Entrepreneurship Development (ED) - Code-303 - B.Com - Sem. V
Entrepreneurship Development (ED) - Code-303 - B.Com - Sem. V
Entrepreneurship Development (ED) - Code-303 - B.Com - Sem. V
Subject Module
On
Semester V (Credit: 4)
Module Contributor(s):
Assistant Professor,BCOM
July 2021
(BCOM 303)
MODULE OBJECTIVES: This module consists of four units related to Entrepreneurship Development.
Every unit is divided into sections and sub sections.The course aims at giving insights into the Management of
Small Business based on 3S Model: Stimulate, Sustain and Support so that a spirit of Entrepreneurship can be
inculcated among the student participants.
UNIT I
In this unit you will be acquainted with different concepts associated Entrepreneur & Entrepreneurial
development, Factors influencing entrepreneurship: Individual factors; Environmental factors; Socio-
cultural factors; Entrepreneurial Support systems; Entrepreneurial motivation. Types of entrepreneurs;
Entrepreneur and Professional manager; and Entrepreneur theories & Women Entrepreneur
UNIT II
This unit will make you enable to acquire the skill of construction and use of Opportunity analysis,
analysis of environment, legal steps to establish venture and venture set up, documentation required
and forms of ownership.
UNIT III
This unit will empower you to understand the need and process of understanding Entrepreneurial
behaviour and Entrepreneurial Development Programmes (EDPs), Need and objectives of EDP; Small
Entrepreneurs: Government Policy for Small Scale Industries (SSIs). Institutional Support Systems for
small entrepreneurs-Role of DIC; SFCs; Commercial Banks; SIDBI; Entrepreneurship Development
Institutes (EDIs); Small Industries Development Corporation (SIDC); SISI; NSIC; NISBUD; State
Financial Corporation SIC etc
UNIT IV
You will be recognize the various new trends in understanding Role of Entrepreneur, GDP- Economy,
Balanced regional development, Employment opportunity, Complimenting and supplementing
economic growth, Export promotion & Import substitution and Foreign exchange earning
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CONTENTS
EDP
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UNIT I
After the completion of this unit, the students will be able to:
The word ‘entrepreneur’ is derived from the French word entreprendre. It means ‘to undertake’.
Thus, entrepreneur is the person who undertakes the risk of new enterprise. Its evolution is as
follows.
EARLY PERIOD: The earliest definition of the entrepreneur as a go-between is Marco Polo. He tried to
establish trade route to the far East. He used to sign a contract with a venture capitalist to sell his
goods. The capitalist was the risk bearer. The merchant adventurer took the role of trading. After
his successful selling of goods and completing his trips, the profits were shared by the capitalist and
the merchant.
MIDDLE AGES: The term entrepreneur was referred to a person who was managing large projects.
He was not taking any risk but was managing the projects using the resources provided. An
example is the cleric who is in charge of great architectural works such as castles, public buildings,
cathedrals etc.
17th CENTURY: An entrepreneur was a person who entered into a contractual arrangementwith the
Govt. to perform a service or to supply some goods. The profit was taken (or loss was borne) by the
entrepreneur.
18th CENTURY: It was Richard Cantillon, French Economist, who applied the term entrepreneur to
business for the first time. He is regarded by some as the founder of the term. He defined an
entrepreneur as a person who buys factor services at certain prices with a view to sell them at
uncertain prices in the future
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19th CENTURY: The entrepreneurs were not distinguished from managers. They were viewed
mostly from the economic perspective. He takes risk, contributes his own initiative and skills. He
plans, organizes and leads his enterprise.
20th CENTURY: During the early 20th century Dewing equated the entrepreneur with business
promoter and viewed the promoter as one who transformed ideas into a profitable business. It was
Joseph Schumpeter who described an entrepreneur as an innovator. According to him an
entrepreneur is an innovator who develops untried technology.
21th CENTURY: Research Scientists live De Bone pointed out that it is not alwaysimportant that
an individual comes up with an entirely new idea to be called an entrepreneur, but if he is adding
incremental value to the current product or service, he can rightly be called an entrepreneur.
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MEANING AND DEFINITION OF ENTREPRENEUR
CHARACTERISTICS OF AN ENTREPRENEUR
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DEFINITION OF ENTREPRENEURSHIP
In the words of Stevenson and others, “Entrepreneurship is the process of creating value by
bringing together a unique package of resources to exploit an opportunity.” According to A.H.
Cole, “Entrepreneurship is the purposeful activities of an individual or a group of associated
individuals undertaken to initiate, maintain or organize a profit oriented business unit for the
production or distribution of economic goods and services”.
All activities undertaken by an entrepreneur to bring a business unit into existence are
collectively known as entrepreneurship. It is the process of changing ideas into commercial
opportunities and creating values. In short, entrepreneurship is the process of creating a business
enterprise.
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NATURE AND CHARACTERISTICS OF ENTREPRENEURSHIP
1) It is a function of innovation.
2) It is a function of leadership.
3) It is an organization building function.
4) It is a function of high achievement.
5) It involves creation and operation of an enterprise.
6) It is concerned with unique combinations of resources that make existing methods or
products obsolete.
7) It is concerned with employing, managing, and developing the factors of production.
8) It is a process of creating value for customers by exploiting untapped opportunities.
9) It is a strong and positive orientation towards growth in sales, income, assets, and
employment.
1) FINANCIAL RISK: The entrepreneurship has to invest money in the enterprise on the
expectation of getting in return sufficient profits along with the investment. He may get attractive
income or he may get only limited income. Sometimes he may incur losses.
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2) PERSONAL RISK: Starting a new venture uses much of the entrepreneur’s energy and
time .He or she has to sacrifice the pleasures attached to family and social life.
3) CARRIER RISK: This risk may be caused by a number of reasons such as leaving a
successful career to start a new business or the potential of failure causing damage to professional
reputation
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BARRIERS TO ENTREPRENEURSHIP
Entrepreneurial development is very slow in under developed and developing countries. This is
due to the presence of several factors. Gunnar Myrdal pointed out that Asian societies lack
entrepreneurship not because they lack money or raw material but because of their attitudes. These
barriers to entrepreneurship are classified into three as follows:
A. ENVIRONMENTAL BARRIERS
Following are the important environmental barriers to entrepreneurship:
B PERSONAL BARRIERS
Personal barrier are those barriers that are caused by emotional blocks of an individual. Some
of the personal barriers may be outlined as below:
Unwillingness to Invest Money: - Even though people have money, still they do not come in
entrepreneurship. They are not willing to take the risk of investing money in business.
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Lack of Confidence: - Many people thing that they lack what it takes to become an entrepreneur.
They feel that they could not master all the skills. Thus most people are reluctant to become
entrepreneurs.
Lack of Patience: - The desire to achieve success in the first attempt or to become rich very soon
is the prime motivating factor of modern youth. When such dreams do not come true , they lose
interest. This gradually drives to fail in business.
Inability to Dream: - Entrepreneurs, who are short on vision or become satisfied with what they
achieve, sometimes lose interest in further expansion/growth of business.
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C SOCIAL BARRIERS
The social attitude inhibits many people even from thinking of starting a business. The
important social barriers are as follows.
1) Low Status: - The society things that entrepreneurs are the people who exploit the
society. Thus the attitude of the society towards entrepreneurs is not positive.
2) Custom and Tradition of People: - Most people want a real job. Even parents who are
entrepreneurs wouldn’t like their children to be entrepreneurs. Thus lack of support from society
and family hinder the growth of entrepreneurs.
There are large number of varied factors which contribute to the growth of entrepreneurship. These
factors can be broadly classified into five.
(A) Need for Achievement: - Need for achievement means the drive to achieve a goal. People
having need for achievement will be so much self – confident that they do not believe in mere
luck. If an individual has need for achievement, he will become a successful entrepreneur.
(B) Personal Motives: - These have been found to be one of the crucial factors responsible for
entrepreneurship amongst individuals. Bill Gates dreamt that one day he would become the richest
person. His dream became a reality later.
(C) Recognition: - Many people become successful entrepreneurs just for getting recognition
from others.
(D) Need of Authority: - ‘Need of authority’ will inspire men to work. When they become
entrepreneurs, they can exercise authority over managers, employees etc.
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CULTURAL FACTORS: - Culture consists of (1) Tangible man – made objects like furniture,
buildings etc.., (2). Intangible concepts like Laws, morals, knowledge etc.., (3) Values and
behaviour acceptable within the society. The important cultural factors influencing
entrepreneurial growth are briefly explained as follows:
(A) Culture: - Culture is closely related with accepted values and human behaviour. For e.g.
some societies have customs of polygamy and some have not.
(B) Religious Belief: - According to Max Weber, entrepreneurism is a function of religious belief
and the impact of religion shapes the entrepreneurial culture. He emphasized that the
entrepreneurial energies are exogenous supplied by means of religious belief.
(C) Minority Groups: - Hoselitz explained that the supply of entrepreneurship is governed by
cultural factors, and culturally minority groups are the spark plugs of entrepreneurial and
economic development. Minority groups like the Jews and Greeks in Medieval Europe, the
Lebanese in West Africa, the Indians in East Africa has important roles in promoting economic
development
(D) Spirit of Capitalism: - It guides the entrepreneur to engage in activities that can bring more
and more profits. The profit motive character coupled with the attitude towards acquisition of
money urges the individual to start new venture.
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SOCIAL FACTORS: - What mould a man into an entrepreneur is the sociological and
environmental factors during childhood, and at the school, personal experience in adult life at
the college and job environments, the mobility, occupation and support from parents. The
social factors include:
(A) Legitimacy of Entrepreneurship: - System of norms and values within a socio – cultural
setting is responsible for the emergence of entrepreneurship. The degree of approval or
disapproval granted to entrepreneurial behaviour will influence its emergence and its
characteristics if it does emerge.
(B) Social Marginality: - Individuals or groups on the perimeter of a given social system or
between two social systems provide the personnel to assume the entrepreneurial roles. Social
marginality is likely to promote entrepreneurship are largely determined by two factors, namely
the legitimacy of entrepreneurship and social mobility.
(C) Family, Role Models and Association with Similar Type of Individuals: - If an individual
has a supportive family, he or she is more likely to become an entrepreneur. Similarly, if an
individual has role models who have been successful in entrepreneurship, certainly, he may be
motivated to start ventures. If a person is in association with entrepreneurs, this may add to his or
her desire of setting up a new venture. Reliance, Tata, Birla etc. are the industries depend upon
family based inheritance. Roberts (1991) has developed the idea of the ‘entrepreneurial heritage ‘
to describe the importance of the family background for the entrepreneur. This heritage includes
factors such as the father’s occupation, the family work ethic and religion, family size and the first
born son, growing up experience and so on.
Caste System: - Certain religions and caste encourage the growth of entrepreneurial talent. Some
religious communities like the parsees, marwaris and sindhees seem to have an affinity for
entrepreneurial activity. The caste system in Hindu society has promoted to the growth of business
and professional skills.
Occupation :- Those born in rich families with silver spoons in their mouth have not only an
advantage of having financial resources for carrying out business but also learn the business skill
by continuous interaction and contacts with parents, customers, employees and visitors in family
shops, offices and homes.
Education and Technical Qualifications: - Education is the best means of developing man’s
resourcefulness which encompasses different dimensions of entrepreneurship. It may be expected
that the high level of education may enable the entrepreneurs to exercise their entrepreneurial
talent more efficiently and effectively.
Social Status: - Every human being aspires for a high social status and once he achieves a
reasonable level, his aspirations and desires for its start getting multiplied. People work hard to
maintain their status as it also contributes to their entrepreneurial growth.
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Social Responsibility: - It is the obligation to the society in which the business enterprise
operates. An entrepreneur generates employment for others besides helping himself.
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ECONOMIC FACTORS: - Economic factors also influence the growth of entrepreneurship.
The important economic factors are:
(A) Infrastructural Facilities: - Entrepreneurship development requires certain basic
infrastructure like power, transportation, communication, technical information etc. These provide
external economies and improve the efficiency of investments by entrepreneurs. These
infrastructural facilities are scarce in less developed countries. The entrepreneurs themselves have
to procure these facilities at their own cost. They have to obtain these facilities at higher costs.
This will greatly discourage the entrepreneurship development. In advanced countries, those who
are desirous of starting an enterprise will find no difficulty in procuring the infrastructural
facilities at reasonable costs.
(B) Financial Resources: - Finance is the life blood of business activity. Capital is required to
obtain materials, machinery, equipment, etc. and to undertake innovation. Capital is regarded as
lubricant to the process of production. The lack of financial resources discourages the youth and
potential entrepreneurs to start new ventures. Hence, the need for fixed and working capital should
be adequately met if new entrepreneurs are to come forward and grow.
(C) Availability of Material and Know – How: - Entrepreneurship is encouraged only if there is
an adequate supply of materials and know-how. Easy availability of materials attracts more
individuals towards entrepreneurship. Technical know-how is essential for innovation. With
technical knowledge, men discover more and sophisticated techniques of production.
(D) Labour Conditions: - The quality rather than quantity of labour is another factor which
influences the emergence and growth of entrepreneurship. The availability of cheep labour
positively affects entrepreneurship. Labour problem can be solved not by capital intensive
technologies but by increasing their mobility, by offering them facilities, incentives and
concessions in every remote corner of the country.
(E) Market: - The size and composition of market influence entrepreneurship in their own ways.
Practically, monopoly in a particular product in a market becomes more influential for
entrepreneurship than a competitive market.
(F) Support System: - Ability, initiative and support systems include financial and commercial
institutions, research, training, consultancy services, ancillary industry etc.
(G) Government Policy: - The socio- political and economic policies of the government inhibit or
foster entrepreneurial growth. Land and factory sheds at concessional rates, adequate sources of
power, supply of materials and other physical facilities should be provided by the government to
facilitate the setting up of new enterprises. The government has a dominant role to play in the
industrial development of backward regions with a view to attain a balanced regional
development.
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PERSONALITY FACTORS: - The supply of entrepreneurship in a society is largely
influenced by the presence of individuals with the initiativeness, foresightedness and organizing
and managerial competence. The following personality factors contribute to the entrepreneurial
development:
(A). Personality: - The entrepreneurial personality comprises of the person, his skills, styles and
motives. Impressive personality and individual skill help to develop entrepreneurship. These
qualities are required for entrepreneurs because they have to work with officers, managers,
engineers, labourers, customers, investors, govt. officers, ministers etc.
(B). Independence:-Another personality factors which influences entrepreneurship is
independence. An entrepreneur works out plans on his own, searches and explores resources and
experiences and uses inner urge to make the enterprise a success instead of waiting for
suggestions or directions from others.
(C). Compulsion: - Certain compelling reasons also force the people to become entrepreneurs.
These include: (a) unemployment or dissatisfaction with existing job or occupation, (b) to use
technical or professional knowledge and skills, (c) to put the idle funds to use. A large number of
technically qualified people after gaining initial experience and confidence and not being satisfied
by their growth in the profession have a compulsive reason to try entrepreneurship.
In order to organize and run it successfully, the entrepreneur must possess some qualities and traits.
They are as following:
1) Willingness to Make Sacrifices and Assume Risks: - A new venture is full of
difficulties and unanticipated problems. In such an inhospitable environment entrepreneur has to be
prepared to sacrifice his time, energy and resources in order to carry out the venture and make it
success.
2) Hard Work: - Willingness to work hard distinguishes a successful entrepreneur from an
unsuccessful one. For example, Assim Premji (chairman of Wipro) works in his office fourteen
hours every day. He is a successful entrepreneur. He is one of the richest persons in India.
3) Optimism: - Successful entrepreneurs are not worried by the present problems that they
face. They are optimistic about the future. This enhances their confidence and drives them towards
success. Some of the world’s greatest entrepreneurs failed before they finally succeeded.
4) Self Confidence: - This is the greatest asset of a successful entrepreneur. He must have
the confidence to make choices alone and bounce back when he fails.
5) Leadership: - Successful entrepreneur generally has strong leadership qualities. He
should be a good judge of human nature and a good leader. He must be able to select, train and
develop persons who can properly manage and control the labour force. McClelland identified two
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main characteristics in an entrepreneur- (1) Doing things in a new and better manner. (2) Decision
making under uncertainty.
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NEED FOR ACHIEVEMENT (ACHIEVEMENT MOTIVATION)
It is the psychological need to achieve. It provides drive to the entrepreneur to set up a new
venture, to achieve targets, to sense problems and opportunity, to take much risk so as to run the
business successfully. It is nothing but a person’s desire either for excellence or to succeed in
competitive situation. Thus achievement motivation means a drive to overcome challenges in
reaching higher goals. It is a strong desire to achieve a higher goal and make dreams come true. In
short it is the strong desire to win.
TYPES OF ENTREPRENEURS
Entrepreneurs may be classified in a number of ways.
A. ON THE BASIS OF TYPE OF BUSINESS.
Entrepreneurs are classified into different types. They are
1) Business Entrepreneur: He is an individual who discovers an idea to start a business
and then builds a business to give birth to his idea.
2).Trading Entrepreneur: He is an entrepreneur who undertakes trading activity i.e;
buying and selling manufactured goods.
3) Industrial Entrepreneur: He is an entrepreneur who undertakes manufacturing
activities.
4) Corporate Entrepreneur: He is a person who demonstrates his innovative skill in
organizing and managing a corporate undertaking.
5) Agricultural Entrepreneur: They are entrepreneurs who undertake agricultural
activities such as raising and marketing of crops, fertilizers and other imputs of agriculture. They
are called agripreneurs.
1) Technical Entrepreneur: They are extremely task oriented. They are of craftsman type.
They develop new and improved quality goods because of their craftmanship. They concentrate
more on production than on marketing.
2) Non-Technical Entrepreneur: These entrepreneurs are not concerned with the technical
aspects of the product. They develop marketing techniques and distribution strategies to promote
their business. Thus they concentrate more on marketing aspects.
3) Professional Entrepreneur: He is an entrepreneur who starts a business unit but does
not carry on the business for long period.
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C. ON THE BASIS OF MOTIVATION:
Entrepreneurs are of the following types:
1) Pure Entrepreneur: They believe in their own performance while undertaking business
activities. They undertake business ventures for their personal satisfaction, status and ego. They are
guided by the motive of profit. For example, Dhirubhai Ambani of Reliance Group.
2) Induced Entrepreneur: He is induced to take up an entrepreneurial activity with a view to avail
some benefits from the government. These benefits are in the form of assistance, incentives,
subsidies, concessions and infrastructures.
3) Motivated Entrepreneur: These entrepreneurs are motivated by the desire to make use of their
technical and professional expertise and skills. They are motivated by the desire for self-fulfillment.
4) Spontaneous Entrepreneur: They are motivated by their desire for self-employment and to
achieve or prove their excellence in job performance. They are natural entrepreneurs.
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Innovative entrepreneurs bring about a transformation in lifestyle and are always interested in
introducing innovations.
2) Adoptive Or Imitative Entrepreneurs: Imitative entrepreneurs do not innovate the
changes themselves, they only imitate techniques and technology innovated by others. They copy
and learn from the innovating entrepreneurs. While innovating entrepreneurs are creative, imitative
entrepreneurs are adoptive.
3) Fabian Entrepreneurs: These entrepreneurs are traditionally bounded. They would be
cautious. They neither introduce new changes nor adopt new methods innovated by others
entrepreneurs. They are shy and lazy. They try to follow the footsteps of their predecessors. They
follow old customs, traditions, sentiments etc. They take up new projects only when it is necessary
to do so.
4) Drone Entrepreneurs: Drone entrepreneurs are those who refuse to adopt and use
opportunities to make changes in production. They would not change the method of production
already introduced. They follow the traditional method of production. They may even suffer losses
but they are not ready to make changes in their existing production methods.
There is another classification of entrepreneurs. According to this, entrepreneurs may be
broadly classified into commercial entrepreneurs and social entrepreneurs.
Commercial Entrepreneurs: They are those entrepreneurs who start business enterprises for their
personal gain. They undertake business ventures for the purpose of generating sales and profits.
Most of the entrepreneurs belong to this category.
Social Entrepreneurs: They are those who identify, evaluate and exploit opportunities that create
social values and not personal wealth. Social values refer to the basic long standing needs of
society. They focus on the disadvantaged sections of the society. They play the role of change
agents in the society. In short, social entrepreneurs are those who start ventures not for making
profits but for providing social welfare.
COPRENEURS
Copreneurs are entrepreneurial couples who work together as co-owners of their business.
They are creating a division of labour that is based on expertise as opposed to gender studies show
that companies co-owned by spouses represent one of the fastest growing business sectors. Marcia
Sherrill with her husband William Kleinberg (USA) runs Kleinberg Sherrills, a leather goods and
accessories business. She says, “There is nothing more exciting than nurturing a business and
watching it grow with someone you love.”
INTRAPRENEURS
The term intrapreneur was coined in USA in the late seventies. Many senior executives of
big companies in America left their jobs and started small business of their own. They left the
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organisation because they did not get any opportunity to apply their own ideas and innovative
ability. These entrepreneurs become successful in their own ventures. Some of them caused a threat
to the corporations they left. This type if entrepreneurs have come to be called Intrapreneurs. They
believe strongly in their own talents. They have desire to create something of their own. They want
responsibility and have a strong drive for individual expression and more freedom in their present
organisational structure. When this freedom is not forthcoming, they become less productive or
even leave the organisation to achieve self actualisation elsewhere.
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ULTRAPRENEURS
Now-a-days, new products and services are conceived, create, tested, produced and
marketed very quickly and with great speed. Therefore, today’s entrepreneur needs to have a
different mindset about establishing and operating a business. This mindset is called
ULTRAPRENEURING. An entrepreneur with this mind set is known as Ultrapreneur. The
concept of Ultrapreneuring is to identify a business opportunity, determine its viability and form a
company. It requires assembling a super competent management team, who then develop, produce
and markets the product or service in the shortest optimum time period. They create business and
then sell out, merge or combine.
FUNCTIONS OF AN ENTREPRENEUR
Entrepreneur is a lead player in the drama of business. According to Kilbt, an entrepreneur has to
perform four groups of functions:
EXCHANGE RELATIONSHIP:
1) Perceiving market opportunities
2) Gaining command over scare resources.
3) Purchasing inputs.
4) Marketing of the products and responding to competition.
POLITICAL ADMINISTRATION:
1) Dealing with public bureaucracy (concession, licences and taxes)
2) Managing the human relation within the firm.
3) Managing customer and supplier relations.
MANAGEMENT CONTROL:
1) Managing finance.
2) Managing production.
TECHNOLOGY:
1) Acquiring and overseeing assembly of the factory.
2) Industrial engineering.
3) Upgrading process and product quality.
4) Introducing new products.
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2) Developing an organization including efficient relations with subordinates and all
employees.
3) Securing adequate finance
4) Developing a market for the products and devising new products to meet customers
demand.
5) Maintaining good relations with public authorities and with society.
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ENTREPRENNEURIAL COMPETENCIES
Competency is a characteristic of a person, which results in effective and/or superior performance
in a job. It is a combination of knowledge, skills and appropriate motives or traits that an individual
must possess to perform a given task.
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Persuasion: Entrepreneurs should have the ability to successfully persue others to perform
the activities effectively and efficiently.
Use of Influence Strategies: Entrepreneurs should have the competence of using a variety
of strategies to influence others. Such entrepreneurs can develop business contacts and use
influential people to accomplish his/her own objectives.
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B) VENTURE INITIATION AND SUCCESS COMPETENCIES:
An entrepreneur must also posses the competencies required for launching the enterprise and for its
survival and growth. These competencies may be further divided into two categories of
competencies:
WOMEN ENTREPRENEURS
Women constitute about 50% of the world population. In traditional societies, they are
confined to performing household activities. Hence women are generally called home makers. But
today, in modern society, they have moved out of the house and are taking part in all areas of life.
Today, the entrepreneurial world is open to the womenfolk. Thailand tops the list with 18.5% of
women as entrepreneurs followed by India with 14.1% women entrepreneurs. Japan has the lowest
rate of women entrepreneurs with just 0.6% women as entrepreneurs.
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THE CONCEPT OF WOMEN ENTREPRENUERSHIP
In spite of the initiatives taken by the government, the growth of women entrepreneurship is
very slow in the state. The reasons are outlined as below:
5) High Cost of Production: High prices of material, low productivity. Under utilisation of
capacity etc. account for high cost of production. The government assistance and subsidies would
not be sufficient for the survival.
7) Low Mobility: One of the biggest handicaps for women entrepreneur is her inability to
travel from one place to another for business purposes. A single women asking for room is looked
upon with suspicion. Sometimes licensing authorities, labour officials and sales tax officials may
harass them.
8) Lack of Education: About 60% of women are still illiterate in India. There exists a
belief that investing in woman’s education is a liability, not an asset. Lack of knowledge and
experience creates further problems in the setting up and operation of business.
9) Low Capacity to Bear Risks: Women lead a protected life dominated by the family
members. She is not economically independent. She may not have confidence to bear the risk
alone. If she cannot bear risks, she can never be an entrepreneur.
10) Social Attitudes: Women do not get equal treatment in a male dominated society.
Wherever she goes, she faces discrimination. The male ego stands in the way of success of women
entrepreneurs. Thus, the rigid social attitudes prevent a woman from becoming a successful
entrepreneur.
11) Low Need for Achievement: Generally, a woman will not have strong need for
achievement. Every women suffers from the painful feeling that she is forced to depend on others
in her life. Her pre-conceived notions about her role in life inhibit achievement and independence.
12) Lack of Training: A women entrepreneur from middle class starts her first
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entrepreneurial venture in her late thirties or early forties due to her commitments towards children.
Her biggest problem is the lack of sufficient business training.
13) Lack of Information: Women entrepreneurs sometimes are not aware of technological
developments and other information on subsidies and concessions available to them. They may not
know how to get loans, industrial estates, raw materials etc.
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REMEDIES TO SOLVE THE PROBLEMS OF WOMEN ENTREPRENEURS
The following measures may be taken to solve the problems faced by women entrepreneurs
in India:
1) In banks and public financial institutions, special cells may be opened for providing easy
finance to women entrepreneurs. Finance may be provided at concessional rates of interest.
2) Women entrepreneurs’ should be encouraged and assisted to set up co-operatives with a
view to eliminate middlemen.
3) Scarce and imported raw materials may be made available to women entrepreneurs on
priority basis.
4) Steps may be taken to make family members aware of the potential of girls and their due
role in society.
5) Honest and sincere attempts should be undertaken by the government and social
organizations to increase literacy among females.
6) In rural areas self employment opportunities should be developed for helping women.
7) Marketing facilities for the purpose of buying and selling of both raw and finished goods
should be provided in easy reach.
8) Facilities for training and development must be made available to women entrepreneurs.
Family members do not like women to go to distant place for training. Therefore mobile training
centres should be arranged. Additional facilities like stipend, good hygienic chreches, transport
facilities etc., should be offered to attract more women to training centres.
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MEASURES TAKEN FOR THE DEVELOPMENT OF WOMEN
Women empowerment should be one of the primary goals of a society. Women should be given
equality, right of decision-making and entitlements in terms of dignity. They should attain
economic independence. The most important step to achieve women empowerment is to create
awareness among women themselves. Development of women can be achieved through health,
education and economic independence. Realizing the importance of women entrepreneurs, Govt. of
India has taken a number of measures to assist them. Some of the important measures are outlined
as follows:
1) TRYSEM: Training of Rural Youth For Self Employment was launched on 15th August
1979 which is still continuing. The objective of TRYSEM is to provide technical skills to rural
youth between 18 and 35 years of age from families below the poverty line to enable them to take
up self employment in agriculture and allied activities, industries, services and business activities.
This is a sub scheme of IRDP. Training given through ITIs, Polytechnics, Krishi Vigyan Kendra,
Nehru Yuva Kendras etc has helped many rural women set up their own micro entreprises with
IRDP assistance.
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PROGRESS CHECK
Question No: 1
a) Business model
b) Modeling
c) Creative flexibility
d) Innovation
Question No: 2
Which one of the following gives suggestions for new product and also help to market new
products?
b) Federal government
c) Distribution Channels
d) Consumers
Question No: 3
a) Merger
b) Minority Interest
c) Joint venture
d) Majority interest
Question No:4
a) German leadership
b) U.S. leadership
c) French leadership
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d) U.K. leadership
Question No: 5
a) Middle ages
b) 17th century
c) 18th century
Question No: 6
A person who managed large project was termed as the entrepreneur in the .
a) Earliest period
b) Middle ages
c) 17th century
Question No: 7
What is the process by which individuals pursue opportunities without regard to resources
a) Startup management
b) Entrepreneurship
c) Financial analysis
d) Feasibility planning
Question No: 8
a) Joint Venture
b) Majority interest
c) Minority interest
d) Exporting
34
Question No: 9
Having more than 50% ownership position that provides the entrepreneur with managerial
control is called:
a) Joint venture
b) Majority interest
c) Horizontal merger
QUESTION BANK
35
UNIT II
PROMOTION OF VENTURE
After the completion of this unit, the students will be able to:
THE MICRO, SMALL AND MEDIUM ENTERPRISES (MSME) DEVELOPMENT ACT, 2006
Under this act, the central Government shall set up, for the purpose of the act, a Boardknown
as the National Board For Micro, Small and Medium Enterprises.
(a) A micro enterprise is one in which the investment in plant and machinery does not
exceed Rs.25 Lakhs.
(b) A small enterprise one in which the investment in plant and machinery is more than
Rs.25 Lakhs but does not exceed Rs. 5 crores.
(c) A medium enterprise is one in which the investment in plant and machinery is more
than Rs. 5 crores but does not exceed Rs. 10 crores.
(a) A micro enterprise is one in which the investment in plant and machinery does not
exceed Rs. 10 lakhs.
(b) A small enterprise one in which the investment in plant and machinery is more than Rs.
36
10 lakhs but does not exceed Rs. 2 crores.
(c) A medium enterprise is which the investment in plant and machinery is more than Rs. 2
crores but does not exceed Rs. 5 crores.
ANCILLARY UNITS
These units provide inputs to other industries. These are engaged in the manufacture of parts,
components, light engineering products like cycles, sewing machines diesels engines, machine
tools, electrical application. The investment in plant and machinery should not exceed Rs. 5 crores.
Export oriented units are those SSI units which export at least 30% of its annual production by the
end of the 3th year of commencement of production.
CHARACTERISTICS OF MSMEs
The primary objectives of MSME are to play a complementary role in the socio-economic set
up of a country. The other objectives are as follows:
2) To provide production of large variety of goods especially consumer goods through labour-
intensive methods.
5) To create a climate for the development of self-employed experts, professionals and small
entrepreneurs.
ADVANTAGE OF MSMEs
9) There is a close and direct personal contact with the customer and employees.
10) They create more employment opportunities. They are labour intensive. They offer ample
scope for self employment.
38
11) They require only less capital. It is a boon to a country like India where capital is deficient.
DISADVANTAGES OF MSMEs
They suffer from lack of managerial and other skills. They cannot employ highly paid
officials.
They are not well equipped to make advantage of the latest technology and modern
methods.
MSMEs cannot afford to spend large sums of money on research and experiments
1) Economical Use of Capital: MSMEs need relatively small amount of capital. Hence it is
suitable to a country like India where capital is deficient.
2) Balanced Regional Development: Generally small enterprises are located in village and
small towns. Therefore it is possible to have a balanced regional growth of industries.
India is aland of villages.
3) Equitable Distribution of Income And Wealth: It removes the drawbacks of capitalism,
abnormal profiteering, concentration of wealth and economic power in the hands of few
etc.
4) Higher Standard of Living: MSMEs bring higher national income, higher purchasing
power of people in rural and semi-urban areas.
5) Mobilization of Locals Resources: The spreading of industries even in small towns and
villages would encourage the habit of thrift and investment among the people of rural
39
areas.
6) Simple Technology: New but simple techniques of production can be adopted more easily
by MSMEs without much investment.
7) Less Dependence on Foreign Capital: MSMEs use relatively low proportion of imported
equipment and materials. The machinery needed for these industries can be manufactured
within the country.
8) Promotion of Self Employment: MSMEs foster individual skill and initiative and
promote self-employment particularly among the educated and professional class.
9) Promotion of Exports: With the establishment of a large number of modern MSMEs in
the post independence period, the contribution of the small scale sector in the export
earnings has increased much.
10) Protection of Environment: MSMEs help to protect the environment by reducing the
problem of pollution.
11) Shorter Gestation Period: In these enterprises the time-lag between the execution of
the investment project and the start of flow of consumable goods is relatively short.
12) Facilitate Development of Large Scale Enterprises: MSMEs support the development
of large enterprises by meeting their requirements of inputs of raw materials,
intermediate
.
40
PROBLEMS OF MSMEs
Some of the more important problems faced by MSMEs are as follows:
1) LACK OF MANAGERING EXPERIENCE: They may not be having specialised
knowledge in the different fields of management. At the time of initiating the project, they are not
in a position to anticipate correctly their financial requirements and the size of market for their
products.
2) INADEQUATE FINANCE: Generally MSMEs are not in a position to arrange full
finance from their own sources. They obtain finance from unorganized finance sector at higher rate
of interest.
3) LACK OF PROPER MACHINARY AND EQUIPMENT: Many MSMEs use
inefficient and outdated machinery and equipment. This affects the quality of production.
4) LACK OF TECHNICAL KNOW-HOW: Do not have the knowledge about different
alternative technologies and processes available for manufacturing their products to improve the
quality of products and reduce costs.
5) RUN ON TRADITIONAL LINES: They have not yet adopted modern methods and
techniques of production. They have not taken adequate interest in research and development
efforts. Hence they cannot be run efficiently.
6) IRREGULAR SUPPLY OF RAW MATERIALS: The majority of MSMEs depends
on local sources for their raw material requirements. Small entrepreneurs are forced to pay high
prices for materials because they purchase materials in small quantity.
7) PROBLEM OF MARKETING: The brand name of the products of MSMEs is acute
due to tough competition from large industries. It cannot afford to costly advertisement and
network of distribution system. There are delays in the payment of bills by large purchasers
resulting in inadequate working capital.
8) PERSONNEL PROBLEMS: It is difficult for them to get qualified persons to run the
business. They cannot provide much training facilities to employees.
9) LACK OF CLEAR-CUT POLICY OF THE GOVT: The Govt. may take decisions
relating to MSMEs on the basis of political consideration rather than on economic consideration.
10) BOGUS UNITS: The government should look into this aspect seriously, break the
strong hold of such vested-interested and promote only genuine entrepreneurship in the country.
11) OTHER PROBLEMS: Like inefficient management, non-availability of cheap power,
burden of local taxes etc.
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STEPS FOR STARTING SSIs/MSMEs
As soon as a person decides to become an entrepreneur and to start a MSME, he is required
to take a number of steps and formalities one after the other. They are as follows:
1) Scanning of Business Environment: it is essential on the part of the entrepreneur to
study and understand the prevailing business environment. Entrepreneur should scan the business
opportunities and threats in the new environment. To study the administrative framework,
procedure, rules and regulations and other formalities implemented by the government. The
potential entrepreneur must assess his own deficiencies, which he can compensate through training.
2) Selection of the Product: The very success of one’s venture will depend on the
rationality of his decision in this regard. The economic viability of the product can be ascertained
by considering certain demand aspects such as volume of demand in the domestic market, volume
of demand in the export market, volume of potential demand, a degree of substitution of an existing
product etc. The prospective entrepreneur has to identify the product based on market research or
market survey.
3) Selection of Form of Ownership: He has to select sole proprietorship or family
ownership or partnership or private limited company as the form of the ownership.
Selection of Location and Site: Location is selected after considering certain factors such as
nearness to market, sources of material and labour, modern infrastructure facilities etc. The
entrepreneur has to choose a suitable plot for the factory. He may purchase land directly or choose
from an industrial area developed by State Development Corporations like SIDCO, or Directorate
of Industries. In order to stimulate industrial growth, the government of Kerala is providing
infrastructural assistance by way of
(1). Developing areas.
(2). Development Plots.
(3).Industrial estates, and
(4). Mini industrial units.
4) Designing Capital Structure: Apart from the own capital, he may secure finance from
friends and relatives, term loans from banks and financial institutions.
5) Acquiring Manufacturing Know-How or Technology: Many institutions of
government, research laboratories, research and development divisions of big industries and certain
consultancy agencies provide the manufacturing know-how.
6) Preparation of Project Report: The report usually covers important items like sources
of finance, availability of machinery and technical know-how, sources of raw material and labour,
market potential and overall profitability.
Registration as a Small Scale Industry: Registration with Department of industries and
Commerce is only optional. There is no statutory obligation, but small scale industries can
42
avail various facilities, incentives and concessions offered by the state as well as central
government onlyif they registered as SSI. The registration would be done in two stages.
Provisional Registration: It will be valid for one year with possible three extensions of six
months each. It helps entrepreneur to take necessary steps to bring the units into existence. The
provisional registration may enable the party to:
(1) Apply to NSIC/SIDO and other institutions for procuring machines on H.P basis.
(2) Apply for power connection.
(3) Apply to local Bodies for permission to construct the shed to establish a unit.
(4) Apply for financial assistance to SFC/Banks or other financial institutions on the basis of
project report.
(5) Obtain sales tax, excise registration etc whenever required.
(6) Apply for a shed in an industrial estate/ development site in an industrial area/ material for
construction of shed as the case may be.
7) Obtaining Statutory Licence: Any person should obtain the following licences and
certificates before starting the venture:
(A) Licence from Local Bodies For
(1) Construction of the building.
(2) Installation of plant and machinery.
(B) Licence from the Directorate of Factories and Boilers For:
(1) Approval of factory building.
(2) Registration under section 6, 7 and 85 of the Factory Act.
8) No Objection Certificate from State Pollution Control Board. Apply for Power Connection:
There are 2 categories of power, the Low Tension (LT) and High Tension (HT). A consumer can
avail LT only if the connected load is 75 HP and below. If connected load is between 75 HP and
130 HP, the consumer has the option to avail either LT supply or HT supply.
9) Arrangement of Finance: Entrepreneur needs to acquire assists of 2 kinds namely Fixed assets
and current assets. Long term finance is needed to acquire fixed assets like land, building, plant and
machinery and for security deposits. Short term funds are required for acquiring current assets.
Current assets are essential for the day to day working of the industry. Long term funds includes
owner’s capital, subsidy from central/ state govt., personal borrowings from friends and relatives
and long term loans from financial institution like KFC and KSIDC.
10) Registration under the Sales Tax Act: Business enterprises are subject to three important
taxes- Income Tax, Excise Duty and Sale Tax. Income tax is levied on income as defined under the
IT Act of 1961. It is revenue of Central Government. Excise duty is a tax levied by the central
Government. It is the duty levied on the cost of goods manufactured within a country. Sales tax is
43
levied whenever goods are purchased from within the state. When goods are purchased from
outside the state, Central Sales Tax is levied. Application for registration should mention all places
of business dealer including the godown in which the goods are stored. The following papers are to
be submitted for registration.
On the basis of declaration of the anticipated turn over and nature of turnover, registering authority
may demand security, which is normally ½ times of the anticipated tax due.
11) Installation of Machinery: Machinery should preferably be installed as per the plant layout.
12) Recruitment of Manpower: The number and type of workers is to be decided. After this, the
required workers should be recruited.
13) Procurement of Raw Material: The raw materials may be procured indigenously or may have
to be imported by the entrepreneur. The next step is to start production, which is taken up in two
stages- Trial production and Commercial production having successfully test marketed the product,
commercial marketing can be undertaken.
14) Application for Permanent Registration: For this, application form has to be made to the GM
of DIC through IEO/ Taluk Industries Officer. The GM should inform the entrepreneur of the date
and time of inspection of the unit. On being satisfied a registration certificate may be issued by the
Directorate of Industries within one month of the receipt of the application. The period of the
certificate whether provisional or permanent will be for a period of 2 years. Renewal certificate
would be affected by the GM (DIC) within a period of 3 months from the date of expiry of
certificate.
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GOVT. REGULATORY FRAMEWORK FOR MSMEs
The govt. has two roles to play regulatory role and protective role. Govt. regulates as well as
protects small business. It plays the regulatory role by imposing certain restriction and formalities
on small business. It provides assistance and support to small business.
(1) Financial Incentives: SIDBI provides direct assistance, among others for specialized
marketing agencies, industrial estates, acquisition of machinery/ equipment, both
indigenous and imported, seed capital scheme and National Equity Fund Scheme, bills re-
discounting and direct discounting scheme. State and Local Government provides financial
subsidies like interest rate and capital subsidies, and water and electricity subsidies and
subsidies for the acquisition of land.
(2) Fiscal Incentives: These comprise investments allowance, tax holidays, additional
depreciation for new plant and machinery and state and local Governments provide
exemption from electricity tariffs.
3) General Incentives: These include, among other things, reservation of items for exclusive
purchases from SSI, price preference over medium and large units in public sector
purchases and scheme for Self- Employment to Educated Unemployed Youths (SEEUY).
(4) Special Incentives in Backward Areas: Some of the schemes which are operational are
concessional finance scheme, transport subsidy scheme, intrest subsidy scheme and income
45
tax incentives, etc.
RESERVATION OF ITEMS: As per the policy certain items have been exclusively
reserved for manufacturing in the MSME sector. The objective is to protect MSMEs
engaged in the manufacturing of such items from the competition of medium and large-
scale units.
STATUTORY BOARDS: Govt. has setup six exclusive boards, namely, (1) Khadi and
Village Industries Board. (2) Handloom Board (3) Handicrafts Board (4) Coir Board (5)
Seri Culture Board, and (6) Small Scale Industries Board.
PENALITIES FOR DELAYED PAYMENTS TO MSMEs: The Govt. has enacted the
interest on delayed Payments Act for the benefit of MSMEs. The Act prescribes that the
customers of MSMEs should make the payments within 120 days of accepting the goods.
Delays beyond this would attract interest at 11/2 times the prime lending rate of the SBI.
ASSISTANCE FOR MSME EXPORTS: Following are the assistance to MSME exports:
(a) MSMEs are helped in participating in trade exhibitions. The Govt. would meet the expenses
in this regard on space rent, handling and clearing charges, insurance and shipment charges
46
etc.
(b) MSMEs are given triple weightage for being recognized as Export Houses, Trading Houses,
Star Trading Houses and Super Star Trading Houses.
(c) Capital Goods Zero Duty Scheme is extended to MSMERs without any conditions.
(d) Marketing Development Assistance is given to MSMEs to facilitate market research,
publicity etc.
(a) Integrated Infrastructural Development Scheme: Under this scheme the Central Govt. would
contribute Rs 5 crore in the ratio of 2:3 for the development of industrial infrastructure in rural
and backwards areas. The objective of the scheme is to promote the location of MSMEs in rural
and backward areas and facilitate linkage between agriculture and industry.
(b) Marketing Development Assistance Scheme: MDA is a new scheme launched in August
2001. This scheme provides following five types of assistance:
(c) Trade Related Entrepreneurship Assistance And Development For Women: TREAD is a
scheme for giving trade-related assistance to women entrepreneurs in the form of Loans, grants,
trade-related training and information, counseling and extension services
INDUSTRIAL ESTATES
47
FEATURES OF INDUSTRIAL ESTATES
The following are the important features of industrial estates:
It is a tract of land subdivided and developed into factory plots or sheds.
It is a planned clustering of industrial units.
It may be developed in urban, semi-urban or rural areas.
It may be large, medium or small.
It may be set up by the Government, or by co-operatives or even by private agencies.
1) Economies of Scale: It arises because all the industrial units enjoy common infrastructural
facilities like water, roads, etc. As the size of the industrial units increases, the costs of estate
development and administration per unit of each facility decrease.
2) External Economies: Several industrial units are clustered together in an industrial estate. This
enable them to enjoy the benefits of agglomeration and external economies like improved transport
facilities, availability of trained labour, repair facilities, power and water etc.
3) Low Investment: Even a small entrepreneur can acquire an industrial plot or shed on rent or hire
purchase basis.
4) Less Risks: Since all units enjoy common facilities and low capital investment, risks are
relatively low. Mutual Co-Operation: All industrial units located in an industrial estate face
common problemsand seek to achieve common objectives.
5) Balanced Regional Development: It is possible to secure a balanced regional development by
developing industrial estates in industrially backward areas.
6) Saving Of Time and Effort: An individual entrepreneur is relieved of trouble of searching for
suitable space.
7) Entrepreneurial Development: Industrial estates reduce risks and increase profitability
throughinternal and external economies
48
INCENTIVES AND SUBSIDIES
In India Entrepreneurs are offered a number of incentives because they fulfil two main objectives of
economic development. Firstly, they facilitate decentralization of industries. They assist in the
dispersal of industries over the entire geographical area of the country. Secondly, they facilitate the
transformation of a traditional technique into modern technique characterized by improved skills,
high production and higher standard of living.
INCENTIVES
It is the financial and promotional assistance provided by the government to the industries for
boosting up industrial development in all regions particularly in backward areas. Incentives include
concession, subsidies and bounties. ‘Subsidy’ denotes a single lump-sum which is given by a
government to an entrepreneur to cover the cost. It is granted to an industry which is considered
essential in the national interest. The term Bounty denotes bonus or financial aid which is given by
a government to an industry to help it compete with other units in home market or in a foreign
market. Bounty offers benefits on a particular industry; while a subsidy is given in the interest of
the nation. The object of incentives is to motivate an entrepreneur to start new ventures in the larger
interest of the nation and the society.
2) To Provide Competitive Strength, Survival and Growth: several other incentives are
provided for the survival and growth of industries. For example, reservation of products, price
49
preference etc. will improve the competitive strength. Other concessions like concessional finance,
tax relief etc., contribute their survival and growth.
Some problems may arise in devising and implementing a subsidy system. They are as follows.
50
The SIDO was formed under the Ministry of Industry. It is a policy making, co-ordinating and
monitoring agency for the development of small scale industries. It maintains a close liaison with
the government, financial institutions and other agencies which are involved in the promotion and
development of small scale units. It provides a comprehensive range of consultancy services and
technical, managerial, economic and marketing assistance to the small scale units. It has
launched various technology support programmes for the benefit of small scale industries in the
country through a number of steps. The steps include establishment of (a) process-cum-product
development centres, (b) tool rooms and training centres. (c) specialized institutes and (d) regional
testing centres with its field testing stations.
FUNCTIONS OF SIDO
The main functions are co-ordination, industrial development and industrial extension service, other
functions are summarized as follows:
1) To estimate the requirements of raw material for the small scale sector and to arrange their
supply.
2) To collect data on consumer items which are imported and encourage the setting up of
new units by giving them co-ordinated assistance
3) To prepare project reports and other technical literature for prospective entrepreneurs.
4) To secure reservation of certain products for the SSIs.
51
5) To obtain orders for SSI units from government department and offices.
6) To provide machinery to SSI units on hire purchase basis.
7) To construct Industrial Estate and establish and run proto-type production-cum-training
centres.
It is a national level apex organization of young entrepreneurs. It assists in promoting new enterprises through
first generation entrepreneurs. NAYE sponsored an Entrepreneur Development Scheme with Bank of India in
August 1972 on pilot basis. The scheme is known as BINEDS. It is operative in the states of Punjab, Rajasthan,
Himachal Pradesh and Union Territories of Chandigarhand Delhi. NAYE has entered into similar arrangement
with Dena Bank, Central Bank Of India and Union Bank of India .NAYE strives hard for upliftment of young
entrepreneurs especially women. It holds workshops, conferences, training programmes etc. to create
awareness.
It was established in different parts of the country to provide consultancy services to small and
medium enterprise at reasonable costs. The TCO was established in Kerala( KITCO) in June
1972.Functions and activities of TCOs include:
(a) Industrial potential surveys.
(b) Preparation of profits and feasibility studies.
(c) Evaluation of project.
(d) Conduct of EDPs.
(e) Assisting in the modernization, technical upgradation and rehabilitation programmes etc.
(f) Undertaking market research and surveys for specific products.
(h) Offering merchant banking services.
52
SMALL INDUSTRIES SERVICE INSTITUTES (SISIs)
Small Industries Service Institutes have been established in each state in 1956 as agencies of
SIDO. The objective is to develop small scale industries. The functions performed may be
summarized as follows:
1) It promotes entrepreneurship and development of SSIs in rural and other underdeveloped areas.
2) It supplies market information in selected cases and undertakes market distribution surveys for
industrial enterprises.
3) It conducts various programmes for workers in other organizations as well as in small industry in
certain trades.
4) It assesses the capacities of small units for imported/controlled materials.
5) It provides technical guidance on the efficient use of wastages and scraps.
6) It prepares designs and drawing for production equipment and accessories.
7) It ensures that small industry development in India is being done in right lines.
8) It provides workshop common facilities to industrialists at reasonable charges.
9) It conducts detailed plant studies to locate production and other problems. It initiates and co-
ordinates modernization of selected industries.
10) The institute assists in rehabilitation of sick units.
11) It helps to develop ancillary industries. It registers SSI units with NSIC to supply their products
to government.
12) The institute conducts modernization studies for technology upgradation.
13) It undertakes quality control, energy conservation and pollution control, specialized training
programmes on export marketing.
14) The institutes also conduct surveys and studies for identification of industries having scope of
promotion and development.
15) It advises the Govt. of India and state government on policy matters relating to small industry
development.
KVIC makes finance available to the implementing agencies in the form of capital expenditure
loans. It also extends assistance for setting up of retail sales outlets and also for strengthening of the
capital base of the registered institutions and cooperatives. It also assists individual artisans besides
formulating liberal pattern of assistance for identified hill, border and weaker sections. The loans
for Khadi are interest free, while those for village industries have an interest at the rate of 4% per
annum.
53
FUNCTIONS OF KVIC
54
SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI)
SIDBI was set up on April 2, 1990 as a wholly owned subsidiary of IDBI. It is operating through its
Head Office at Lucknow and a network of 5 Regional Offices and 25 Branch Offices in all the
states. It is an apex institution for promotion, financing and development of industries in small
scale sector and co-ordination of functions of other institutions engaged in similar activities.
FUNCTIONS OF SIDBI
1) Taking steps for technological upgradation and modernization of existing units.
2) Providing services like factoring, leasing etc. to industrial concerns in the small scale sector.
3) Extending financial support to National Small Industries Corporation for providing leasing hire-
purchase and marketing support to SSI units.
4) Expanding the channels for marketing the products of SSI sector in domestic and international
markets.
5) Promoting employment oriented industries especially in semi-urban areas to create more
employment opportunities and thereby checking migration of people to urban areas.
6) Refinancing of loans and advances extended by the primary lending institutions to industrial
concerns in the small scale sector and also providing resource support to them.
It also offers bills discounting and rediscounting facilities. It also has a few schemes of direct
assistance.
It is an apex body established in 1983 by the ministry of Industries, Government of India, for coordinating,
training and overseeing the activities of various institutions/agencies engaged in entrepreneurship development,
particularly in the area of small industry and small business. The Institute which is registered as a society under
Government of India Societies Act started functioning from 6th July, 1983.The policy, direction and guidance to
the institute is provided by its governing council whose chairman is the minister of SSI. It has an executive
committee
55
OBJECTIVES OF NIESBUD
The objectives of the institute include the following:
To evolve standardized materials and processes for selection, training, support and
sustenance of entrepreneurs, potential and existing.
To share internationally, its experience and expertise in entrepreneurship development.
To train the trainers, promoters and consultants in various areas of entrepreneurship
development.
.
FUNCTIONS OF NIESBUD
COMMERCIAL BANKS
It plays an important role in the growth and development of economy in general and enterprise
sector in particular. Commercial Bank in India comprises the State Bank of India (SBI) and its
subsidiaries, nationalized Banks, foreign banks and other scheduled commercial banks, regional
rural banks and non-scheduled commercial banks. The period for which loan is granted varies from 7
to 10 years. These loans are repayable in half yearly or yearly installments. Most commercial banks
have got specialized units in their administrative structure to take care of the financial needs of the
small scale industrial units. The fixed capital needs or the long and medium term needs of the small
scale industrial units are presently being taken care by the banks under their integrated scheme of
credit for the small entrepreneurs. The rate of interest charged normally from the small scale
industrial units is between 12% and 15% against 18% from the large scale units.
BRIDGE CAPITAL/FINANCE
Bridge capital is the advance given to cover the finance requirement during the time lag between the
sanctioning and disbursement of term loan by financial institutions. It is an assistance given for a
short period to help borrower for overcoming the delay in disbursement of a sanctioned term loan or
in getting the proceeds of a public issue. It is provided by commercial bank.
56
KERALA INDUSTRIAL AND TECHNICAL CONSULTANCY ORGANISATION
LIMITED (KITCO)
KITCO was set up in 1972 by IDBI in association with other national and state level financial
institutions. KITCO is a public sector consultancy organization. It was established by IDBI in
association with the Govt. Kerala, other national and state level financial institutions and banks. It
has been established with the objective of meeting the technical consultancy needs of the
entrepreneurs in the small, medium and large scale industrial sectors.
57
PROGRESS CHECK
Question No: 10 –
Which one of the following is the process of entrepreneurs developing new products that
b) Anatomization
d) Creative destruction
Question No: 11
Which of the following factors is the most important in forcing U.S companies to focus on
a) Entrepreneurship
b) Hyper competition
c) Governmental laws
d) Organizational culture
Question No: 12
a) Entrepreneurship
b) Intrapreneurship
Question No: 13
Individuals influencing an entrepreneur’s career choice and style are known as which of the
58
following?
a) Moral-support network
b) Role model
d) Support system
Question No: 14
The activity which occurs when the new venture is started is called:
a) Motivation
b) Business skills
c) Departure point
d) Goal orientation
Question No: 15
a) Financial status
b) Qualification
c) Social status
d) Achievement
Question No: 16
Which one of the following is an important source of idea generation due to their familiarity
b) Distribution channels
c) Federal government
59
d) Consumers
Question No: 17
Members of distribution channels are excellent sources for new ideas because:
60
QUESTION BANK.
10. Explain the development of women entrepreneurs with reference to Self Help Groups
11. Give the case studies on takeover, mergers and acquisitions in India.
16. Explain the meaning, definition and evolution of Small and Medium Enterprises.
17. Explain the role and importance of Small and Medium Enterprises.
61
UNIT III
After the completion of this unit, the students will be able to:
1. Understand Entrepreneurial behavior, values and its attitude
2. Psychological theories and social responsibility
3. EDP
Meaning of Value:
Human values have been employed in so distinctively different ways in human discourse. It is often
said that a person has a value or an object has a value. These two usages have been explicitly
recognised by writers in various disciplines such as Charles Mortris in Philosophy, Brevster Smith in
Psychology and Roibin Williams in Sociology.
According to Rokeach, “Value is an enduring belief, a specific mode of conduct or an end state of
existence, along a continuum of relative importance.”
Nature of Values:
(2) Values are express feelings but they are more than feelings.
(3) Values exist in the mind, and, are independent of Public affirmation.
(4) Values are absolute but they are dimensional. That is, values are a criteria for judging
the degree of goodness of badness, Tightness or wrongness. Values are concepts
heavily weighted with emotions and influence the child’s selection from variable
modes, means and ends of action
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Concept and Nature of Attitude
Nature of Attitude:
(2) An attitude exists in every person’s mind. It helps to define our identity,
guide our actions, and influence how we judge people.
(3) Although the feeling and belief components of attitude are internal to a
person, we can view a person’s attitude from his or her resulting behavior.
(4) Attitude helps us define how we see situations, as well as define how we
behave toward the situation or object.
(5) Attitude provides us with internal cognitions or beliefs and thoughts about
people and objects.
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Characteristics of attitudes:
(2) Strength: Attitudes based on direct experience with the object may be
held with greater certainty. Certainty is also influenced by whether affect
or cognition was involved in the creation of the attitude. Attitudes formed
based on affect are more certain than attitudes based on cognition.
(5) Multiplicity: It refers to the amount of features creating the attitude. For
example, one may show interest in becoming a doctor, but another not
only shows interest, but also works hard, is sincere, and serious.
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Essential Attitudes of Successful Entrepreneurs
(2) Attitude towards Risk. Entrepreneurs are inclined to take calculated risks to
introduce something new and earn higher profits. But they are not gamblers.
(3) Attitude towards Initiative. Entrepreneurs have a tendency to false initiative and
not remain just onlookers. The are basically leaders and not followers. They
endeavor to convert their dreams into reality.
(4) Attitude for looking new opportunities. Entrepreneurs are always been to locate
new opportunities and start new ventures to make use of the opportunities.
(5) Attitude towards changes. Entrepreneurs have a positive attitude towards change.
They love change as change is the law of life. The accept challenges thrown open
by the changes in the environment.
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can be achieved through their own efforts. They think that in any given situation
they can change and influence the environment.
(10) Attitude toward customers. Entrepreneurs have respect for their customers and so
they put the customers first. They accord top priority to customer satisfaction, and
maintain an expert saesforce that is given the responsibility of building customer
trust. The success of a business rests to a great extent on the ability of the
entrepreneur to listen to the customer to find out quickly what the customer wants.
This feedback is of immense importance as it helps the entrepreneur in bringing
about changes in the contents, quality and delivery of the product
Meaning of Motivation:
Motivation refers to a process that causes, controls, and sustains certain behavior. For
instance, if an individual has not eaten, s/he feels hungry, and as a response s/he eats
and fulfills her/his feeling of hunger.
It involves the biological, emotional, social and cognitive forces that activate behavior.
In everyday usage, the term motivation is frequently used to describe why a person
does something. For example, you might say that a student is so motivated to pass in an
examination that she spends every night studying.
Nature of Motivation:
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Internal organization factors play important role in motivating the employees, pallor
working conditions, labor management conflict, autocratic style of management may
affect individual’s initiative to work, however, able or willing he is to perform the task.
Conversely, a clean and a quiet environment, healthy and cordial relationships
encourage workers to contribute to organizational output.
The process of motivation; observing human needs, behavior and action is continuously
followed by managers. Since human needs are multiple and importance of needs keeps
changing, managers constantly watch their needs- behaviour-action.
Motivation is required at all levels o management. Both managers and non- managers
need to be motivated to accomplish the organization goals and though them their
personal goals.
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Significance of Motivation
(i) The workforce will be better satisfied if management provides them with
opportunities to fulfil their physiological and psychological needs. The workers will
cooperate voluntarily with the management and will contribute their maximum towards
the goals of the enterprise.
(ii) Workers will tend to be as efficient as possible by improving upon their skills
and knowledge so that they are able to contribute to the progress of the organization.
This will also result in increased productivity.
(iii) The rates of labour turnover and absenteeism among the workers will be low.
(iv) There will be good human relations in the organization as friction among the
workers themselves and between the workers ant the management will decrease.
(v) The number of complaints and grievances will come down. Accident rate will
also be low.
(vi) There will be increase in the quantity and quality of products. Wastage and scrap
will be less. Better quality of products will also increase the public image of the
business
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Maslow’s Need Hierarchy Model
needs can be arranged in a particular order from the lower to the higher. The need
hierarchy is as follows:
(1) Basic Physiological Needs: The needs that are taken as the starting point
for motivation theory are the so-called physiological needs. These needs
relate to the survival and maintenance of human life. They include such
things as food, clothing, shelter, air, water and other necessities of life.
(2) Safety and Security Needs: After satisfying the physiological needs,
people want the assurance of maintaining a given economic level. The
want job security, personal bodily security, security of sources of income,
provision for old age, insurance against risks, etc.
(4) Esteem and Status needs: These needs embrace such things as self-
confidence, independence, achievement, competence, knowledge, and
success. They are also known an egoistic needs. They are concerned with
prestige and status of the individual.
(5) Self-fulfillment Needs: The final step under the need priority model is
the need for self-fulfillment or the need to fulfil what a person considers
to be his mission in life. It involves realizing one’s potentialities for
continued self-development and for being creative in the broadest sense of
the word. After his other needs are fulfilled, a man has the desire for
personal achievement. He wants to do something which is challenging
and since this challenge gives him enough dash and initiative to work, it is
beneficial to him in particular and to the society in and initiative to work,
it is beneficial to him in particular and to the society in general. The sense
of achievement gives him psychological satisfaction.
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Mcclelland’s Psycho Theory
(i) Need for Power -The need for power is expressed as a desired to influence
others. In relation to Maslow’s hierarchy, power would fall somewhere
between the needs for esteem and self-actualization. People with a need for
power tend to exhibit behaviors such as out-spoken, forceful, willing to
engage in confrontation, and a tendency to stand by their original position.
They often are persuasive speakers and demand a great deal from others.
Management often attracts people with a need for power because of the many
opportunities it offers to exercise and increase power. Managers who are
motivated by the need for power are not necessarily “power hungry” in the
sense in which the expression is often used.
(ii) Need for Achievement - The need for achievement would fall between the
needs for esteem and self-actualization given by Maslow. This need is
satisfied not by the manifestations of success, which confer status, but with
the process of carrying work to its successful completion Individuals with a
high need for achievement generally will take moderate risks, like situations
in which they can take personal responsibility for finding solutions to
problem, and want concrete feedback on their performance. As McClelland
points out. “No matter how high a person’s need to achieve may be, he cannot
succeed if he has no opportunities, if the organization keeps him away from
taking initiative, or does not reward him if he does.” Thus, if management
wishes to motivate individuals operating on the achievement level, it should
assign them tasks that involve a moderate degree of risk of failure, delegate to
them enough authority, allow them to take initiative in completing their tasks,
and give them periodic, specific feedback on their performance.
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McClelland’s theory and research have significant implications for managers. If the
motives of employees can be accurately measured, management can improve the
selection and placement processes. For example, an employee with a high need for
achievement may be placed in a position that would enable him to achieve. This would
result in higher performance. Need for achievement is the most crucial to a nation’s
economic progress as it contributes to entrepreneurial success.
Entrepreneurial Competencies
(1) Body of Knowledge: Innovation is possible only through knowledge. The inventor or
originator of the idea that led to the knowledge or vision, of some thing new; the artist
of creative Endeavour. Inventors include those who identify new technological
processes, new forms of plant life and new designs. Thus, inventions deal with new
processes, or new technical knowledge. In a simple way, knowledge means collections
of information and retention of facts that an individual stores in some parts of his
brain.
Creative process provides imaginative people, geminate ideas, nurture them and develop
them successfully. This type of idea has a value. However, it must be proven useful or
be marketable and to achieve either status or achievement, must be developed. But
innovation is the development process which translates an idea into an application. It
requires persistence in analytically working out the details of product design or service,
to develop marketing, obtain finances and plan operations.
(2) Set of Skills: Skill is the ability to demonstrate a system and sequence of behavior that
are functionally related to attaining a performance or goal. An entrepreneur is required
to have certain skills and these skills also constitute his leadership qualities. These
skills are as follows.
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(a) Anticipatory Skills–Foresight into a constantly changing environment;
In practice, an entrepreneur who pursues the idea, planning its application, acquiring
resources and establishing its market through persistence, planning, organizing and
leadership needs above skills. With the help of these skills, entrepreneur is expected to
perform well in his entrepreneurial behavior.
Cluster of Motives and Traits: Motives deal with recurrent concern for a goal, state or
condition appearing in fantasy, which drives, directs and selects behavior of the
individual. Actually motive represents thought related to a particular goal, state.
McClellend opined that “need achievement” is social motive to excel that tends to
characterize successful entrepreneurs especially when reinforced by cultural factors.
According to Paul Wilken “entrepreneurship becomes the link between need
achievement and economic growth. Thus, need for achievement is guiding force behind
entrepreneurial activities. It is the desire to do well and it motivates the people to
undertake innovative activities.
The trait may be defined as a dispositional or characteristic way in which the person
responds to an equivalent set of stimuli. These responses represent intelligence,
charisma decisiveness, enthusiasm, strength, bravery, integrity and self-confidence.
Thus, traits are an individual’s personal characteristics. Traits are contents of leadership
qualities. So an effective leader is one who possesses intelligence, alertness to the needs
of others, understanding of the task, good communication skills, initiative and
persistence in dealing with the problems. It is important to note that personal elements
that govern the leadership ability are intelligence, self-confidence, the drive to accept
responsibility, good communication skills and education
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In this way, entrepreneur is required to have certain traits. These traits are necessary for
leadership qualities expected from an entrepreneur. An entrepreneur should be (i)
adaptable to situations, (ii) alert to social environment,
(iii) ambitious and achievement oriented, (iv) assertive, (v) cooperative. (vi) decisive,
(vii) dependable, (viii) dominant (desire to influence others), (ix) energetic (high activity
level); persistent, (x) self-confident, (xi) tolerant of stress and (xii) willing to assume
responsibility.
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(a) Initiative: The entrepreneur should be able to take actions that go beyond his job
requirements and to act faster. He is always ahead of others and able to become a leader
in the field of business. He Does things before being asked or compelled by the situation
and acts to extend the business into new areas, products or services.
(b) Sees and acts on opportunities: An entrepreneur always looks for and takes
action on opportunities. He Sees and acts on new business opportunities and Seizes
unusual opportunities to obtain financing, equipment, land, work space or assistance.
(e) Concern for High Quality of Work: An entrepreneur acts to do things that meet
certain standards of excellence that gives him greater satisfaction. An entrepreneur states
a desire to produce or sell a top or better quality product or service. They compare own
work or own company’s work favourably to that of others.
(h) Systematic Planning: An entrepreneur develops and uses logical, step-by- step
plans to reach goals. They plan by breaking a large task into subtask and develop plans,
then anticipate obstacles and evaluate alternatives. They take a logical and systematic
approach to activitie
(i) Problem Solving: Entrepreneurs identify new and potentially unique ideas to
achieve his goals. They generate new ideas or innovative solutions to solve problems
and they take alternative strategies to solve the problems.
(j) Self-Confidence: Entrepreneur with this competency will have a strong belief in
self and own abilities. They express confidence in their own ability to complete a task or
meet a challenge. They stick to their own judgment while taking decision.
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(k) Assertiveness: An entrepreneur confronts problems and issues with others
directly. Entrepreneur with this competency vindicate the claim to asset their own rights
on others. They demand recognition and disciplines those failing to perform as expected.
They asset own competence, reliability or other personal or company’s qualities. They
also assert strong confidence in own company’s or organization’s products or service.
(n) Monitoring: Entrepreneurs with this competency normally monitor or surprise all
the activities of the concern to ensure that the work is completed by maintaining good
quality.
(o) Concern for Employee Welfare: Entrepreneurs with this competency take action
to improve the welfare of employees and take positive action in response of employee’s
personal concerns.
The entrepreneur is the pivot of development,” this statement attract our attention
towards the importance of entrepreneurs in economic development. Economic
development of a country takes place when output increases as a result
of entrepreneurial activity. The entrepreneur is the central figure in the process of
development. The economic development of a country to a large extent depends on
human resources. But the human resources alone can not bring economic development
and for solving this purpose, there must be dynamic entrepreneurs. A country maybe
rich in natural resources but if it lacks in dynamic entrepreneurs then, it may not be able
to utilise the resources and it may lag in economic development. Entrepreneurs are
action oriented, highly motivated
individuals who take risks to achieve goals. An entrepreneur is one who looks for
opportunities, identifies and seizes them mainly for profit. Entrepreneurs seizing
opportunities set up business undertaking and industries,
economic thereby make transformation.
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to create markets and to carry on trade. It has been well said that entrepreneurial
inputs spells the difference between prosperity and poverty among nations.
It is true that a person must have certain entrepreneurial attributes and need not
necessarily belong to a particular caste, community or a group to become an
entrepreneur. But mere personality traits of an individual would not be sufficient
condition for him/her becoming an entrepreneur. Other social, cultural and economic
factors as well as support-system also influence, to a considerable extent, the promotion
and development of entrepreneurship. However, it has been found that the
entrepreneurial attributes of an individual can be improved, to a certain extent, through
stimulation and training, provided he or she has latent potential for entrepreneurship.
The entrepreneurial potential of an individual thus developed can lead to the promotion
of an enterprise with the help of counselling, infrastructural support and financial
assistance from institutional sources. And in this way, the constraints in development of
entrepreneurship due to unfavourable personality traits, social conditioning, cultural
ethos and economic factors, could be reduced to a great extent.
The present lesson describes the concept of entrepreneurship development, the main
objectives of Entrepreneurship Development Programme (EDP), need for training and
development, phases of EDPs and organisational efforts for EDPs in India.
Development of entrepreneurship incorporates four basic issues viz (i) the availability of
material resources (ii) the selection of real entrepreneurs, (iii) the formation of industrial
units, and (iv) policy formulation far the development of the region. All these issues are
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closely inter-related. Given the resources and the entrepreneurs expected to exploit them,
the focal issue that remains is, that of the type of the industrial unit, particularly because
it affects the proper utilisation of raw material and the marketing of the product. An
interaction of the first two variables, and the ground work created by the third one
depends an the specific policies which constantly supervise the direction of the process
An EDP is based on the belief that individuals can be developed, their outlook can be
changed and their ideas can be converted into action through an organized and
systematic programme. EDP is not merely a training programme. It is process of (a)
enhancing the motivation, knowledge and skills of the potential entrepreneurs, (b)
arousing and reforming the entrepreneurial behaviour in their day-to-day activities, (c)
assisting them develop their own ventures or enterprise as a sequel to entrepreneurial
action.
The urge to achieve is one of the most significant variables associated with economic
development. People with high need for achievement tend to be more successful
entrepreneurs as compared to people with low achievement. The Kakinada Experiment
revealed that entrepreneurship can be developed through training and is not necessarily a
hereditary quality. The man behind a project rather than physical and financial facilities
is the key to entrepreneurial success. The significance of personality lies in the fact that
it is the entrepreneur who has to start and run the enterprise and overcome obstacles in
the process of building up and growth of enterprise. The objective of entrepreneurial
training is to develop motivation and competence necessary for successful launching,
management and growth of the enterprise. Entrepreneurial development is relatively a
recent phenomenon as-compared, to executive development.
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short term objective is to help a participant in the fixation of his/her goal of life as
entrepreneurisation.
(ii) to develop small and medium enterprises sector which is necessary for employment
generation and wider dispersal of industrial ownership;
1. Pre-training Phase
2. Training Phase
3. Post-training Phase
1. Initial Phase : This phase includes the activities and the preparations required to
launch the training programme. The main activities of this phase are:
(a) Is there any change in his entrepreneurial outlook, role and skill ?
(b) Is he motivated to plunge for entrepreneurial venture and risk that is expected of an
entrepreneur?
(d) Does he possess the knowledge of technology, resources and other related
entrepreneurial knowledge?
(e) Is he skilful in choosing the right project, mobilising the right resources at the right
time?
3. Post-Training or Follow-up Phase : Under this phase it is assessed that how far the
objectives of the programme have been achieved. Monitorin and follow up reveals
drawbacks in the earlier phases and suggests guidelines, for framing the future policy. In
this phase infrastructural support, counseling and assistance in establishing new
enterprise and in developing the existing units can also be reviewed.
The first step in the EDP is the proper identification and selection of potential
entrepreneurs. Selection and training of an unsuitable person to go into independent
business is a national waste as well as harmful to the person concerned. His failure in
business would result in loss of prestige, or social standing and a setback in life.
Every participant must have a minimum level of eligibility for developing into an
entrepreneur. Entrepreneurial traits include socio-personal and human resources
characteristics.
(v) Achievement-motivation
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(vi) Risk taking willingness
B) Identification of Enterprise
(1) Technical Knowledge and Skills : The entrepreneur has to be wellconversant with
the process of manufacture and trading for which a practical training based on sound
theory is essential.
(3) Support Systems and Procedures : Training needs to include information about
support systems. The participants have to be exposed to agencies like the local banks
and other financial institutions, industrial services corporations and other institutions
dealing with supply of raw materials, equipment, etc. The session on support systems
needs to also include the procedures for approaching them, applying and obtaining
assistance from them and availing of the services provided by them. A linkage between
the training institute and the support system agencies can be established by participation
of these agencies in sponsoring and financing the EDP.
(4) Market Survey : The participants should be given opportunity to actually conduct
market surveys for their chosen projects. This would help expose the candidate to the
marketing avenues available and could be followed by sessions on methods of dealing in
the markets.
(5) Managerial Skill : Once a participant is able to start the enterprise, he requires
managerial skills. A list of the agencies along with details of the formalities to be
completed, specimen forms to be filled in would greatly facilitate the entrepreneurs.
(6) Project Preparation : A lot of time needs to be devoted to the actual preparation of
projects. Their active involvement in this task would provide them necessary,
understanding and also ensure their personal commitment.
Support Systems
After equipping himself with the requisite skills, the new entrepreneur is now ready to
set up his enterprise. In order to launch his new venture, he requires assistance and
support of many agencies. These are the support systems which form a large and an
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important part of the EDP. The strength and coordination of the support system form the
backbone of an EDP. Credit, service and implementing institutions, form the three major
support systems.
For the success of any entrepreneurial development continuous monitoring and follow
up is essential. It is only through proper monitoring that defects and problem can be
identified and removed. Care is required so that the monitoring procedure is not too
bureaucratic where rules become inhibitive rather than promotive. Monitoring should
provide continuous guidance to ensure better results.
The EDPs may be organised for anyone of the following target groups:
(1) Technical and other Qualified Persons : This group consists of persons who have
pursued technical and allied courses of study. For instance, degree/ diploma holders in
science, engineering and technology are an important group in India. The government
and Semi-Government agencies/institutions operate special entrepreneurial development
programmes and schemes of assistance for this group. The training programme for such
people may be designed to enable and assist them in setting up their own manufacturing
units.
(2) Ex-Servicemen : Persons who have retired from the army, navy and airforce
constitute an important group for entrepreneurial training. These persons have acquired
many useful skills and experience during their service period. They tend to be highly
disciplined, hardworking, enterprising and innovative. Therefore they can become
successful entrepreneurs after proper entrepreneurial training. The Government of India
provides special facilities and preference in order to rehabilitate them. Many ex-
servicemen are successfully operating their own manufacturing, training and service
enterprises in the country.
(3) Business Executives : Some business executives want to start their own independent
enterprises after getting sufficient business experience. Some of them have certain
innovative ideas which they are not able to try in their existing firms due to lack of
sufficient autonomy or authority. Some among them are not satisfied with their present
economic and social status. After entrepreneurial training senior business executives can
become successful entrepreneurs. They already possess knowledge of management. .
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(4) Women Entrepreneurs : Women are entering the world of business in increasing
numbers, especially traditional food processing industries like spices, agarbati, papad,
sauces, etc? Several government and non government organisations e.g. FICCI Ladies
Organisation, etc. are therefore, organizing entrepreneural training programmes for
women.
(6) Special Agencies and Schemes : The Government of India has established
specialised agencies for training entrepreneurs. Special schemes have also been launched
to train, develop and assist entrepreneurs. Some of the special agencies and schemes for
entrepreneurial development are given below. These programmes should be conducted
in places where necessary infrastructure for training is available and proximity of the
support agencies is assured. This would underline the need for proper selection of the
trainees.
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Northern-Eastern Region; Xavier Centre for Entrepreneurship Development,
Ahmedabad; state financial corporations; the Centre for entrepreneurship Development,
Hubli; Small
Development (NIESBUD)
Over the years, the Institute stands devoted to evolving model syllabi for training
various target groups-by effective training strategies, methodology, manuals and tools;
facilitating and supporting Central/State governments and other agencies in benefit and
accelerating entrepreneurship development; conducting programmes for motivators,
trainers and entrepreneurs which are commonly not undertaken by other agencies.
Above all organising those that help in developing entrepreneurial culture is worth
appreciation in society. The Institute is also the secretariat of the National
Entrepreneurship Development Board (NEDB), the apex body which determines policy
for entrepreneurship development in the country. The Institute, therefore, performs the
task of processing the recommendations made by the Board.
Objectives
impact throughout the country and among all segments of the society.
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sustenance to potential entrepreneurs enabling them to set up and run
to entrepreneurship development.
PROGRESS CHECK
Question No: 18
Which one of the following is the most important characteristic of a successful business
website?
a) Innovation
b) Speed
c) Graphics
d) Products
Question No: 19
Which one of the following is the next stage to the Concept Stage of Product Planning
and
Development Process?
a) Idea Stage
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Question No: 20
Question No: 21
Question No: 22
a) Location
b) Promotion
c) Raw materials
d) Labor skills
Question No:23
A performance and credit rating scheme has been launched by the MSME Ministry to
assess
Question No: 24
A Micro Enterprise is an enterprise where investment in plant and machinery does not
exceed
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(According to MSMED Act, 2006):
Question No: 25
QUESTION BANK
27. Explain the Role of Central Government and State Government in Promoting
Entrepreneurship
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UNIT IV
ROLE OF ENTREPRENEUR
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.
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.
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
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.
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Generation of Employment Opportunities
So, there is a very important role for entrepreneurs to spark economic development by
starting new businesses, creating jobs, and contributing to improvement in various key
goals such as GDP, exports, standard of living, skills development and community
development.
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Giving emphasis upon village and cottage industries: Up liftment of economically
backward sections of the society can be possible if self- employment opportunities can
be provided at the grass root level. To enable these people in backward regions of the
state to set up village and cottage industries, government has implemented several
antipoverty programmes like PMRY, TRYSEM, SGSY, REGP etc, and the importance
of entrepreneurs in cottage and village industries sector has been clearly acknowledged
by Mahatma Gandhi by his policy priorities in village upliftment including khadi and
village industries in his famous constructive programme in 1922. Prior to independence,
cottage industries and handicraft production located in rural areas had occupied a
distinct place in Indian economy because of their high potential in employment
generation and income creation especially in rural and backward areas. As such,
entrepreneur can play a significant role in setting up and reviving the cottage and village
industries, thereby creating employment opportunities to a large number of people living
in rural and backward pockets of the country.
Utilising the surplus labour force in industrial activities: India is a primary producing
country. This characteristics feature is further accentuated by seasonality feature of the
agriculture. Therefore, for a large part of the year, people remain, more unemployed.
Disguised unemployment is a chronic phenomenon in agriculture where in more people
work in a field than actually required. So the surplus labour force is transferred and
utilized by the entrepreneur in non-farm sector activities like small tiny, cottage and
village industries which are labour intensive in nature.
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An entrepreneur creates lot of employment opportunities for different sections of
society. By generating opportunities, the entrepreneur adds to the economic growth.
Setting up a new venture leads to creation of new opportunism for labour, supplier of
inputs, supplier of industrial equipments, marketing traders etc. All these sectors are
benefited by the setting up of new enterprises of the expansion/diversification of existing
ones. Employment opportunities are created by the entry of new units in the economy.
When the existing units increase their production capacity, more employment
opportunities are created.
A new industrial unit will require raw materials, power, water, banking and
communication facilities, plant and machinery, furniture and fixtures etc. The providers
of all these goods and facilities will get work from the new unit. The suppliers of all the
goods and services will certainly gain from this demand. These input and services will
be required on a regular basis on permanent demand is created for these things.
The goods and services produced by the entrepreneurs will be sold in the market. This
would require the services of traders. The increase in trading activity will further require
the services of transport, warehousing, insure, advertising, communication etc. The
resultant effect would be creation of more job opportunities in the economy.
Social Stability
Social stability comes along with prosperity in the society. Entrepreneurs help the
society in attaining social stability in the following ways:
(i) Entrepreneurs create both direct and indirect employment for the society. They
generate self employment by setting up their units and have a respectable social life.
Those who have the talent and knowledge can start their own units. There are many
government and non-government agencies which helping selling up new units. Besides
self employment, these units create millions of jobs in the country. Employment
provides respectable life to people in the society. When people have opportunities for
work, they will certainly channels their energies into productive activities.
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(ii) Enraptures set up industries which remove scarcity of essential commodities. They
also introduce new products as per the requirements of the society. This helps in
improving the standard of living of the people.
(iii) Entrepreneurs are units. Besides self employment, these units create millions of jobs
in the country. Employment provides respectable life to people in the society. When
people have opportunities for work, they will certainly channels their energies into
productive activities.
(iv) They set up industries which remove scarcity of essential commodities. They also
introduce new products as per the requirements of the society. This helps in
improving the standard of living of the people.
(v) Entrepreneurs are conscious of their social responsibilities. Many entrepreneurs
try to help the society by creating infrastructural facilities for the society, providing
medical and educational faculties, controlling pollution etc.
(vi) Entrepreneurs start and run productive ventures. They create wealth for the
nation and help in increasing the national income. Ultimately, per capital income of
the people goes up leading to rise in their standard of living.
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BALANCED REGIONAL DEVELOPMENT
Thus the regional balance implies uniform distribution pattern of the planned investment
among different regions of a country. Alternatively, regional balance demands
distribution of investment in such a way so that the regional rates of growth in different
parts of the country be equally attained, eliminating the regional disparities prevailing in
the country.
Utilisation of local resources: Balanced regional development paves the way for
optimum utilisation of resources available in different regions of the country. Over
concentration of industrial activity into certain centres leads to wastage of local
resources like raw materials, fuels, labour, skills, etc. for their non utilisation.
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(2) Non-Economic Considerations: The following are the two non-economic
considerations of balanced regional development:
Besides, balanced regional development can pave the way for an egalitarian society
having negligible differentials in per capita incomes and other parameters existing
between classes and regions.
The basic policy followed by the Indian Government since independence in regard to
location of industries is the achievement of balanced regional growth of the country.
Balanced regional development has been a vital part of India economic planning.
Different way have been followed to achieve balanced industrial policy statements made
by the Government form time to time have also emphasized the need of balanced
regional development.
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(v) Control over the problems of slums, overcrowding, congestion of traffic,
etc.
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SUPPLEMENTING AND COMPLEMENTING ECONOMIC GROWTH
Schumpeter postulates that the rate of economic progress of a country depends largely
upon its rate of innovation, which in turn, depends upon the entrepreneurial talents.
According to Schumpeter, technological development cannot alone bring about
economic growth unless they are put to practical use by the entrepreneurs. Similarly,
Peter Drucker has also emphasized that this is the age of entrepreneurial society.
Economic development and growth of a country depends to a great extent upon effective
entrepreneurship. In his opinion, 92 entrepreneur plays a crucial role for the creation of
new small enterprises that energize the economic structure. Through constant creativity,
new businessmen/entrepreneurs assure a strong economy and rising national income.
Thus, the role of entrepreneur is important, as it is not only complements but also
supplements the economic growth of the Country.
Backward and Forward Linkages: It is the entrepreneur who initiatives change and
this to maximize his profits by innovations. Setting up of an enterprise in accordance
with the changing technology has several backward and forward linkages. For example,
the establishment of a textile unit generates several ancillary units and expands demand
for cotton, chemicals, dyes, etc.
Others:
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ROLE OF AN ENTREPRENEUR IN EXPORT PROMOTION AND IMPORT
SUBSTITUTION:
An entrepreneur has a similar, but not identical, role under both import substitution and
export promotion models of economic development. Import substitution is based on the
idea that a country can stimulate its own economic growth (particularly in the earliest
stages of its development) by creating its own domestic industries to replace foreign
imports. Entrepreneurs would be needed in an import substitution model, not so much to
come up with brand-new ideas as to come up with new ways to execute known ideas.
Their primary role would be to find a way to make products that are cheaper to produce
or more attractive to local populations than the foreign imports. It is notable that most
import substitution models rely on tariffs to restrict imports, which would perform part
of the entrepreneurs' task for them. Furthermore, import substitution is sometimes
(though not always) a state-led project, which would also diminish the need for private
entrepreneurs. Economists also theorize that import substitution slows technological
progress by removing opportunities for the "cross-fertilization" of ideas that comes from
trade. This means that an import substitution model may result in fewer entrepreneurs
with valuable ideas over time.
In an export promotion model, entrepreneurs would be needed to come up with ideas for
products and services that would be attractive to the rest of the world, either based on
their price of production or their novelty, quality, or other unique characteristics. This is
the scenario that generally creates the type of entrepreneur that is popular in the public
imagination, like Bill Gates. Furthermore, economists theorize that export promotion
and free trade promote faster technological progress. Export promotion models,
therefore, do not just depend on entrepreneurs—they also produce them.
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Objectives of setting up of EPZs:
(3) To channel the sources of foreign exchange within the system in a phased
manner.
(6) To channel the foreign exchange earnings for the further development of
these zones and explore new areas for the development of Indian exports.
Special Economic Zones Act, 2005, was passed by Parliament in May, 2005 and
received Presidential assent on the 23rd of June, 2005. The act envisages that the SEZs
would attract a large flow of foreign and domestic investment in infrastructure and
productive capacity leading to generation of additional economic activity and creation of
employment opportunities.
Salient Features:
(2) A SEZ does not require a license for imports. Other notable features are as
follows:
(3) The units must become net foreign exchange earners within 3 years.
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(6) The domestic sales from the SEZ are subject to full custom duties and
import policy is in force, when they sell their produce to domestic
markets.
(8) The corporation in SEZs will not have to pay any income tax on their
profits for the first five years and only 50% of the tax for 2 more years
thereafter.
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Export Promotion Policies in India
Exim policies aim at export assistance such as export credit, cash assistance, import
replenishment, licensing, free trade zones, development of ports, quality control and pre-
shipment inspection, and guidance to Indian entrepreneurs to set up ventures abroad.
There are 22 export promotion councils for different products, offering services of
export promotion such as price, quality, packing, marketing, transport etc. They conduct
market surveys, publish reports on foreign trade, administer various export promotion
schemes, develop trade contacts, quality control, joint participation in trade fairs and
exhibitions.
Trade reps: There are Trade Representatives abroad who conduct market surveys,
furnish information on exports-imports, settle trade disputes and pass on information
about the rules and regulations for imports.
Indian Institute of Foreign Trade: The Indian Institute of Foreign Trade (IIFT) was
set up by the Government in co-operation with trade, industry, universities, educational
and research institutions. It is an autonomous body, set up to train people in international
trade, conduct research, survey and organize training programmes.
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Trade development Authority: In addition to the above, we have Trade Development
Authority to collect information, conduct research and render export finance and help in
securing and implementing export orders.
Financing for export: The Export Credit Guarantee Corporation (ECGC) covers both
commercial and political risks on export credit transactions. Its head office is in Mumbai
and branches are in Delhi, Calcutta and Chennai. In 1982, the Government set up EXIM
Bank with head office in Mumbai, branch offices in other major cities in India and
abroad.
EXIM Bank finances exports and imports of machinery, finances joint ventures,
provides loan, undertakes merchant banking functions such as underwriting stocks,
shares and bonds or debentures, develops and finance export oriented industries,
undertakes techno marketing studies and, promotes international trade.
Advisory Councils: Some of the State Governments have set up specialized Export
Trade Corporations which undertake export promotion. They are established in Andhra
Pradesh, Bihar, Karnataka, Uttar Pradesh, Madhya Pradesh, Himachal Pradesh. There
are also Advisory Councils like Board of Trade, Export- Import Advisory Council, etc.
An entrepreneur has a similar, but not identical, role under both import substitution and
export promotion models of economic development. Import substitution is based on the
idea that a country can stimulate its own economic growth (particularly in the earliest
stages of its development) by creating its own domestic industries to replace foreign
imports. Entrepreneurs would be needed in an import substitution model, not so much to
come up with brand-new ideas as to come up with new ways to execute known ideas.
Nature of assistance: The scheme offers funding up to 90 per cent in respect of to and
fro air fare for the participation by MSME entrepreneurs in overseas fairs/trade
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delegations. The scheme also provides funding for producing publicity material (up to
25 per cent of costs) sector specific studies (up to Rs 2 lakh) and for contesting anti-
dumping cases (50 per cent up to Rs 1 lakh).
Nature of assistance: The units are allowed to import or procure locally without the
payment of duty all types of goods including capital goods, raw materials, components,
packing materials, consumables, spares and various other specified categories of
equipment.
Description: STP Scheme is a 100 per cent export-oriented scheme for undertaking
software development for export using.
Nature of assistance: The approvals are given under single window clearance
mechanism. All imports of hardware and software in STP units are completely duty free,
and import of second-hand capital goods and re-export of capital goods are also
permitted.
From where to apply: FIEO, Export Promotion Council and Ministry of Commerce
Description: The SEIS has been introduced to increase exports of notified services.
Nature of assistance: The rewards under SEIS shall be admissible for exports
made/services rendered on or after the date of notification of this policy. The duty credit
scrips shall be granted as rewards under SEIS. The duty credit scrips and goods
imported/domestically procured against them shall be freely transferable.
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6. The Merchandise Exports from India Scheme (MEIS)
Description: The MEIS has been introduced for the export of specific goods to
specified markets.
Nature of assistance: Rewards for the export of notified goods to notified markets
Description: The objective of the EPCG Scheme is to facilitate import of capital goods
for producing quality goods and services to enhance India’s export competitiveness.
Nature of assistance: EPCG Scheme allows import of capital goods for preproduction,
production and post-production at zero customs duty
In an export promotion model, entrepreneurs would be needed to come up with ideas for
products and services that would be attractive to the rest of the world, either based on
their price of production or their novelty, quality, or other unique characteristics. This is
the scenario that generally creates the type of entrepreneur that is popular in the public
imagination, like Bill Gates. Furthermore, economists theorize that export promotion
and free trade promote faster technological progress. Export promotion models,
therefore, do not just depend on entrepreneurs—they also produce them
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Import Substitution
Import substitution gained widespread prominence and adopted by many countries after
World War II to bolster domestic industry and growth. This was also done to reduce
dependence on other countries. India too had resorted to import substitution which was later
reversed during 1991 currency crisis. Indian industry could not be expanded to its full
potential due to severe lack of sophisticated basic infrastructure.
Import substitution although can prove beneficial for certain sectors of economy for some
specific phases in economic conditions but if the policy is stretched over the entire
industrial sector as a long term policy can eventually lead to less competitive production
which will gradually start to decline. Thus the output will also dip and so will the job
creation avenues as the incentive to produce more will fade due to absence of global
competition. It is thus, different from the theory of comparative advantage in which
countries engage in production of specialised goods and then enter global markets to
bravely fight international competition.
The phenomenon has again gained limelight due to ‘Make in India’ campaign being
promoted by the Government of India. The idea is to make India a favoured investment
destination and attain a considerable level of output from 16% to 25% by 2022. It has been
cautioned that India’s ‘Make in India’ campaign should not be seen as the strategy for
import substitution as that will lead to reduction in domestic competition, production
inefficient and thereby leading increase in commodity prices. Such increased prices shrink
demand for products. Thus, over protectionism can lead to dynamic inefficiency as
domestic players replace foreign producers. This often leads to poor allocation of resources
as there is no incentive for domestic producers for innovation. There is a fine line between
the two phenomena and the government has to carefully walk the talk.
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PROGRESS CHECK
Question No: 26
A corporate manager who starts a new initiative for their company which entails setting up
a new distinct business unit and board of directors can be regarded as?
(a) Ecopreneur
(b) Technopreneur
(c) Intrapreneur
Question No: 27
entrepreneur’s enterprise:
Question No: 28
Family business always interested to handover the change of his business to:
Question No: 29
A corporate manager who starts a new initiative for their company which entails setting up
a new distinct business unit and board of directors can be regarded as?
(a) Ecopreneur
(b) Technopreneur
(c) Intrapreneur
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Question No: 30
QUESTION BANK
31. Examine critically the government policies and programs to foster the growth of
32. How can a business determine the right price of the product, in this essence explain all
the Determinants of pricing a product for a small organization.
Answer Key: 1(d), 2(c), 3(b), 4(b), 5(c), 7(b), 8(c), 9(b), 10(d), 11(b), 12(b), 13(b), 14(c),
15(c), 16(b), 17(b),
18(b), 19(c), 20(b), 21(b), 22(c), 23(a), 24(c), 25(b), 26(c), 27(c), 28(c), 29(c), 30(a)
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ESSENTIAL AND ADDITIONAL READINGS:
Publication.
Education.
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