Technological Innovation Management & Entrepreneurship MODULE 3

MANAGEMENT & ENTREPRENEURSHIP

B.E., V Semester, Electronics & Communication Engineering
[As per Choice Based Credit System (CBCS) scheme] [Subject
code: 15EC51]

MODULE – 3
a) SOCIAL RESPONSIBILITIES OF BUSINESS
&
b)ENTREPRENUERSHIP

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 Technological Innovation Management & Entrepreneurship MODULE 3

MANAGEMENT & ENTREPRENEURSHIP

B.E., V Semester, Electronics & Communication Engineering
[As per Choice Based Credit System (CBCS) scheme] [Subject
code: 15EC51]

MODULE – 3a

SOCIAL RESPONSIBILITIES OF BUSINESS

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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.

…………………………………

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MANAGEMENT & ENTREPRENEURSHIP

B.E., V Semester, Electronics & Communication Engineering
[As per Choice Based Credit System (CBCS) scheme] [Subject
code: 15EC51]

MODULE – 3b
ENTREPRENUERSHIP

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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.
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

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 simulatory,
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
 Deficiency of funds

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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.

……………………………….

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