Chapter 1

OVERVIEW OF
ENTREPRENEURSHIP

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 After completing this chapter, you will be able to:

• Knowing the history of entrepreneurship

• Define entrepreneur and entrepreneurship,
enterprise
• Identify the importance of entrepreneurship
• Relate among Entrepreneurship, creativity and
Innovation
• Identify the Competencies of entrepreneurship
• Knowing the entrepreneurship Environment
• Knowing the entrepreneurship Skills
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 History of entrepreneurship

• Derived from French word ‘Entreprendre’ which mean

‘undertaking or individual who undertook the risk of a new
enterprise.’ an individual commissioned to undertake a
particular commercial project.(Adam S)
• The word designates the process of organizing of musical or
other entertainments.
• 16th century, entrepreneurship extended to cover all
activities of civil engineering.
• 18th century, Richard Cantillon, an Irishman living in France
first coined term entrepreneurship to economic activities.
• “activity of buying a certain product at certain price with a
view to sell it at uncertain price. ‘’
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• the 18th Century the first theory of entrepreneur
has been developed by Richard Cantillon. He said
that an entrepreneur is a risk taker.
• late 19th and early 20th Century an entrepreneur
was viewed from economic perspectives.
• The entrepreneur organizes and operates an
enterprise for personal gain.
• In the middle of the 20th Century
• the notion of an entrepreneur as an inventor as
established.

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• The function of the entrepreneurs is to recreate
or revolutionize the pattern of production by
introducing an invention.
• Innovation, the act of introducing some new
ideas, is one of the most difficult tasks for the
entrepreneur.

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 Concept of entrepreneurship and
entrepreneur

Entrepreneurship

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 Definition
• The purposeful activity of an individual or group
of associated individuals, undertaken to initiate,
maintain or earn profit by production and
distribution of economic goods and services”
• The function of seeking investment and
production opportunity, organizing an
enterprise to undertake a new production
process, raising capital, hiring labor, arranging
the supply of raw materials and selecting top
managers of day-to-day operations.
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 Cont…
• Entrepreneurship is essentially a creative activity
that consists of doing things as are not generally
done in ordinary course of business.

• the attempt to create value through recognition

of business opportunity, the management of risk
taking appropriate to the opportunity and
through the communicative and management
skills to mobilize human, financial and material
resources necessary to bring a project to fruition.
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 Cont…
• the art of identifying viable business opportunities
and mobilizing resources to convert those
opportunities into a successful enterprise through
creativity, innovation, risk taking and progressive
imagination.
• Entrepreneur is an economic agent who unites all
means of production land, labor and capital and
thus produces a product. By selling the product in
the market he pays rent of land, wages to labor
and interest on capital and what remains is his
profit.
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 Cont…
• Entrepreneurship is the process of creating
something different, with value, by devoting
necessary time and effort, by assuming the
accompanying/associated financial,
psychological, and social risks, and receiving the
resulting rewards of monetary and personal
satisfaction

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• In general, the process of entrepreneurship
includes five critical elements. These are:
 The ability to perceive an opportunity.
 The ability to commercialize the perceived
opportunity i.e. innovation
 The ability to pursue it on a sustainable basis.
 The ability to pursue it through systematic
means.
 The acceptance of risk or failure.

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 Entrepreneur

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• An entrepreneur is any person who creates and
develops a business idea and takes the risk of
setting up an enterprise to produce a product or
service which satisfies customer needs.
• An entrepreneur is therefore a business-minded
person who always finds ways to improve and
grow in business.
• A professional who discovers a business
opportunity to produce improved or new goods
and services and identifies a way in which
resources required can be mobilized.
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• An entrepreneur is an individual who:
 has the ability to identify and pursue a business
opportunity;
 undertakes a business venture;
 raises the capital to finance it;
 gathers the necessary physical, financial and human
resources needed to operate the business venture;
 sets goals for him/herself and others;
 initiates appropriate action to ensure success; and
 Assumes all or a major portion of the risk!
 An entrepreneur is a job-creator not a job-seeker
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 To an economist an entrepreneur is one who brings
resource, labor, materials, and other assets into
combination that makes their value greater than
before and also one who introduces changes
innovations.
 To a psychologist an entrepreneur is a person
typically driven by certain forces need to obtain or
attain something, to experiment, to accomplish or
perhaps to escape the authority of others.
 For the capitalist philosopher an entrepreneur is one
who creates wealth for others as well, who finds
better way to utilize resources and reduce waste and
who produce job others are glad to get.
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 Types of Entrepreneurs

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 Innovative Entrepreneurs:

• are one who believe in introducing new goods(commodity),

adopt new method of production, develop new market and
restructure the organisation under their command.
• These entrepreneurs are quite aggressive in
experimentation and putting attractive or viable possibilities
into practice.
• Mostly, Innovative entrepreneurs are the product of
developed nations and they are in position to adopt and
implement innovative process in action. But
underdeveloped nations are unable to have this type of
entrepreneurs as they lack resources and expertise to invest
in innovation process.
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 Imitating Entrepreneurs:

• These entrepreneurs are those entrepreneurs who are

unable to innovate the changes themselves but they are
capable enough to imitate the techniques and
technology innovated by innovating entrepreneurs. Thus,
these entrepreneurs are always ready to adopt successful
innovation executed by innovating entrepreneurs as
there is little involvement of huge capital expenditure in
this process.
• Developing economies or underdeveloped economies
need this type of entrepreneurs.
• Prospective entrepreneur of these nations prefer to
imitate the technology, knowledge and skill developed by
innovating entrepreneurs.
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 Fabian Entrepreneurs:

• These entrepreneurs are shy and lazy in their working. Their

dealings are guided by the customs, religion, tradition and past
practices. Actually, Fabian entrepreneurs are always conscious in
their dealings and believe in skepticism in initiating any change.
• They do not have any will power to initiate new changes as well
as lack desire to adopt new methods innovated by innovating
entrepreneurs.

• Thus, they always believe in tested routes of production and not

interested in taking risk.
• Actually, they are habitual of following the paths directed by
earlier entrepreneurs. They avoid in taking challenges in
production system and that is why they are unable to maximize
the fruits of entrepreneurial actions.
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 Cont…
• They are imitative by nature but are not
determined and also lack power.
• They imitate only when it becomes perfectly
clear that failure to do so would result in a loss of
the relative position of the enterprise.

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 Drone Entrepreneurs:

• These entrepreneurs are those who are not inclined to bring

changes in their production system as demanded by the change in
consumer preferences, technological innovation, economic and
social behaviour of the prospective customers.
• Drone entrepreneurs are characterized by a refusal to adopt
opportunities to make changes in production formulae even at the
cost of severely reduced returns.
• They can suffer loss but are not ready to make changes in their
existing production methods.
• When competition increases, they are pushed out of the market as
it becomes uneconomical for them to exist and operate in a
competitive market.

• .They are traditional in their approaches and do not make changes

in production methods.
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 Types of entrepreneurs
1. According to source of Capital
• i. Private Entrepreneur:
• ii. Public Entrepreneur:
2. According to Gender and Age:
• i. Man entrepreneur
• ii. Woman entrepreneur
• iii. Young entrepreneur
• iv. Old entrepreneur
• v. Middle-aged entrepreneur
3. According to Area:
• i. Urban entrepreneur
• ii. Rural entrepreneur
4. According to Scale:
• i. Large scale industry entrepreneur
• ii. Medium scale industry entrepreneur
• iii. Small scale industry entrepreneur
• V. Micro scale entrepreneur
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 Cont…
5. Based on Utilization of Technology –
(i) Technical Entrepreneurs
(ii) Non-Technical Entrepreneurs
6. Based on sources of capital
• a) Private entrepreneurship:
• b) Collective entrepreneurship:
7. Based on business idea generation
• a) Technological entrepreneur:
• b) Geographical entrepreneur:
• c) Sociological entrepreneurs: finds a new situation in which to
sell an old product.
8. Based on reason for start up
• a) Opportunity driven:
• b) Necessity-driven
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 Intrapreneurship

• Corporate entrepreneurship/ corporate venturing/

Intrapreneurship is a process whereby an individual or
a group of individuals in association with an existing
organization creates new organization or instigates
renewal or innovation within the organization.

• Intrapreneur is a person who focuses on innovation

and creativity and who transforms a dream or an idea
into a profitable venture, by operating within the
organizational environment.

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 Creativity, Innovation & entrepreneurship
• Creativity is the ability to develop new ideas and to
discover new ways of looking at problems and
opportunities.
• To be creative, entrepreneurs need to keep their
mind and eyes open to their environment.
• Innovation is the ability to apply creative solutions
to those problems and opportunities in order to
enhance people’s lives or to enrich society.
• In other words, creativity is thinking new things,
and innovation is doing new things.
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 cont,…
• Innovation is the process that transforms new
ideas into new value- turning an idea into value.
Innovation is the process of bringing the best
ideas in to reality.

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 Cont…
• In order to be creative, you need to be able to view things in new
ways of from a different perspective.
• Among other things, you need to be able to generate new
possibilities or new alternatives.
• Tests of creativity measure not only the number of alternatives
that people can generate but the uniqueness of those
alternatives.
• The ability to generate alternatives or to see things uniquely does
not occur by change; it is linked to other, more fundamental
qualities of thinking, such as flexibility, tolerance of ambiguity or
unpredictability, and the enjoyment of things heretofore
unknown.
• Thus, creativity is the development of ideas about products,
practices, services, or procedures that are novel and potentially
useful to the organization.
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Creativity, Innovation & Entrepreneurship

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 Steps in the Creative Process

• Step1: Opportunity or problem Recognition: A person

discovers that a new opportunity exists or a problem needs
resolution.
• Step2: Immersion: the individual concentrates on the
problem and becomes immersed in it. He or she will recall
and collect information that seems relevant, dreaming up
alternatives without refining or evaluating them.
• Step 3: Incubation: the person keeps the assembled
information in mind for a while. He or she does not appear
to be working on the problem actively; however, the
subconscious mind is still engaged. While the information is
simmering it is being arranged into meaningful new
patterns.
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 Cont…
• Step 4: Insight: the problem-conquering solution
flashes into the person’s mind at an unexpected
time, such as on the verge of sleep, during a
shower, or while running. Insight is also called
the Aha! Experience.
• Step 5: Verification and Application: the
individual sets out to prove that the creative
solution has merit. Verification procedures
include gathering supporting evidence, using
logical persuasion, and experimenting with new
ideas.
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 Barriers to Creativity

• includes
 searching for the one ‘right’ answer
 focusing on being logical
 blindly following the rules
 constantly being practical
 viewing play as frivolous
 becoming overly specialized
 avoiding ambiguity
 fearing looking foolish
 fearing mistakes and failure
 believing that ‘I’m not creative
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 Innovation
• Innovation lies at the heart of the
entrepreneurial process and is a means to the
exploitation of opportunity.
• It is the implementation of new idea at the
individual, group or organizational level.
Innovation is a process of intentional change
made to rate value by meeting opportunity and
seeking advantage.

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 Cont….
• There are four distinct types of innovation, these
are as follows:
A. Invention - described as the creation of a new
product, service or process
B. Extension - the expansion of a product, service or
process
C. Duplication - defined as replication of an already
existing product, service or process
D. Synthesis - the combination of existing concepts
and factors into a new formulation
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 The Innovation Process
i. Analytical planning: carefully identifying the
product or service features, design as well as the
resources that will be needed.
ii. Resources organization: obtaining the required
resources, materials, technology, human or capital
resources
iii. Implementation: applying the resources in order to
accomplish the plans
iv. Commercial application: the provision of values to
customers, reward employees and satisfy the
stakeholders.
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 Areas of Innovation

• New product:
• New Services:
• New Production Techniques:
• New Way of Delivering the Product or Service to the
Customer:
• New Operating Practices: As with innovations in the
production of physical products, innovation in service
delivery must address customers need and offer them
improved benefits, for example easier access to the
service, a higher quality service, a more consistent
service, a faster or less time consuming service etc.
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 Cont….
• New Means of Informing the Customer about the
Product:
• New Means of Managing Relationship within the
Organization: Any organization has a wide variety of
communication channels running through it. The
performance of the organization will depend to a
great extent on the effectiveness of its internal
communication channels. These communication
channels are guided by the organization’s structure.
• New Ways of Managing Relationships between
Organizations:
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 Role of Entrepreneurs in Economic
Development
1. Improvement in per capita Income/Wealth
Generation
2. Generation of Employment Opportunities:
3. Inspire others Towards Entrepreneurship
4. Balanced Regional Development:
5. Enhance the Number of Enterprise:
6. Provide Diversity in Firms:
7. Economic Independence:
8. Combine Economic factors:
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 Cont…

9. Provide Market efficiency:

10. Accepting Risk:
11. Maximize Investor’s Return

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 Entrepreneurial Competence and Environment

• Under this topic entrepreneurial mindset will

address subtopics such as,
I. who become an entrepreneur;
II. qualities of successful entrepreneurs;
III. entrepreneurial skills;
IV. entrepreneur’s task and
V. wealth of the entrepreneur and

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 Entrepreneurial Mindset
Who Becomes an Entrepreneur?
• Anyone with the following characteristics can be an
entrepreneur.
i. The Young Professional:
ii. The Inventor:
iii. The Excluded: people nothing is open to them.
Displaced communities and ethnic and religious
minorities have not been invited to join the wider
economic community due to a variety of social, cultural
and political and historical reasons. As a result they may
form their own internal networks, trading among
themselves and, perhaps, with their ancestral countries.
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 Qualities of an entrepreneur

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 Qualities of an Entrepreneur

• In order to be successful, an entrepreneur should have the following

qualities:
 Opportunity-seeking
 Persevering (Persistent)
 Taking calculated Risk
 Demanding for efficiency and quality
 Information-seeking
 Goal Setting
 Planning
 Persuasion and networking
 Independence and Building self-confidence
 Commitment
 Building self-confidence
 Listening to others
 Demonstrating leadership
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 1. Opportunity-seeking

• An opportunity is a favorable set of circumstances

that creates a need for a new product, service or
business. It includes access to credit, working
premises, education, trainings etc. An
entrepreneur always seeks out and identifies
opportunities.

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 2. Calculated Risk Taking
• The best entrepreneurs tend to:-
– Set their own objectives where there is moderate
risk of failure and take calculated risks
– Gain satisfaction from completing a job well
– Not be afraid of public opinion, skepticism
– Take responsibility for their own actions
• Importance of Risk-taking
• Build self confidence
• Create a feeling of leadership
• Create strong motivation to complete a job well

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 3. Demanding for efficiency and quality

• Efficiency
• Being efficient means producing results with little wasted
effort. A successful entrepreneur always finds ways to do
things faster or with fewer resources or at a lower cost.
• Quality
• A characteristic of the product or service that makes it fit
to use. It makes a product, process, or service desirable.
An entrepreneur acts to do things that meet certain
standards of excellence which gives him greater
satisfaction.
• The ability of a product or service to meet a customer’s
expectations for that product or service.
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 Benefits of quality includes
• Reduction of waste: Striving to maintain quality means
examining all processes that contribute to the creation of a
product, to remove non-productive processes and waste. If
businesses keep to their standard of maintaining the quality
of the product, the number of defective products will be
reduced. Consumers prefer to buy quality products. Hence
the quality products/services help in increasing the share in
market and ensure that they will not be returned.
• Cost-effectiveness: Striving to ensure quality helps
businesses to minimize the chances that they will make
mistakes. As a result, the costs of re-doing work or changing
the product after it has been sold are greatly reduced.

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 Cont…
• An increase in market share:
• Better profitability:
• Social responsibility:
• Reputation:

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 4. Information-seeking

• Successful entrepreneurs do not rely on

guesswork and do not rely on others for
information. Instead, they spend time collecting
information about their customers, competitors,
suppliers, relevant technology and markets.
Gathering relevant information is important to
ensure that the entrepreneur makes well informed
decisions.

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 Cont…
• Information on the area of market, supply,
operations, finance, legislation, and
infrastructure are important for entrepreneurs.

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 5. Goal Setting

• A Goal - is a general direction, or long-term aim

that you want to accomplish. It is not specific
enough to be measured. It is large in scope, not
necessarily time-bound, and is something that
people strive for by meeting certain objectives
which will hopefully add up to eventually
achieving the goal.

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 Cont…
• Objectives - are specific and measurable.
• Specific: Great goals are well-defined and focused.
• Measurable: A goal without a measurable outcome is like a
sports competition without a scoreboard or scorekeeper.
• Attainable: Far too often, entrepreneurs can set goals which
are beyond their reach. Dream big and aim for the stars but
keep one foot firmly based in reality.
• Relevant: Achievable business goals are based on the
current conditions and realities of the business climate.
• Time-Based: Business goals and objectives just don’t get
done when there’s no time frame tied to the goal-setting
process.
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 6. Planning

• Planning is making a decision about the future in

terms of what to do, when to do, where to do,
how to do, by whom to do and using what
resources. An effective entrepreneur therefore,
usually plans his/her activities and accounts as
best as they can for unexpected eventualities.
• An entrepreneur develops and uses logical, step-
by step plans to reach goals.

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 7. Independence and Building self-confidence

• Self-confidence is the state of being certain that a

chosen course of action is the best or most
effective given the circumstances.
• Confidence can be described as a subjective,
emotional state of mind, but is also represented
statistically as a confidence level within which one
may be certain that a hypothesis will either be
rejected or deemed plausible.
• Self-confidence is having confidence in oneself
when considering a capability.
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 Characteristics of a Self-confident Person

• A person with self-confidence may exhibit some of the following

characteristics:
• Risk-taking: willing to take risks and go the extra mile to achieve better
things.
• Independent: entrepreneurs like to be their own masters and want to be
responsible for their own decisions.
• Perseverance: Ability to endure and survive setbacks and continue to
build confidence in whatever you do in your business.
• Able to learn to live with failure. Entrepreneurs are going to make
mistakes. They are human. But they learn from these mistakes and then
move on.
• Ability to find happiness and contentment in work.
• Doing what you believe to be right, even if others mock or criticize you for
it.
• Admitting mistakes and learning from them
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 8. Persistence

• An entrepreneur is able to make repeated efforts or

to take different actions to overcome an obstacle
that get in the way of reaching goals.
• Characteristics of Persistence
 Taking actions in the face of a significant obstacles
 Taking repeated actions or switching to an
alternative strategy to meet a challenge or
overcome a challenge
 Taking personal responsibility for the performance
necessary to achieve goals and objectives
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 Cont….
• An entrepreneur always makes concerted efforts
towards the successful completion of a goal.
• An entrepreneur perseveres and is undeterred by
uncertainties, risks, obstacles, or difficulties
which could challenge the achievement of the
ultimate goal.
• Edison is now famous for saying that genius is
• “1% inspiration and 99% perspiration.”

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 Activity 1.1: Understanding perseverance

Objective of activity: To enable students to internalize the concept of perseverance

The story of Thomas Edison (please adapt to the context)
When he was young, Thomas Edison’s parents took him out of school after his teachers declared that he was “stupid” and
“unteachable.” Edison spent his early years working and being fired from various jobs, culminating in his firing from a
telegraph company at the age of 21. Despite these numerous setbacks, Edison was never discouraged from his true calling in
life: inventing! Throughout his career, Edison obtained more than one thousand patents. And although several of these
inventions such as the light bulb, stock printer, phonograph and alkaline battery -- were groundbreaking innovations, the vast
majority of them could be fairly described as failures. Edison is now famous for saying that genius is
“1% inspiration and 99% perspiration.”
One of Edison’s best examples of perseverance occurred after he was already a successful man. After inventing the light bulb,
he began seeking an inexpensive light bulb filament. At the time, ore was mined in the Midwest of the United States, and
shipping costs were very high. In order to minimize his costs with ore, Edison established his own ore-mining plant in
Ogdensburg, New Jersey. For nearly ten years, he devoted his time and money to the enterprise. Edison also obtained 47
patents for innovations that helped make the plant run more smoothly. And even despite those inventions, Edison’s core
project failed because of the low quality of ore on the East Coast.
However, despite that failing, one of those 47 inventions (a crushing machine) revolutionized the cement industry, and
actually earned Edison back almost all of the money he had lost. Later, Henry Ford would credit Edison’s Ogdensburg project
as the main inspiration for his Model T Ford assembly line. And in fact, many believe that Edison paved the way for modern-
day industrial laboratories. Edison’s foray into ore-mining demonstrates that dedication can pay off even in a losing venture.

Instructions: Read the story of Thomas Edison for the students

Reflection questions:
• What are the major challenges that Thomas Edison faced?
• What were his achievements?
• What are the causes for his success?
• What do we learn from the story of Thomas Edison?
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 9. Persuasion and Networking

• An entrepreneur can successfully persuade or influence others

for mobilizing resources, obtaining inputs, organizing
productions and selling his products or services.
• Seven sources of power
 Coercive power
 Connection power
 Information power
 Expert power
 Position(legitimate) power
 Referent/Identification power
 Reward power
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 Cont…
• Importance of Persuasion in Business
 We purchase goods from people
 We sell goods to people
 We need support from people
 We work with people.
• Without people, be they are suppliers, workers,
and most importantly customers, there is no
business.

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 Networking
• Networking is an extended group of people with
similar interests or concerns who interact and remain
in informal contact for mutual assistance or support.
In a business environment where we are in, we
network with customers, suppliers, competitors,
various firms, different organizations, government
offices and family, etc.
• Factors that Affect Persuasion and Networking
• Socio-cultural background and perceptions
• Communication skills (both verbal and non-verbal).
• Negotiation skills
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 Cont…
• Networking is an extended group of people with similar
interests or concerns who interact and remain in informal
contact for mutual assistance or support. In a business
environment where we are in, we network with customers,
suppliers, competitors, various firms, different organizations,
government offices and family, etc.
• The three characteristics/behavioral indicators of persuasion
and networking
 Using deliberate strategies to influence or persuade others.
They design sincere (honest) strategies to have things done.
 Using key people as agents to accomplish own goals and
objectives to approach the right people in a right way to
implement their goals done.
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Acting to develop and maintain business contacts 61
 10. Fulfilling commitment

• Characteristics/ behaviors of fulfilling

commitment entrepreneurial competence
 Making personal sacrifice or expending
extraordinary efforts to complete a job
 Striving to keep customer satisfied and working
with employees to make things for customer
ready
 Placing long-term good will over short term gain.

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 Entrepreneurial Skills

• A skill is simply knowledge which is demonstrated

by action. It is an ability to perform in a certain
way.
1. General management skills and
2. People management skills

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 General Management Skills:
• These are skills required to organize the physical and financial
resources needed to run the venture. Some of the most
important general management business skills are:
• Strategy Skills – An ability to consider the business as a
whole, to understand how it fits within its market place, how
it can organize itself to deliver value to its customers, and the
ways in which it does this better than its competitors.
• Planning Skills – An ability to consider what the future might
offer, how it will impact on the business and what needs to
be done to prepare for it now.
• Marketing Skills – An ability to see past the firm’s offerings
and their features, to be able to see how they satisfy the
customer’s needs and why the customer finds them
attractive.
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 Cont…
• Financial Skills – An ability to manage money; to be
able to keep track of expenditure and to monitor
cash-flow, but also an ability to assess investments in
terms of their potential and their risks.
• Project Management Skills – An ability to organize
projects, to set specific objectives, to set schedules
and to ensure that the necessary resources are in the
right plat of the right time.
• Time Management Skills – An ability to use time
productively, to be able to priorities important jobs
and to get things done to schedule.
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 People Management Skills
• Communication Skills – An ability to use spoken
and written language…
• Leadership Skills – An ability to inspire people
to work in a specific way
• Motivation Skills – An ability to enthuse people
and get them to give their full commitment
• Delegation Skills – An ability to allocation of
tasks
• Negotiation Skills

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 Entrepreneurial Tasks

• We recognize entrepreneurs, first and foremost, by

what they actually do – by the tasks they undertake. A
number of tasks have been associated with the
entrepreneur. Some of the more important are:
• Owning Organizations:
• Founding New Organizations:
• Bringing Innovations to Market:
• Identification of Market Opportunity:
• Application of Expertise:
• Provision of leadership:
• The entrepreneur as manager:
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 Wealth of the Entrepreneur

• Wealth is money and anything that money can buy. It includes money,
knowledge and assets of the entrepreneur.
• Who Benefits from the entrepreneur’s Wealth?
• Employees:
• Investors:
• Supplier:
• Customers:
• The local community:
 Not polluting their shared environment
 Contributing and sponsoring local development activities
 Contribution for political and cultural stabilities and economic
improvements
 Acting in an ethical way.
• Government: tax
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 Entrepreneurship and Environment.
• Business environment refers to the factors
external to a business enterprise which influence
its operations and determine its effectiveness.
Business environ­ment may be healthy or
unhealthy. Healthy business environment means
the conditions are favorable to the growth of
business whereas unhealthy environ­ment implies
conditions hostile or unfavorable to business
operations.

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 External Environment
• It is the environment which is external to the business and hardly to influence
independently. The following are the components of external environment:
• Economic Environment
• Economic environment is of multidimensional nature. It consists of the structure of the
economy, the industrial, agricultural, trade and transport policies of the country, the
growth and pattern of national income and its distribution, the conditions prevailing in
industrial, agricultural and other sectors, the position relating to balance of trade and
balance of payments, and other miscellaneous conditions of the economy. There is a close
relationship between a business firm and the economic environment around it. The
success of a business enterprise depends considera­bly upon the State and growth of the
economy.
• Legal Environment
• Business must function within the framework of legal structure.
• There are several business laws in our country. A working knowledge of these laws is very
helpful for the entrepreneur. Some laws differ from region to region and amendments arc
made from time to time. Therefore, the entrepreneur must always keep in touch with
those who know the latest position in law. In addition, an entrepreneur should:
– Read the books that enlighten on the legal side of business
– Consult government agencies concerned with the implementation of business laws.
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 Cont…
• Political Environment
• In a democratic country, politics cannot be ignored.
• Public opinion is very important and today's public opinion becomes
tomorrow's legislation. Businessmen should, therefore, learn to take
public opinion into account in the decision-making process.
• Socio-Cultural Environment
• It consist the social and culture, norms, values, beliefs, religion,
Attitude, fashions and fads of a particular society.
• Demographic Environment
• It assesses the overall population pattern of a given geographical
region. age profile, distribution, sex, education profile, income
distribution etc.
• The demographic appraisal can help in identifying the size of target
customers
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 Internal Environment

• Internal environment is the environment which is under

the control of a given organization.
– Raw Material: It assesses the availability of raw material now
and in the near future.
– Production/Operation: It assesses the availability of various
machineries, equipment, tools and techniques that would be
required for production/operation.
– Finance: It assesses the total requirements of finance in
terms start-up expenses, fixed expenses and running
expenses. It also indicates the sources of finance that can be
approached for funding.
– Human Resource: It assesses the kind of human resources
required and its demand and supply in the market.
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Environmental Factors Affecting Entrepreneurship
• Some of the environmental factors which hinder entrepreneurial
growth are given below:
• Sudden changes in Government policy.
• Sudden political upsurge.
• Outbreak of war or regional conflicts.
• Political instability or hostile Government attitude towards industry.
• Excessive red-tapism and corruption among Government agencies.
• Ideological and social conflicts.
• Unreliable supply of power, materials, finance, labor and other
inputs.
• Rise in the cost of inputs.
• Unfavorable market fluctuations.
• Non-cooperative attitude of banks and financial institutions
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