Q3. Define environment?

Discuss the Socio Economic environmental factors influencing

Entrepreneurship?
The term business environment connotes external forces, factors and institutions that are
beyond the control of the business and they affect the functioning of a business enterprise.
These include customers, competitors, suppliers, government, and the social, political, legal
and technological factors etc., business environment may also be defined as the set of
external factors, such as economic factors, social factors, political and legal factors,
demographic factors, technical factors etc.,
According to Glueck and Jauch -: The environment includes outside the firm which can
lead to opportunities for or threats to the firm. Although, there are many factors, the most
important of the sectors are socioeconomic, technical, supplier, competitors, and
government.
A. ECONOMIC FACTORS
Economic environment exercises the most direct and immediate influence on
entrepreneurship. The economic factors which influence the entrepreneurs in identifying the
business opportunity and giving decision to finalize the venture as per economically viable &
financially feasible . these are the factors which imparted in growth of entrepreneurship are
the following.
1. ECONOMIC SYSTEMS- it is a set of institutions for allocating resources and making
choices to satisfy human wants. It is classified on three category Capitalism Market,
Command Economy Communism, Mixed Economy.. Capitalism Market: is an economic
system in which individuals own productive resources, and those individuals can use
resources in whatever manner they choose, subject to common productive legal
restrictions. Command Economy Communism: is a system where government mostly
decides what and how much to produce how it will be produced, and who will get them.
Mixed Economy: it is an economic system in which decisions about how resources should
be used are actually made partly private sector and partly by public sector.
2. ECONOMIC PLANNING: In economic planning, we have to make plan regarding optimum
use of our resources in producing of goods. We also have to make plan to produce optimum
quantity of output. We can use economic planning at small level and at large level like
investment decisions of Govt.In our country second five year plan involved in rapid
industrialization & as well as entrepreneurial development.
3. INDUSTRIAL POLICIES-: In Industrial policies are important for the growth of SSI. The
second five- year plan gave high priority to industrial development aimed at setting up a
number of heavy industries such as steel plants, capital goods industries, etc., for which
direct government participation and state involvement was needed.
4. FISCAL INITIATIVES-: it influences the entrepreneurial development. these incentives not
only stimulate economic environment but also create favorable climate for entrepreneurial
growth.

5. IMPORT DUTY -: it is levied as a productive cover to small scale industry. In undeveloped

country import duty is considered as a necessary instrument to to help and develop the
enterprise where it will be competitive & able to sustain in adopting market pressure.
6. FISCAL POLICY-: it is a government's decision regarding spending and taxing. If a
government wants to stimulate growth in the economy, it will increase spending for goods
and services. This will increase demand for goods and services. Since demand goes up,
production must go up. If production goes up, companies may need to hire more people.
People that were once unemployed may now have jobs and money to spend on goods and
services.
7. MONETARY POLICY-: it is the decisions a government makes regarding the money supply
and interest rates. It affect a business in selecting cost , inflationary pressure , maintaining
balance of payments equilibriums in the country.
8. GOVERNMENT INFLUENCES ON INVESTMENT -: the role of govt. in influencing the
decision are very important such as employment generation schemes PMRY ( prime
minister rojgar yojana ) , IRDP ( Integrated rural development programme ) . the govt.
takes crucial steps to promote first generation entrepreneurs by providing capital as well as
training for managing the enterprise.
9. LABOUR: The quality and quantity of labour is another factor which influences the
emergence of entrepreneurship. Availability of labour makes entrepreneurship attractive. If
entrepreneurial activities are initiated near areas where labour is available, then it is easy
to carry out the business more comfortably and profitably at low cost.
10.
RAW MATERIALS & MARKET: Raw materials & market are required for establishing
any industrial activity and therefore have an influence in the emergence of
entrepreneurship. In the absence of raw materials, neither any enterprise can be
established nor can an entrepreneur emerge. If sufficient market is not there, people will
naturally hesitate to do business in a sector where there is no market. In addition to market
opportunities, it is equally important to ensure future market opportunities for the
emergence of entrepreneurial activities.
B. SOCIAL FACTORS :
Development of entrepreneurship in a society may take place not just because of better
economic factors but because of the presence of positive social factors. The following social
factors influence the development of entrepreneurship in a society.
1. SOCIAL NORMS AND VALUES: A society sets certain norms and values for the behaviour
of people who are part of that society. If people violate or overstep these norms and values,
certain restrictions are likely to be imposed on them. As a result, many people are forced to
accept certain types of jobs and tasks that reflect the social environment. If the society has
an open and flexible approach towards various types of jobs and works, then people will
feel free to do whatever they like and even go in for innovation and creativity.
2. ROLE MODELS: Societies that celebrate entrepreneurship and felicitate successful
entrepreneurs in a way encourage many future generations to take up entrepreneurial
activities. This is because successful businessmen prove to be role models for the society
at large. For instance, states like Gujarat, Maharashtra and to some extent Tamil Nadu and

Haryana have experienced better industrial development as a result of higher

concentration of entrepreneurs compared to lesser industrialized states such as Orissa,
Chattisgarh, Madhya Pradesh and other Northeastern states.
3. SOCIAL PRESSURE: At times, entrepreneurship can emerge in a society due to social
restriction too. If a society is orthodox, close and imposes a lot of restrictions, then it is
likely to backfire. People who are at the receiving end are likely to react strongly and go in
for change. In other words, because of negative pressure, more number of people would
like to become entrepreneurs as a means of improving their status.
4. RESPECT AND STATUS: If societies accord recognition and respect to people who dare to
do something different and creative, it proves to be an encouragement for others to do
something enterprising. Therein lies the emergence of entrepreneurship. In the traditional
societies, people were looked down upon rather than encouraged for deviating from the set
norms or regular occupation. This means there was no respect for change.
5. SECURITY: The view regarding role of social security in encouraging entrepreneurship
development is rather divided. One school of thought is of the view that people are more
prone to take entrepreneurial risks in secure social environments. On the other hand, there
are others who argue that entrepreneurship will more likely emerge if there are turbulent
conditions. In both cases, there is scope for entrepreneurship development.

Q4. Definition of techno Competitive environment which influence the development of entrepreneurship?
Technological Environment means the development in the field of technology which affects
business by new inventions of productions and other improvements in techniques to
perform
the
business
work.
According to J.K Galbraith -: Technology is a systematic application of scientific or other
organized knowledge to practical tasks. After Independence, India had basic problems like
poverty , unemployment and development of India . Indian Govt. has taken many
following steps for technological development.
Businesses have been at the forefront of technology for ages. Whatever can speed production will
draw in more business. As computers emerged in the 20th century, they promised a new age of
information technology. But in order to reap the benefits, businesses needed to adapt and change
their infrastructure [source: McKinney]. For example, American Airlines started using a
computerized flight booking system, and Bank of America took on an automated check-processing
system.

IMPACT OF TECHNOLOGY ENVIRONMENT ON BUSINESS UNIT

1. Increased Productivity-: Using technology to maximize your business productivity
creates the platform to realize true business success. Business productivity software
ensures organizations have the tools to overcome the challenges of executing on
strategy every day and prospering in today's economic times. Increased business

productivity can be traced to the automation of processes allowing for faster

communication of strategy, increased time spent on strategic priorities and greater
project completion rates.
2. Reducing Business Costs-: Small business owners can use technology to reduce
business costs. Business technology helps automate back office functions, such as
record keeping, accounting and payroll. Business owners can also use technology to
create secure environments for maintaining sensitive business or consumer
information.
3. Improving Communication--; Business technology can help small businesses
improve their communication processes. Emails, texting, websites and personal digital
products applications, known as apps, can help companies improve communication
with consumers. Using several types of information technology communication
methods allow companies to saturate the economic market with their message.
4. Potential Increase in Business opportunity -: Technology allows small businesses
to reach new economic markets. Rather than just selling consumer goods or services in
the local market, small businesses can reach regional, national and international
markets. Retail websites are the most common way small businesses sell products in
several different economic markets.
Some of Landmarks of Technological Environment In India
1. Establishment of technological and research institute -: Indian govt. has
established 500 technological institutes for providing education to Indian students. It
has also established 1080 research institutes. In these institutes major names like
space research centre, medical research centre and agricultural research centre have
developed India technically.
2. Positive Technical policy -: India has strong and positive technical policy for
technological development. This policy opens door to import technology from foreign
countries for increasing agricultural and industrial developments.
3. High Growth Rate of Information Technology in India -: In India, IT sector is
developing with 35% growth rate, India is second country after China who is using
internet at large scale for e-commerce , e-education and e-accounting
4. Incentive for promoting Technology in India-: Indian Govt. has given 100%
income tax exemption for expenses incurred in research of technology in India. State
financial corporation is uplifting domestic technology by supporting finance to domestic
Industries.
COMPETITIVE ENVIRONMENT

Means the immediate competitive factors in which an organization conducts its activities.
Michael Porters Five forces of competitive positions analysis is a framework for assessing and
evaluating the competitive strength and position of an organization. Existence of market
bottlenecks, degree of responsiveness of demand to change in price and other external factors
promote the entrepreneur to study the competitive situation with reference to the chosen
market.
1. Rivalry among existing competitors-: Organizations in an industry are affected by the
number of competitors and capability of the competitors. Competitive strategies of an
organization make use of techniques like rigorous promotion of products, providing good
customer service, reducing the price of the product etc. When the fixed costs are high the
rivalry among the firms increases because of economies of scale.
2. Threat of new entrants-: Second force that creates competition is new Firms entering
the industry. Threat of new entry depends on the entry and exit barriers. When entry and
exit barriers are low, the firms easily enter and exit the industry, the profit is low and vice
versa. Government controls entry of new firms with policies and laws.
3. Threat of Substitutes-: Substitutes means the products of other firms. Threat of
substitutes means the threat when the demand for product of firm gets affected because
the price of the substitute product of other firm gets changed. Price of substitute
commodities impact on business & as well as decision of a entrepreneur .
4. Bargaining power of buyers-: Powerful buyers are able to force the industry to reduce
the prices of the products. The smaller the number of buyers the greater is the bargaining
power of the buyers. The greater the size of the order; greater is the bargaining power of
the buyers. The entrepreneur tries to get the advantages Cost of switching.
5. Bargaining Power of suppliers-: When suppliers have bargaining power, they sell their
products at higher prices and exercise power on the firm. When supplier demands for more
share in profits, the profits of the firm get reduced. If the product supplied has unique
features and has no substitutes, supplier is powerful; he can demand more price.
Competitive Strategies adopted by entrepreneur are -:
1. Cost Leadership Strategy - : The entrepreneur focuses on Goods are produced for broad customer base. Strict
attention always is given to product controls and budgets. More importance is given on improving the productivity.
Tries to understand the need of the specific market of consumers and creates a product that will attract the
customers.
2. Differentiation Strategy-: It is adopted to offer products which are unique. The organization makes effort to
create brand loyalty. This strategy gives organization advantage over its competitors. Its helps company to offers
products that create value to customers.

3. Low-Cost Focus Strategy-: Similar to Cost Leadership Strategy except that it focuses on niche market. Product is
not marketed to the entire market but to a particular segment of consumers.The focus is to provide goods at lower
rate to that particular segment.
4. Differential Focus Strategy-: It Also focuses on a particular segment of consumers like the low-cost strategy.
The product is marketed as being unique in some way, to a particular segment.. In this strategy, the organization
offers something unique to the customers in the niche market.

Q5. What are the legal requirements of establishing a new entrepreneurship?

REQUIREMENTS FOR STARTING YOUR BUSINESS
Once an entrepreneur has taken all the important decisions relating to starting a business,
he/she has to take into account the basic regulatory requirements which are to be followed for
setting up the organisation. The most important regulation is the Companies Act,1956, which
regulates all the affairs of a company. It contains provisions relating to the formation of a
company, powers and responsibilities of the directors and managers, raising of capital, holding
company meetings, maintenance and audit of company accounts, powers of inspection and
investigation of company affairs, reconstruction and amalgamation of a company and even
winding up of a company. The Ministry of Corporate Affairs, earlier known as Department of
Corporate Affairs under Ministry of Finance, is primarily concerned with administration of this
Act as well as other allied Acts and rules & regulations framed there-under.
Below is a listing of the most common requirements that affect small businesses, but it is by
no means exhaustive. But the regulations are vary from industry to Industry . If you're in the
food service business, for example, you will have to deal with the health department..
Carefully investigate the regulations that affect your industry.
Being out of compliance could leave you unprotected legally, lead to expensive penalties, and
jeopardize your business.
1. Business Licenses-: There are many types of licenses. You need one to operate legally
almost everywhere. If the business is located within an incorporated city limits, a license
must be obtained from the city; if outside the city limits, then from the county. For more
information contact the county or city office in your area.
2. Certificate of Occupancy-: If you are planning on occupying a new or used building for a
new business, you may have to apply for a Certificate of Occupancy from a city or county
zoning department. For more information contact the county or city office in your area.

3. Business Organization -: There are many forms of legal structure you may choose for
your business. The most common structures are Sole Proprietorships, General and Limited
Partnerships, C and S Corporations and Limited Liability Companies. Each legal structure
offers organizational options which are appropriate for different personal situations and
which affect tax and liability issues. We suggest you research each legal structure
thoroughly and consult a tax accountant and/or attorney prior to making your decision.
4. Fictitious Business Name -; Businesses that use a name other than the owner's must
register the fictitious name with the county as required by the Trade Name Registration Act.
[Check with your local government offices] This does not apply to corporations doing
business under their corporate name or to those practicing any profession under a
partnership name.
5. Protecting Your Idea -: If applicable to your business, you may want to apply for
trademarks, patents and your copyrights.
6. Trademarks -: Trademarks are names or symbols used in any commerce that is subject to
regulation by state government or the U.S. Congress. Trademarks and service marks may
be registered in a state for a term of ten years. For more information about Applications for
Registration of Trademark or Service Mark .
7. Copyrights-: Copyrights protect the thoughts and ideas of authors, composers and artists.
A copyright prevents illegal copying of written matter, works of art or computer programs.
In order to ensure copyright protection, the copyright owner should always include notices
on all copies of the work.
8. Business Insurance-: Like home insurance, business insurance protects the contents of
your business against fire, theft and other losses. Many small businesses must protect
themselves from lawsuits and other situations for which they might be deemed liable. All
businesses should research the advisability of appropriate liability insurance. Contact your
insurance agent or broker.
9. Sales Tax Number-: In your state there is a percent sales and use tax which applies to the
retail purchase, retail site, rental, storage, use or consumption of tangible personal
property and certain services. In other words, sales tax must be collected on just about
every tangible item sold. A sales tax number is required for each business before opening.
The number, plus instructions for collection, reporting and remitting the money to the state
on a monthly basis.
10. Employees-: All businesses with employees are required to comply with state and
federal regulations regarding the protection of employees. For information on state labor

laws, work force availability, prevailing wages, unemployment insurance, unionization,

benefits packages and employment services.
11. Unemployment Insurance Tax-: Businesses are required by the state to pay
unemployment insurance tax if the company has one or more employees for 20 weeks in a
calendar year, or it has paid gross wages of $1,500 or more in a calendar year. The taxes
are payable at a rate of 2.7 percent on the first $8,500 in annual wages of an employee.
Unemployment insurance must be reported and returns made to the state.
12. Immigration Act-: The Federal Immigration Reform and Control Act of 1986 requires all
employers to verify the employment eligibility of new employees. The Immigration and
Naturalization Service makes available a Handbook for Employers, which provides step-bystep instructions on how to complete the "Employer Eligibility Verification" Form I-9, which
is required by law when hiring a new employee.
13. Health and Safety -: The Federal Occupational Safety and Health Administration
(OSHA) outlines specific health and safety standards employers must provide for the
protection of employees. Many states have similar standards.
14. Workers' Compensation (1923)-: If a business employs three or more people,
workers' compensation insurance must be carried to provide protection to those injured in
on-the-job accidents. The State Board of Workers' Compensation aids people who need
claim assistance.
15. Minimum Wage-: Virtually all business entities are subject to the federal minimum
wage, overtime and Child labor laws. Information on these laws and other federal laws,
may be obtained from U.S. Department of Labor Wage and Hour Division.