MODULE 5.pptx

ENTREPRENEUR
“An entrepreneur is one who always searches for changes, responds
to it and exploits it as an opportunity”.- Peter F Drucker
Thus, entrepreneur is an innovator, who carries out new
combinations in ever changing environment to initiate and accelerate
the process of economics, social and technological development.
An entrepreneur is an economic agent who plays an important role in
the economic development of a country.
He identifies opportunities and grabs them for economic benefits.

CONCEPT OFENTREPRENEURSHIP
Entrepreneurship is a process undertaken by an entrepreneur to
augment his business interests.
Some authors define “Entrepreneurship is the individual process
flourishes, when the interlinked dimensions of individual
psychological entrepreneurship, entrepreneur traits, social
encouragement, business opportunities, government policies,
availability of resources and opportunities coverage towards the
common good, development of the society and economy”.
Entrepreneurship is the product of teamwork and the ability to
create, build and work as a team.

It is the process of identifying opportunities in the market pace,
arranging the resources required to pursue these opportunities and
inverting the resources to exploit the opportunities for better gains.
HIGGINS defined “Entrepreneurship as the function of foreseeing
investment and production opportunities, organizing an enterprise to
undertake a new production process, raising capital, hiring labour,
arranging the supply of raw materials, finding site, introducing new
technique, discovering new source of raw materials and selecting top
managers for day to day operation”.
Coles definition is that “The purposeful activity of an individual or a
group of associated individuals undertaken to initiate, maintain or
organize profit by production or distributing of economic goods and
services”.

CHARACTERISTICS OF ENTREPRENEURSHIP
1. Innovation
2. Risk taking
3. Skillful management
4. Organization
5. Decision making
6. Making the enterprise a success.
Both thinker and doer, planner and worker.
Future vision, intelligent, imaginative and self directed.

An entrepreneur is a highly goal oriented, enthusiastic and
energetic individual.
Action oriented, highly motivated and ready to take risks at all
levels to achieve the goal.
Should have unwavering determination and commitment.
Creativeness and result oriented and hard working.
Accepts responsibilities with enthusiasm.
Self confident, dedicated and self disciplined.

FUNCTIONS OF AN ENTREPRENEUR
1.Planning
2.Organizing
3.Decision making
4.Management
5.Innovation
1.Diversification of
production
2.Expansion of the
enterprise.
3.Maintaining cordial
employer and
employee relations.
4.Talking labour
problems
5.Coordination with
outside agencies.
1.Management of
scarce resources.
2.Dealing with public.
3.Engineering
4.New product
development.
5.Parallel
opportunities.

6.Risk bearing
7.Leading
8.Controlling
6.Marketing
7.Management
8.Customer relation

STAGES IN ENTREPRENEURIAL PROCESS:
• Starting a new venture is the main theme of entrepreneurial process.
• It involves just more than solving problem in any typical management
position. He must find, evaluate and develop an opportunity by
overcoming the problem that arise in developing something new.
1. IDENTIFICATION OF AN OPPORTUNITY
2. EVALUATION OF THE OPPORTUNITY
3. PREPERATION OF THE BUSINESS PLAN
4. DETERMINATION AND ORGANIZING THE RESOURCES
5. MANAGEMENT OF THE ENTERPRISE.

IDENTIFICATION OF OPPORTUNITY
• This may be from his own ideas or from external sources like
Consumers
Business associates
Members of distribution system
Independent technical organizations
Consultants etc.
Consumers are the best source of ideas for a new venture who spells
out the need of a product or service.
Due to the close contact with the end user, member of distribution
system also see product needs one can identify new business
opportunities through a discussion with retailer, wholesalers or a trade
representative.

EVALUATION OF OPPORTUNITY
This evaluation is perhaps the most critical element of this process as it
allows the entrepreneur to assess whether the specific product or service
provides sufficient return on investment.
This process involves;
1. Looking at the length of opportunity
2. Its real and perceived valve
3. Its risks and returns
4. Its fit with personal skills and goals and its uniqueness.
SWOT analysis is one of the useful analysis tools. Strength and
weakness are internal factors and are related to organization where as
opportunities and threats are related to the environment and competition.

This plan includes;
Description of product or service
Agreement of opportunity
Assessment of the entrepreneur and his team
Resources needed
Amount and source of capital needed
Rewards and profit expected.
DEVELOPMENT OF A BUSINESS PLAN:
This is a time consuming activity of the process. This plan contains the
following in order

1. Title of project, table of contents and executive summary
2. Description of business and industry
3. Technology plan
4. Financial plan
5. Organization plan
6. Production and operation plan
7. Marketing and distribution plan
8. Summary of plan.
DETERMINATION AND ORGANIZING THE RESOURCES
• This process begins with the assessment of present resources.
• Enough care must be taken not to underestimate the amount and nature
of resources required.

• Organizing the required resources at the appropriate time is another
important aspect of this process.
• Alternative sources of supply, process of manufacture etc., are to be
planned.
MANAGEMENT OF ENTERPRISE
• After resources are acquired, the entrepreneur must use them to
implement the business plan.
• The operational problems of the growing enterprise must also be
examined.
• This calls for a management with all functions like planning,
organizing, staffing, directing and controlling.

BARRIERS OF ENTREPRENEURSHIP
1. Lack of capital
2. Lack of technical knowledge
3. Economic business cycle
4. Non availability of raw materials and resources
5. Government regulations
6. Obsolescence of technology or idea
7. Unstable and unpredictable markets
8. Globalization and entry of foreign goods
9. Risk

EVOLUTION OF ENTREPRENEURSHIP
Early period
An early example of entrepreneurship is known to be the example of
Marco polo who tried to trade routes 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( a person or company
involved in wholesale trade) adventure took the role of trading, bearing
all physical and other risks.
After his successful selling of goods and completing his trip, the profits
were shared by capitalist and 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.
For example cleric who used to be in charge of big architectural
works like castles, cathedrals etc.
17th Century
An amalgamation of risk with entrepreneurship had evolved.
A person used to enter into a contractual agreement with government
to perform a service or to supply some goods.

Cantillon viewed that entrepreneurs are risk taker, observing that
merchants, formers, craftsmen, buy at a certain price and sell at an
uncertain price, hence operating at risk.
18th and 19th Century
As a result of industrialization during 18th century the person with
capital( capitalist) is differentiated from the person who needs capital(
entrepreneur).
Many of the technical inventors did not have money to turn their
inventions into products. Hence some capitalist had to finance them.

20th Century
The entrepreneur organizes and operates an enterprise for personal
gains.
He takes risk, contributes his own initiative, skills, he plans, organizes
and leads his enterprise.
He owns and bears the loss or gain.
Although the tools have changed with advances in science and
technology, the ability to innovate and risk taking has been present in
all generations

SOURCES OF FINANCE FOR ENTREPRENEUR
 An entrepreneur might face the major hurdle of acquiring financing to
jumpstart a business and increase the likelihood for success.
 Depending on the services or products provided, your company might
require thousands of dollars to open for business.
 Fortunately, an array of finance sources is available. However, you
must select the source based on your personal financial standing and
that best meets your needs.

Small Business Administration Loan
The SBA is a federal government agency that provides financial
assistance to new and existing businesses.
Retirement Funds
If you have an Individual Retirement Account or 401(k) retirement
plan, you might withdraw funds to invest in a new business or provide
capital for an existing company.
Private Loan
You might need complete funding of your new business or a loan
amount that augments your existing funds. Consider a loan from
family or friends.

Personal Credit Card
• Although it is best to separate personal and business transactions, you
might consider using your personal credit card to start up a company.
Keep records of business-related charges to your credit card.
Personal Bank Loan
• You might initiate a personal bank loan that you personally guarantee,
perhaps with a lean on your home.
• If your company has other owners, they are not liable for this debt,
regardless of the company’s use of funds that you provide.
Venture Capital Investors
• Generally, venture capital investors provide funds to early-stage
startup companies.
• These investors are interested in industries with high-growth potential,
such as information technology.

CENTRAL LEVEL INSTITUTIONS
Important Central Level Support Agencies for Promotion & Development of
Small Scale Enterprises are as under :
1) Development Commissioner, Micro, Small & Medium
Enterprises (DC – MSME) under the Central Ministry of Micro, Small
& Medium Enterprises in which Ministry of Agro & Rural Industries
has also been merged.
2) National Board for Micro, Small & Medium Enterprises
(NBMSME).
3) Small Industries Development Organization (SIDO).
4) National Small Industries Corporation (NSIC).
5) Small Industries Development Bank of India (SIDBI).
6) Khadi & Village Industries Commission (KVIC).
7) National Science & Technology Entrepreneurship
Development Board (NSTEDB).

8) National Productivity Council (NPC).
9) National Institute for Small Industry Extension & Training
(NISIET).
10) National Institute for Entrepreneurship & Small Business
Development (NIESBUD).
11) Indian Institute of Entrepreneurship (IIE).
12) Entrepreneurship Development Institute of India (EDII).
13) National Bank for Agricultural & Rural Development
(NABARD).
14) Council of Scientific & Industrial Research (CSIR)
15) Industrial Credit And Investment Corporation Of India(ICICI)
16) Industrial Finance Corporation Of India (ICFI)

SSIB( SMALL SCALE INDUSTRIES BOARD)
It provides a forum to its members for interaction to facilitate
cooperation and inter institutional linkages and to render advice to
government on various policy matters.
The board was first constituted in 1954. Its term is for 2 years.
The board was last constituted on 18th January 2003, with 101
members and held its 48th meeting on 17 January 2004.
The industrial minister of the government of India is the chairman of
the SSIB.
 Its key members are state industry minister, some members of
parliament, secretaries of various departments of government of India,
financial institutions, public sector undertakings, industry
associations, eminent experts in the field.

NSIC(NATIONAL SMALL INDUSTRIES CORPORATION)
This was set up in 1955 with a view to promoting, aiding and
fostering the growth of SSI in the country with focus on commercial
aspects of these functions.
 The corporation has been assisting the sector through several
schemes and activities.
 It started with multiple objectives of helping SSI units for:
• Providing machinery on hire purchase,
• Assisting ,marketing and exports,
• Organizing supply of raw materials,
• Training of personnel,
• Assistance in modernization of the units,
• Enlisting SSI units for tender participation in government purchases.

SIDO(SMALL INDUSTRIES DEVELOPMENT
ORGANISATION)
 The office of development commissioner is also known as small
industry development organization
 It was established in 1954 for assisting the ministry in formulating,
coordinating, implementing and monitoring policies and programs
for the promotion and development of small scale industries.
It has over 60 offices and 21 autonomous bodies under its
management, including tool rooms, training institutes and project-
cum-process development centers etc.

KVIC(KHADI AND VILLAGE INDUSTRIES COMMISION)
It is a statutory body created by an act of parliament in April 1957.
 The KVIC is supposed to do the planning, promotion, organizing
and implementation of programs for the development of khadi and
other village industries in the rural areas in coordination with other
agencies engaged in rural development wherever necessary.
National Science & Technology Entrepreneurship
Development Board (NSTEDB)
Established in 1982 by GOI
Promote and develop high end entrepreneurship for S & T manpower
as well as self employment by utilizing S & T infrastructure.

Network agencies of support system, academic institutions and R & D
organizations to foster self employment using S& T with special focus
on backward areas.
NPC(NATIONAL PRODUCTIVITY COUNCIL)
Primary objective is to act as a catalyst in enhancing the productivity
of all sectors of the economy, including industry and agriculture.
ICICI
It was set up in January 1955 under Indian companies act with primary
objective of developing small and medium industries in the private
sector.
It performs the following functions:-

It provides assistance by way of rupee and foreign currency loans,
underwriting and direct subscriptions to shares/ debentures and
guarantees.
It offers variety of financial services such as deferred credit, leasing
credit, installment sale, asset credit and venture capital.
It guarantees loans from other private investment sources.
Industrial Finance Corporation Of India Ltd ( IFCI)
It extend financial assistance to the industrial sector through rupee
and foreign currency loans and offers services through its facilities of
equipment procurement, equipment finance, buyers and suppliers
credit, equipment leasing and finance to leasing and hire purchase
companies.

In recent years, the IFCI has started new promotional schemes, such as
interest subsidy scheme for women entrepreneurs; consultancy fee
subsidy schemes for providing marketing assistance to SSIs to
encourage the modernization of tiny, small-scale ancillary units and
control of pollution in small and medium scale industries.

Characteristics of Small Scale
Industries
• Ownership: Such units are generally under single ownership. So
it is a sole proprietorship or sometimes a partnership.
• Management: Both the management and the control generally is
with the owner/owners. So the owner is actively involved with
the daily running of the business.
• Limited Reach: Small scale industries have a restricted area of
operations. So they meet local and regional demand.

Characteristics of Small Scale
Industries
• Labor Intensive: These small scale industries tend to use labour
and manpower for their production activities. So their
dependence on technology is pretty limited.
• Flexibility: These units are more adaptable to their
changing business environment. So in case of sudden changes
or unexpected developments, they are flexible enough to adapt
and keep carrying on. Large industries do not have this
advantage.
• Resources: They use local and readily available resources. This
also helps the economy with better utilization of natural
resources and less wastage.

Advantages
1.Potential for large employment
• Small Scale Industries have potential to create employment opportunities on
a massive scale. They are labor intensive in character. They use more labor
than other factors of production. They can be set up in short time and can
provide employment opportunities to more number of people. This is
important for a labor abundant country like India.
2. Requirement of less capital
• Small Scale Industries require less capital when compared to large scale
industries. India is a capital scarce country and therefore Small Scale
Industries are more suitable in the Indian context. They can be started and
run by small entrepreneurs who have limited capital resources
3. Contribution to industrial output
• Products manufactured by Small Scale Industries form a significant portion
of the industrial output of the country. They produce a number of consumer
goods as well as industrial components in large quantities and satisfy the
needs of consumers. The consumer goods produced by Small Scale
Industries are cheaper and satisfy the requirements of the poorer sections.

4. Contribution to exports
• Small Scale Industries contribute nearly 40 per cent to the industrial exports of the
country. Products such as hosiery, knitwear, hand loom, gems and jewellery, handicrafts,
coir products, textiles, sports goods, finished leather, leather products, woolen garments,
processed food, chemicals and allied products and a large number of engineering goods
produced by the SSI sector contribute substantially to India’s exports. Further products
produced by Small Scale Industries are used in the manufacture of products manufactured
and exported by large scale industries. Therefore they contribute both directly and
indirectly to exports and earn valuable foreign exchange.
5. Earning foreign exchange
• Small Scale Industries earn valuable foreign exchange for the country by exporting
products to different countries of the world. At the same time, their imports are very little
and so there is less foreign exchange outgo. Therefore Small Scale Industries are net
foreign exchange earners. For e.g. Small Scale Industries in Tiruppur contribute to a
substantial portion of India’s textile exports and earn valuable foreign exchange for the
country.
6. Equitable distribution
• Large scale industries lead to inequalities in income distribution and concentration of
economic power. But small scale industries distribute resources and wealth more
equitably. It is because income is distributed among more number of workers since it is
labor intensive. This results in both economic and social welfare.

7. Use of domestic resources
• Small Scale Industries use locally available resources in a productive
manner which would have otherwise gone waste. Small amounts of
savings which would have remained idle is channelized into setting up of
small enterprises. This increases capital formation and investment in the
economy.
8. Opportunities for entrepreneurship
• Small Scale Industries provide opportunities for entrepreneurs with
limited capital. Setting up of an SSI requires less capital and lower
investment in technology and machines when compared to large scale
enterprises. Therefore small entrepreneurs car start Small Scale
Industries easily and succeed. Japan which was devastated by the
Second World War became a major economic power because of many
small entrepreneurs, who contributed greatly to the nation’s
development.
9. Cost efficiency
• Small scale units can adopt lean production method. which offer better
quality and more variety at a lower cost. They can bi more cost efficient
when compared to large scale units because their expenses are lower.

10. Reducing migration
• Migration happens when people living in rural areas are not able to find employment and
therefore migrate to urban areas seeking employment. Large scale migration puts
tremendous pressure on land, water and other resources in urban areas leading to poor
quality of life. Small Scale Industries use the skills and talents of rural craftsmen, artisans
etc. They provide gainful employment to those with inherited skills resulting in their
economic upliftment. Thus Small Scale Industries help in reducing migration.
11. Suitable for non-standardized products
• Large scale enterprises are suitable for manufacturing standardized products on a large
scale whereas Small Scale Industries are more suitable for manufacturing non-
standardized products.
12. Flexibility in operation
• Small scale enterprises are more flexible. They can adapt themselves to changing market
requirements very fast and benefit from new opportunities.
13. Quick decisions
• Since the enterprise is small and there is not much hierarchy, quick decisions.can be taken.
Quick decisions are helpful in solving problems in the initial stages and also to exploit
market opportunities.

14. Adaptability to change
• Small Scale Industries can understand the changing requirements of the customers and adapt
themselves much quickly. They can change their procedures, methods and techniques faster and cater
to new requirements of their customers.
15. Small market size
• In case the market size is small, producing products on a large scale would not be feasible. In such
cases, Small Scale Industries are more suitable since they produce limited quantities.
16. Customization
• Today customers prefer products tailored to their specific needs. They demand unique products. In
such cases where products have to be customized to individual customer needs large scale production
would not be suitable. Small Scale Industries are better suited in case products have to be customized.
17. Low social costs
• In the case of large scale enterprises, society has to incur high social costs in terms of air and water
pollution and environmental degradation. But in the case of small enterprises, such social costs are
less.
18. Opportunity for talent
• Small Scale Industries provide opportunity for talented individuals who do not have huge funds, to
start enterprises on a small scale. Dhirubhai Ambani of Reliance, Karsanbhai Patel of Nirma, Brij
Mohan Munjal of Hero Honda, Venugopal Dhoot of Videocon, Sunil Mittal of Bharti Enterprises
(Airtel), Narayanamurthy and his co-promoters of Infosys, Ramalinga Raju of Satyam are all examples
of entrepreneurs who started their business on a small,scale, and through intelligence, determination
and commitment have transformed their small companies into large world class players.

19. Lesser industrial disputes
• In large scale enterprises workers are more organized and in many large scale
enterprises there are strong trade unions. The trade unions fight for the workers
rights. If the management fails to accept the demands of the trade unions, the
trade unions gherao the management, adopt go slow tactics and strike work. But
in small scale enterprises, workers are not well organized and union activity is
less. So there is very little possibility of industrial disputes to occur.
20. Personal contact with employees
• Businesses engaged in small scale production have less number of employees. It
is easy to maintain personal contact with employees. Grievances and problems
would be known immediately and solved. Therefore there is very little possibility of
any industrial dispute.
21. Personal contact with customers
• The number of customers is limited and the small scale entrepreneur would be
directly involved in the business. Personal contact can be maintained with
customers. Their needs and requirements can be understood and satisfied. This
results in satisfied customers leading to stable demand.
22. Self interest
• Small business is generally run by the sole proprietor of the business. He earns
all and risks all. Self interest act as a strong motivator. Therefore he would put in
his best efforts to make the business a success.

MODULE 5.pptx

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MODULE 5.pptx