MANAGEMENT AND ENTREPRENEURSHIP

MANAGEMENT & ENTREPRENEURSHIP

[As per Choice Based Credit System (CBCS) scheme]
[Subject code: BEC501]

MODULE – 3

a) SOCIAL RESPONSIBILITIES OF BUSINESS

&

b)ENTREPRENEURSHIP

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SOCIAL RESPONSIBILITY

MEANING OF SOCIAL RESPONSIBILITY

DEFINITION of 'Social Responsibility' Social responsibility is the idea that

businesses should balance profit-making activities with activities that benefit society;
it involves developing businesses with a positive relationship to the society in which
they operate.

Social responsibility is a nebulous idea and hence is defined in various ways.

Adolph Berle! has defined social responsibility as the manager's responsiveness to

public consensus. This means that there cannot be the same set of social
responsibilities applicable to all countries in all times. These would be determined in
each case by the customs, religions, traditions, level of industrialisation and a host of
other norms and standards about which there is a public consensus at any given time
in a given society.
According to Keith Davis,' the term "social responsibility" refers to two types of
business obligations, viz., (a) the socio-economic obligation, and (b) the socio-human
obligation.

The socio-economic obligation of every business is to see that the economic

consequences of its actions do not adversely affect public welfare. This includes
obligations to promote employment op-opportunities, to maintain competition, to
curb inflation, etc. The socio-human obligation of every business is to nurture and
develop human values (such as morale, cooperation, motivation and self-realization
in work).

Every business firm is part of a total economic and political system and not an island
without foreign relations. It is at the centre of a network of relationships to persons,
groups and things. The businessman should, therefore, consider the impact of his
actions on all to which he is related. He should operate his business as a trustee for
the benefit of his employees, investors, consumers, the government and the general
public. His task is to mediate among these interests, to ensure that each gets a square
deal and that nobody's interests are unduly sacrificed to those of others.

SOCIAL RESPONSIBILITY OF BUSINESS TOWARDS DIFFERENT GROUPS:

Social responsibility of business refers to its obligation to take those decisions and
perform those actions which are desirable in terms of the objectives and values of our
society. Reality is that, despite differing arguments relating to social responsibility,
business enterprises are concerned with social responsibility because of the influence
of certain external forces.

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Business enterprises have responsibility towards

1. Towards the Consumer and the Community

2. Towards Employees and Workers

3. Towards Shareholders and Other Businesses

4. Towards the government

A businessman's social responsibilities to each of these parties are briefly enumerated

below.

Towards the Consumer and the Community

1. Production of cheap and better-quality goods and services by developing new

skills, innovations and techniques, by locating factories and markets at proper places
and by rationalizing the use of capital and labor.

2. Levelling out seasonal variations in employment and production through accurate

forecasts, production scheduling and product diversification.
3. Deciding priorities of production in the country's interest and conserving natural
resources.

4. Providing for social audit (see section below).

5. Honoring contracts and following honest trade practices. Some important but
dishonest trade practices are: making misleading advisements calculated to deceive
the purchaser: misbranding of articles with respect to their material. impediments,
quality, origin, etc.; selling rebuilt or secondhand goods as new; procuring business
or trade secrets of competitors by espionage, bribery or other means: restraining free
and fair competition by entering into combination agreements; using containers that
do not give a correct idea of the weight and quantity of a product; making false
claims of being an "authorized dealer". "manufacturer" or "importer" of certain goods;
giving products misleading names so as to give them a value which they do not
possess; declaring oneself insolvent through questionable financial manipulations.

6. Making real consumer needs as the criterion for selecting messages to be given by
product advertisements. Nearly all current advertising seeks to create wants. Thus.
people no longer buy soap to make them clean. They buy the promise that it would
make them beautiful. Toothpaste is bought not to kill bacteria but to create white
teeth. Cars are bought for prestige rather than travel. Even foodstuffs such as oranges
are bought for vitality, not nutrition. This kind of advertising promotes over-
consumption, forces consumers to constantly compare themselves negatively with
others, creates in them dissatisfaction with the old and outmoded. and makes them
feel that without a particular brand of a product they are losers.

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7. Preventing the creation of monopolies. Monopolies are bad in that they make the
community face high prices, short supply and inferior quality of goods. Inequalities
of wealth distribution are accentuated and the standards of public morality
deteriorate as bribing the

judges. legislators and the government to gain favors becomes very common. 8.
Providing for after-sale servicing.
9. Ensuring hygienic disposal of smoke and waste and voluntarily assisting in making
the town environment aesthetically satisfying.

10. Achieving better public relations (that is, creating a more favorable attitude
towards the enterprise) by giving to the community, true, adequate and easily
intelligible information about its working.

11. Supporting education. slum clearance and similar other programs.

Towards Employees and Workers
1. A fair wage to the workers (and not merely one determined by market forces of
supply and demand), which is possible only when the businessman is willing to
accept a voluntary ceiling on his own profits.

2. Just selection, training and promotion (without any discrimination on grounds of

sex, race, religion and physical appearance).

3. Social security measures and good quality of work life.

4. Good human relations (i.e., maintaining industrial peace, creating conditions for
collective bar-gaining, educating workers to produce their own leadership and
participative management).
5. Freedom, self-respect and self-realization. A businessman should devote his
knowledge and ability not only to making his worker's life more affluent, but also to
making it more satisfying and rewarding. There should he an awareness that the
quality of man's life is as important as the-quantity of his material wealth.

6. Increase in productivity and efficiency by recognition of merit, by providing

opportunities for creative talent and incentives.

Towards Shareholders and Other Businesses

1. Promoting good governance through internal accountability and transparency.

2. Fairness in relations with competitors. Competition with rival businessmen should

always be fair and healthy, based on rules of ethics and fair play rather than on rules
of warfare. Businessmen sometimes treat their rivals as enemies and try to harm each
other by malicious propaganda, price-cutting, interference in production and
distribution.

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Towards the government

1. Shunning active participation in and direct identification with any political party.

2. Observing all the laws of land which may have the following objectives:

(a) To provide direction to the economic and business life of the community.

(b) To bring about harmony between the limited enterprise interest and the wider
social interest of the country.

(c) To provide safeguard against errant business practices.

(d) To compel business to play fair to all participants in the economy—employees,

shareholders, minority shareholders, etc.
(e) To prevent oppression or exploitation of the weaker partners in business, such as
employees, minority shareholders, etc.

(f) To enforce maximum production according to the priority of sectors and

production lines laid down by the government.

(g) To allocate limited resources according to social priorities and preferences.

(h) To enforce distributive justice, especially to weaker sections of the community.

(i) To implement rural uplift and secure balanced development of the country
SOCIAL AUDIT
A social audit is a systematic study and evaluation of the organization’s social
performance as distinguished from its economic performance. The term "social
performance" refers to any organizational activity that effects the general welfare of
society.
BENEFITS
1. It supplies data for comparison with the organization’s social policies and
standards. The management can determine how well it is living up to its social
objectives.

2. It develops a sense of social awareness among all employees. In the process of

preparing reports and responding to evaluations, employees become more aware of
the social implications of their actions.

3. It provides data for comparing the effectiveness of different types of programmes.

4. It provides data about the cost of social programmes, so that the management can
relate this data to budgets, available resources, company objectives, etc.

5. It provides information for effective response to external groups which make

demands on the organization.

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LIMITATIONS

A social audit is a process audit rather than an audit of results. This means that a
social audit determines only what an organization is doing in social areas and not the
amount of social good that results from these activities. An audit of social results is
not made because:

1. They are difficult to measure. If. for example, following a company's S.C./S.T.
employment programme in a certain region. there is a fall in the violent crime rate by
4 per cent, it is difficult to measure how much of the benefit is caused by this
programme.
2. Their classification under "good" or "bad" is not universally accepted. In other
words, the same social result may be classed as "good" according to one opinion, and
as "bad" according to an-other.

3. Most of them occur outside the organisation, making it difficult for the organisation
to secure data from these outside sources.
Even though social results cannot be proved, an audit of what is being done is still
considered desirable, because it shows the amount of effort that a business is making
in area deemed beneficial to society. Further, if effort can be measured, then informed
judgements can be made about potential results.
Social audits can be made either by internal experts, outside consultants, or a
combination of the two. The internal auditor has the advantage of familiarity with the
business, but his judgements may be influenced by company loyalties. An outside
consultant has the advantage of an outsider's view, but he lacks familiarity with
organisational activities, so he may overlook significant data. In any case, if audit
information is to be released to the public, the outside auditor has more credibility.
There is a difference of opinion on the issue whether social audit should be made
public by means of a social performance report or not. Some say that these reports are
too vague and inconcrete to satisfy the public and anyone can find reasons for
criticising a firm's performance, which can increase social conflict. But some others
assert that these reports contribute to public understanding for they replace rhetoric
with facts.

The Tata Iron and Steel Company is the first industrial organisation in India to have
carried out a social audit of its performance in 1979. The social audit was conducted
by a committee under the chairmanship of Justice S.P. Kotval, former Chief Justice of
Mumbai High Court. The committee's terms of reference were to examine and report
whether, and the extent to which the company had fulfilled the objectives contained
in clause 3A of its Articles regarding its social and moral responsibilities to the
consumers, employees, shareholders, society and the local community. The
Committee in its report praised TISCO's social welfare work and made a number of
suggestions to improve its programmes.

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BUSINESS ETHICS AND CORPORATE GOVERNANCE

BUSINESS ETHICS

Business ethics is the application of moral principles to business problems. However,

ethics extend beyond the question of legality and involve the goodness or badness of
an act. Therefore, an action may be legally right but ethically wrong. For example, a
small village community located twenty miles from the closest urban shopping area
has a single grocer's shop. The owner of the shop can charge any exorbitant price for
his product though legally but not ethically.

Sexual harassment, discrimination in pay and promotion and the right to privacy are
some other issues specially relevant to the study of ethics.

Sexual harassment in the workplace can be defined as unwelcome sexual advances,

sexual favor or other verbal or physical conduct of a sexual nature. Although the
landmark judgment of the Supreme Court in the case of Vishaka& others vs State of
Rajasthan makes it a mandatory duty of the employer to prevent this misconduct at
the workplace, it does not appear that the sensitivity of today's organisations has kept
pace. The negative aspects of sexual harassment are: costly lawsuits, decreased
productivity, increased absenteeism, lower morale and higher staff turnover.

Discrimination against women in pay and promotion opportunities is also unethical,

which continues to exist despite there being the Equal Remuneration Act, 1976. One
of the most commonly cited reasons for the lack of promotions of women is the glass
ceiling effect a term used for artificial barriers based on attitudinal or organisational
bias that prevent qualified women from progressing in the organisation into senior
management level positions.
Employees' right to privacy raises several questions, some of which are: "Can a
company refuse to hire smokers and/or make current smokers quit smoking"? and
"Can a company conduct drug tests on its prospective employees"?

It should be remembered that the corporate "shield" which protects a company's

management from unlimited legal liability does not protect it against unlimited
public condemnation for its unethical and immoral actions. The credibility of a
business depends on its high business ethics and integrity.

How does a manager decide what is ethical or unethical? There are four important
factors which affect his decision.

 Government legislation.
 Business codes. (But being voluntary in nature these codes, though pointed to
with pride, are usually ignored in practice.)
 Pressure groups. (For example, in recent years Indian carpet industry has been
facing consumer boycott from the west for employing child labor.)
 Personal values of the manager himself. (But a manager with strong personal
values mostly finds himself in a dilemma when an unethical course of action

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becomes his only choice to achieve the company's goal. This has prompted
many major business houses, to teach executives the importance of remaining
true to their convictions, whether rooted in organized religion or personal
morality, amid the conflicting demands and temptations they confront when
taking decisions. New approaches (e.g., asking participants to write their
autobiographies, as if they are at the end of their lives) are being tried to make
them inspiring decision-makers, with a sense of morality. "Under-promise
over-deliver" is a much-revered motto at Infosys. The company can excuse
incompetence but not lack of ethics.)

CORPORATE GOVERNANCE

The term "corporate governance" is used to denote the extent to which

companies run in an open and honest manner in the best interest of all stake-
holders. The key elements of good corporate governance are transparency and
accountability projected through a code which incorporates a system of checks
and balances between all key players, viz., board of directors, auditors and
stake-holders. In Britain, following corporate scandals in the early
1990s, a committee was appointed in 1991 under the chairmanship of Sir
Adrian Cadbury to prepare a code for best corporate governance. Major
recommendations of this committee are as under:

• Non-executive directors whose most important role is to bring an

independent judgement to bear on issues of strategy, performance, resources,
etc. should be picked through a formal selection process on merits.

• Companies should have remuneration committees consisting wholly or mainly

of non-executive directors which should recommend to the board executive
directors' emoluments.

Companies should have audit committees consisting of minimum 3 non-

executive directors to report on any matter relating to financial management.

• Audit partners should be rotated and there should be fuller disclosure of non -
audit work.

This is a voluntary code and has only some moral pressure of the London Stock
Exchange requiring companies to mention in their annual report whether they are
following the code, and if not, why.

Benefits of Good Corporate Governance

I. It creates overall market confidence and long-term trust in the company.
2. It leads to an increase in company's share prices.
3. It ensures the integrity of company's financial reports.
4. It maximizes corporate security by acting as a whistle blower.

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5. It limits the liability of top management by carefully articulating the

decision-making process.
6. It improves strategic thinking at the top by inducting independent directors
who bring a wealth of experience and a host of new ideas.

…………………………………

REVIEW QUESTIONS (MODULE-3)

1. Define Leadership. Explain any two leadership styles.

2. Explain the Characteristics of leadership.
3. Define Co-ordination. Explain the types of co-ordination.
4. Explain the importance and techniques of co-ordination.
5. Explain the meaning of control. Write the benefits of control.
6. Discuss Essentials of Effective control system.
7. Explain the steps involved in controlling.
8. Explain in detail, the social responsibilities of business towards different groups.
9. Explain in detail business ethics and corporate governance.
10. What is Social Audit? What are its benefits and limitations?

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ENTREPRENEURSHIP
ENTREPRENEUR
Meaning and evolution of concept:

The term "Entrepreneur" is defined in variety of ways. It varies from country to

country, time to time and the level of economic development.
The word "entrepreneur" is derived from the French verb "entreprendre" which
means "to undertake". In 16th century, the Frenchmen who organized and led
military expeditions were referred to as "entrepreneurs".

In early 18th century, French economist Richard Cantillon used the word
entrepreneur to business. Since then the word entrepreneur is used to one who takes
the risk of stating new organization or business or introducing a new idea, product or
service to society.
According to Joseph Schumpeter "An entrepreneur in an advanced economy, is an
individual who introduces something new in the economy a method of production
not yet tested by experience in the branch of manufacture concerned, a product with
which consumers are not yet familiar, a new source of raw materials or of new
markets and the life”. Accordingly to him the functions of an entrepreneurship are:
Introduction of new product Introduction of new methods of production

• Development of new markets and finding fresh sources of raw materials and

• Making changes

Cantillon defined entrepreneur as "The agent who buys factors of production at

certain prices in order to combine them into a product with a view to selling it at
uncertain prices in future". To summaries, "an entrepreneur is the person who bears
risk, unites various factors of production, to explore the perceived opportunities in
order to evoke demand, create wealth and employment".

IMPORTANCE OF ENTREPRENEUR

Entrepreneurship is the dynamic process of creating incremental wealth and

innovating things of value that have a bearing on the welfare of an entrepreneur. It
provides civilization with enormous amount of goods and services and enhances the
growth of social welfare. The man behind the entrepreneurship is an action oriented
and highly motivated individual who is ready to achieve goals.

M. Kirzner (1973) observes entrepreneurs as; “one who perceives what others have
not seen and acts upon that perception”.

Thus, entrepreneurs take the economy and the society that is the whole civilization to
the state of progress and prosperity.

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Taking this into consideration we can describe the Significance or importance of

entrepreneurs which is stated below

1. Growth of Entrepreneurship

Entrepreneurship the advent of new venture particularly small ventures in order to

materialize the innovative ideas of the entrepreneurs. Thus, the growth or
establishment of small enterprises ii the specific contribution of entrepreneurship in
in every economy of the world.

The statistics reveals that in USA economy nearly half a million small enterprise are
established every year. Our country is not an exception in this regard.

2. A Creation of job opportunities

Entrepreneurship firms contributed a large share of new jobs. It provides entry-level

jobs so necessary fur training or gaining experience for unskilled workers.

The small enterprises arc the only sector that generates large portion of total
employment every year. Moreover, entrepreneurial ventures prepare and supply
experienced labor to the large industries.

3. Innovation

Entrepreneurship is the incubator of the innovation. Innovation creates disequilibria

in the present state of order.

It goes beyond discovery and does implementation and commercialization, of

innovations. “Leap frog” innovation, research, and development are being
contributed by entrepreneurship.

Thus, entrepreneurship nurses innovation that provides new ventures, product,

technology , market, quality of good etc. to the economy that increase Gross Domestic
Products and standard of living of the people.

4. Impact on community development

A community is better off if its employment base is diversified among many small
entrepreneurial firms.

It promotes abundant retail facilities, a higher level of home ownership, fewer slums,
better, sanitation standards and higher expenditure of education, recreation and
religious activities. Thus, entrepreneurship leads to more stability and a higher
quality of community life.

5. Consequence of business failure

The collapse of large industry almost has irresistible damage to the development of
state and to the state of economy and to the financial condition of the relevant

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persons. The incumbents lost their jobs: suppliers and financial institutions face a
crisis of recovery.

Customers are deprived from goods, services, and the government losses taxes. This
could not happen in the case of failure of entrepreneurship. There shall be no
measurable effect upon the economy and no political repercussions too.
6. Political and economic integration of outsiders

Entrepreneurship is the most effective way of integrating those who feel disposed
and alienated into thconomy. Minorities, migrants and women are safely integrated
into entrepreneurship that will help lo develop a well-composed plural society.
7. Spawns entrepreneurship

Entrepreneurship is the nursing ground for new inexperienced adventurists. It is the

field where a person can start his/her idea of venture, which may be ended up in a
giant enterprise. All the large industrial ventures started as a small entrepreneurial
enterprise.
Therefore, entrepreneurship provides wide spectrum of ventures and entrepreneurs
in every economy. The vast open arena of entrepreneurship thus, acts as incubator to
entrepreneurs.

8. Enhances standard of living

Standard of living is a concept built on increasing amount of consumption of variety

of goods and services over a particular period by a household.

So it depends on availability of diversified products in the market. Entrepreneurship

provides enormous kinds product of various natures by their innovation.
Besides, it increases the income of the people who are employed in the
entrepreneurial enterprises. That also capable employed persons to consumer more
goods and services. In effect entrepreneurship enhances the standard of living of the
people of a country.

9. Promotes research and development

Entrepreneurship is innovation and hence the innovated ideas of goods and services
have to be tested by experimentation. Therefore, entrepreneurship provides funds for
research anddevelopment with universities and research institutions. This promotes
the general development of research and development in the economy.

Entrepreneurship is the pioneer zeal that provides events in our civilization. We are
indebted to it for having prosperity in every arena of human life- economic,
technological and cultural.

The above discussion in a nutshell enumerates that tremendous’ contributions of

entrepreneurship.

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CONCEPT OF ENTREPRENEURSHIP:

Entrepreneurship is a process undertaken by an entrepreneur to augment his

business interests. Some authors define it as "Entrepreneurship is the indivisible
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 lies more in the ability to minimize the use of resources and to put
them to maximum advantage. Above all, entrepreneurship in today's context is the
product of teamwork and the ability to create, build and work as a team.

Entrepreneurship is the process of identifying opportunities in the market place,

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 labor, 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.
Cole's definition for entrepreneurship is "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".

Risk bearing, innovating and resource organizing, achieving goal through production
of goods or services. All the above definitions highlight the risk bearing, innovating
and resource organizing, achieving goal through production of goods or services.

CHARACTERISTICS OF SUCCESSFUL ENTREPRENEUR:

The process of entrepreneurship is a complex one having multidimensional

characteristics. The following are some of the commonly accepted characteristics
suggested by experts.
(i) Innovation

Entrepreneurship involves innovation of new things to effect dynamic changes and

good success in economy. It should create conditions for growth of the economy.
(II) Risk-taking
Risk is a inbuilt element of any business. Entrepreneurship should be risk bearing to
cater uncertainty of future.
(iii) Skillful management
Entrepreneurship brings together various functions of the management —planning,
organizing, staffing, directing, controlling and leading.

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(Iv) Organization

It brings together various facilities of production for an efficient and economical use.

(v) Decision making

Decision-making is a very vital characteristic of an entrepreneurship. Taking
decisions at all levels and stages of an entrepreneurship is a routine task.
(vi) Making the enterprise a success

Entrepreneurship is mainly an economic activity as it deals with creating and

operating an enterprise. it involves in satisfying the needs of customers with the help
of production and distribution of goods and services. This makes the enterprise a
success.

There are common qualities or skills found in successful entrepreneurs, expansion of

the word 'ENTREPRENEUR' gives a good idea of successful entrepreneurs.

E - Effective Communicator

N - Negotiating skills.

T - Total Commitment / Time management / Tactical / Team man

R - Risk-taking ability / Resourceful / Responsible

E - Emotional Stability / Ethical

P - Problem solving / Patience / Passion / Perseverance

R - Relations-Human & public / Realistic / Result-oriented

E - Energetic / Endurance

N - Networking ability.

E - Excellence in 'Economics'

U - Understands how to administer and organize / Unambiguous

R - Real innovator.

Entrepreneurship today

 Four aspects of being an entrepreneur today:

• Involves creation process.

• Requires devotion of time and effort.

• Involves rewards of being an entrepreneur.

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• Requires assumption of necessary risks

CLASSIFICATION OF ENTREPRENEURS
Entrepreneurs in business can be broadly classified based on criteria like - stages of

economic development, types of business, use of technology, area, age, gender and so
on:

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Among all the different types of entrepreneurs, we shall discuss the first type, as
described by Danhof, an American:
1. Innovative Entrepreneur

 An innovative entrepreneur is one who introduces a new product or a new

technique or a new market and can re-organize the enterprise if needed.
 They are generally aggressive in experimentation and seize opportunities. -
They are capable of converting attractive possibilities into practice.
 They raise money to start an enterprise, assemble the various factors, choose
the right employees and set the organization going. Innovative entrepreneurs
are more commonly found in developed countries.
 This is because such entrepreneurs can work only when a certain level of
development is already achieved.

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2. Imitative Entrepreneur or Adoptive entrepreneur -

 Imitative entrepreneurs are those who adopt or copy successful innovations

created by innovative entrepreneurs.
 They do not innovate the changes themselves, but only imitate techniques and
technology innovated by others.
 Imitative entrepreneurs are more commonly found in developing countries
because people there prefer to imitate products, technology, knowledge and
skill already available in more advanced countries.
 They are nevertheless important for the development of poor countries.
3. Fabian Entrepreneur

 Fabian Entrepreneurs are those who are very cautious and are skeptical about
any changes.
 they have neither the will to introduce any new changes nor the desire to
adopt new methods innovated by others, unless pushed to the wall.
 they are generally driven by custom, religion, tradition and past practices.
 they imitate or bring in changes only when it is a question of survival.
4. Drone Entrepreneurs

 Drone entrepreneurs are those who are highly resistant to changes.

 They refuse to adopt, imitate or make changes in production methods, come
what may.
 They choose to sink rather than imitate or bring in changes.
 They may even suffer from losses but prefer to stick to traditional ways.
 Such (old fashioned) entrepreneurs are found plenty in India.
 Ideal Jawa, a motorbike company based in Mysore is an example

5. According to Type of business

• Business entrepreneur: Convert ideas into reality; deal with both manufacturing
and trading aspect of business (Small trading and manufacturing business)
• Trading entrepreneur: Undertakes trading activities; concerned with marketing
(Domestic and international level).
• Industrial entrepreneur: Undertakes manufacturing activities only; new product
development etc (textile, electronics, etc)
• Corporate entrepreneur: Interested in management part of organization;
exceptional organizing, coordinating skills to manage a corporate undertaking
(Ambani, Tata families).

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6. Use of Technology
• Technical entrepreneur: Production oriented, possesses innovative skills in
manufacturing, quality control etc.
• Non-technical entrepreneur: Develops marketing, distribution facilities and
strategies
• Professional entrepreneur: Uses the proceeds from sale of one business to start
another one. Brimming with ideas to start new ventures

7. Growth
• Growth entrepreneur: One who enters a sector with a high growth rate; is a
positive thinker.
• Super growth entrepreneur: One who enters a business and shows a quick, steep
and upward growth curve.

8. Others
• Area- Rural and Urban entrepreneur
• Age- Men and Women entrepreneur
• Scale- Small- and Large-scale entrepreneur.

INTRAPRENEURSHIP
• Also Called Intra Corporate entreps.
• Persons with deep desire of personal achievements within organization are internal
entreps.
• Creative and innovative people within the organization, catch hold of new ideas for
product, service or process and work to bring their vision into reality.
• Work independently but do not assume ownership from employer. They are on the
payrolls of the company. In charge for an identifiable activity.
• Allowed to reap the full benefit of their creative effort.
• May leave the company to start their own venture and compete with the company.
• Dynamic executive, leads company to greater heights that’s why encouraged.
• Top Management provide financial and technical assistance to their ideas.

ENTREPRENEURIAL COMPETENCIES
• The success of a small-scale industrial venture depends on 'the following major
factors
a) Inherent viability of the project, i.e., technical, organizational, financial and
commercial viability.
b) The way a project is planned, i.e. decisions regarding various project parameters
such as where to locate, what technology to use, what should be the capacity of the
machineries, etc.

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c) The meticulousness with which a project is implemented.

d) The way a project is managed.
• In a small-scale enterprise, it is the promoter of the project, i.e., the entrepreneur
who does most of the functions of the project planning, implementation and
management.
• If the side of the project is big enough to call for employing professional managers,
it is, the entrepreneur who acts as a driving
force behind performance of these three aforesaid major tasks.
• In order to plan a project flawlessly,
implement it meticulously and manage it effectively, an entrepreneur needs
to possess certain knowledge, skills and appropriate personality profile.
• A competence is an underlying characteristic of a person, which results is effective
and/or superior performance in a job.
• A job competence is an underlying characteristic of a person, in that it may -be
motive, traits, skills, aspect of one’s self-image or a body of knowledge which one
uses.

MYTHS OF ENTREPRENEURSHIP

Entrepreneurship is a career which is gaining popularity worldwide but still isn’t

very well understood which is why there are so many myths regarding this career
option. A lot of people believe these myths to be true which is why they don’t pursue
their ambition of being an entrepreneur despite having a great idea. So, if you’re still
confused, don’t worry, we’ve got the most common myths debunked for you.

1. Entrepreneurs are born, not mad This is the most common myth that deters people
from becoming entrepreneurs. However, this is completely untrue. A normal person
with an idea which solves a problem the society is dealing with can become an
entrepreneur if he works on certain skills. If one is ready to develop on leadership
and managerial skills and isn’t scared to take risks, one can aim to become a
successful entrepreneur.

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2. All you need is money

This myth is not completely justified because you may have great investors pumping
in a lot of money into your venture but if you’re idea doesn’t appeal to the people,
they will not buy your product or service. Thus, money might be important but it is
more important to use the money wisely in places where it is required.

3. Entrepreneurs are usually college drop-outs

This is a common disbelieve because great people like Mark Zuckerberg, Mukesh
Ambani and Steve Jobs have managed to become successful entrepreneurs without a
college degree. However, a formal and educated background only helps an
entrepreneur to understand concepts and the business better. An entrepreneur
becomes one because of his idea and developed skills set and not his college degree.

4. You need an out of the box idea to start up

This is another myth about entrepreneurship which needs to be debunked. It is true

that you need an idea to develop on but the idea doesn’t need to be a completely new
or innovative one. Running a restaurant, school or any kind of a business or adding
value to an already existing idea which solves problems of the society can also serve
as a great base for entrepreneurship.

5. Having no boss the best feeling

A lot of people consider entrepreneurship because they believe they will get to set
their own terms at work and lead a team. However, this might not be a favourable
scenario for every venture. With ideas like leadership coaches catching up, it is
proved that even entrepreneurs who lead a team require help from superiors in order
to succeed.

6. You need the perfect timing

People often comment saying that it is actually luck which will make you a successful
entrepreneur. They believe that it is important that the time is right and destiny is in
your favour. However, the history of entrepreneurs has proved this to be absolute
rubbish as successful people like Reid Hoffman, the founder of LinkedIn, got success
only later in their life in spite of a brilliant idea.

7. Starting a business isn’t that difficult

A lot of entrepreneurs we see aren’t college pass outs which has led to the common
belief that entrepreneurship isn’t very difficult to achieve. Instead of attending
rigorous classes, they concentrated on developing a skills set and an idea which
they’ve grown only due to their hard work. A typical entrepreneur fails many times
before s/he can succeed and defeating failure isn’t everyone’s cup of tea.

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ENTREPRENEURIAL DEVELOPMENT MODELS

The models for the development of the entreneurship fall in the following categories

1. Psychological models
2. Socilogicla Models
3. Integrated Models
1. Psychological models

McClelland in 1961 has given a Signification of determinants of entreneurship.

in this model he ascribes importance to the achievement motives which earlier

related ‘’child rearing practices”

But D.G Winter in his model has ascribed it has intrinsic determinant of the
achievement motive

Now change in motivation is seen primarily as a result of the ideological arousal of

the talent need for achievements among the adults. After identifying achievement
orientation as the key variables in the development of entreneurship.

McClelland Suggest motivation-Training Programme as policy measure which will

make the entreneurs really willing and the eager to exploit the new opportunities
provided.

Everett Hagen’s theory of Social Change Lays emphasis on “Creative

Personality” as casual link in entrepreneurial behavior and “Status withdrawal” as
determinant of creative Personality.

Hagen elaborately explains the casual Sequence Entrepreneurial behavior. But his
model of Entrepreneurship fails to give any positive variable for the development of
the entrepreneurship “status withdrawal” would occur in the natural Evolutionary
process of the society and not by any deliberate attempt.

John Kunkel in 1965 considered Entrepreneurial supply by suggesting a behaviorist

model. His model Suggest that Entrepreneurial behavior is the function of the
surrounding of Social Structure, Both Past and the Present, and can really be
influenced by manipulating economic and social incentives.

Kunels Model is based upon Experimental Psychology, which identifies sociological

variables as the determinant of Entrepreneurial supply.
2. Socilaogical Model

Frank W Young’s theory of Entrepreneurship is a theory of change based upon the

society’s in Corporation of relative sub- group. The relativenss of Sub group which as
a low status in a larger Society will lead to Entrepreneurial behavior, if the group has
better institutional resources than others in the Society at the same level.

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Young’s model of entrepreneurship suggests the creation of supporting

institution in Society as the determinant of Entrepreneurship.
3. Integrated model

T.V Rao in 1975 “Entrepreneurial disposition” has included the following factors

1. Need for motive is the dynamic which for the prospective Entrepreneur, has
greatest possibility of achieving the goals if one performs those activities.
2. Long term involvement is the goal either at thinking level or at the activity level, in
Entrepreneurial activity that is viewed as target to be fulfilled.
3. Personal, Social and material resources which he thinks are related to entry and
Success in the area of Entrepreneurial activity
4. Soci-political system to be perceived as suitable for establishment and development
his enterprise.

ENTREPRENEURIAL DEVELOPMENT CYCLE

Entrepreneurs are not just born, they can be developed and trained to undertake
ventures. However, everybody does not have the potential to become an
entrepreneur. Entrepreneurial development is essentially an educational process
and an endeavor in human resource development. It is a process in which
persons are injected with motivational drives of achievement and situations
especially in business/enterprise undertakings.

In many developing countries and especially in certain backward areas of these

countries, the socio-economic environment has not been conducive to the
emergence of entrepreneurial talents. It has been experienced that entrepreneurs
have originated from all strata of society, but entrepreneurial abilities/ talents
have remained latent and hence, a lot depends on activating these talents. It is,
therefore, necessary to identify, motivate, strengthen and support people
possessing these talents.

In many developing countries and especially in certain backward areas of these

countries, the socio-economic environment has not been conducive to the
emergence of entrepreneurial talents. It has been experienced that entrepreneurs
have originated from all strata of society, but entrepreneurial abilities/ talents
have remained latent and hence, a lot depends on activating these talents. It is,
therefore, necessary to identify, motivate, strengthen and support people
possessing these talents.

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In order to accelerate formation of indigenous enterprises, imaginative development

programmes and policies backed up by sound institutional support are necessary, as
it has been recognised that, entrepreneurs do not respond spontaneously to available
business opportunities despite various inducements, schemes and programmes to
promote and assist them. It is necessary to have an effective mechanism, once they
are identified.

Entrepreneurship requires an environment in which an entrepreneur can learn and

discharge necessary functions. For an entrepreneurial development, intelligence,
motivation, knowledge, stimulation, sustained efforts, human factor, government
assistance and support and opportunity are the pre-requisites, as entrepreneurship
cannot grow in vacuum. The process of entrepreneurial development emphasis on
training, education, reorientation and creation of conducive and healthy
environment for the growth of enterprises Entrepreneurship Development
incorporates four basic issues':

a. The availability of material resources,

b. The selection of real entrepreneurs,
c. The formation of industrial units, and
d. The policy formulation for the development of the region(s).

entrepreneurial skills can be developed through inculcating entrepreneurial traits,

imparting the required knowledge, developing the technical, financial, marketing and
managerial skills, and building the entrepreneurial attitude. The process of
entrepreneurial development involves equipping a person with the information
necessary for enterprise building and sharpening his entrepreneurial skills. The
objective of entrepreneurial development is to motivate a person for entrepreneurial
career and to make him capable of perceiving and exploiting successfully, the
opportunities for enterprise. Thus, it is regarded as a tool of industrialization and a
solution to unemployment problem. One trained entrepreneur can guide other on
how to start their own enterprises. The figure shows entrepreneurial development

cycle" consisting of stimulatory, support and sustaining aspects for

entrepreneurship development.

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1. Entrepreneurial education
2. Planned publicity for entrepreneurial opportunities
3. Identification of potential entrepreneurs through scientific method
4. Motivational training to new entrepreneurs
5. Help and guidance in selecting products and preparing project reports
6. Making available techno-economic information and products profiles
7. Evolving locally suitable new products and processes
8. Availability of local agencies with trained personnel for counseling and
promotions
9. Creating entrepreneurial forum
10. Recognition of entrepreneur

1. Registration of unit
2. Arranging finance
3. Providing land, shed, power, water
,etc.
4. Guidance for selecting and obtaining
machinery
5. Supply of scarce raw materials
6. Getting licenses / import licenses
7. Providing common facilities
8. Granting tax relief or other subsidy
9. Offering management consultancy
10. Help marketing product
11. Providing information

1. Help modernization
2. Help diversification / expansion / substitute production
3. Additional financing for full capacity utilization
4. Deferring repayment / interest
5. Diagnostic industrial extension / consultancy source
6. Production units legislations / policy change
7. Product reservation / creating new avenues for marketing
8. Quality testing and improving services
9. Need-based common facility centre
Entrepreneurial Development Cycle

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PROBLEMS FACED BY ENTREPRENEURS

Entrepreneurs face a number of problems in the promotion of units and during

production, marketing, distribution, procurement of raw material, and availing of
incentives offered by the State government.

The problems of entrepreneurs may be divided into two groups-external and

internal. External problems are those, which result from factors beyond the control
of entrepreneurs while internal problems are those, which are not influenced by
external factors.

The problems of industries, whether in the small sector or in organized sector are
almost identical. However, given that the organized industry is financially very
strong and its resources large, it can therefore, face its problems more effectively.
Owing to its weak financial structure, the resources of the small sector are limited.
While the large sector can employ trained and experienced managers, in the small
industry, its proprietor or partners or if the unit is a company, its director or
directors themselves have to take care of all the problems. The large sector can
influence its raw material suppliers, its customers and at times even the government
in framing its policies, but the small entrepreneur is helpless in this respect.

I. Internal Problems of Entrepreneurs

1. Planning
a) Technical feasibility
 Inadequate technical know-how.
 Locational disadvantage
 Outdated production process
b) Economic viability
 High cost of input.
 Break-even point too high
 Uneconomic size of project
 Choice of idea
 Feeble structure
 Faulty planning
 Poor project implementation
 Lack of strategies
 Lack of vision
 Inadequate connections
 Lack of motivation
 Underestimation of financial requirements
 Unduly large investment in fixed assets
 Overestimation of demand

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2. Implementation

Cost over-runs resulting from delays in getting licenses, sanctions and so on and
inadequate mobilization of finance.

3. Production

a) Production management

 Inappropriate product mix

 Poor quality control
 Poor capacity utilization
 High cost of production
 Poor inventory maintenance and replacement
 Lack of timely and adequate modernization and so on
 High wastage
 Poor production

b) Labor management

 Excising high wage structure

 Inefficient handling of labor problems
 Excessive manpower
 Poor Labor productivity
 Poor labor relations
 Lack of trained skilled labor or technically competent personnel

c) Marketing Management

 Dependence on a single customer or a limited number of customers/single or

a limited number of products. 
 Poor sales realization
 Defective pricing policy
 Booking of large orders at fixed prices in an inflationary market
 Weak market organization
 Lack of market feedback and market research
 Unscrupulous sale purchase practices

d) Financial management

 Poor resource management and financial planning

 Faulty costing
 Dividend policy
 General financial indiscipline and application of funds for unauthorized
purposes

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 Over trading
 Unfavorable gearing or keeping adverse debt equity ratio
 Inadequate working capital
 Absence of cost consciousness
 Lack of effective collection machinery

e) Administrative management

 Over centralization
 Lack of professionalism
 Lack of feedback to management (management Information System)
 Lack of timely diversification
 Excessive expenditure on R&D

II. External Problems of Entrepreneurs

a) Infrastructure

 Location
 Power
 Water
 Post Office and so on
 Communication
 Non-availability or irregular supply of critical raw materials or other inputs
 Transport bottlenecks

(b)Financial

 Capital
 Working capital
 Long term funds
 Recovery
 Marketing Taxation
 Raw material
 Industrial and financial regulations
 Inspections
 Technology
 Government policy Administrative hurdles
 Rampant corruption
 Lack of direction
 Competitive and volatile environment

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CAPACITY BUILDING FOR STRONG ENTREPRENEURSHIP

To be a successful entrepreneur, individuals must build capacities in four key

strategic areas – Operational, Management, Financial Management, and Personal
capacities. Entrepreneur capacity building involves developing the combination of
all four capacity elements, to provide the ingredients for a great entrepreneurial
success soup.

Some of these capacities are gained through experience throughout your

career, while others are learned through educational avenues. Some successful
entrepreneurs are born with strong personality traits, and some behaviors are
strengthened through learned responses in the business environment.

Here are the four key categories of capacity building leading to the
development of successful entrepreneurs.

Operational Capacity Building

Having a brilliant understanding of an industry and business at ground level

builds operational capacity. This of course involves working in a variety of business
operations for a period of time prior to diving into entrepreneurship. This is where
you gain valuable insight into what makes businesses tick. Understanding the
dynamics on the floor, in the cubicles, in the field and out on the road, gives you the
perspective on how to lead, organize and plan for operations.

Management Capacity Building

Taking operational experience one more step, gaining management

experience in a field or business will be directly applicable to managing your own
business. The valuable experience you gain managing operations, resources and
people will give you the applicable tools for your own business. With a few years of
management experience, you will gain management capacity and an understanding
of responsibilities and accountabilities at that level… all precursors to managing
your own company.

Financial Management Capacity Building

Through a combination of work experience and education, you need to be

well-grounded and versed in managing finances. You need to be able to accurately
estimate and build financial statements and to understand them. With gained skills,
you will need to be able to analyze financial statements, looking at trends and
indicators and what those all mean to your business. Financial reports provide key
indicators and information on the business’ financial health…there is a wealth of
information in the financial statements. Other parties, partners and financial
institutions will be looking at you and your organization’s ability to manage
finances.

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Personal Capacity Building

Of extreme importance, if you don’t have some key personal, entrepreneurial

traits you may be closing up shop fast. Some people are born with strong traits
while other behaviors can be picked up along the development pathway.
Demonstrating strong traits and behaviors such as dedication, perseverance,
ambition, determination, strong-will, openness, honesty, transparency, fairness, etc
may move you along the pathway to become a successful entrepreneur.

REVIEW QUESTIONS

1. Define Entrepreneur. Discuss the importance and concept of

Entrepreneurship.

2. Illustrate the broad Classification of Entrepreneurs. (or) Discuss the

classification of Entrepreneurs based on Functional and types of
Entrepreneurial Business. (Any three)

3. Explain the Importance of Entrepreneur.

4. Discuss the Myths of Entrepreneurship.

5. Explain the need of capacity building to Entrepreneurship.

6. Explain the Characteristics of successful Entrepreneur.

7. What are the Problems faced by Entrepreneurs?

8. Explain Entrepreneurial development cycle.
9. Explain Entrepreneurial development Models.

……………………………….

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