1

Module -3
Social Responsibilities & Entrepreneurship
Prepared by

Dr. Dilip R

Associate Professor

Department of Electronics and Communication Engineering

SJB Institute of Technology, Bengaluru

(An Autonomous institution, affiliated to VTU, Belgaum and Aided by

Government of Karnataka)

BGS Health & Education City, Dr. Vishnuvardhan Rd, Kengeri,

Bengaluru-560060

Karnataka
Module-3
A. Social Responsibilities of Business:
I. Meaning Responsibility
II. Social Responsibilities of Business towards Different Groups
III. Social Audit
IV. Business Ethics and Corporate Governance
(Selected topics from Chapter 3, Text 1).

B. Entrepreneurship:
I. Definition of Entrepreneur
II. Importance of Entrepreneurship
III. Concepts of Entrepreneurship
IV. Characteristics of successful Entrepreneur
V. Classification of Entrepreneurs
VI. Myths of Entrepreneurship
VII. Entrepreneurial Development models
VIII. Entrepreneurial development cycle
IX. Problems faced by Entrepreneurs
X. Capacity building for Entrepreneurship
(Selected topics from Chapter 2, Text 2). L1, L2
A. Social Responsibilities of Business:
Social responsibility in business, also known as corporate social responsibility (CSR),
pertains to people and organizations behaving and conducting business ethically and
with sensitivity towards social, cultural, economic, and environmental issues.
Striving for social responsibility helps individuals, organizations, and governments
have a positive impact on development, business, and society.

I. Meaning Responsibility

The concept of social responsibility in relation to business means that the firm
functions to accomplish its financial objectives and serves the society as well. No
business exists in isolation. Every organ of the society contributes towards the success
of a business. Thus it becomes imperative that business too does something for the
society in return. This responsibility of business towards the society is called social
responsibility.

A socially responsible firm should not work solely for profit maximization but should
also seek the welfare of different sections of the society. Social responsibility of
business refers to its obligations to take those decisions and perform those actions
which are acceptable in terms of the objectives and values of the society.

The World Business Council for Sustainable Development (WBCSD):

“Corporate Social Responsibility is the continuing commitment by business to behave
ethically and contribute to economic development while improving the quality of life
of the workforce and their families as well as of the local community and society at
large.”

II. Social Responsibilities of Business towards Different Groups

There are various interest groups in the society which may affect the functioning of a
business organisation.
Such interest groups may be identified as:
1. Shareholders
2. Customers
3. Employees
4. Government
5. Suppliers, creditors and others
6. Society in general.
1. Responsibility Towards Shareholders:
The shareholders take great risk in making investment in a business. Therefore, a
business organisation is responsible to safeguard the interest of shareholders who are
its owners.
This can be done by:
i. Ensuring a fair return on the investment made by shareholders, which is possible
when the enterprise earns adequate profit;
ii. Keeping the shareholders informed about the functioning of the organisation;
iii. Strengthening and consolidating the position of enterprise;
iv. Generating adequate funds and reserves for re-investment and also for declaring
reasonable by dividend during a lean period;
v. Building up the company’s financial independence;
vi. Keeping up the prices of shares; and
vii. Improving the public image of the company.
2. Responsibility Towards Customers:
Customers are the foundation of business. It is they who keep a business organisation
in existence. It is basically to meet the wants of consumers that the society entrusts
wealth-producing resources to business organisation.
It, therefore, becomes obligatory on the part of a business organisation to create and
serve customers through:
i. Supplying goods and services at fair and reasonable prices;
ii. Ensuring good quality of such goods and services;
iii. Ensuring after-sales services;
iv. Ensuring only genuine advertisements, and that too in accordance to public morals
and culture;
v. Redressing the grievances of customers, if there are any;
vi. Ensuring adequate research and development to improve quality and reduce cost
of production of goods and services; and
vii. Informing about adverse effects, if any, of the goods and services being sold by the
organisation.
3. Responsibility Towards Employees:
A business organisation can run effectively only when the morale of its employees is
high and their needs are fully met.
Hence, the management owes responsibility towards its employees which it can
discharge in the following manner:
i. Fair wages to employees.
ii. Adequate training and development facilities.
iii. Reasonable opportunities for promotion.
iv. Good working and living conditions.
v. Adequate welfare facilities and amenities.
vi. Adequate social security measures.
vii. Worker’s participation in management.
viii. Recognition of their personality.
ix. Appreciation for good work and conduct.
x. Progressive and healthy personnel policies and conduct.
Needless to mention that contented labour force is a real asset of an organisation.
4. Responsibility towards Government:
Government provides a number of infrastructure facilities and a conducive
environment to business organisation for their proper functioning.
Therefore, the management of a business organisation can also discharge its
responsibility towards the government in the following manner:
i. By abiding with all relevant government legislation;
ii. By maintaining fair trade policies and practices;
iii. By paying all duties and taxes due from it;
iv. By avoiding political favours; and
v. By not giving any bribe, etc., to any government official, etc.
5. Suppliers, Creditors and Others:
The functioning of a business enterprise is also affected by the suppliers, creditors and
other interest groups with whom the business has to interact. Hence, management
owes a responsibility towards such interest groups.
This can be performed in the following manner:
1. Prompt payment to suppliers.
2. Prompt payment of interest to lenders.
3. Furnishing of accurate information to creditors, financial institutions and suppliers.
4. Proper liaison with all interest groups.
Discharging of the responsibility towards suppliers and creditors, etc., boosts the
public image of the enterprise.
6. Responsibility towards the Society in General:
A business enterprise exists and functions in the society. It is an integral part of our
social system which facilitates its functioning.
Hence, it owes a special responsibility towards the society in general which can be
discharged in the following way:
1. By extending general amenities to society;
2. By assisting in improving the standard of living of the people of the community;
3. By avoiding pollution of the environment;
4. By avoiding wasteful expenditure;
5. By establishing socially desirable standards;
6. By keeping in view the social norms, conventions, traditions and customs while
forming its policies and programmes; and
7. By adopting some village(s) for its/their social and economic development.

Thus, no business enterprise, specially the big ones, should ignore its social
responsibility, if it has to function effectively. The enterprise should be so managed as
to make possible everything likely to strengthen the society and lead to its betterment
and prosperity.
It is indeed difficult to make a categorical statement on the question whether Indian
business managers are discharging their social responsibilities properly. As a matter
of fact, the Indian business sector presents a mixed picture in this regard. There are a
number of leading business organisations in India which have recognised their social
responsibility.
They have set up a large number of dispensaries, health centres, hospitals, libraries,
schools and colleges, professional institutions, workers, clubs, temples, research
institutes, etc., making them available to the people of adjoining localities and villages,
etc. Some of them have taken due care of their employees, customers, shareholders,
government rules and regulations, suppliers, creditors, banking institutions and
society in general.

However, most of the Indian managers and business organisations, especially in the
private sector, have been showing a totally indifferent attitude towards their social
responsibility. Their record of discharging social responsibility has often been poor
and, in some respect, dismal, judged by the extent of profiteering, black marketing,
corruption, pollution of environment, poor quality of goods and services
.
III. Social Audit
● A social audit is a formal review of a company's endeavours, procedures, and
code of conduct regarding social responsibility and the company's impact on
society.
● A social audit is an assessment of how well the company is achieving its goals
or benchmarks for social responsibility.
● Ideally, companies aim to strike a balance between profitability and social
responsibility.

Understanding a Social Audit

A social audit is an internal examination of how a particular business is affecting
society. The audit helps companies to determine if they're meeting their objectives,
which may include measurable goals and benchmarks. A social audit serves as a way
for a business to see if the actions being taken are being positively or negatively
received and relates that information to the company’s overall public image.
In the era of corporate social responsibility, corporations are often expected to deliver
value to consumers and shareholders as well as meet environmental and social
standards. Social audits can help companies create, improve, and maintain a positive
public relations image. For many companies, a good public perception helps foster a
positive image of the company and ultimately reduce negative impacts on earnings
from bad press.

Parameters:
The scope of a social audit can vary and be wide-ranging. The assessment can include
social and public responsibility but also employee treatment. Some of the guidelines
and topics that comprise a social audit include the following:
● Environmental impact resulting from the company's operations
● Transparency in reporting any issues regarding the effect on the public or
environment.
● Accounting and financial transparency
● Community development and financial contributions
● Charitable giving
● Volunteer activity of employees
● Energy use or impact on footprint
● Work environment including safety, free of harassment, and equal opportunity
● Worker pay and benefits
● Non-discriminatory practices
● Diversity
There is no standard for the items included in a social audit. Social audits are optional,
which means that companies can choose whether to release the results publicly or
only use them internally.
The flexibility surrounding social audits allow companies the ability to expand or
contract the scope based on their goals. While one company might wish to understand
the impact it has on a particular town or city, other companies might choose to expand
the range of the audit to include an entire state, country, or throughout the globe.
Ex.
Infosys Foundation:
Since its inception in 1996, the Infosys Foundation has constructed hospital
wards, built dharmashalas (rest houses), and provided medical equipment to
various hospitals across India.
The Foundation has also donated medicines in addition to organizing health
camps in rural India.
The Infosys Foundation has donated more than Rs.50 crore to expand the
capacity of hospitals across India and is involved in several healthcare
programs.

IV. Business Ethics and Corporate Governance

Business Ethics
Business ethics is the study of how a business should act in the face of ethical
dilemmas and controversial situations. This can include a number of different
situations, including how a business is governed, how stocks are traded, a business'
role in social issues, and more.

Business ethics is a broad field because there are so many different topics that fall
under its umbrella. It can be studied from a variety of different angles, whether it's
philosophically, scientifically, or legally. However, the law plays the biggest role in
influencing business ethics by far.

Many businesses leverage business ethics not only to remain clean from a legal
perspective, but also to boost their public image. It instills and ensures trust between
consumers and the businesses that serve them.

Importance of Business Ethics

Business ethics are important for a variety of reasons. First and foremost, it keeps the
business working within the boundaries of the law, ensuring that they aren't
committing crimes against their employees, customers, consumers at large, or other
parties. However, the business also has a number of other advantages that will help
them succeed if they are aware of business ethics.

Businesses can also build trust between the business and consumers. If consumers feel
that a business can be trusted, they will be more likely to choose that business over its
competitors. Some businesses choose to use certain aspects of business ethics as a
marketing tool, particularly if they decide to highlight a popular social issue.
Leveraging business ethics wisely can result in increased brand equity overall.

Being an ethical business is also highly appealing to investors and shareholders. They
will be more likely to sink money into the company, as following standard ethical
business practices and leveraging them properly can be a path to success for many
businesses.

Following business ethics can also be beneficial for the business' employees and
operations. Attracting top talent is significantly easier for ethical businesses.
Employees not only appreciate a socially aware employer, but will also perceive them
as the kind of business that will act in the best interest of their employees. This
produces more dedicated employees and can also reduce recruitment costs.

Principles of Business Ethics

Business ethics as a field of study is incredibly diverse, but many concepts can be
divided into a few basic principles. Every business should strive to follow these
guidelines in the pursuit of success.

1) Trustworthiness
Achieving trustworthiness typically involves being transparent and honest in all
actions and communications. Being trustworthy can have a positive impact both
internally and externally. Consumers appreciate openness, as it provides them with
insight into how a business operates and conceptualizes the work that they do.
Employees also appreciate this quality in a business that they work for.

2) Respect
Showing respect for employees and customers involves following through on all
promises -- and providing sincere apologies and appropriate compensation if
anything falls through. Showing a lack of respect will deter customers from engaging
with a business and lower a business' reputation. It will also do significant damage to
employee morale and increase turnover.

3) Fairness
Treating customers and employees with a sense of fairness and justice is a key type of
ethics. Manipulative behaviors aren't just unethical, but they are also unhelpful -- and
the top priority of any business should be to be helpful to its customers and
employees. It is also important to treat all people equally.

4) Caring
Businesses, at the end of the day, are composed of human beings. There are human
beings that consume goods or services from the business and then there are human
beings that work to produce those goods or services. Being open to their struggles and
coming to the table with solutions will show empathy -- a valuable tool for any
business to utilize. Showing a sense of caring and keeping the lines of communication
is not just the ethical thing to do, but can also boost internal and external perceptions
of the business.

Examples of Ethical Behavior in the Workplace

While understanding the basic principles of business ethics is important, it is arguably
more important to understand how these ideas apply to day-to-day business
operations. Here are some examples of how ethical behaviours can be practically
applied.
1) Putting Customer Needs First
If a customer comes into a store looking for a product that meets very specific needs,
it's important to provide them the best product for the situation described instead of
up selling them or encouraging them to buy a product that won't meet their needs.
However, it is important to ensure that the "customer first" attitude does not
unintentionally result in the unethical treatment of employees -- such as encouraging
them to work more overtime than allowed, forcing them to endure abuse from
customers with no safe way to escape the situation, and more.

2) Being Transparent
Transparency and clear communication is paramount when it comes to ethical
workplace behaviors. Employees and consumers alike should never be lied to or told
untruths, as this breaks trust within the business. For example, when faced with a
public relations crisis, companies should call a meeting and address the problem
directly with their employees. It's important to truthfully describe the situation as it
unfolded, present solutions, and accept criticism humbly.

3) Prioritizing Workplace Diversity

Part of being fair is providing everyone with an equal opportunity to be employed at
the company. While there is much political debate around how to create workplace
fairness, it is undeniable that providing equal opportunity for employment to every
applicant is an ethical standard. For example, if someone notices that management
tends to hire the same type of person, they may suggest getting employees more
involved in the hiring process. This will introduce different perspectives to the hiring
process and increase the possibility that different kinds of applicants will be selected
for a position.

4) Respecting Customer Information

Many businesses collect the personal information of their customers, whether it's
payment information, health information, or similar. One of the priorities for any
business should be securing and protecting this information. For example, a hospital
may create and enforce aggressive policies around staff sharing patient information on
social media. Having an employee share this kind of information on their personal
accounts is not only disrespectful of the patient's privacy, but could also put the
hospital at risk of violating regulations.

5) Providing Resources for Reporting Unethical Behavior

If an employee notices unethical behavior in the workplace, they should have an
outlet to report these behaviors. The business is responsible for putting this
infrastructure in place and designing it in a way that insulates the employee from
harm. For example, a research university should have a neutral office of compliance
that is organizationally detached from the research arm of the institution. This
provides a neutral space where academics can report unethical studies or harmful
practices without fear of workplace repercussions.

Examples of Unethical Behavior in the Workplace

Just as it is important to understand how to practically apply ethical behavior, it is
equally important to understand what qualifies as unethical behavior. Here are some
examples of what unethical situations can look like in the workplace.

1) Taking Sides in an Employee Argument

It is not uncommon for conflicts to arise between employees in the workplace.
Ethically, it is the job of company leadership and management to remain impartial
during these conflicts. For example, if two of a manager's employees are in conflict, it
is important for the manager to remain as neutral as possible. When a manager gives
preference to a favorite or senior employee or provides a solution that only works in
favor of one party, they are participating in unethical behavior. They must allow both
employees to speak their piece and then come to a solution that works best for both
parties, as well as the business itself.
Lying
Lying to your employees or customers is the biggest way to break trust. Trust is the
best source of dedication and loyalty that any business has. Once that trust is broken,
it is extremely difficult to get it back. For example, if a company has a high-
performing employee who is asking for a promotion, they may say that there is no
room in the budget for a promotion this year. A few months later, another employee
may receive a promotion. Telling obvious lies isn't just unethical -- it will drive people
away from your business.

Misusing Company Time

This is a common ethical dilemma that many businesses face. Many employees misuse
company time in a variety of ways, whether it's surfing the internet during business
hours, taking extended breaks, altering time sheets, or similar. Misusing company
time is unethical because the employee is being paid a salary for work that they did
not complete or time they did not dedicate to their job.

Cultivating a Hostile Workplace

While there is bound to be some conflict in the workplace, it is important to make the
workplace a safe environment for everyone. Some companies unintentionally cultivate
a hostile or overly competitive company culture. For example, employers may
encourage an unhealthily competitive environment among employees to drive
productivity and innovation. However, cultivating this kind of environment can tax
employee mental health, and even encourage unethical, sabotaging behavior among
employees who want to get ahead at work.

Ignoring Conflicts of Interest

Conflicts of interest encourage businesses to act in ways that do not benefit their
customers or employees. For example, if a manager has a relative as their direct
report, that manager may treat that employee differently than their other reports. It is
the duty of the business to address this situation. Removing conflicts of interest can
become more complex when a business is publicly traded, non-profit, or receives
funds from a government entity.

Corporate Governance
What is corporate governance? It is a process set up for the firms based on certain
systems and principles by which a company is governed. The guidelines provided
ensure that the company is directed and controlled in a way so as to achieve the goals
and objectives to add value to the company and also benefit the stakeholders in the
long term.
The high profile corporate governance failure scams like the stock market scam, the
UTI scam, Ketan Parikh scam, Satyam scam, which was severely criticized by the
shareholders, called for a need to make corporate governance in India transparent as it
greatly affects the development of the country.
It is the legal framework.
The Objectives Of Corporate Governance
Transparency in corporate governance is essential for the growth, profitability and
stability of any business. The need for good corporate governance has intensified due
to growing competition amongst businesses in all economic sectors at the national, as
well as international level.
The Indian Companies Act of 2013 introduced some progressive and transparent
processes which benefit stakeholders, directors as well as the management of
companies. Investment advisory services and proxy firms provide concise information
to the shareholders about these newly introduced processes and regulations, which
aim to improve the corporate governance in India.
Corporate advisory services are offered by advisory firms to efficiently manage the
activities of companies to ensure stability and growth of the business, maintain the
reputation and reliability for customers and clients. The top management that consists
of the board of directors is responsible for governance. They must have effective
control over affairs of the company in the interest of the company and minority
shareholders. Corporate governance ensures strict and efficient application of
management practices along with legal compliance in the continually changing
business scenario in India.
Legal Provisions
Corporate governance was guided by Clause 49 of the Listing Agreement before
introduction of the Companies Act of 2013. As per the new provision, Security And
Exchange Board of India(SEBI) has also approved certain amendments in the Listing
Agreement so as to improve the transparency in transactions of listed companies and
giving a bigger say to minority stakeholders in influencing the decisions of
management. These amendments have become effective from 1st October 2014.
A Few New Provision for Directors and Shareholders
● One or more women directors are recommended for certain classes of
companies
● Every company in India must have a resident directory
● The maximum permissible directors cannot exceed 15 in a public limited
company. If more directors have to be appointed, it can be done only with
approval of the shareholders after passing a Special Resolution
● The Independent Directors are a newly introduced concept under the Act. A
code of conduct is prescribed and so are other functions and duties
● The Independent directors must attend at least one meeting a year
● Every company must appoint an individual or firm as an auditor. The
responsibility of the Audit committee has increased
● Filing and disclosures with the Registrar of Companies has increased
● Top management recognizes the rights of the shareholders and ensures strong
co-operation between the company and the stakeholders
● Every company has to make accurate disclosure of financial situations,
performance, material matter, ownership and governance
Additional Provisions
● Related Party Transactions – A Related Party Transaction (RPT) is the transfer
of resources or facilities between a company and another specific party. The
company devises policies which must be disclosed on the website and in the
annual report. All these transactions must be approved by the shareholders by
 passing a Special Resolution as the Companies Act of 2013. Promotors of the
company cannot vote on a resolution for a related party transaction.
● Changes in Clause 35B – The e-voting facility has to be provided to the
shareholder for any resolution is a legal binding for the company.
● Corporate Social Responsibility – The company has the responsibility to
promote social development in order to return something that is beneficial for
the society.
● Whistle Blower Policy – This is a mandatory provision by SEBI which is a vigil
mechanism to report the wrong or unethical conduct of any director of the
company.
Importance of Corporate Governance
A company that has good corporate governance has a much higher level of confidence
amongst the shareholders associated with that company. Active and independent
directors contribute towards a positive outlook of the company in the financial
market, positively influencing share prices. Corporate Governance is one of the
important criteria for foreign institutional investors to decide on which company to
invest in.
The corporate practices in India emphasize the functions of audit and finances that
have legal, moral and ethical implications for the business and its impact on the
shareholders. The Indian Companies Act of 2013 introduced innovative measures to
appropriately balance legislative and regulatory reforms for the growth of the
enterprise and to increase foreign investment, keeping in mind international practices.
The rules and regulations are measures that increase the involvement of the
shareholders in decision making and introduce transparency in corporate governance,
which ultimately safeguards the interest of the society and shareholders.
Corporate governance safeguards not only the management but the interests of the
stakeholders as well and fosters the economic progress of India in the roaring
economies of the world.

B . Entrepreneurship:
 I. Definition of Entrepreneur
Entrepreneurship is the ability and readiness to develop, organize and run a business
enterprise, along with any of its uncertainties in order to make a profit. The most
prominent example of entrepreneurship is the starting of new businesses.

In economics, entrepreneurship connected with land, labour, natural resources and

capital can generate a profit. The entrepreneurial vision is defined by discovery and
risk-taking and is an indispensable part of a nation’s capacity to succeed in an ever-
changing and more competitive global marketplace.

II. Importance of Entrepreneurship

● Creation of Employment- Entrepreneurship generates employment. It

provides an entry-level job, required for gaining experience and training for
unskilled workers.

● Innovation- It is the hub of innovation that provides new product ventures,

market, technology and quality of goods, etc., and increase the standard of
living of people.
 ● Impact on Society and Community Development- A society becomes greater
if the employment base is large and diversified. It brings about changes in
society and promotes facilities like higher expenditure on education, better
sanitation, fewer slums, a higher level of homeownership. Therefore,
entrepreneurship assists the organisation towards a more stable and high
quality of community life.

● Increase Standard of Living- Entrepreneurship helps to improve the standard

of living of a person by increasing the income. The standard of living means,
increase in the consumption of various goods and services by a household for a
particular period.

● Supports research and development- New products and services need to be

researched and tested before launching in the market. Therefore, an
entrepreneur also dispenses finance for research and development with
research institutions and universities. This promotes research, general
construction, and development in the economy.

III. Concepts of Entrepreneurship

The entrepreneur is defined as someone who has the ability and desire to establish,
administer and succeed in a startup venture along with risk entitled to it, to make
profits. The best example of entrepreneurship is the starting of a new business
venture. The entrepreneurs are often known as a source of new ideas or innovators,
and bring new ideas in the market by replacing old with a new invention.

It can be classified into small or home business to multinational companies. In

economics, the profits that an entrepreneur makes is with a combination of land,
natural resources, labour and capital.

In a nutshell, anyone who has the will and determination to start a new company and
deals with all the risks that go with it can become an Entrepreneur.

IV. Characteristics of successful Entrepreneur

Not all entrepreneurs are successful; there are definite characteristics that make
entrepreneurship successful. A few of them are mentioned below:

1) Ability to take a risk- Starting any new venture involves a considerable

amount of failure risk. Therefore, an entrepreneur needs to be courageous and
able to evaluate and take risks, which is an essential part of being an
entrepreneur.

2) Innovation- It should be highly innovative to generate new ideas, start a

company and earn profits out of it. Change can be the launching of a new
product that is new to the market or a process that does the same thing but in a
more efficient and economical way.

3) Visionary and Leadership quality- To be successful, the entrepreneur should

have a clear vision of his new venture. However, to turn the idea into reality, a
lot of resources and employees are required. Here, leadership quality is
paramount because leaders impart and guide their employees towards the
right path of success.

4) Open-Minded- In a business, every circumstance can be an opportunity and

used for the benefit of a company. For example, Paytm recognised the gravity
of demonetization and acknowledged the need for online transactions would
be more, so it utilised the situation and expanded massively during this time.

5) Flexible- An entrepreneur should be flexible and open to change according to

the situation. To be on the top, a businessperson should be equipped to
embrace change in a product and service, as and when needed.

6) Know your Product-A company owner should know the product offerings and
also be aware of the latest trend in the market. It is essential to know if the
available product or service meets the demands of the current market, or
whether it is time to tweak it a little. Being able to be accountable and then alter
as needed is a vital part of entrepreneurship.

V. Classification of Entrepreneurs
It is classified into the following types:
1). Small Business Entrepreneurship-

These people run or own their own business and hire family members or local employee. For
them, the profit would be able to feed their family and not making 100 million business or taking
over an industry. They fund their business by taking small business loans or loans from friends
and family.

These businesses are a hairdresser, grocery store, travel agent, consultant, carpenter, plumber,
electrician, etc.

2) Scalable Startup Entrepreneurship-

This start-up entrepreneur starts a business knowing that their vision can change the world. They
attract investors who think and encourage people who think out of the box. The research focuses
on a scalable business and experimental models, so, they hire the best and the brightest employees.
They require more venture capital to fuel and back their project or business. A scalable company is
one where the main brand keeps on growing over time naturally, they have the potential to keep
increasing their revenue while keeping their incremental costs at a minimum.

Ex: Google, Reliance

3) Large Company Entrepreneurship-

These huge companies have defined life-cycle. Most of these companies grow and sustain by
offering new and innovative products that revolve around their main products. The change in
technology, customer preferences, new competition, etc., build pressure for large companies to
create an innovative product and sell it to the new set of customers in the new market. To cope
with the rapid technological changes, the existing organisations go for either buy innovation
enterprises or attempt to construct the product internally.

4) Social Entrepreneurship-

This type of entrepreneurship focuses on producing product and services that resolve social needs
and problems. Their only motto and goal is to work for society and not make any profits.

VI. Myths of Entrepreneurship

There are many myths about entrepreneurship and false beliefs that often misguide an
aspiring entrepreneur in taking wrong steps. Thus it is necessary to clear such myths
and have a clear picture of Entrepreneurship in India.
Widely believed myths about Entrepreneurship in India:
1) A lot of fund is required for a start-up:This is one of the big myths about
entrepreneurship in the Indian society. People believe that they require big
fund to start a business of their own, even some entrepreneurs in India still run
their business on that belief, but in reality they just need about INR 17,00,000/-
for a typical business to get going. And most of the funding can be done by
various other means.
2) Venture capitalists is the perfect place to go for startup funding: This is true but
only in case of a computer or biotech start up. Only about 3,000 companies per
year are funded by VCs and just one quarter of those companies are funded in
the seed or startup stage. Thus it is unrealistic for Entrepreneurs in India to
plan their business model on seed funding by VCs. This myth about
Entrepreneurship is the most common mistake a startup makes in the intial
fund raising stage.
3) Most business angels are Wealthy:Although the definition of Business Angels
says differently but approx. three quarters of the people who offer capital to
fund the startups of other people who are not family, friends, co-workers or
neighbours don’t meet accreditation requirements. In fact, few of them have a
normal annual household income and some even have a negative net worth.
4) Startups in India cannot be financed with debt: This is a big myth about
entrepreneurship, in reality, debt is a more common means among
Entrepreneurs in India of financing a business than equity. As per the survey of
Small Business Finances by the Federal Reserve, almost 53% of the financing of
start-ups that are 2 or less years old comes from debt and only 47% comes from
equity.
5) Banks doesn’t finance startups:This is yet another one of the common myths
about Entrepreneurship in India. Again a survey by the Federal Reserve data
proved that bank is the source for 16% of all the financing provided to
companies that are 2 or less year old. Although 16% doesn’t seem that high, it is
3% higher than the funds provided by the next highest source and is higher
than other usual sources like friends and family, venture capitalists, business
 angels, strategic investors and government agencies. But one of the drawbacks
of financing by banks is, banks won’t be taking the risks involved in startup
business because of the depositor’s protection laws.
6) Entrepreneurs prefer attractive industries for their start-up:In reality,
Entrepreneurs in India prefer the opposite. Most entrepreneurs chose the most
unprivileged industry for their startup business. This means entrepreneurs
prefer industries where failure is a big possibility which would give them the
advantage of low competitiveness. Choosing the most booming industry is a
big myth about entrepreneurship, since chances of innovation are always in a
less preferred industry.
7) A start-up’s growth depends on the Entrepreneur’s quality instead of the
industry:The industry in which the entrepreneur decides to start his/her
business has a huge effect on the odds that grows. Provided the Entrepreneur is
efficient enough to execute an effective business plan, there is nothing about the
effects of entrepreneurial talent that has a similar effect on the growth of the
business.
8) Most entrepreneurs are successful financially:This is another one of the widely
believed myths about entrepreneurship in India. Although Entrepreneurship
creates a lot of wealth, but it is distributed unequally. An owner-managed
business in its latter stage creates an average annual profit of INR 27,00,000.
Only the top 10% of entrepreneurs earn more than average profit. In general
entrepreneurs in India earns less money than they would have earned as a
corporate employee.
9) Entrepreneurs take high risks: Entrepreneurs in India undoubtedly take risk as
there is always a risk in starting or running your own business. As not all ideas
are successful so until and unless one takes risk there won’t be a chance of
success. But entrepreneurs learn how to take calculated risk and walk on a very
thin line that lies between high risk-high potential return and low risk-low
return. They do not gamble or rely on luck to run their business, they carefully
calculate every possible outcomes and take necessary steps accordingly.
 10) Anyone can start a Start-up:According to a survey there are only 400million
entrepreneurs out of 7 billion people in the world. And most people who starts
a start-up fail to get one up and running successfully. A person needs to be
highly motivated with proper resources to start a business of their own, they
have to completely uproot their life and sometimes even move to different
country for their business. Event after 7 years of starting a business, only one-
third of people have a new company with positive cash flow greater than the
salary and expenses of the owner for more than three consecutive months.
Although theoretically anyone can become an Entrepreneur, but practically it
takes a lot to be a successful Entrepreneur in India.
VII. Entrepreneurial Development models
Model describes the process by which a rational organization creates and delivers
value to the target consumers. The Term Entrepreneurial Model Refers To Creation Of
A New Business Entity As A Means Of Providing Work For An Individual, Or A
Group Of Individuals. It also refers the organisational set up.
Entrepreneurship helps in generating employment opportunities, earning foreign
exchange, and increasing the total income of a country. The development of
entrepreneurship requires proper attention and supervision by the entrepreneur. It
can be performed efficiently by using various models. Schumpeter was the first who
introduced the dynamic model of entrepreneurship.
The three types of models are discussed as follows:
1) Psychological Model:
Psychological model signifies that psychological factors are responsible for the
development of entrepreneurial behavior in individuals. Need for achievement may
be described as the internal stimulus in an individual that incites him/her to achieve
something. McClelland played a significant role in the identification of factors
responsible for entrepreneurship development.
He focused on actors (entrepreneurs) rather than the act (entrepreneurship) in his
work on entrepreneurship (1961). In this model, McClelland in association with D. G.
Winter stated that need for achievement is the prime factor for entrepreneurship
development. He also asserted that a society with a high level of need for achievement
comparatively produces more entrepreneurs.
After identifying the need for achievement as a prime factor for entrepreneurship
development, he stated that the need of achievement can be aroused in individuals by
increasing their motivation level. He suggested that motivation can be inculcated in
individuals by rewarding the best performers and generating interest in excellence.
McClelland also asserted that motivation-oriented training programs inspire
individuals to take up entrepreneurship as a career and make them willing and eager
to exploit new opportunities.
Everett Hagen’s in 1962 gave another psycho-social model of entrepreneurship
development. In his model, he referred economic variables to a minor role and put an
emphasis on creative personality as an important factor in developing entrepreneurial
behavior. The Hagen’s model explains the causal sequence of entrepreneurial
behavior, but fails to give any policy variable for entrepreneurial development.
In 1965, John Kunkel suggested a behaviorist model for entrepreneurial development.
In his model, he suggested that entrepreneurial behavior is a function of the
surrounding social structure, both present and past, and can be influenced by creating
favorable economic and social conditions.
In the recent time, several other psychological approaches to entrepreneurship have
been suggested. For example, Bird in 1989 examined entrepreneurial behavior of
individuals by observing their work, family background, personal values, and
motivation level.
2) Sociological Model:
Sociological model considers societal factors responsible for the development of
entrepreneurial behavior in individuals. Some entrepreneurship scholars have
emphasized the importance of socio-cultural surrounding in the development of
entrepreneurs.
They stated that socio-cultural history has accounted for the development of
entrepreneurship and the performance of entrepreneurial activities. Different societies
with differing interests, attitudes, and systems of arranging people in to different
classes are likely to produce different kinds of entrepreneurs and different patterns of
entrepreneurial behavior.
The sociological model given by Frank W. Young is based on the theory of
entrepreneurship, which is based on society’s system of stratification. The model
explains that a sub-group that has a low status in a larger society leads to
entrepreneurial behavior, if the institutional resources are provided by the
government to the sub-group. The model suggests the creation of supporting
institutions in the society to promote entrepreneurship.
3) Population-Ecology Model (PEM):
PEM analyzes the determinants of entrepreneurship development. PEM was
developed Hannan and Freeman in 1977 to analyze the concept of entrepreneurship.
The PEM model considers the probability of births and deaths within a population
falling in a particular industry niche.
This model considers environment as the important determinant for the survival of
the enterprise rather than individuals with status and personality traits. In addition, it
focuses on the presence, characteristics, composition, and change in a population or in
ecological circumstances in a particular society for developing entrepreneurial
activity.

VIII. Entrepreneurial Development Cycle

The entrepreneurial development cycle is the combination of all support activities and
assistance that are conducted and provided continuously for the development
of entrepreneurship. It generates entrepreneurial awareness in the community
through well-planned publicity. It is a process of evolving one’s skills in a systematic
manner. Therefore, the same goes for the process of entrepreneurship development.
There are basically three types of assistance for the entrepreneurs:
1. Stimulating assistance – To rouse to action or increased activity; excite a policy
that stimulated people to protest; incentives to stimulate consumer spending.
2. Supportive assistance – To be supportive is to give help or assistance, or to hold
something or someone up.
 3. Sustaining assistance – Practices that enable or aid self-sustainability include
autonomous building, sustainable agriculture, and renewable energy.

Finally, we can say that entrepreneurship development cycle is the combination of

overall assistance that is provided for the development of entrepreneurship. It starts
with an entrepreneur who perceives an opportunity, creates an organization to
practice it, assembles the required resources, implements a practical plan, assumes the
risks and the rewards, all in a timely manner for all involved.

IX. Problems faced by Entrepreneurs

Stories of successful startups are making headlines on daily newspapers! The
government has recognized the importance of entrepreneurship and launched
the programs like the Start-up India and Make in India with an aim to celebrate
the entrepreneurial spirit. It is the best time than ever before to start a business
in India and to be a successful entrepreneur because these programs have also
opened the doors to countless opportunities for startups.

All in all, currently, India has a blooming startup ecosystem, but still
entrepreneurship is a big challenge for many innovative minds as there are
countless exceptional challenges that cannot be ignored. Indeed, there are great
steps taken by the government, however there are some factors which are
making challenging for startups to grow fast.

When startups take off, commonly they require planning, a lot of hard work, a
right amount of money, resources, patience, dedication and a lot more. There
are few challenges that need to consider at the initial stage so that
entrepreneurs can prepare themselves for challenges before they lead to
unexpected failure:

Orthodox Indian Society

What if someone from a middle class family in India tells that he or she is opting of
starting own business after quitting a high salary job or do not want to go for
engineering or doctoral studies? The whole society starts discouraging from starting
up a business. This could be more threatening when families do not acknowledge the
decision of starting a business and stop supporting entrepreneurs financially and
morally as well.

Wrong Timing

Timing can make or break a startup! Many entrepreneurs fail because they launch
their idea in the wrong time. They don’t know about the real market scenario and
size. They just launch their ideas haphazardly and it leads nowhere. Extensive market
study is required before launching any business idea and a sales representative can
clear you the real picture of market.

No Talent
Running a startup successfully demands teammates who share passion. But finding a
team with this approach could be challenging for entrepreneurs especially when they
are looking for people of non-tech skills. In addition, many intelligent minds end up
becoming engineers and doctors because of family and society pressure.
Funding Not Easy
The funding scenario is still in nascent stage in India. They can think of getting seed
funding and venture funding on their ideas, but the process of getting funding from
these sources is not easy as it looks. When entrepreneurs ask for funding, they need to
follow a complicated process and sometimes potential business ideas fail to get any
funding.
Rare Right Information Resources
Next dilemma of entrepreneurship, which resources are good for taking help and
whom to ignore! Startups seek advice and information for picking up strategically, but
in India, they don’t know whom to seek right advice. There is lack of resources and
startups don’t know whom to contact for what purpose. Even they need to spend a lot
of time and energy to meet with a right startup guru at every level.

Ecosystem Limited to Big Cities

The startup ecosystem in India is limited to big cities including Bangalore, Delhi,
Bangalore, Pune and Chennai etc. There are very few resources that are actually
working toward strengthening the startup ecosystem.
Weak Education System
Indian education system is very weak especially when it comes to educating about
entrepreneurship. Students hardly get to know about entrepreneurship during their
school studies.

X. Capacity building for Entrepreneurship

To be a successful entrepreneur, individuals must build capacities in four key strategic
areas – 1)Operational,
2)Management
3) Financial Management
4) 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.
1)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
one gains 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 the
perspective on how to lead, organize and plan for operations.
2)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 the
applicable tools for own business. With a few years of management experience, will
gain management capacity and an understanding of responsibilities and
accountabilities at that level… all precursors to managing own company.

3)Financial Management Capacity Building

Through a combination of work experience and education, need to be well-grounded
and versed in managing finances. Need to be able to accurately estimate and build
financial statements and to understand them. With gained skills, will need to be able
to analyze financial statements, looking at trends and indicators and what those all
mean to the 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 the
organization’s ability to manage finances.
4) Personal Capacity Building
Of extreme importance, if one doesn’t have some key personal, entrepreneurial traits
may be closing up business 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 along the
pathway to become a successful entrepreneur.