. Liberalization and the new
economic policy have thrown upon the doors for every entrepreneur to seek its own fortunes and
thus contribute to the growth of the economy and entrepreneur is an important input of economic
development. He is a catalyst of development. Only the entrepreneurs create capital, wealth and
resources in a country by their inventive and risk-taking behaviour. They are the prime movers of
industrial development in a country. Entrepreneurs are found in every economic system and in
every type of economic activity. Artisans, traders, importers, engineers, exporters, bankers,
industrialists, farmers, forest workers, tribal‘s, professionals, politicians, and bureaucrats, any
one from these could be entrepreneur. Entrepreneurship can take a variety of forms and it is
important to recognize different ―types‖ of entrepreneurship, styles of entrepreneurs, business
ethics and social responsibility of business and concepts of Indian Business Environment.

3.2 TYPES OF ENTREPRENEUR

The various types of entrepreneur are explained in the figure 3.1:

Figure 3.1 : Types of Entrepreneur

(Source: https://ecestudy.wordpress.com/2015/02/24/entrepreneurship-notes/)

1. On the Basis of Economic Development:

Clarence Danhof classified entrepreneurs into four groups on the basis of economic
development.

A. Innovating Entrepreneurs:

This type of entrepreneurship is characterized by aggressive assemblage of information and the

analysis of results deriving from novel combination of factors of production. Entrepreneurs
falling in this class are generally aggressive in experimentation and exhibited shrewdness in
putting attractive possibilities into practice. They are the entrepreneurs who have creative and
innovative ideas of starting a new business. An innovating entrepreneur sees the opportunity for
introducing a new technique or a new product or a new market. He may raise money to launch an
enterprise, assemble the various factors, and choose top executives and the set the organization
going. Schumpeter‘s entrepreneur was of this type. Innovative entrepreneurs thus, results in the
creation of something new. They are the contributors to the economic development of a country.
Innovating entrepreneurs are very commonly frond in undeveloped countries. There is dearth of
such entrepreneurs in developed countries. Innovating entrepreneurs played the key role in the
rise of modern capitalism, through their enterprising sprit, hope of moneymaking, ability to
recognize and exploit opportunities, etc.

B. Adoptive or Imitative Entrepreneur:

There is a second group of entrepreneurs generally referred as imitative entrepreneurs. The

imitative entrepreneurs copy or adopt suitable innovations made by the innovative entrepreneurs.
They does not innovate the changes himself. They only imitates technology innovated by others.
Such entrepreneurs are particularly important in developing courtiers because they contribute
significantly to the development of such economies. Imitative entrepreneurs are most suitable for
the developing regions because in such countries people prefer to imitate the technology,
knowledge and skill already available in more advanced countries. In highly backward countries
there is shortage of imitative entrepreneurs also. People who can imitate the technologies and
products to the particular conditions prevailing in these countries are needed. Sometimes, there
is a need to adjust and adopt the new technologies to their special conditions. Imitative
entrepreneurs help to transform the system with the limited resources available. However; these
entrepreneurs face lesser risks and uncertainty then innovative entrepreneurs. While innovative
entrepreneurs are creative, imitative entrepreneurs are adoptive.
C. Fabian Entrepreneur:

The third type is Fabian entrepreneur. By nature these entrepreneurs are shy and lazy. This type
of entrepreneurs have neither will to introduce new changes nor desire to adopt new methods of
production innovated by the most entrepreneurs. They follow the set procedures, customs,
traditions and religions. They are not much interested in taking risk and they try to follow the
footsteps of their predecessors. Usually they are second generation entrepreneur in a business
family enterprise.
D. Drone Entrepreneur:
The fourth type is Drone entrepreneurs who refuse to copy or use opportunities that come on
their way. They are conventional in their approach and stick to their set practices products,
production methods and ideas. They struggle to survive not to grow. They may be termed as
Laggards. In such cases the organization looses market, their operations become uneconomical
and they may be pushed out of the market.

2. On the Basis of Type of Business:

Under this category we can classify entrepreneurs as described below:

A. Business Entrepreneurs:

They are the entrepreneurs who conceive an idea for a new product or service and then create a
business to materialize their idea into reality. They tap the entire factor of production to develop
a new business opportunity. They may set up a big enterprise or a small scale business. When
they establish small business units they are called small business entrepreneurs. In a majority of
cases, entrepreneurs are found in small trading and manufacturing business.

B. Trading Entrepreneur:

These types of entrepreneurs undertake trading activities and are not concerned with the
manufacturing work. They identifies potentiality of their product in markets, stimulates demand
for their product line among buyers. They may go for both domestic and overseas trade. These
entrepreneurs demonstrated their ability in pushing many ideas ahead which promoted their
business.

C. Industrial Entrepreneur:

Industrial entrepreneur is essentially a manufacturer who identifies the needs of customers and
creates products or services to serve them. He is product-oriented who starts through an
industrial unit to create a product like electronic industry, textile unit, machine tools.

D. Corporate Entrepreneur:

These entrepreneurs used his innovative skill in organizing and managing a corporate
undertaking. A corporate undertaking is a form of business organization which is registered
under some statute or Act like a trust registered under the Trust Act, or a company registered
under the Companies Act. These corporate work as separate legal entity. He is thus an individual
who plans, develops and manages a corporate body.

E. Agricultural Entrepreneur:

Agricultural entrepreneurs are those who undertake agricultural activities as through

mechanization, irrigation and application of technologies to produce the crop. They cover a
broad spectrum of the agricultural sector and include agriculture and allied occupations

3. According to the Use of Technology:

The application of new technology in various sectors of the national economy is essential for the
future growth of business. We may broadly classify these entrepreneurs on the basis of the use of
technology as follows:
A. Technical Entrepreneurs:

With the decline of joint family business and the rise of scientific and technical institutions,
technically qualified persons have entered the field of business. These entrepreneurs may enter
business to commercially exploit their inventions and discoveries. Their main asset is technical
expertise. They raise the necessary capital and employ experts in financial, legal- marketing and
other areas of business. Their success depends upon how they start production and on the
acceptance of their products in the market.

B. Non-technical Entrepreneur:

Non-technical entrepreneurs are those who are not concerned with the technical aspects of the
product or service in which they deal. They are concerned only with developing alternative
marketing and promotional strategies for their product or service.

C. Professional Entrepreneur:

Professional entrepreneur is an entrepreneur who is interested in establishing a business but does

not have interest in managing it after establishment. A professional entrepreneur sells out the
existing business on good returns and starts another business with a new idea. Such an
entrepreneur is dynamic and conceives new ideas to develop alternative projects.

4. According to Motivation:

Motivation is the main force that promotes the efforts of the entrepreneur to achieve his goals.
An entrepreneur is motivated to achieve or prove his excellence in their performance. According
to motivation we can classify entrepreneur as:

A. Pure Entrepreneur:

A pure entrepreneur is the one who is motivated by psychological economical, ethical

considerations. He undertakes an entrepreneurial activity for his personal satisfaction in work,
ego or status.

B. Induced Entrepreneur:

This type of entrepreneur is one who induced to take up an entrepreneurial task due to the policy
reforms of the government that provides assistance, incentives, concessions and other facilities to
start a venture. Most of the small scale entrepreneurs belong to this category and enter business
due to financial, technical and several other facilities provided to them by the various agency of
Govt. to promote entrepreneurship. Today, import restrictions and allocation of production
quotas to small units have induced many people to start a small scale unit.
C. Motivated Entrepreneur:

New entrepreneurs are motivated by the desire for self-fulfillment. They come into being
because of the possibility of making and marketing some new products for the use of consumers.
They are motivated through reward like profit.

5. According to Growth:

The industrial units are identified as high growth, medium growth and low growth industries and
as such we have ‗Growth Entrepreneur‘ and ‗Super Growth Entrepreneur.‘

A. Growth Entrepreneur:

He necessarily takes up a high growth industry and chooses an industry which has sustained
growth prospects. Growth entrepreneurs have both the desire and ability to grow as fast as large
as possible.

B. Super-Growth Entrepreneur:

This category of entrepreneurs is those who have shown enormous growth of performance in
their venture. The growth performance is identified by the high turnover of sales, liquidity of
funds, and profitability.

6. According to Entrepreneurial Activity:

Based on entrepreneurial activity, entrepreneurs are classified as novice, serial, and portfolio
entrepreneur.

A. Novice Entrepreneur:

A novice is someone who has started his/her first entrepreneurial venture. A novice entrepreneur
is an individual who has no prior business ownership experience as a business founder, inheritor
of a business, or a purchaser of a business. It is not similar to early starter; a novice can also be a
50 year old with over 25 years of experience in the industry.

B. A Serial Entrepreneur:

A Serial Entrepreneur is someone who is devoted to one venture at a time but ultimately starts
many. It is the process of starting that excites the starter. Once the business is established, the
serial entrepreneur may lose interest and think of selling and moving on.

C. Portfolio Entrepreneur:

A portfolio entrepreneur is an individual who retains an original business and builds a portfolio
of additional businesses through inheriting, establishing, or purchasing them. A portfolio
entrepreneur starts and runs a number of businesses. It may be a strategy of spreading risk or it
may be that the entrepreneur is simultaneously excited by a variety of opportunities. Also, the
entrepreneur may see some synergies between the ventures.

7. Other Entrepreneurs:

A. First-Generation Entrepreneurs:

This category consists of those entrepreneurs whose parents or family had not been into business
and was into salaried service. The booming economy of India has led to a multitude of business
opportunities, and with deregulation, it has become easier to set up businesses. Also, with a
change in the mindset of the middle class, it is now more acceptable to become an entrepreneur.
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.

B. Modern Entrepreneur:

A modern entrepreneur is one who undertakes those businesses which go well along with the
changing scenario in the market and suits the current marketing needs.

C. Women Entrepreneurs:

Women as entrepreneurs have been a recent phenomenon in India. Progressive laws and other
incentives have also boosted the presence of women in entrepreneurial activity in diverse fields.
In 1988, for the first time, the definition of Women Entrepreneurs‘ enterprise was evolved that
termed an SSI unit/industry-related service or business enterprise, managed by one or more
women entrepreneurs in proprietary concerns, or in which she/they individually or jointly have a
share capital of not less than 51 per cent as partners / shareholders / directors of a private limited
company / members of a cooperative society, as a Woman Enterprise.

D. Nascent Entrepreneur:

A nascent entrepreneur is an individual who is in the process of starting a new business.

E. Habitual Entrepreneur:

A habitual entrepreneur is an individual who has prior business ownership experience. The
nascent entrepreneur can either be a novice or a habitual entrepreneur.

F. Lifestyle Entrepreneurs:

Lifestyle entrepreneurs have developed an enterprise that fits their individual circumstances and
style of life. Their basic intention is to earn an income for themselves and their families.
G. Copreneurs:

It is related to the married couples working together in a business. When a married couple share
ownership, commitment and responsibility for a‘ business, they are called ―copreneurs‖. As
copreneurs, couples struggle in ventures to establish equality in. their relationships. Such couples
represent the dynamic interaction of the systems of love and work.

H. IT Entrepreneurs:

IT entrepreneurs are creating a new business platform that takes them straight to the top. They
are confident, ambitious innovative and acquired creativity in the competitive global
environment and created a niche of their self. They are the brave new bunch of entrepreneurs

who are raring to take on the world of information technology.

I. Social Entrepreneur:

Social entrepreneur is one who recognizes the part of society which is stuck and provides new
ways to get it unstuck. Be it dedicated efforts for child upliftment, fighting for the conservation
of Assam‘s rainforests, working for the betterment of the blind or initiatives to empower women,
the entrepreneur‘s passion is very strong. Freedom, wealth, exposure, social mobility and greater
individual confidence are driving this huge wave of social innovation and entrepreneurship.
After all are tired with the Inefficiency of governments and the indifference of corporate, and
want to make a change and this is the case everywhere.
J. Forced Entrepreneurs:

The money-lenders of yesterday, who are thrown out of their family business because of govern-
ment legislation, the Indians returning from abroad and the educated unemployed seeking self-
employment form this class of entrepreneurs.
K. Individual and Institutional Entrepreneurs:

In the small scale sector individual entrepreneurs are dominant. Small enterprises outnumber the
large ones in every country. Such entrepreneurs have the advantage of flexibility, quick decision
making. But a single individual can establish, operate and control an organization up to a limit.
Thereafter, it becomes necessary to institutionalize entrepreneurship. The business will have to
acquire a number of new entrepreneurial skills through a corporate body. A group of
entrepreneurs has to be developed to handle the increasingly complex network of decision
making. The central function of the entrepreneur remains the same but the basic decisions like
the line of business, the amount of capital employed, etc. are taken collectively by the promoters
at the helm of affairs. Thus, individual entrepreneur and institutional entrepreneur coexist and
support each other. Corporate sector the symbol of institutionalized entrepreneurship.
L. Entrepreneurs by Inheritance:

At times, people become entrepreneurs when they inherit the family business. In India, there are
a large number of family controlled business houses. Firms in these houses are passed from one
generation to another.

3.3 STYLES OF ENTREPRENEURS

Entrepreneurs classically will recognize themselves in each of the following styles, or a combination of several
styles. The challenge is to match one‘s own style with the needs of the company and many entrepreneurs prefer to
run their businesses single-handedly. There are six ways to run a company without management assistance: the
Classic, the Coordinator, the Craftsman, the Entrepreneur Employee Team, the Small Partnership and the Big
Team Venture.

3.3.1 The Classic

This is the traditional entrepreneurial management style. It‘s also known as the "watch it all yourself"
mode of operation. People criticize entrepreneurs for being unwilling to delegate. Management consultants
contemptuously exhort entrepreneurs to reform their evil ways, to cure themselves of the neurotic need to
supervise everything personally.

3.3.2 The Coordinator

An alternative to the classic style is the coordinator method, whereby leaders can run a
fairly good-sized business with just a handful of employees. This type of business structure is sometimes called a
"virtual corporation" and the essence of its style is that most of the sub-tasks are jobbed out. The leader does little
more than organize the enterprise and verify that everything gets done. In theory, this type of entrepreneur can job
everything out: arrange for the product to be manufactured; get brokers and representatives to sell it; hire an
accounting firm to handle the books and sell receivables to someone else to do the collections. A
coordinator can grow a multi-million-dollar business without a single employee.

3.3.3 The Craftsman

Craftsmen are leaders who maximize their control over business by doing everything themselves.
Obviously this approach, like the classic approach, limits the size of the business. This style makes sense if the
business‘ biggest concern is the quality of the output. It‘s an attitude characterized by craft types, although many
entrepreneurs in other businesses also adopt this style. There are advantages to doing everything: everything is
done "right" because the expert does it; expenses are minimized; and operating without employees can simplify
life. The only problem with this rosy scenario is that the leader must do the tasks he or she likes, as
well as the ones disliked.

3.3.4 The Entrepreneur Employee Team

This leadership strategy gives the entrepreneur the most control within the big business leadership styles.
Authority is delegated to key employees, with the understanding that final authority rests with the
entrepreneur. Few start-ups can afford a host of high-level employees, most often leaders find
themselves growing from the classic style into this mode of operation. It‘s company growth that most often forces
the change. That transition, however, is not as easy as it might appear. Don‘t hesitate to delegate: Do it all at once.
This forces the transition, rather than muddling it over a longer period of time where people question sincerity and
are less apt to rise to the occasion. Be firm and explicit. Announce to one and all that the company has grown and
is successful, so much so that the old ways of doing things won‘t work anymore. Point out the opportunities for
promotion, and make an effort to promote from within.

3.3.5 The Small Partnership

This once-popular leadership style has all but disappeared among today‘s modern management
techniques. However, it may be on the comeback. Leaders who adopt the small partnership style have
considerably less control and autonomy in this type of structure, and they must share tactical decisions with one or
more partners. In compensation for this loss of control, small partners receive a substantial advantage: the
assistance of others who, like to have a real stake in the company and share motivation to make it succeed in a way
no employee can. One of the most effective and widespread ways to organize a company around small partnership
lines is to make it an "inside-outside" partnership. One partner takes all of the "inside" tasks—operations and
management. The other partner handles marketing and sales. But even small partners eventually face the limit of
their abilities and must decide to manage a dynamic firm that won‘t grow any larger—only better—or
change.

3.3.6 The Big Team Venture

This style puts the leader right on the back of the tiger. This style divides leadership among a group of
major players including venture‐capitalist and board‐of‐director types. In addition to capital,
growth‐company, management team is needed in order for the Big Team Venture to succeed.
These companies go the farthest, burn the brightest, and fade the fastest.

3.4 BUSINESS ETHICS AND SOCIAL RESPONSIBILITY OF BUSINESS

Ethics and social responsibility are two concepts many individuals believe go hand in hand for
organizations in the business environment. Business ethics represents the moral principles an
organization uses to ensure all employees act in an acceptable manner when completing business
functions. Social responsibility is typically an ideological theory governments and the general
public hold, believing that businesses should not conduct themselves in a manner counter to
cultural or societal norms. The blending of business ethics and social responsibility bears when
organizations implement a written code of ethics to prove that the organization only acts in its
best interest so long as it does not damage the organization‘s social responsibility.

3.4.1 Business Ethics

Ethics refers to the ―study of whatever is right and good for humans, business ethics concerns
itself with the investigation of business practices in light of human values. Ethics is the broad
field of study exploring the general nature of morals and the specific moral choices to be made
by the individual in his relationship with others. Although the English word ethics is generally
recognized as stemming from the Greek ethos, meaning ―custom and usage, ―it is more properly
identified as originating from swedhethos, in which the concepts of individual morality and
behavioural habits are related and identified as an essential quality of existence.

Ethics involves the rules and principles that define right and wrong decisions and behaviours. In
other words, as we live our lives - attend school, go to work, engage in hobbies, go out with
friends, and so forth - certain decisions are ethically ―right‖ and others are ethically ―wrong‖. A
manager‘s attitude concerning corporate responsibility is related to the organizational climate
perceived to be supportive of laws and professional codes of ethics. On the other hand,
entrepreneurs with a relatively new company who have few role models usually develop an
internal ethical code. Entrepreneurs tend to depend on their own personal value systems much
more than other managers when determining ethically appropriate courses of action. Ethics is not
only a general topic for conversation but a deep concern of business people.

3.4.2 The Seven Principles of Public Life

1. Selflessness Holders of public office should take decisions solely in terms of the public
interest. They should not do so in order to gain financial or other material benefits for
themselves. their family, or their friends.

2. Integrity Holders of public office should not place themselves under any financial or other
obligation to outside individuals or organizations that might influence them in the performance
or their official duties.

3. Objectivity In carrying out public business including making public appointments, awarding
contracts, or recommending individuals for rewards and benefits. holders of public office should
make choices on merit.

4. Accountability Holders of public office are accountable for their decisions and actions to the
public and must submit themselves to whatever scrutiny is appropriate to their office.

5. Openness Holders of public office should be as open as possible about all the decisions and
actions that they take. They should give reasons for their decisions and restrict information only
when the wider public interest clearly demands.

6. Honesty Holders of public office have a duty to declare any private interests relating to their
public duties and to take steps to resolve any conflicts arising in a way that protects the public
interest.

7. Leadership Holders of public office should promote and support these principles by sound
leadership and prove to be an example in whatever they perform.
3.4.3 Social Responsibilities

Social responsibility is an ethical ideology or theory that an entity, be it an organization or

individual, has an obligation to act to benefit society at large. Social responsibility is a duty every
individual or organization has to perform so as to maintain a balance between the economy and
the ecosystem. A trade-off always exists between economic development, in the material sense,
and the welfare of society and the environment. Social responsibility means sustaining the
equilibrium between the two. It pertains not only to business organizations but also to anyone
whose action impacts the environment. This responsibility can be passive, by avoiding engaging
in socially harmful acts, or active, by performing activities that directly advance social goals.
Generally, the social responsibility of business comprises of certain duties towards entities, which are
depicted and listed below.

Figure 3.2 Social Responsibility of Business towards Society

(Source: http://social-responsibility-of-business-for.html)

1. Shareholders or investors who contribute funds for business.

2. Employees and others that make up its personnel.
3. Consumers or a customer who consumes and/or uses its outputs (products and/or
services).
4. Government and local administrative bodies that regulate its commercial activities in
their jurisdictions.
5. Members of a local community who are either directly or indirectly influenced by its
activities in their area.
6. Surrounding environment of a location from it operates.
7. The general public that makes up a big part of society.
The social responsibility of business comprises of the following obligations:

1. A business must give a proper dividend to its shareholders or investors.

2. It must provide fair wages and salaries with good working conditions.
3. It must provide a regular supply of good quality goods and/or services to its
consumers/customers at reasonable prices.
4. It must abide by all government rules and regulations, supports its business-related
policies and should pay fair taxes without keeping any delays or dues.
5. It must also contribute in betterment of a local community by doing generous activities
like building schools, colleges, hospitals, etc.
6. It must take immense care to see that its activities neither directly nor indirectly create a
havoc on the vitality of its surrounding environment.
7. It should maintain a stringent policy to curb or control pollution in regard to
contamination of air, water, land, sound and radiation leakages. Here, to do so, it must
hire experienced professional individuals who are experts in their respective fields.
8. It should also offer social-welfare services to the general public.
The core objectives of social responsibility of business are as follows:
1. It is a concept that implies a business must operate (function) with a firm mindset to
protect and promote the interest and welfare of society.
2. Profit (earned through any means) must not be its only highest objective else
contributions made for betterment and progress of a society must also be given a prime
importance.
3. It must honestly fulfill its social responsibilities in regard to the welfare of society in
which it operates and whose resources & infrastructures it makes use of to earn huge
profits.
4. It should never neglect (avoid) its responsibilities towards society in which it flourishes.
3.4.4 Business Ethics and Social Responsibility
Business ethics is the principles and standards that determine acceptable conduct in
business organizations. The acceptability of behaviour in business is determined by customers,
competitors, government regulators, interest groups, and the public, as well as each individual‘s
personal moral principles and values.
Many consumers and social advocates believe that businesses should not only make a
profit but also consider the social implications of their activities. Social responsibility is defined
as a business‘s obligation to maximize its positive impact and minimize its negative impact on
society. Although many people use the terms social responsibility and ethics interchangeably,
they do not mean the same thing. Business ethics relates to an individual‘s or a work group‘s
decisions that society evaluates as right or wrong, whereas social responsibility is a broader
concept that concerns the impact of the entire business‘s activities on society. From an ethical
perspective, for example, one may be concerned about a health care organization or practitioner
overcharging the provincial government for medical services. From a social responsibility
perspective, one might be concerned about the impact that this overcharging will have on the
ability of the health care system to provide adequate services for all citizens. The most basic
ethical and social responsibility concerns have been codified as laws and regulations that
encourage businesses to conform to society‘s standards, values, and attitudes. At a minimum,
managers are expected to obey these laws and regulations.

Most legal issues arise as choices that society deems unethical, irresponsible, or
otherwise unacceptable. However, all actions deemed unethical by society are not necessarily
illegal, and both legal and ethical concerns change over time. Business law refers to the laws and
regulations that govern the conduct of business. Many problems and conflicts in business can be
avoided if owners, managers, and employees know more about business law and the legal
system. Business ethics, social responsibility, and laws together act as a compliance system
requiring that businesses and employees act responsibly in society.

3.4.5 Entrepreneurship v/s Ethics and Social Responsibility

Ethics and social responsibility are very important values in entrepreneurship ventures. This is
particularly essential in decision making process. Ethical conscience reminds entrepreneurs to
make trustworthy and profitable entrepreneurship decisions. Likewise, the social responsibility
component sought entrepreneurs to make entrepreneurial decisions that can enhance benefits and
repelling harms to the stakeholders.

The entrepreneur must establish a balance between ethical exigencies, economic expediency, and
social responsibility. A managers attitudes concerning corporate responsibility tend to be
supportive of laws and professional codes of ethics. Entrepreneurs have few reference persons,
role models, and developed internal ethics codes. Entrepreneurs are sensitive to peers pressure
and social norms in the community as well as pressures from their companies.

While ethics refers to the ―study of whatever is right and good for humans,‖ business ethics
concerns itself with the investigation of business practices in light of human values. The word
―ethics‖ stems from the Greek ethos, meaning custom and usage. Development of Our Ethical
Concepts Socrates, Plato, and Aristotle provide the earliest writings dealing with ethical
conceptions; earlier writings involving moral codes can be found in both Judaism and Hinduism.

Ethics and social responsibilities of an entrepreneur is certainly an important issue considering

the role of social responsibility in society and ethics in business. Social responsibility is
beneficial for business community and at the same time for global community. Social
responsibility is significant owing to the realism of globalization. The people of the universe are
becoming interconnected more owing to the advancement of technology, transportation and
communication. The world market economy is affecting not only services and goods but values
and ideas as well. Expansion on the global front, enhancing regulatory omission and the factors
which is responsible for creating awareness regarding the significance of making for sectored,
macro and operational hazards to both an organization‘s and entrepreneur‘s competitive position
and reputation. As small business owners and entrepreneurs, activities which harm the people
and the planet, will spoil the scope for your profits. For this reason there is great significance for
―triple bottom line‖ which is profits, planet and people.

The world economy requires innovators and entrepreneurs to both advance and sustain global
community. While ethics and social responsibilities of an entrepreneur and businesses undertake
the plan and consider social responsibility a vital event in their activities, everybody benefits.
The effect could be noticed within local communities and ultimate profit making from their
business. With the extension of cooperation for businesses, governments and NGOs, they
encourage in the matter of corporate social responsibility and entrepreneurship and take steps to
improve the mechanism for its potential growth. Therefore, in regards ethics and social
responsibilities, an entrepreneur has to become aware about his role and strive to obey them in
perfect manner which would be beneficial to him as well as the community as a whole

An entrepreneur is actually running his own business and being a businessman he has some
obligation of a business to meet his economic and legal responsibilities. Social responsibility is
basically a business intention, beyond its legal and economic obligation to do the right things and
act in ways that are good for society.

3.5 BUSINESS ENVIRONMENT

Business environment refers to those aspects of the surroundings of business enterprise which
have influence on the functioning of business. An organization can survive and grow only when
it continuously and quickly adapts to changing environment.

According to Wheeler, ―Business Environment is the total of all things external to business
firms and industries which affect their organization and operations.‖

According to Keith Davis, ―Business Environment is the aggregate of all conditions, events and
influence that surround and affect the business.‖

3.5.1 Components of Business Environment:–Business Environment has two components

a) Internal Environment b) External Environment

a) Internal Environment : Internal Environment refers to environment within the

organization. It includes internal factors of the business which can be controlled by business. It
includes objectives of business, managerial policies, management and employees of the
organization, labour management relationship, brand image and corporate image, working
conditions in the organization, technological and research and development capabilities etc.
Internal environment includes 5 M's i.e. men, material, money, machinery, management
available with business. These components are usually within the control of business.
The components are:

1. research development
2. technological capabilities
3. work environment
4. managerial policies
5. objectives of business
6. human resources
7. financial resources
b) External Environment : External Environment refers to external aspects of the
surroundings of business enterprise which have influence on the functioning of business. These
factors beyond the control of business. External environment includes factors outside the firm
which can provide opportunities or pose threats to the firm. External environment has two types
i) Micro Environment ii) Macro Environment
i) Micro Environment : The micro environment of a company consists of elements that
directly affect the company. It includes suppliers, customers, market intermediaries,
competitors and public etc., which is explained as below :-
a) Suppliers : Suppliers are those who supply raw materials and components of the
company. Every business requires the suppliers. If our supplier is reliable, our business
will run smoothly. If our supplier is not reliable, we have to maintain high inventories.
b) Customer :–Customer is the central point of the business. The success of a business
organization depends upon the customers, their needs, tastes etc. Now days the
competition is growing so it is very essential to satisfy the customer. For attracting new
customers companies conduct consumer research, provide after sale services etc.
c) Market Intermediaries :–Market Intermediaries which include agents and brokers who
help the company to find customers. It is a link between company and consumer. Market
intermediaries help the company to promote sell and distribute its goods to final buyers.
Market intermediaries include middlemen, marketing agencies, financial intermediaries,
physical intermediaries etc.
 d) Competitors :–Competitors means other business units which are producing similar
products or a very close substitute of our product. Now a day‘s competition has
increased. No business unit enjoys monopoly in the market. So the business has to satisfy
the customer for the success in the market.
e) Public :–Public is group that has actual or potential interest in the business. So public
also affect the business.
f) Media :–Media also affect the business. It includes all newspaper, magazines, journals
etc. Media also affects the reputation of the company.
ii) Macro Environment :–Macro Environment means general environment of business. These
factor are uncontrollable. These factors create opportunities and pose threats to the business.
It includes economic, political, socio cultural, technological, natural, demographic, and
international environment.
a) Economic Environment :–Economic Environment refers to those economic factors
which have impact on the working of business. Economic environment is very complex
in nature. It is very dynamic. It has three elements :-
i) Economic Conditions :– Economic conditions include income level, distribution
of income, demand and supply trends etc. If the economy is in boom conditions, it
positively affect demand and market share. On the other hand if the economy is in
depression, it will have negative effect on the business.
ii) Economic Policies :–Economic policies are framed by government. These
policies establish relationship between business and government. The effect of
these policies may be favorable or unfavorable.
iii) Economic System :–Different economic system prevail in different countries.
These system affect the business. The economic system includes capitalism,
socialism and mixed economy.
b) Political Environment :–Political Environment affect the different business units. A
stable and dynamic political environment is very necessary for business growth. Political
environment includes political stability in the country, relation of the government with
other countries, welfare activities of government, centre state relationship, thinking of
opposition parties towards business. If the political system is stable and efficient then the
business grows. In the lack of political stability long terms plans cannot be formulated.
 Thus business is adversely affected if the government is not stable. Similarly relations of
government with other countries also affect business. If a country enjoys friendly
relations with other nations, then it has favorable effect on foreign trade.
c) Socio Cultural Environment :–Socio- Cultural Environment refers to social and cultural
factors which are beyond the control of business unit. Such factors includes attitude of
people at work, family system, caste system, education, habits, language, religion etc.
Socio-cultural environment is one of the important non-economic external components of
business environment. Religion has considerable effect on business. Some religions
restrict their followers from doing a particular type of business, e.g. Jain religion does not
allow its followers to engage in leather industry, wine making etc. Similarly difference in
language is another problem area in national level and international level business. The
businessman must be familiar with the local language of the place where business is to be
operated.
d) Technological Environment :–Technological environment is most important factor
which affect the business enterprise. The faster changes in technology create problems
for business enterprise. Product have shorter life span than the past because of rapid
technological development. Technology provides a various advantage. Success in many
industries depends on a innovation and research. For promote innovation and research
some companies establish research and development department in their enterprise. For
example Japanese industries have achieved a great success because of innovation and
rapid technological upgradation.
e) Natural Environment :–Natural Environment refers to geographical and ecological
factors which are beyond the control of the enterprise. It includes natural resources,
weather and climatic conditions, landforms rainfall, environmental pollution etc. Climate
and weather conditions affect the location certain industries like textile industry.
Similarly environment pollution in the form of air pollution, water pollution and noise
pollution have caused disturbances in ecological balance. Government has framed
various Acts for the control of environmental pollution. The business enterprise must
keep in mind these factors.
f) Demographical Environment :–Demographical environment affect the business
externally. Demographic environment differs from country to country and from place to
 place within the same country. Demographic factors includes size of population and
population growth, family size, age composition, sex composition, urban-rural population
education level etc. Huge population size indicate cheap labour and more demand in the
economy. If population size is large then there will be more demand for goods and
services. It will have favourable effect on business. Similarly, Education level is also
important demographic factor affecting business. If public is highly educated, supply of
unskilled labour will decrease. On the other hand if education level is low then supply of
unskilled labour will increase.
g) International Environment :–International Environment is the important component of
the business environment. International environment affect the business differently.
International environment is very important for certain types of business. It is particularly
important for industries directly depending on imports or exports. Recession in foreign
market may create difficulties for industries depending on exports. Liberalisation of
imports may help some industries but may adversely affect other industries. For eg. the
entry of multinationals such as LG, Samsung in electronics industry has adversely
affected the market share of domestic business firms.
3.6 SUMMARY

In recent decades the role of an entrepreneur has been considered of very great significance in
accelerating the pace of growth and economic development in both the developed and
developing countries. An entrepreneur is a person who perceives opportunities, organizes the
resources needed to exploit the opportunity and sets up an enterprise. The process of setting up
an enterprise is called entrepreneurship. An enterprise is a business venture. It is an undertaking
that involves uncertainty and risk as well as innovation. An individual has the right to choose any
income generating activity or self-employment or entrepreneurship as a career option.
Functionally income generating and self-employment activities are the initial sages of
entrepreneurship. The qualities of entrepreneurship and management are present in varying
degrees in both managers as well as entrepreneurs. Yet entrepreneurs are different from
managers. They create opportunities for innovation, experimentation and production. Once
production begins managers take over. They are more concerned with organizing the routine
day-to-day jobs. They do not prefer to take risks. Entrepreneurship is a discipline with a
knowledge-based theory. A person can learn and acquire the competencies of becoming an
entrepreneur and start a venture and make it grow. So the myth that entrepreneurs are born and
not made can safely be dispelled. Businesses ensure that its directors, managers and employees
act ethically and the theory of social responsibility is built on a system of ethics, in which
decisions and actions must be ethically validated before proceeding. If the action or decision
causes harm to society or the environment then it would be considered to be socially
irresponsible. A complex and varying combination of financial, institutional, cultural and
personality factors determines the nature and degree of entrepreneurial activity at any time. The
personal backgrounds of the entrepreneurs are determined mainly by the environment in which
they are born and brought up and work. A multitude of environmental factors determine the
entrepreneurial spirit among people. The entrepreneurs in turn create on impact on the
environment. The interaction between the entrepreneur and his environment is an ongoing
process. At any given point of time, the entrepreneurs derive meanings from the environment
prevailing at that time and try to adapt and/or change the environment to suit their needs.

3.7 SELF ASSESSMENT QUESTIONS

1. Distinguish between a portfolio entrepreneur and a social entrepreneur.

2. ―The entrepreneur is more than a manager. He is an innovator and promoter as well‖. Explain
this statement and describe the various types of entrepreneur.

3. Entrepreneurs classically will recognize themselves in each of the styles, or a combination of several styles.

Explain the various styles of entrepreneurs.

4. Define Business ethics and explain in detail the seven principles of public life.

5. Social responsibility of business comprises of certain duties towards entities. Explain them in detail.

5. Compare Business ethics and Social responsibility in business.

6. An organization can survive and grow only when it continuously and quickly adapts to
changing environment. Explain in Detail.

3.8 REFERENCE
 Sharma Sudhir, Singh Balraj, Singhal Sandeep (2005), ―Entrepreneurship Development‖,
Wisdom Publications, Delhi.
 Badi R.V., Badi N.V. (2010), ―Entrepreneurship‖, Vrinda Publications (P) Ltd., Delhi.
 https://ecestudy.wordpress.com/2015/02/24/entrepreneurship-notes/
 The Styles of Entrepreneurial Leadership - Ronald E. Merrill, Henry D. SedgwickMar 1, 1995
(TMA International Headquarters); https://www.scribd.com/document/.../The-Six-Styles-of-
Entrepreneurial-Leadership
 Ethics and Social Responsibility- Vipin Sharma, Conference Paper · January 2011
Business ethics – ICAI study material.
 kalyan-city.blogspot.com/2013/07/social-responsibility-of-business-for.html
 Indian Business Environment – ZAD institute of IT & Management PP (108 – 112).
Unit 4: Creativity and Innovation: (5 hrs)

Identification of Business - Preparation of Business Plan – Significance of Business Plan-

Components of Business Plan - Feasibility study: (Innovation ideas for marketing)

Activity: Business Plan

INTRODUCTION
Entrepreneurs need ideas to start and grow their entrepreneurial ventures. Generating
ideas is an innovative and creative process. Sometimes, the most difficult aspect of starting a
business is coming up with a business idea. Even if you have a general business idea in mind, it
usually needs to go through fine tuning processes. Fruitful ideas often occur at points where your
skill set, your hobbies and interests, and your social networks intersect. In other words, the best
ideas for a new business are likely to come from activities and people that you already know
well.
MEANING OF BUSINESS PLAN
Whether you are starting a small business or exploring ways to expand an existing one, a
business plan is an important tool to help guide your decisions. Think of it as a road and financed
map to success, providing greater clarity on all aspects of your business, from marketing and
finance to operations and product/service details.
While some owners may be tempted to jump directly into startup mode, writing a
business plan is a crucial first step for budding entrepreneurs to check the viability of a business
before investing too much time or money. The purpose of a business plan is to help articulate a
strategy for starting your business. It also provides insights on steps to be taken, resources
required for achieved your business goals and a timeline of anticipated results.
For existing small businesses, a business plan should be updated annually as a way to
guide growth and navigate the expansion into new markets. Your plan should include explicit
objectives for hiring new employees, spelling out their duties and indicating how they will help
your business prosper and grow
WHAT IS A BUSINESS PLAN?
A business plan is a comprehensive, written description of the business of an enterprise.
It is a detailed report on a company‘s products or services, production techniques, markets and
clients, marketing strategy, human resources, organization, requirements in respect of
infrastructure and supplies, financing requirements, and sources and uses of funds.
The business plan describes the past and present status of a business, but its main purpose
is to present the future of an enterprise. It is normally updated annually and looks ahead for a
period of usually three to five years, depending on the type of business and the kind of entity. It
is a crucial element in any application for funding , whether to a venture capital organization or
any other investment or leading source. Therefore, it should be complete, sincere, factual, well
structured and reader friendly.
DEFINITION
Mar J. Dollinger has defined the business plan as ―the formal written expression of the
entrepreneurial vision, describing the strategy and operations of the proposed venture.‖
According to Jack M. Kaplan, ―The term business plan means the development of a
written document that spells out like a roadmap where you are, where you want to be, and how
you want to get there‖. Thus, a business plan or project report can best be defined as a well
evolved course of action devised to achieve the specified objective, i.e. setting up a small
business enterprise within a specified period of time. So to say, business plan is initially an
operating document.
OBJECTIVES OF A BUSINESS PLAN
The following are the objectives of a business plan,
 To give direction to the vision of Entrepreneur
 To objectively evaluate the future prospects of the business
 To monitor the progress after implementation of the plan
 To seek loans from Financial Institutions
 To facilitate the decision making process
 To persuade others to join the business
 To identify strengths and weaknesses present in the internal environment
 To identify opportunities and threats in the external environment
 To assess the feasibility of the business

DIFFERENT TYPES OF BUSINESS PLANS

The structure, content and depth of a business plans depends on many factors, such as:
 The main objective of a business plan;
  The stage of the business (start-up or existing company or spin-off)
 Type of business/industry
 Financing situation;
 Financing situation;
 Size of a company, etc.
The brief discussion below gives some examples of relevant factors.
 Types of business/industry - If you are in trade, your business plan will not be dealing
with issues such as manufacturing process or investments in machinery. You will put
more emphasis on obtaining funds to finance the building up of your procurement and
sales network and pre-financing the goods you will be trading with. The mix of products
and services to be offered can also affect the content of a plan. Issues relating to
inventory, storage and so forth become less significant as the product/service mix moves
towards a pure service business. In any case, your business plan should cover standard
issues such as development of human resources and marketing.
 Sole ownership - If you are a sole proprietor of a small business, perhaps you will be
drafting the entire business plan yourself. For a small business, the size, complexity and
effort spent in producing the business plan have to be kept within limits. In such a case
the business plan has to put emphasis on your own person. Personal financial information
may be required in order to support your statement that your statement that you will be
allocating a certain part of your own funds as an investment in the business. You should
also provide specific details regarding any personal non-financial assets that you plan to
use in your business.
 Transnational Corporation - The corporate business plan of a transnational corporation
with an annual sales volume of several billion dollars does not put emphasis on the same
issues as an average medium-size company with an annual turnover of a few million
dollars. Issues covered in the business plan of transnational corporations are:
 Global image promotion strategies;
 Expansion through acquisition of other companies/mergers, etc.
 Analysis of global macroeconomic developments and international politics
that are likely to influence the business
  Prediction of long-term trends and developments in demographic, social and
consumer behavior
 Long-term product development(5 to 10 years or beyond )
 Government relations and lobbying policies.
Issues of less significance for corporate business plans are perhaps the following:
 Production techniques (such corporations have many different types of
products).
 Sales tactics (these could vary in different continents/countries).
 Staff policy (with perhaps the exception of top management in the different
countries, etc.).
CONTENTS OF BUSINESS PLAN
The more concrete and complete the business plan, the more likely it is to earn the respect of
outsiders and their support in making and running an enterprise. Therefore, the business plan
needs to be prepared with great care and consideration.
A good business plan should contain the following contents:
1. General Information - Information on product profile and product details.
2. Promoter - His/her name, educational qualification, work experience, project related
experience.
3. Location - Exact location of the project, lease or freehold, location advantages.
4. Land and Building - Land area, construction area, type of construction, cost of
construction, detailed plan and estimate along with plant layout.
5. Plant and Machinery - Details of machinery required, capacity, suppliers, cost,
various alternatives available, cost of miscellaneous assets.
6. Production Process - Description of production process, process chart, technical
knowhow, technology alternatives available, production programme.
7. Utilities - Water, power, steam, compressed air requirements, cost estimates, sources
of utilities.
8. Transport and Communication - Mode, possibility of getting costs.
9. Raw Material - List of raw material required by quality and quantity, sources of
procurement, cost of raw material, tie-up arrangements, if any, for procurement of raw
material, alternative raw material, if any.
 10. Manpower - Manpower requirement by skilled and semi-skilled, sources of
manpower supply, cost of procurement, requirement for training and its cost.
11. Products - Product mix, estimated sales, distribution channels, competitions and their
capacities, product standard, input-output ratio, product substitute.
12. Market - End-users of product, distribution of market as local, national, international,
trade practices, sales promotion devices, and proposed market research.
13. Requirement of Working Capital - Working capital required, sources of working
capital need for collateral security, nature and extent of credit facilities offered and
available.
14. Requirement of Funds - Break-up of project cost in terms of costs of land, building,
machinery, miscellaneous assets, preliminary expenses, contingencies and margin money
for working capital, arrangements for meeting the cost of setting up of the project.
15. Cost of Production and Profitability of first ten years - The costs incurred by a
business when manufacturing a good or providing a service. Production costs include a
variety of expenses, such as labour, raw materials, consumable manufacturing supplies,
and general overhead.
16. Break-Even Analysis - The level of sales at which you start to exceed your costs is
known as the break-even point. Beyond this you start to go into profit.
17. Schedule of Implementation - The project implementation schedule is an important
time management document that defines and schedules the major phases of project work
being carried out to fulfil the desired project objective(s) and achieve the expected
deliverables.
PREPARATION OF BUSINESS PLAN
A good business plan must identify strengths and weaknesses internal to the business and
the challenges in terms of opportunities and threats to assess the viability of the business. It must
lay down all the necessary steps that are involved in initiating and operating a proposed business.
Preparation of a business plan involves the following steps:
(i) Preliminary Investigation
In order to create an effective plan an entrepreneur must –
 Review available business plan
 Draw key business assumptions on which plan is based
 Scan the environment Strengths, Weakness, Opportunities and Threats
 Seek Professional advice
 Conduct a functional audit
(ii) Idea Generation
It involves generation of a new concept, product or service or value in addition to an
existing product or service. The idea must be such that satisfies the existing demands and future
demands of market. The sources of ideas are Consumers, Existing Companies, R&D, Employees
and Dealers.
(iii) Environmental Scanning
The internal and external environment must be analyzed to study the prospective
strength, weakness, opportunities and threats of a business. An entrepreneur must collect
information from all formal and informal sources in order to understand the supportive and
obstructive factors related to the business enterprise.
(iv) Feasible Analysis
This is done to find out whether the proposed project will be feasible or not. The various
variables that are include, market analysis, technical analysis and financial analysis.
(v) Drawing functional Plan
If the feasible plans give a positive indication a draft plan is formulated. It involves
preparation of marketing plan, production plan, organisational plan, financial plan and human
resource plan.
(vi) Project Report Presentation
It is a written document that describes step by step, the strategies involved in starting and
operating a business. It is prepared when environmental scanning has been done and feasible
studies have been carried out.
(vii) Evaluation, Review and Control
It is necessary to periodically evaluate, control and review a business to keep up with the
technological changes and introduce changes in the business strategy.
COMMON BUSINESS PLAN ERRORS
While including the necessary items in a business plan is important, you also want to
make sure you don‘t commit any of the following common business plan mistakes.
(i) Not creating a plan
Entrepreneurs have many reasons for not completing a business plan-not enough tie,
don‘t believe it will be useful, not sure where to start, and so on. Not creating a business plan is a
fundamental error for an entrepreneur. In fact, when reviewing an unsuccessful venture, many
find their biggest mistake was not taking the time to think through what it would take to make
their venture successful. Readers of your plan will be able to see what is missing and can point
out flaws in your logic if they have something in critique.
(ii) Idea inflation
Don‘t overestimate the importance of the idea. You don‘t need a great idea to start a
business; you need time, money, perseverance, and common sense. Few successful businesses
are based entirely on new ideas. A new idea is harder to sell than an existing one, because people
don‘t understand a new idea and they are often unsure if it will work.
Plans don‘t sell new business ideas to investors. People do. Investors invest in people, not ideas.
The plan, though necessary, is only a way to present information. So make sure you‘re ready to
wow your prospective investors with your knowledge and leadership skills, and don‘t expect
your business idea—or the business plan you explain it in—to do the work for you.
 (iii)Incomplete Market Research
Many times information about the market for your product or service is the most difficult
to gather. Trying to gauge who wants your product, how much they want, what they will pay,
and how competitors will respond is not an easy task. While challenging, the time and energy
invested in truly understanding your market will pay off. Your business should be market-driven
rather than product-driven. Your business plan should not be built around a product searching for
a problem to solve. Competitors exist for virtually every business—you simply must do your
homework on who they are and what they bring to the market. In the end, you cannot skimp on
market research. Your plan must demonstrate knowledge of customer needs and wants, and
prove that you have a reachable, and significant, market.
(iv) Not Being Objective
In new venture planning, it is easy to be caught up in the enthusiasm of the venture or be
overly eager to get to the marketplace. Being critical about the idea, the market, or yourself is
difficult. However, not recognizing up front what you need be successful will catch up with you
at some point. For example, if you are starting an agri-tourism venture, you need to be very
objective about your people skills. Are you good with people? Will you be an effective host for
your guests? You need an honest answer to these questions. Maybe you have these skills and
hence possess an important capability for success. If people skills are not your strength, then
your business plan must address this gap. Be objective in your analysis, or it could potentially
cost you a lot of money later
(v) Making Unrecognized Assumptions
Putting together a business plan requires estimates about many things that are not known with
certainty—sales volumes, construction costs, competitor response, etc. Such assumptions are a
necessary part of the process. The problem occurs when your assumptions about something you
don‘t know for sure become fact in the business plan. For example, it is easy for the assumption
you have made about sales volume or market share to become a fact in the business plan. If you
treat this information as a fact, you don‘t plan for the situation where actual sales volume or
market share turn out radically different than the assumptions. You need to recognize what you
are assuming and separate your assumptions from the things you can state with certainty because
they are backed up by facts. In essence, you need to know what you don‘t know. Forecasts
developed with no substance will get you nowhere. Assumptions that become facts are trouble.
Your assumptions must be stated clearly for your business plan to be an accurate road map for
your decisions.
(vi) Providing Useless Information
When you start the business planning process, you will likely find more data than you
ever imagined possible. And, depending on your personality, you can become enamored with the
business plan itself, treating it as the end point. The business plan is a tool, it is a step in the
process of launching a new venture. It is a road map, and clarity is important. Long, detailed text
and ―data dumps‖ are unlikely to provide the guidance you are looking for. Your business plan
should state clearly how your business will make money. Don‘t focus on long descriptions of the
product over descriptions of your path to profitability. Your business plan should show that you
are aware of buying cycles and adoption rates, have a growth plan, and are not too dependent on
others. It should be a selling document that is concise, clear, and logical; it should contain
quantitative rather than qualitative information.
(vii) Skipping Steps
As the plan comes together, there is a tendency to spend time on the sections of interest or where
the data is ―best.‖ This leads to an unbalanced plan where the marketing plan is spelled out in
tremendous detail, but the financial plan gets little attention simply because the entrepreneur is
not a ―numbers person.‖ The value of the business plan is that it provides a place to think
comprehensively about the future of the venture. That value is severely undermined when you do
not discuss all of the important parts of the venture.
(viii) Missing Linkages
Another common mistake in business planning is the inconsistent plan. This is a plan
where the different stages described above are not interrelated, where the assumptions made in
one section are different from assumptions made in another. Your marketing budget should be
supported in your marketing plan. The marketing budget should contain the same number used in
the financial projections. The pricing policy chosen should be consistent with your market
position. Your market research should guide the marketing plan and the financial projections. An
experienced lender, venture capitalist, or other reader of your plan will quickly disregard a plan
that does not flow. The elements of your business plan should be tied together logically and
accurately tell the story of how you will turn your idea into a business.
 These errors in business plan preparation will undermine the credibility of the plan and
hurt your chances to receive funding:
 Submitting a “rough copy”, (with coffee stains and typos) tells the reader that
management doesn‘t take the planning process seriously.
 Outdated historical financial information or realistic industry comparisons will
leave doubts about the entrepreneur‘s planning abilities.
 Unsubstantiated assumptions can hurt a business plan; the business owner must
be prepared to explain the ―why‖ of every point in the plan.
 Too much “blue sky” - a failure to consider prospective pitfalls will lead the
reader to conclude the idea is not realistic.
 A lack of understanding of financial informations – even if someone else
prepares the projections, the owner must be able to explain them.
 Lack of specific, detailed strategies – A plan that includes only general
statements of strategy (―we will provide world class service and the lowest
possible price‖) without important details will be dismissed as fluff.

SIGNIFICANCE OF BUSINESS PLAN

A business plan is an important tool for managing and growing your business. A well-
designed plan lays out a vision of growth and the steps needed to get there. A plan is also an
essential communications tool for attracting financing for your business as well as managers and
staff as your business grows.
(a) Plotting a Course
A business plan is a focusing device. It helps the entrepreneur think long-term. When
writing a business plan, it is important to project into the future and not get bogged down in the
steps involved in starting the company. Keeping the stone rolling is just as, or even more,
important. Having a road map keeps the entrepreneur focused and motivated.
(b) Feasibility Study
A business plan should delineate plans for marketing, operations and finance. Delineating
these three pillars of a business venture helps demonstrate the viability of the entrepreneur‘s
ideas. It clarifies how a business can be profitable, highlights financial requirements and warns
about barriers to success.
(c) Decision-Making
Preparing a business plan requires research and critical thinking about complex business
issues. Gathering information boosts knowledge of the industry and the competitive landscape.
Possible problems can be anticipated and prepared for. Hence, going through the business plan
process hones the decision-making skills of the entrepreneur.
(d) Action Plan
A business plan explains how the business will operate in the marketplace. It describes
what is being sold, who the prospective customers are, where they can be found and what is
needed to succeed. The business plan guides the entrepreneur through the start-up phase of the
business and keeps them focused.
(e) Prediction
The business plan functions as a prospectus for potential investors. It anticipates capital
requirements and predicts cash flow to reassure lenders or backers. It also helps put together the
best team by explaining the business in a presentable format. A good business plan can also play
a part in attracting reliable suppliers.
IDENTIFICATION OF BUSINESS
Identification and evaluation of the business opportunities (i.e., basic ideas, inspiration) is
one of the most important elements of the decision-making process on a business start. To be a
successful entrepreneur we need to be continually innovating and looking for opportunities to
grow our business. A prospective entrepreneur can get ideas for establishing his/ her enterprise
from various sources. These may include consumers, existing products and services presently on
offer, distribution channels, the government officials, and research and development. Here are
the ways to identify more business opportunities.
(i) Observing Markets
Careful observation of markets can reveal a business idea. Market surveys can also reveal
the demand and supply position for various products. It is necessary to estimate future demand
and to take into account the anticipated changes in fashion, income levels, technology, etc. In
this connection, it will be useful to ascertain whether the demand is elastic or inelastic and
whether the product is repeat purchase or not. Attempt should be made to determine the trend of
demand and the composition and the pattern of potential users of the product. A survey of the
available channels of distribution should also be made so that the selling campaign can be
properly planned well in advance of the production. Advise of professional experts like dealers,
commercial consultants, bank managers, advertising agencies may also be obtained to
supplement product analysis and market surveys.
(ii) Prospective Consumers
Consumer knows the best in what he wants and the habits/taste which are going to be
popular in the near future. Contact with prospective consumers can also reveal the feature that
should be built into a product or service. These days good business firms usually conducts a
survey among the prospective customers before choosing the product to be manufactured. These
firms also conduct a market test of the prototype product before launching it into the market. The
consumer is the foundation of the business and it is he who keeps it going. Therefore data on
consumer needs and preferences must be collected. Initially a new enterprise should concentrate
on one or a limited range of products. More products can be added to complete the line later on
the business becomes well established.
(iii) Development in other nations
People in under developed countries generally follow the fashion trends of developed
countries. For example video, washing machine, micro ovens, etc. which are now the ‗in things‘
in India were being used in the United States and Europe before the eighties. Therefore an
entrepreneur can discover good ideas by keeping in touch with developments in advanced
nations.
(iv) Government organization
Governments develop industries in rural and backward areas by giving various facilities
with the objective of balances regional development. The government set programmes to help
entrepreneurs in the field of technique, finance, market and entrepreneurial development so that
they help to accelerate and adopt the changes in industrial development. Various institutions
were set up by the central and state governments in order to fulfil this objective.
(v) Trade Fairs and Exhibitions
National and international trade fairs are very good sources of business ideas. At these
fairs, producers and dealers in the concerned industry put up their products for display and for
sale. A visit to these fair provides information about new products/machines. Negotiations for
the purchase, production, collaboration, dealership, etc. may also be made at these fairs.
FEASIBILITY STUDY
A Business Feasibility Study can be defined as a controlled process for identifying
problems and opportunities, determining objectives, describing situations, defining successful
outcomes and assessing the range of costs and benefits associated with several alternatives for
solving a problem. It is used to support the decision-making process based on a cost benefit
analysis of the actual business or project viability.
A Feasibility Study investigates, in detail, the factors that will determine if the business is
feasible. These factors include:

Market Industry, market niches , customers (real and potential),

competition, collaboration, market share expectation
Supply & Materials Cost of goods
Production Process Equipment, transportation, labour
Operating Costs Labour, utilities, insurance
Overhead Costs Labour, support services, utilities, financing,
office/warehouse/production facility/store
Financials Capitals costs including depreciation of assets, forecast
assumptions, income statement, break even analysis, cash flow
statement, risks
Financing options Lease, rent, purchase, joint use
Member Share options Working capital, reserve
BUSINESS FEASIBILITY STUDY
Executive Summary
All key sections of the Business Feasibility Study should work as a separate, stand-alone
document.
Product/Service
• Describe the enterprises, product or service in simple language. Give product mix if the
enterprise will initially be focusing on more than one product.
• Describe how customers would use and buy the product or service. Give enough detail
to help the reader judge the effectiveness of your marketing and positioning plans.
 • Describe key components or raw materials that will be used in the product, how the
enterprise will source these and how available they are.
• Describe plans to test the product to ensure it works as planned and is sufficiently
durable, rugged, secure, etc. (e.g. consumer product test, beta test with major company,
etc.).
• Describe plans to upgrade product or expand product line.
Technology
• As necessary, provide further technical information about the product or service.
• Describe additional or ongoing research and development needs.
• Keep the description in lay terms and/or explain technical terms enough to be
understood by business-savvy but not necessarily technology expert readers.
Intended Market Environment
Target Market:
• Define and describe the target market(s). Distinguish between end users and customers.
• Be clear how end users and customers benefit. How and why would they buy the
product or service?
• What is the projected need(s) your product or services fulfil so beautifully? How big is
the opportunity? What level of actual market demand can be measured versus projected?
For business-to-business markets, include:
• What industry is the target market in, who are the key players, frequency of product
purchase, replacement needs versus expansion, purchasing process
• Estimates of market size, initial targeted geographic area, enterprise‘s targeted market
share. For business-to-consumer markets, include:
• Demographic factors, such as income level, age range, gender, educational level,
ethnicity.
• Psychographic factors.
• Relevant behavioural factors such as frequency of product purchase and shopping
behaviour.
Competition
• Describe direct and indirect competition (as it pertains to the target markets only).
• For key competitors, give market share, resources, product and market focus, goals,
strategies, strengths and weaknesses.
• List all key barriers to entry.
• Describe what is unique about the enterprise‘s product/service compared to the
competition. Make sure this is consistent with the unmet need of the target market(s).
• State how difficult it will be for competitors to copy the enterprise‘s product/service.
• Describe how competitors will most likely react to the enterprise‘s product launch and
the enterprise‘s response strategy. Include estimates of the time it might take a competitor
to copy your product or service.
Industry
• Clearly define and describe the industry in which the enterprise operates. Include the
size, growth rate, and outlook. Define key industry segments and state where enterprise
fits in.
• Describe demand and supply factors and trends.
• Describe the larger forces that drive the market - e.g. innovation, cultural change,
regulation, whatever.
Business Model
• Describe the proposed enterprise's business model. How will the business generate
revenue (i.e. sell the product; charge licensing, retail sales)? Will there be recurring
revenue?
• Describe the model in enough detail to support financial projections.
Marketing and Sales Strategy
• Lay out the basic marketing and sales strategies.
• Discuss any strategic partnership the enterprise has or is planning to form. Do they
provide critical market access or other resources? What are their rights and
responsibilities?
• Describe the distribution strategy (sell direct to customers through sales force, direct
mail, or Internet; sell through manufacturers‘ representatives, wholesalers, distributors, or
 retailers). Provide projected profit margin or mark-up expectations, commissions, and
other expected compensation (co-op advertising, slotting fees, etc.)
• Describe the pricing strategy and justification. Include the expected gross profit
margins.
• Describe intended typical payment terms for customers.
• Other issues and their impact - e.g., warranties.
• Quantify the marketing budget for at least the first year (ideally three).
Production/Operating Requirements
• Describe enough of how and where the enterprise will manufacture, source or create
and deliver the final product or service to be able to estimate costs.
• What physical premises are required? Give location, size, age, condition, and capacity
of planned production and warehouse facilities and number of shifts planned.
• Will space be owned or leased? Will renovations be required? At what cost?
• How complex is the manufacturing process? Describe equipment needed and costs.
Management and Personnel
• List the proposed key managers, titles, responsibilities, relevant background,
experience, skills, costs.
• Sketch personnel requirements: what people will be needed now, in a year, in the long
term? What skills and qualifications are required and what financial implications result?
Intellectual Property
• Briefly describe patents, copyrights, and trademarks obtained and in process. Give all
names that are on issued patents; summarise results of patent searches.
• If enterprise is operating under a licensing agreement or patent assignment, give name
of licensor/assignor, describe key terms (e.g. exclusivity, rights and responsibilities), and
give termination or renewal date.
Regulations/Environmental Issues
Outline non-economic forces that might affect the prospects of the firm:
• Key government regulations and the enterprise‘s plans for compliance.
• Any environmental problems on property, plans to address the problems, and their cost.
• Environmental factors i.e. waste disposal plans, if needed.
• Political stability, if applicable.
 • Any other regulatory or political issues. This may deal with proposed industry
regulatory changes, stable versus unstable environments.
Critical Risk Factors
Describe critical risks faced by the enterprise (currently or in the future). Much of these
components will arise from the SWOT, Porters Five Forces and PEST analysis. Examples
include internal characteristics, uniqueness, investment, economic forecasts, change in
regulations and technical obsolescence, etc. Be sure to describe how you will mitigate each risk.
Start-Up Schedule
Sketch the major events in the life of the venture by listing the timetable/deadlines for
completion of phases of venture start-up. Be sure to demonstrate the relationship of events and to
keep the milestones, financial requirements, personnel requirements, etc consistent. If establish a
formal project schedule for the start-up process.
Financial Projections
Include a narrative highlighting key underlying assumptions and the logic governing your
projections. Include financial history, if any (e.g. equity and debt), and likely financing stages
including information about funding sources and uses. Provide a page or two of footnotes for
each financial spreadsheet attached explaining the assumptions behind each major line item.
Some core components of this part of the report are listed below.
• Balance Sheet Projections - Three Years & Highlight Inflows of Capital,
• Income Projections - Year 1: Monthly or quarterly; years 2 and 3: Annually,
• Cash Flow Projections - Year 1: Monthly or quarterly; Years 2 and 3: Annually,
• Break-Even Analysis - When will the firm begin to turn a profit, and
• Cost Benefit Analysis - Will the business provide a viable return on investment for the
owner and/or the investors.
Capital Requirements & Strategy
• How much funding (equity) will the firm need, and when?
• What projected revenue or assets does the proposed business have to secure the
financing?
• What sources will provide the funding, i.e. investors, lending institutions etc?
• What ratio of debt to equity financing will occur?
 • When will investors begin to see a return? What is the expected return on investment
(ROI)?
How to Conduct a Break Even Analysis
The entrepreneur will need to understand the following terms in order to understand and
communicate the break-even analysis:
•Selling Price (SP) - Represents the price that each unit will sell or retail for. The SP is
generally expressed as revenue in rupees per unit.
•Variable Costs (VC) - Consist of costs that vary in proportion to sales levels. They
include direct material and labour costs, the variable part of manufacturing operating
cost, transportation and sales expenses. The VC is usually expressed as a cost in rupees
per unit.
•Contribution Margin (CM) - Equal to sales revenues less variable costs or SP - VC.
•Fixed Costs (FC) - These costs are considered those that remain constant within the
projected range of sales levels. These can include facilities costs, general and
administrative costs, capital interest and depreciation expenses. The FC is usually
expressed as a lump-sum cost in rupees.
•Units (X) - Represents the number of items sold or produced. For the purpose of a
break-even calculation, it is assumed that the number of units sold during a period is
equal to the number of units produced during the same period.

Fixed costs
Break Even Point = -------------------------------------
Sales Price – Variable cost

SOURCES OF HELP
To write the Feasibility Study, you need to go to others for help and information. Look at
recent history to demonstrate the best approach or business model. Suggested sources are:
• Business Enterprise Centres - Information, business counselling, training workshops,
research facilities, back up and support facilities, networking and publications. •
Accountant - Advice on all financial issues, assist in feasibility study, legal structure
suggestions, assist in funding estimates, sourcing and applications, check books if buying
an existing business.
 • Solicitor - Contracts, leases, legal representation.
• Bank - Finance, information and support, leasing, advice on contracts, specialist
services.
• Business Advisers/Consultants - Someone to talk to, specialist advice, mentoring,
negotiations, training, back-up.
• Trade Associations - Membership and support, group deals, training, advice, research,
industrial relations expertise, and networking.
• Potential Suppliers - Information, back up, promotional support, training, etc.
• Sources of Information - Own research, government departments, information and
publications available from many departments including the Australian Bureau of
Statistics. Local council demographic reports, publications, studies and future plans for
development.
• Competitors - Check the competition, their location, layout, advertising and service.

CONCLUSION
No matter how long you want to stick with your business, you need to formulate a plan
and a schedule. It will be helpful to analyze the potential of your business idea through an
opportunity analysis. As an entrepreneur, try your hand in this process when you want to
evaluate the market potential of a new product or service idea. It evinces you how to use your
talents, creativity and resources to identify and develop a small business idea through a strategic
thinking process. Although the outlined process cannot guarantee success, it is designed to assist
entrepreneur a certain degree of discipline in learning about his business, his competitors, his
customers and most importantly the chances of survival in a competitive and hostile business
environment.

Text Book

S.No. Edition & Year of

Title Authors Publishers
Publication
1. ―Entrepreneurial Khanka. S.S S.Chand& Co. 2013
Development‖ Ltd.,Ram
Nagar, New
Delhi
 2. ―Entreprenuership Donald F Kuratko Cengage 9th edition, 2014
– Theory, Process Learning
and Practice‖

Reference Book

Edition &
S.No. Title Authors Publishers Year of
Publication
1. ―Entrepreneurship‖ Hisrich R D, Tata 8th Edition,
Peters M P McGraw-Hill 2013
2. ―Enterprenuership theory Mathew J Dream tech 2nd Edition,
at cross roads: paradigms Manimala 2005
and praxis‖
3. ‗Entrepreneurship‘ Rajeev Roy Oxford 2nd Edition,
University 2011
Press
4. ―Faulty and External EDII Institute of 1986
Experts – A Hand Book for India,
New Entrepreneurs Ahmadabad,
Publishers:
Entrepreneurship
Development‖
5. ―Entrepreneurial DR.C.B.Gupta Sultan Revised
Development‖ DR.N.P.Srinivasan Chand&Sons Edition 2015