UNIT-1 ENTREPRENURSHIP DEVELOPMENT
- 1. Entrepreneurship Development- Emergence of entrepreneurial class- we know very well that an entrepreneur self-motivated and talented who are engaged in the development of new enterprises. In 19th century an entrepreneurs included those person who bore (whole) risk for future uncertainty of profits in new ventures. Differences between the entrepreneurs and capital suppliers is that, an entrepreneur earned profits from taking risk of forming new venture called entrepreneurs, and capital suppliers those people who earned profits by supplying capital. During 20th century, those people who not only take risk of creating a new venture but also innovate new useful products, technology, markets,etc .
- 2. Causes of slow growth of entrepreneurship- 1)In India traditional attitude. 2)Discourages full utilisation of human capital. 3)Individualistic spirit is absent. 4)Lack of infrastructural facilities. Some of the major problems of small entrepreneurs- 1) Shortage of raw-material and power- in India the small scale industries suffered from accurate shortage of basic raw materials. For exp- handloom industries totally depend up on the supply of yarn which is generally in short supply, and also lack of reliability in the quality of raw material in the market.
- 3. And shortage of power is the another factors. We know very well that all the small firms can not afford their own generator set to continue production during the period of non- supply of power. 2) In adequate financial resources- each and every business needs sufficient funds to finance the purchase of plant & machinery, building, materials etc.and also day to day expenses including- wages, rent, power, water charges, administrative & selling expenses. some times small firms can not able to raise sufficient money for all expenses. In this condition shortage of funds must create shut-down the business.
- 4. The step taken by the central/state govt. to provide short-term and long term credit to small –scale sectors have not proved to be adequate. 3) Lack of technology- most of small firms are using old techniques of production. Reason behind that they do not afford new techniques. Which are necessary for production, they are not in position to use latest technology for production. so the cost of production of small units is higher than large scale units. Profit margin of small units is usually low due to they can not compete with large scale units.
- 5. 4) Lack of trained personnel- small industrial units get the personnel rejected by the large scale units. There is a lack of entrepreneurs with the knowledge and vision who can see development. Need the personnel with adequate managerial skills and qualities, if such type personnel available then they look for better opportunities in the large scale industries. 5) Difficulties in marketing- in this case small firm can face different types of difficulties like- their cost of production is higher so they can not have their marketing dept.
- 6. Some times small firms manufacture goods which are not uniform quality. They are not follow the standard because they are not producing quality products. 6) Imperfect management- in most of the small enterprises, ownership, and mgt. function are not separated. It is generally happens that the person who finance the business but does not have skills- planning, organising, and controlling of various operations. no proper division of work in small units. Managing is no more a simple job, its requires a lot of knowledge and training which are not happen in case of small business.
- 7. Factors favouring entrepreneurship- 1)Independent way of life- the entrepreneur has choice/desire to create more money in business than in fixed salary job. He can earn/create good status/livelihood independently instead of working any where as a employee either govt. or private enterprise. He want to own boss and does not want to carry out the orders of others. 2)Achievement orientation- a person should ambitious and hard-working and he observe/analysis that his skills/quality/talents can not be fully utilised in his present job. The higher achiever go for independent business.
- 8. 3) Implementation of ideas- a person create/implement his ideas in product and become an entrepreneur. He may find out that existing product/services is in short-supply and he can supply better products or services than those offered by the existing business. Start a business unit of his own. 4) Insecurity of job- a person might be an entrepreneur because he does not feel secure in his present job or he may believe that his employer is likely to wind up his business.
- 9. 5) Family business- if a graduate or diploma holder has the background of a business family, he may think of setting up his own business after some training and experience. 6) Risk-taking- one who is avoiding the risk, can never become an entrepreneur. The major characteristic of a businessman is willingness to take risk. The nature of risk would be vary business to business. And it should be calculated in advance. The risk taking spirit influences him to become an entrepreneur.
- 10. 7) Govt. economic policy- govt. policies also influences a person to start a new entrepreneurs if he understand that the infrastructural facilities/ financial assistance provided by the state/ central govt. are than well paid white collar jobs. it is influences availability of finance, land, accessibility of customers, suppliers, transport and economic and political stability of a country are the factors that stimulate entrepreneurship.
- 11. Definition of Entrepreneur According to Joseph A. Schumpeter, the entrepreneur in an advanced economy is an individual who introduce something new the economy. According to Drucker's “ innovation is the specific tool of entrepreneurs, the means by which they exploit changes as an opportunity for different business or a different services. “a good entrepreneur is one who is capable of inspiring confidence in people, and has the ability to motivate them to work with him in fulfilling the economic goals set by him”
- 12. Characteristics of entrepreneur 1. Mental ability 2. Clear objective 3. Human relation ability 4. Communication ability 5. Technical knowledge 6. Motivator 7. Self-confidence 8. Long-term investment 9. High energy level 10. Initiative 11. Problem - solver
- 13. Entrepreneur vs. entrepreneurship Entrepreneur 1.Refers to a person 2.Visualiser 3.Creator 4.Organiser 5.Innovator 6.Technician 7.Initiator 8.Decision-maker 9.Planner 10.Leader 11.Motivator 12.Programmer 13.Risk-taker 14.Communicator 15.Administrator Entrepreneurship 1.Refers to a process 2.Vision 3.Creation 4.Organisation 5.Innovation 6.Technology 7.Initiative 8.Decision 9.Planning 10.Leadership 11.Motivation 12.Action 13.Risk-taking 14.Communication
- 14. Function of entrepreneur 1. Innovation 2. Risk-taking 3. Deciding the project 4. Raising finance 5. Planning production 6. Managing enterprise 7. Earning profits
- 15. Inspiring and innovative entrepreneurs- 1. Samuel moore walton, founder and former chairperson of Wal-mart. 2. Dhirubhai ambani- founder of reliance industries ltd. 3. Azim hashim premji- chairman Wipro technologies.
- 16. Entrepreneurship & social factors in India- 1)Family background- family background create impact the entrepreneurial environment. Joint family or nuclear family have their own advantages and disadvantages. More sentimental attachment in between joint family member as compare to nuclear family but nuclear family has more sentiment as compare to western countries. The environment of the family also influences the entrepreneurship. If the father is the professional or businessman, then the son is more likely to adopt the same occupation because of certain inherent advantages by his father being in the same line.
- 17. 2)Social status- every human being aspires (hope, dream) for a high social status and once he achieves, then aspirations and desires for it start getting multiplied. People protecting & developing their status .people work hard to maintain their status as it also contributes to their entrepreneurial growth. 3) Caste & religion- it is a contributory factors of entrepreneurial growth. Entrepreneurial traits do not belong to specify caste rather than entrepreneurs emerge from varied communities. But sociologist still claim that caste and religions do have an impact on the environment. Exp- parsis of Maharashtra, jain of Rajasthan & Gujarat involve in entrepreneurial activity.
- 18. 4) Social mobility- it is depend up on the degree of social & geographical mobility and the nature of mobility channels with in a system. McLennan's define that high degree of social mobility would help in the emergence of entrepreneurship. But Hagen’s belief that lack of mobility possibilities promote entrepreneurship. Brozen’s define that the system should be neither be too flexible nor too rigid. Social mobility does not work in the system in isolation but these are many other factors which influence the entrepreneurial environment.
- 19. Entrepreneurship and economic factors in India- 1)Govt. policy towards entrepreneurs- the central govt. has taken the different decision for the growth and development of entrepreneurship- a)Maintain proper distribution of economic power between both player ( private & public sectors). b)To encourage entrepreneurship by different promotional program me. The govt. has taken the no. of measure to solve the problems of small entrepreneurs in industrial policies-
- 20. a) Reservation in production for the small scale sector. The large scale could not produce these items. b) Giving concession to the small scale industries. c) Purchase by govt. dept. produced product by the small industries. d) Proper supply of raw material. e) Establish common testing facilities at the centre's point for the group of small scale units. f) Preference in land location and power connection to small scale units & producing power at concessional rates.
- 21. 2)Institutional finance- financial assistance boosts the self-confidence of young entrepreneurs, to set up their units. The institutions and banks also provide facilities in the form of finance, consultancy, purchase of land, fixed assets, etc. the govt. of various states have defined various scheme which grant finance to the entrepreneurs at the low rate of interest (SIDBI). 3)Availability of raw material- shortage of raw material create bad impact on the small scale units, shortage of raw material, inferior quality, with raw material would come up. The more favorable condition of raw materials are better, it would be influence entrepreneurial emergence.
- 22. 4)Availability of machinery- the entrepreneurs do not have huge money to invest in machinery. In this condition govt. assist to the entrepreneurs. NSIC (the national small industries corporation ltd.) supplies machinery & equipment to small enterprise on hire basis. And also guide them in procuring govt. orders for various items of stores. 5)Marketing facilities- if the entrepreneur does not know about the marketing technique then he could not survive in the market. In this condition the govt. has taken steps to solve the marketing problems of small entrepreneurs. The govt. establish quality control centre for the small units and govt. also introduced to all dept. to given preference to small scale units while making procurement of goods. And govt. also supporting small units to export their products.
- 23. 6)Industrial estates- it is defined as an area developed systematically for setting industrial units by the entrepreneurs in accordance with the industrial policy of the govt. The objective of industrial estates- a)Promotion MSME size industrial units in undeveloped and less developed areas. b)Achievement of balanced regional development . c)Removal of concentration of industries in big idea of industrial estate comes from u.k. and some other developed countries.
- 24. It is known by different name like- industrial parks, industrial tracts, organised industrial districts. In India developing industrial estate in different place in country.
- 25. Theories of entrepreneurship- 1)Max Weber's theory- max Weber's defined that entrepreneurial growth dependent upon ethical value system of the society concerned. This theory is also provides an analysis of religion and its impact on entrepreneurial culture. Its define rapid industrial growth depends upon rational use of technology, acquition of money and its rational use for productivity and multiplication of money. Max Weber, analysed religion and its impact on entrepreneurial culture, according to him the spirit of capitalism type/shapes attitude towards
- 26. Involved in it. This spirit of capitalism can be generated only when mental attitude in the society is favorable to acquisition of wealth in India. But it has been critised by subsequent researcher on the ground that it was based on the following assumption which are invalid- a)There is a single system of Hindu values. b)The Indian community internalised those values and translated them to day to day behavior.
- 27. 2)McClelland’s psychological theory- according to this theory entrepreneurship is most likely to generate when a society has sufficient supply of individuals possessing particular psychological feature. This theory is develop psychological roots of entrepreneurship, basic human motive drive individual towards entrepreneurial activities- He identify the following types of needs- a)Need for achievement- a drive to excel, advance, growth. b)Need for power- a drive to influence others and situations.
- 28. c)Need for affiliation-a drive for friendly and close interpersonal relationship. Need for achievement- some people have a desire to do something better or more efficiently than it has done before. McClelland found that higher achiever differentiate them self from others. Higher achievers prefer the challenges of working at a problem and accepting the personal responsibilities for success or failure, rather than leaving the outcome to chance. Need for power-in this condition to be influential and control others. Individual high in need for power enjoy being “in charge” power motivated people to wish to create an impact on their -
- 29. Organisation and are willing to take risk to do so. Need for affiliation- it is derived as the desires to be liked and and accepted by others. it is the need for human association, individual with a high affiliation motive strive for friendship, prefer cooperative situation rather than competitive. A desire relationship involving a high degree of mutual understanding. McClelland found that combination of moderate to high need for power and a lower need for affiliation enables people to be effective entrepreneurs. they can use power to influence and control others behavior and make crucial decision. According to this theory entrepreneurs are actuated-
- 30. (activated) by a high need for achievement. They like to take risk. They are highly motivated by challenging and competitive work situations. 3)Theory of social behavior- Kunkel, presented a behavioral model of entrepreneurship. This model is concerned with the activities of individuals and their relation to the previous and present surrounding. According to this theory an individual perform various activities of which some are accepted by the society, which other are not. And who are accepting its create self-motivation to repeating-
- 31. It again. This pattern of social behavior is entrepreneurial behavior. The supply of entrepreneurship depend upon four structure in the society- a)Limitation structure- the society limits specific activities and this limitation structure affects all the members including entrepreneurs of a society. b)Demand structure- material rewards are necessary to lay the foundation of future social gains. Behavior of people can be made entrepreneurial by manipulating certain selected components of the demand structure.
- 32. c)Opportunity structure- it is define availability of capital management and technological skills, information concerning production methods, labour and markets. This structure is required to increase the probability of entrepreneurial activity. d) Labour structure- it is concerned with the supply of competent and willing labour. The supply of labour is governed by several factors such as available alternative. The major drawback of this theory is its assumes ideal structure for supply of entrepreneurs. Entrepreneurship is governed by the specific combination of situational factors which are -
- 33. Generally not available in the environment. 4) X-Efficiency theory- many firms face the problem of inefficient utilisation of various inputs or resources. An entrepreneurs come forward and identify inefficiencies in the utilisation of various resources according to “Liebenstein, the most significant feature of entrepreneurship is GAP filling. It is job of the entrepreneurs to fill the gap or make up deficiencies which always exist in the knowledge about the production function, utilisation of various resources.
- 34. The gap or deficiencies comes in production because all the inputs in the production can not be marketed. Exp-(motivation and leadership) 5)Hoselitz sociological theory- it is define that an entrepreneurship is most likely to emerge under a specific social culture. They feel that culture values and role, expectation are responsible for the emerge of entrepreneurship. Hoselitz (1964) formulated his socio-cultural theory on the assumption that certain persons are creative power in any cultural or social group and they develop different attitudes.
- 35. Entrepreneurship can be developed in a society in which cultural norms. Hoseletz define that the entrepreneurship can develop in society when its culture permits a variety of choice and where social process are not rigid, encourage the development of personalities interested in enterprise & the suggested marginal groups promote entrepreneurship and economic development. 6)Trait theory of entrepreneurship-according to F.A. Walker an entrepreneur is one who is participates more than average capacities in the task of organising and coordinating factors of production
- 36. An entrepreneur is a leader, and a captain of the firm. For the success of an enterprises/ business/ profits. It is totally depend upon the entrepreneur efficiency and superior talents. As on entrepreneur, an individual must have certain feature of personality like- creativity, self- confidence, risk taking, imagination, etc. the major feature responsible for the emergence of entrepreneurs include- creative and innovative skills, ability to building an organisation. 7)Schumpter’s innovation theory- Joseph scumpter’s described “one who seeks to reform the pattern of production by exploiting an innovation. Possibilities for production of new -
- 37. Commodity or producing an old in a new way, by opening up a new source of supply of material or a new outlet of products. According to schumpeter, an entrepreneur is one who innovates, raises money, organise talent, provides leadership, and sets the organisation. Schumpters also define the difference between inventors and innovator. Inventor- discover new methods and raw material . Innovator- utilises discovers in order to make new combination. This theory based on following assumption- a) Existence of sufficient availability of capital.
- 38. b)Existence of developed banking system to avoid scarcity of capital. c) Existence of a high level developed technology.