Unit 2 (e.d)

Assignment -1
Q.1 what is entrepreneurship? Explain causes of
slow growth rate for entrepreneurs in India.
Q.2 what is entrepreneurship theory and briefly
explain about any two theories.
Date of submission-

unit-2
Business opportunity
There is a maximum opportunity available in the
business. but every one can not observe it. It visible
for those person who constantly remain search of
them. Opportunity not come to easy but the
entrepreneur has to struggle for it.
Business opportunity can be described-
It is an economic idea which can be implemented to
create a business enterprise and earn profits.
Before selecting an opportunity, the entrepreneur has
to ensure two things-
a)Good market for the product, which is going to
produce.

b) The rate of return on the investment is high.
An entrepreneur is basically an opportunity finder.
An entrepreneur generally evaluate different
possibilities and select one who is the highest
paying possibility.
All idea are not opportunity but all opportunity are
idea.
Elements of a business opportunity-
a. Market scope
b.High rate of return on investment
c. Implementation of the idea.
d.Potential of future growth

Exploring opportunities in the environment-
An opportunity may be derived from the needs and
problems of the society. An entrepreneur to
produce/ serve the needs of the society and solve/
remove the problems.
Entrepreneurial opportunities exist in the environment
and entrepreneurs making process of receiving/
getting ideas from different sources.
1.Finding opportunity.
2.Evaluating ideas from environmental sources.
3.Identifying product.
4.Setting up a project.

problems needs
Opportunity
(Scouting)
Creativity
(Ideas)
Innovation
(Product)
Project
(Business enterprise)
environment
environment
E
N
V
I
R
O
N
M
E
N
T
E
N
V
I
R
O
N
M
E
N
T

Needs and
Problems of
society
Creative solutions
Entrepreneurial opportunities

Exp- Tata nano- for lower income group
Nirma for lower income group as compare to surf
and tide.
North Indian foods in south India.

Factors involved in opportunities
1-ability to perceive
and preserve basic
ideas.
a. Problems
b.Changes
c. Inventions
d. competition
2. Ability to
support different
sources of
information
3.Vision
and
creativity

1.Ability to perceive and preserve basic ideas-
a. Problems-idea comes when problem faced by the
people. The solution is called business
opportunity. Exp- multimedia phone, multi use of
products.
b.Change- changes in an environment also causes
of business opportunity. Exp-cyber cafes,
computer institute.
c. Inventions-creative new things as well as new
and creative process that add value of existing
products. Exp- audio and video cassette players
to CD players to DVD players.

d. competition-an entrepreneur is open to receive
ideas from different sources. This expects the
entrepreneur to be a good network besides
having the ability to recognise and nature the
potential idea in to venture.
Exp-Shiv Nadar (HCL Computers)
2.Ability to harness/support different source of
information-supporting information from
different sources is an important aspect of
opportunities. The information collected from
different sources has to be analysed and utilised
for the identification of the right opportunity.
Exp- Tarver Baylis an English inventor, developed-

A portable radio that was powered by clock-work
instead/ in-respect of batteries.
3.Vision and creativity- it is one of the most
behavioral nature of an entrepreneur. He should
able to develop creative ideas.
Exp- Henry Ford developed a motor car for the
common man, in low price so any person can by
it.
Exp- Tata Nano
Idea generation- it is the most important task of an
entrepreneur. It is involves creativity. the
business idea comes from market opportunity.

Environmental analysis-
Importance of environment- environment playing a
very vital role in the success of an existing
enterprise. If a company is able to adopt the
environmental changes/ conditions, then will be
success in the market, for the log-run otherwise
company will be out from the environment/
market.
Exp- Bajaj and Texla television out from the market.
1. Formulation of strategies and policies- it would
be helpful for indentifying the environmental
opportunities in the market. So it create a vital
role in formulating strategies/ policies.

In India different reputed business houses take help
from expert to find out trends in the external
environment and implementing it making
strategies.
2.Tapping useful resources- an entrepreneur gets
various resources/ inputs from the environment
and implement it in goods/ products/ services for
transfer to the ultimate users.
If a business houses capable to understand the
external environment then they arrange all things
from the market at very nominal price and at the
right time.

3.Better performance- if an entrepreneur
understand the external environment then he
can take corrective decision in time and get
opportunity.
4.Sensitisation of entrepreneurs to cope up with
rapid changes- when an entrepreneur doing keen
observation of the trends in environment. It
would be helpful to the entrepreneur in changing
technology, competition, govt. policies, and also
changing need of the customers.
Exp-in India reliance industries always keep the
keen observation of the external environment
and implement strategies to avail opportunities
in emerging areas.

5.Image building-if an organisation keeping keen
observation about the external environment then
it would create/ produce, product and services
according to requirement of the customers and it
create good image/ reputation in the consumer
mind.
Exp- Reliance mobile going to launch 4G services in
Indian market.

Analysis of environment-
It is the process of monitoring/ observing the
economic/ non-economic environment to
determine the opportunities/ threats for a
enterprise.
It includes data collection, information processing
and forecasting for developing goals/ strategies
of a business. It would be also helpful to the an
entrepreneur to predicting future development
and take timely actions.
Information comes from- customers, wholesalers,
retailers, distributors, consultants, company
records, govt./ financial institution, and
international org. etc.

It would be helpful in making forecasting about
economic, social, political, legal, and market
forces in future.
Environmental factors- entrepreneurship,
environment define the various forces with in
which various small, medium, and large
enterprises operate.
Environment consist of the actors and factors
external to the enterprise. It is the total of
external factors with in which the enterprise
operates. It includes controllable and
uncontrollable factors.

Types of external environment
micro
macro
Business environment
Micro environment
a. Suppliers
b. Customers
c. Intermediaries
d. Competitors
Macro environment
a.Economic
b.Socio-cultural
c.Political
d.Technological
e.natural

Competitive analysis of market-
It is define the status of the product and services in
the market. It gives the real picture of the
products/ services in the market.
Needs of competitive analysis-
a. Various dimension of the market
b.Potential entrants in to market
c. Direction of change in the trend
d.The threat of substitute or new products
Micheal E. Porter defined competitive analysis-

Industry
competitors
Rivalry among
existing firms
Potential entrants
buyers
substitutes
suppliers
Bargaining power of buyers
Bargaining power of suppliers
Threat of substitute products
Or services

1.Threat of entry of new firms- an entrepreneur
create good image in local market. He might be
dominate market by one or two product. The
threat of new entry either in terms of new idea, a
new package, a new services or low cost.
Threat could be define-
a. Large scale of capital interventions
b.Product volume interventions
c. Large-scale distribution intervention
d.Establishing a distinct competency
 Capital intervention- an entrepreneur might be
operate with a moderate capital investment for
the product. And might have still a monopoly-

The product might have a market life for a
substantial period of time. If any other
entrepreneur who intervenes in the production
and distribution of the similar product with a very
large capital investment. Then the moderate and
small-scale entrepreneur might extremely
difficult, to compete due to lack of investment
matching the new entrant
 Product-volume intervention-the products in the
market, are either consumable or non-
consumable, no any single entrepreneur could
meet the entire requirements of the market. In
this situation it depend up on the capability -

Of the entrepreneur to capture the market. In this
condition the small entrepreneurs would not be
able to provide the needed supply to the market.
Intervention in distribution system- an
entrepreneur might be producing good product
to the society but he may not have proper
distribution of the product. In this situation he
could not properly access the potential market.
So advantages goes to these entrepreneur who
has good distribution network either his product
may not have the same quality as compare to
another entrepreneur.

Intervention through distinct competence-when
we observing the market we also find that which
brands have distinct place in the market. it is
related to the reputation of an entrepreneur. A
new entrepreneur might find it difficult to
compete with such brands.
Incase of an entrepreneur having established a
market arrival of a new entrepreneur with
products based on a distinct competence is a
matter of great threat.
2.Bargaining power of suppliers- it is depend up on
the economic bargaining power relative to
companies competing in the industry.

Suppliers becomes powerful when company
reduced its profitability by suppliers actions.
When the suppliers raising prices or restricting
the quantity.
Suppliers are more powerful in given situation-
a. When qualitative substitute products are not in
market to buyers.
b.Buyers are not a significant customers group for
the suppliers group.
c. Effectiveness of suppliers products has created
high switching cost for buyers.
d.The suppliers segment of the industry is
dominated by a few large companies-

And it more concentrated than the industry to
which it sales.
3.Bargaining power of buyers-when a company
running in an industry so it maximise return on
investment. So buyers are interested purchasing
products at the lowest possible price. To reduce
cost value, customer bargain for higher quality at
the lowest price.
Buyers groups are more powerful when-
a. Buyers are important because they purchase a
large quantity of the seller’s products.
b.Buyers are able to switch the products from one
suppliers to others.

4.Threat of substitute products- an entrepreneur
better understand that they have to compete
substitute products. those are capable to
satisfying similar customers needs but have
different feature-
The threat of substitute products is greater when-
a. Buyers/customers face few, switching cost.
b.Price of the substitute product are lower
c. Quality, performance, standard of substitute
products are equal to or greater than those of
the existing products.

International environment
It is play a very vital role in case of those firms who
running in export/import and also a firm
manufacturing operation in different countries. It
is includes trade policies of foreign govt.
international org.such as- WTO, IMF, World Bank,
MNC’S, etc.
After the globalisation a large no. of foreign MNC’S
come in India and opened its subsidiaries in India
with Indian company. Its increased competition
in Indian market. In result Indian small and
medium enterprises faced difficulty in competing
with foreign company.

Setting up new business enterprise-
Setting up a new business enterprise is not as easy
job. It is complex and difficult . Because it face
various difficulty when forming new business
enterprise-
Basic consideration in setting up a new business
unit-
1.Selection of line business-
Identify market
Make survey
Find out market demand
Prepare project report

2. Choice of form of ownership-
Sole proprietorship, partnership, joint stock
company.
Depend up on authority of entrepreneur
 insurance and banking business done only joint
stock companies.
Size of business define the form of org.
Sole proprietorship or partnership are suitable
for small & medium scale.
Other factors like- capital requirement,
managerial skills requirement, market coverage,
limit of liab., tax liab, etc.

3.Size of business- it depend up on- technical,
managerial, financial, and marketing.
Some factors favor the large size but some
factors favor the small size.
If the entrepreneur full confident then start large
scale.
For new idea , it would be suitable for small scale
operation.
4. Financing the proposition-
Entrepreneur should have sufficient amount of
capital for continuity of the business.
Capital required in fixed assets like-land, building,
machine, equipment,

5. Location of business- location of business should
be easy accessable to raw materials, labour,
power, markets, other service like- banking,
transportation, communication, insurance,
warehousing, etc.if the location of plant is not
appropriate then it will causes many problems. In
this case increase cost per units and also restrict
the growth of the firm.
6.Machine equipment- it depend up on various
factors like- availability of funds, size of
production, nature of production process, etc.
If the quality worker are available for the
production process then no need of installation
the machine.

Repair/ maintenance and service parts should be
easily available for the machine.
It would be suitable for the large scale of operation.
7.Plant layout-it should be economical and
efficient, and reduced transport, materials
handling, clerical and other cost.
8.Human resources- entrepreneur can not run the
business without human resources, because both
skilled and unskilled and managerial staff include
in an org.,right person for the right job
minimising the wastage of time, money and
effort.

9.Procedural formalities-in case of sole proprietership
or partnership no procedural formalities. Only
permission from the municipality to start the
business.
Less legal formalities joint stock company/public
company have greater procedural formalities. Send
periodical report to the registrar of the company and
SEBI.
10.Tax-planning-it is a compulsory task now days-
Huge profit- promote company
Less profit- promote sole proprietor and partnership
11.Launching the business enterprise- do all the
formalities and arrange all the necessary things.

Steps in setting up a new business
Scanning the environment of entrepreneurial opportunity
Development of product/ service idea
Assessment of feasibility of the idea
Preparation of business plan
Appraisal by the funding agencies
Resources mobilisation
Project commissioning and launch

Practical steps in setting up a small enterprise-
Project report
No objection certificate
Formal sanction of loan
Construction of building and installation of
machinery
Establishing market network
Application for permanent registration
Detailing manpower

Choice of form of organisation-
When selecting a particular form of organisation
then some most of important factors should be
considered by an entrepreneur.
1.Easy formulation- business should be easily
formed.
Minimum cost and minimum legal formalities.
In this condition sole proprietorship and
partnership are preferable.
2.Liability- in an org. should be limited liabilities.
It is helpful in case of winding up the business.
Owner can easily pay his liabilities.

3.Nature of business-
It is the most important factors for selecting the
business.
Business activity might be in trading,
manufacturing, services.
In case of trading business need small capital and
less managerial ability.
It is suitable for sole proprietorship
Service activities needs partnership
For manufacturing partnership and joint stock
company is better choice.

4.Easy to raising finance-
Without capital business can not survive
Large capital needed for the business
It Is depend upon the facility with which finance
can be raised.
5.Control-
For direct control sole proprietorship would be
right form.
In private company the promoter should be able
to control business activities.
In case of public company the promoters have no
direct control over the management of the
company.

6.Business secrecy-
It is not a easy task for any business to keep
secrets in business activities.
It is implemented in soleproprietoship
In case of partnership the partner selection
should be very carefully.
7.flexibility of operation-
Business form should be allow flexibility in
operation.
Possibility of modification/ changes

8.Stability or continuity- in any form of business
continuity should be most important factors. But
in case of soleproprietorship/ partnership get
affected immediately if the partner/ owner exist.
9.Freedom from government regulation- business
form should be free from day to day govt.
regulation , but in case of company form needs
dome more govt. regulation. but in case of
partnership/ soleproprietorship no govt.
regulation.
10.Taxation – minimum burden of income tax, and
should be flexibility in taxation and not same for
all owner’s. Tax rate should be considerable.

Legal requirement of incorporation of a company-
The following documents are required-
A)MOA B)AOA C) List of directors
d) Written consent of directors
e) Declaration regarding qualification shares
f) Notice regarding registered office
g) Statutory declaration
c) List of directors- it is define name, address and
occupation of the person who agreed to act as
first directors of the company. 3 directors in case
of public company and 2 directors in case of
private company.

d)Written consent- it is filled by that person who
agreed to work as a first directors in the
company.
e) Declaration regarding qualification shares- in this
condition directors should give/ undertaking that
they have agreed to purchase and pay for the
qualification shares.
g) Statutory declaration- it is declare by an
advocate or secretary or directors or CA or any
other person who have taken part in the
formation of company.

Raising of capital-
1)SEBI approval for raising capital- SEBI is the
regulatory authority of the financial market in India.
It provide guidelines for shares/ debenture and
protection of investors. When a company inviting to
the public by make all relevant information.
Company take approval from SEBI before going
raising funds from public.
2)Filling of prospectus- a copy of statements which
filled by company registrar, it is the invitation to the
public to apply for share/ debenture of the company.
Investors decided about the investment according to
information and in this documents here no
misrepresentation and should all logical information
disclosed.

3)Appointment of bankers, brokers, underwriters-
raising funds from the public is a most crucial
task for the company. The application money
received by bankers of the company. Brokers try
to sell the shares by distributing the for and
motivating public to apply for the shares. If the
company has doubt/ not sure about the hood
public response then it may appoint
underwriters. Underwriters undertake to by the
shares if there are not subscribed by the public
but it is not necessary.
4) Minimum subscription- it is compulsory for all
the companies who inviting public to buy shares/
debenture. The company should must received

Of shares before going allotment of shares.
Minimum subscription is 90% of inviting shares. If
the subscription goes less than 90% then
allotment can not made and application money
must be returned to the applicants.
5) Application of stock exchange-application should
be made at least 1 stock exchange for taking
permission to deal in share/ debenture. If such
permission not granted before the expiry of 10
weeks from the date of closure of subscription
list then the allotment become void and all
money received from the applicants will have to
returned to them with in 8 days.

6)Allotment of shares- in case the no. of shares
allotted is less than the no. of applied or no share
are allotted to the applicants the application money
is to be returned or adjustment in allotment money.
Returned of allotment signed by a director or
secretary is to be filled with the registrar of the
companies with in 30 days of allotment.

Core values of entrepreneurs-
1)Innovation and creativity- it is the most important
values in between most of the entrepreneur, they
are guided by these values when they come out
with creative ideas, new products, services, to solve
the specific problems of the society. Creativity is the
ability to fond out new way of doing things.
Innovation may be in the area of new products, new
method of production.
2)Self-reliance- it is implemented whether the
entrepreneurs likes to be the master of his own
density. I can not work under any one , I will be my
own boss. Self-reliance is the important assets
because it provides courage and confidence to -

Undertake risk of trying with innovative things.
3)Respect for work- the entrepreneur have great
respect for work. A successful entrepreneur believe
that they can achieve any things by hard work. This
values provides goal direction which encourages
entrepreneurs. They understand “work is worship”
they concentrate on their work to achieve their
goals.
4)Achievement orientation- a good quality
entrepreneurs are guided by the values of out-
standing performance. Dhirubhai Ambani had this
values when he created Reliance Industries LTD. And
made it respected enterprise.

And other out standing performance on the part of
Narayan Murthy that saw the emergence and
growth of Infosys.
They do not fears from the opposite situation they
concentrate their focus on goals. Do hard work
and achieve the target/goals.

Essential attitudes of successful entrepreneurs-
1.Attitude towards imagination- an entrepreneur
predict the future opportunity from the
environment. They observe how can solve the
problems. They are quick to analyse the reason,
for a particular situations and identify the
strengths and weakness of the situation. And find
opportunities for innovation ,growth and
development. They integrate intitution with
imagination to make a new product or new
services.
2.Attitude towards initiative- the entrepreneurs
take initiative because it is the tendency of
entrepreneurs.

Entrepreneurs are the leader not followers. They
convert dreams in to reality.
3.Attitudes towards new opportunities-
entrepreneurs always searching new
opportunities and start new business for availing
this opportunities.
4.Attitudes towards change- entrepreneurs have
positive attitudes towards changes. They are
always ready to adopt changes and make policy/
strategy according this changes.
5.Attitudes towards freedom of expression and
action- it is the tendency of an entrepreneur
make freedom of expression and action.

They do not happy if instruction given by others.
This tendency are not suitable for doing job, but
promote new ventures.
6.Attitudes towards performance- entrepreneur
create value information, when an entrepreneur
successful complete their task. Its indicate their
performance, whether they are performing well
or not. This gives full satisfaction after successful
competition of performance of the task.
7.Attitudes towards personal capacity-
entrepreneur tendency to believe in their
capacity. Who influence the environment , they
have capacity to change it, rather than leave
everything to luck. -

They understand that anything can be achieved by
their own efforts. They think that they can
change and influence the environment.
8.Attitudes towards building relations or
networking- entrepreneurs always do not get
various resources required to complete project. If
they have networking with the suppliers of
various resources. Such as capital, machinery,
materials, etc.
Entrepreneur should have positive attitudes
towards networking and building relations with
the suppliers of various resources.

9.Attitudes towards customers-entrepreneurs
attitude towards customer should be positive
and respectable and they understand customers
comes first. They maintain customers satisfaction
by expert sales force building customers trust.
The success of business and ability of
entrepreneur to listen to the customers problems
and find out quickly what the customers wants
and produce quality products.

Venture capital-
Venture capital used to define financing feature by
high risk and potential for substantial returns. It
is require capital to launch new commercial
ventures and improve/ finance early stage –
growth.
It is just like fund manager who finance the money
for the equity investors in pool. They focus on
high risk entrepreneurial ventures.
Role of venture capital- the first generation
entrepreneurs face the shortage of equity capital,
banks and others financial institution before
providing the loan the observe/ analysis the all

documents and find out credit capabilities of the
entrepreneurs. It will take so much time but
bank/institution do not provide as much require
fund. In this case need of venture capital.
“high risk high reward”
When the business will run successfully then banks
and others investors are willing to invest. In this
stage firm can sell the venture capital
shareholding funds in the enterprise.
Venture capital is a risk capital which is required to
launch and operate a business venture in the
initial stages.

Sebi define the venture capital-
a. Pool capital.
b.Raised in a manner specified in the regulations.
c. Invest capital in ventures in accordance with
these regulations.
Feature of venture capital-
1.Investment made are those enterprise which are
new and use new technology to produce new
products, having an expectation of higher profits.
2.Generally the investments are in equity
instruments.

3.The investors return is taxed as capital gain
rather than ordinary income.
“venture capital is an important source of equity
for start up companies”
These are the some companies- (federal express,
Compaq, sun micro system, Intel, Microsoft,)
received venture capital during the initial stages.
Venture capital funds in India-
Venture capital funds are governed by the SEBI
guidelines-
a.Subsidaries of large financial corporation and
banks.

b.Private independent specilised firms.
c.founded small business investment corporations.
Venture capital in India /provide venture capital for
the young entrepreneurs.
Consideration in extending venture
finance-
The following points to be consider before
extending venture capital to an entrepreneur-
1.Dule diligence- in this case its define the process
of investigating and advantages of project or
prospective investment. It is define qualification
of entrepreneurs, size and growth capacity of -

Venture market, identifying competition, potential
market, returns etc. in initial stage entrepreneurs
observe 30-50% return.
2.Cost of venture capital- it is represented by the
ownership % by the entrepreneurs. It is depend upon
investors perception of risk. Investors will demand in
larger stakes in the company for early stage, and
identify 30-50% return. but few business venture
achieved these projected plans.
3.Exit options- venture capital investment is the crucial
process for capital suppliers. Because gain of capital
realised b/w 3-10 yrs. But in case venture investors
want to know the progress of investments. Business
plans covers all these aspect. but exit option includes
selling of the company.

Unit 2 (e.d)

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Unit 2 (e.d)