Entrepreneurship PDF

Entrepreneurship
Development &
Innovation Management
- Prof. Shashank Divekar
ENTREPRENEURSHIP DEVELOPMENT
“An entrepreneur is an economic agent who unites all means of

Production - land of one, the labour of another and the capital of
yet another and thus produces a product. By selling the product
in the market he pays rent of land, wages to labour, interest on
capital and what remains is his profit.
He shifts economic resources out of an area of lower and into an

area of higher productivity and greater yield.
- J. B. Say (1803)
Entrepreneurship comes from the French verb 'entreprendre'

which means 'To undertake,'
An Entrepreneur is one who identifies an opportunity/

need in the market and provides a product or service to
meet that need.
An Entrepreneur is the one who innovates, raises funds,
assembles resources, selects managers and sets the
organisation going with his ability to identify them.
An entrepreneur is a person who has possession of a new

enterprise, venture or idea and assumes significant
accountability for the inherent risks and the outcome.
Entrepreneurship can be defined as the process of using
private initiative to transform a business concept into a new
venture or to grow and diversify an existing venture or
enterprise with high growth potential.
Entrepreneurs identify an innovation to seize an

opportunity, mobilize money and management skills, and
take calculated risks to open markets for new products,
processes and customers.
“An entrepreneur searches for change, responds to it and

exploits opportunities. Innovation is a specific tool of an
entrepreneur, hence an effective entrepreneur converts a
source into a resource”.
- Peter Drucker (1964)
“An entrepreneur is a person with a high need for

achievement. He is energetic and a moderate risk taker”.
- David McLelland (1961)
Qualities of an Entrepreneur
• Motivated • Disciplined
• Hardworking • Goal-oriented
• Information-seeking • Networking
• Opportunity-seeking • Self-confident
• Creative • Open-minded
• Courageous • Competitive
• Persistent • Strong work-ethics

What does an Entrepreneur do ?
• Use Personal Initiative
• Raise Resources
• Create new business venture
• Engage in calculated risk-taking
• Apply innovative new ideas that solve problems
• Meet Challenges
• Satisfy the need of a clearly defined market

The four key elements involved

in Entrepreneurship are :
• Innovation
All the four elements
• Risk Taking are inter-related and
form a continuous
• Vision process in business.
• Organising Skills
Entrepreneur V/S Manager

Entrepreneur Manager
1. The Entrepreneur is the 1. The Manager is the
owner of the business. employee of the business.
2. All the risks involved in the 2. No risk is taken by the

business are taken. manager
3. Objective is to innovate, 3. Objective is to create

create, and act as an agent systems, assign functions
of change. and supervise.
4. Income and rewards are 4. Income can be assured to a

contingent upon the great extent
success of the venture
Contd..

5. Is required to possess high 5. Needs to be educated and
accomplishment motive, trained in Management
innovation, forethought, theories and practices.
and risk-bearing capacity.
6. Deals with faults and 6. Every effort is made to

failures as a part of learning avoid mistakes and
process. postpone failures.
7. Can perform the functions 7. Cannot perform the

of a manager. functions of an
entrepreneur.
Contd..

8. Initiates Change 8. Follows rules, procedures
and systems
9. Is driven by perception of 9. Is limited by resources he

opportunity currently possesses.
10. May not necessarily be 10. Has to follow discipline

disciplined, organised or and systems in a formal
systematic. organisation.
Intrepreneurship :
An employee of a large organisation who is given freedom
and financial support to create new products, services,
systems etc. and does not have to follow the organisation’s
usual routines or protocols is called an INTRAPRENEUR.
Intrapreneurship is a concept of an employee thinking and

acting as an entrepreneur, but within a company.
An intrapreneur acts independently, is proactive, brings new
ideas, which means that he brings innovations to the
company.
Intrapreneurship rewards the employee for new, innovative
products/ services and gives all employees a chance to excel,
grow and create jobs.
Corporate Entrepreneurship
It is the process whereby an individual or a group of individuals,
in association with an existing organization, create a new
organization or instigate renewal or innovation within that
organization
The corporate entrepreneur is an individual that exists within an
organisation to generate product and process ideas that will
create value for the organisation, its stakeholders and its
consumers that buy its products.
Essence of Corporate Entrepreneurship –
• RISK-TAKING
• INNOVATIVENESS
• PRO-ACTIVENESS
Corporate Entrepreneurship
Corporate Entrepreneurship refers to the process whereby the
firms engage in diversification through internal development.
Such diversification requires new resource combinations to
extend the firm’s activities in areas unrelated, or marginally
related to its current domain of competence and corresponding
opportunity set.
- Burgleman (1983)
Corporate entrepreneurship is an organisational process for
transforming individual ideas into collective actions through the
management of uncertainties.
- Chung & Gibbons (1997)
Entrepreneurship development (ED) refers to the process

of enhancing entrepreneurial skills and knowledge
through structured training and institution-building
programmes.
ED focuses on the individual who wishes to start or
expand a business.
ED aims to enlarge the base of entrepreneurs in order to
hasten the pace at which new ventures are created. This
accelerates employment generation and economic
development.
Entrepreneurship is conducive to economic growth and
the creation of employment. Government programmes
and policies have a significant impact on the level of
entrepreneurship within a country.
Entrepreneurship and
Sustainable Competitive Advantage
Competitive Advantage is the advantage a firm has over its
competitors, allowing it to generate greater sales or margins
and /or retain more customers than its competitors. This may
include the firm’s cost structure, product features, distribution
network and customer support.
Michael Porter has identified two main types of competitive
advantage :
• Cost advantage
• Differentiation advantage
Corporate entrepreneurship has long been recognised as a
potentially viable means for promoting and sustaining
corporate competitiveness and superior firm performance.
Sustainable means ‘over a long term’, something competitors
will take some time to catch up with. It could be a patented
process/ technology, some significant location advantage , raw-
material supply and/ or cost.
Competitive refers to all alternative ways that customers might
solve the problem you are solving for them. To be competitive,
a product offering should possess certain distinct qualities or
features which are comparable to the competitors and
alternatives. These qualities make the customer think several
times, before discarding the product.
Advantage refers to a particular feature of the total product
which makes it irresistible to the target consumer, in
comparison to other offerings in the market.
One goal of every entrepreneur should be to get a competitive

advantage in the marketplace. When you stand out from the
competition by offering something of value that your
competitors don't, you give your customers a better reason to
choose your services.
Overall, a sustainable competitive advantage requires value-

creating products, processes, and services that cannot be
matched by competitors now, and plan content to maintain that
position as the business scales.
THEORIES OF ENTREPRENEURSHIP
Innovation Theory by Schumpeter :
According to Joseph Schumpeter, entrepreneurship is the
catalyst that initiates and sustains the process of
development, through innovation.
Schumpeter argued that the innovation and technological
change of a nation come from the entrepreneurs. profit is
the result of dynamic changes resulting from innovation.
Innovation was defined as ‘new combinations’ of the factors
of production. The concept embraces five major functions :
1. Introduction of a new product

2. Introduction of a new method of production
3. Opening of a new market
4. New source of supply of raw materials
5. New organisation of any industry
David McClelland’s Theory of Needs-Achievement Motivation:
David McClelland proposed that an individual’s specific needs
are acquired over time and are shaped by one’s life experiences.
According to him, human behaviour is affected by three needs –
➢ Power
➢ Achievement
➢ Affiliation
Need for Power is the desire to influence other individual’s
behaviour.
Need for Achievement is the urge to excel, to achieve success.
Need for Affiliation is the need for open and sociable
interpersonal relationships.
Individuals who are motivated by Power (N-Pow) want their

own views and ideas to prevail and thus, they want to lead.
They have a strong need for reputation and self-esteem.
Generally managers with high need for power turn out to be
more efficient and successful managers. The need for power can
be personal or individual.
Individuals with high Achievement (N-Ach) needs are motivated
by competing and challenging work. They look for promotional
opportunities at workplace and have a strong urge for feedback
on their achievement. Such people assume responsibility for
solving problems at work. McClelland calls such people
‘gamblers’ as they set challenging targets.
Those with high need for ‘Affiliation’ need harmonious

relationships with other people and need to feel ‘accepted’ by a
certain group of people. These individuals prefer work that
provides significant personal interaction.
Such individuals are effective performers in a team. They

generally cannot become good leaders since they want to be
liked by everyone and be in the good books of all.
X-Efficiency Theory
The concept of X-efficiency was proposed by economist Harvey
Leibenstein in 1966. The theory is applied to analyse the role of an
entrepreneur.
Firms generally operate within, rather than on their production
frontiers. As such,
• Output is not maximized and their costs per unit are generally
not minimized.
• Innovations are generally not introduced when it is optimal to
do so.
• Less output is not necessarily associated with more desired
leisure.
• The price of the product can have an influence on the cost of
production.
X-Efficiency Theory
X-Efficiency is the degree of inefficiency in the use of resources in

an organisation. X-efficiency describes a company's inability to
get the maximum output for its inputs due to a lack of
competitive pressure.
Harvey Leibenstein’s theory was that when companies aren't

very competitive, their workers don't behave as efficiently.
The theory believes that the actual cost of production of a

commodity always exceeds the minimum cost of production.
X-Efficiency Theory
X-efficiency theory asserts that under conditions of less-than-
perfect competition, inefficiency may persist.
The theory attempts to measure the extent to which a firm
fails to realise its productive potential.
As a concept it may be summarised as follows:
"for a variety of reasons people and organisations normally
work neither as hard nor as effectively as they could. In
situations where competitive pressure is light, many people
will trade the disutility of greater effort, or search for the
utility of feeling less pressure and of better interpersonal
relations."
Risk-Bearing Theory of Prof. Frank H. Knight

Prof. Knight regards profit as the reward of bearing non-
insurable risks and uncertainties.
Knight identifies the entrepreneur as a recipient of ‘Pure Profit’.
According to Knight,
1. The main function of an entrepreneur is to take action in
anticipation of future events.
2. Entrepreneur earns profits because he undertakes risk
3. Uncertainty-bearing is essential to production, thus it
becomes a factor of production.
4. ‘Pure profit’ is reward to the entrepreneur for bearing the
cost of uncertainty.
Theory of Social Change by Everett Hagen

According to Hagen, at some point certain social groups
experience a radical loss of status. He attributed this loss of
status to the genesis of entrepreneurship.
Hagen postulates that four types of events can produce status

withdrawal :
a) The group may be displaced by force

b) It may have its valued symbols denigrated
c) It may drift into a situation of status inconsistency
d) It may not be accepted to the expected status on migration
to a new society
Theory of Social Change by Everett Hagen

According to Hagen, the withdrawal of status respect would
give rise to four possible reactions and create four different
personality types :
1. Retreatist : He who continues to work in the society but
remains indifferent to his work and position
2. Ritualist : Adopts a kind of defensive behaviour and acts in
the way accepted and approved in his society but has no
hopes of improving his position
3. Reformist : He formulates a rebellion and attempts to
establish a new society
4. Innovator : Is a creative individual and is likely to be an
entrepreneur
Entrepreneurial Environment
POLITICAL
E ECONOMIC
N
V
I SOCIAL
R
O
N TECHNOLOGICAL
M
E
N LEGAL
T
CULTURAL
Indian Economic Environment :

Post liberalization economic conditions has created immense
growth prospects for small scale industries.
The New Economic Policy initiated in early 1990s in India had
five main components.
• Devaluation (Of the Indian Rupee)
• Deregulation (Dismantling of govt. controls over industry)
• Privatisation (Sale of PSUs and Disinvestment)
• Liberalisation (Opening up of markets for competition)
• Globalisation (Opening the Indian economy for
foreign investment)
Factors favourable for India’s Economic Growth :

1. Demographic Advantage : Very large numbers in the age-
group below 35. This advantage to sustain for another 30
years.
2. Aspiring Youth : Young generation aspiring for success, good
lifestyle and growth opportunities.
3. Culture of Innovation and Knowledge : India has embraced
technology better than many other countries. Indian youth
have proved to be very adaptive and resourceful.
4. Growth momentum : The country has an underlying growth
momentum and has the ability to reinvent its growth model.
Business Environment in Indian Economy :

1. Strong Growth Momentum
• Sustained process of liberalisation
• Strong average GDP growth
• Increased openness to foreign trade and investment
• Rapid growth in IT and BPO industries
• Strong balance of payments
2. Opportunity
• Large & rapidly growing domestic market
• Large, low-cost labour force
• Engg./ IT/ English language skills
• Abundant natural resources
• Political stability and consensus
Business Environment in Indian Economy : (Contd..)
3. High-Potential Sectors :
• IT
• BPO
• Auto+ Components
• Engineering
• Steel
• Textiles & RMG
• Pharmaceuticals
• Travel & Tourism
Growth Constraints in Indian Economy
• High fiscal deficit discouraging public and pvt.

Investment
• Severe infrastructure bottlenecks
• Rigidities in labour and land markets
• Widespread govt. ownership in business and
Banking sector
• Complex tax regimes and import tariffs
• Restrictions on FDI in some sectors
• Excessive regulation
• Low private investment (15% of GDP)
• Low industry contribution to GDP (Only 25%)
• Only 7% employment in the organised sector
FDI & Entrepreneurship in India
Foreign Direct Investment (FDI) is an investment made by a
company or individual in one country in business interests in
another country, in the form of either –
• Establishing business operations or acquiring business

assets in the other country, such as ownership
OR
• Controlling interest in a foreign company.
FDI are distinguished from portfolio investments in which an

investor merely purchases equities of foreign-based companies.
The key feature of FDI is that it is an investment that establishes
either effective control of, or at least substantial influence over,
the decision making of a foreign business.
Sector-Wise FDI Limits (2017)
FDI
LIMIT
SECTOR % ROUTE
DEFENCE INDUSTRY 49 FIPB
CIVIL AVIATION 49 AUTOMATIC
BANKING (PVT.) 74 FIPB (If beyond 49%)
BANKING (PSU) 20 FIPB
FM RADIO 49 AUTOMATIC
DTH 49 FIPB
INSURANCE 49 FIPB
SINGLE-BRAND RETAILING 100 FIPB (Beyond 49%)
MULTI-BRAND RETAILING 51 FIPB
TELECOM SERVICES 100 FIPB (Beyond 49%)
PHARMA 100 FIPB
RAILWAY INFRA 100 AUTOMATIC
FIPB : Foreign Investment Promotion Board
Sectors where FDI is Not Allowed in India (2017)
• Lottery Business
• Gambling & Betting
• Chit Funds
• Trading in TDRs
• Tobacco Products
• Atomic Energy
• Railways Operations
ENTREPRENEURIAL PROCESS
At start-up, the entrepreneurship process is a course of action
that involves all functions, activities and actions associated with
identifying and evaluating perceived opportunities and the
bringing together of resources necessary for the successful
formation of a new firm.
The entrepreneurial process consists of the following stages :
1. Idea Generation/ Innovation

2. Germination (Recognition)
3. Business Plan
4. Resourcing
5. Organising & Managing
6. Harvesting
1. Idea Generation :
The entrepreneur identifies and visualises the business
opportunity. This is further evaluated in terms of feasibility,
risks and efficiency to decide whether it is sufficiently
attractive.
2. Germination :
This stage involves a detailed market survey, study of data and
empirical evidence in order to give final shape to the business
proposal.
3. Business Plan :
Once the opportunity is identified, an entrepreneur needs to
create a comprehensive business plan. The plan covers all
aspects of the business like finance, manufacturing and
marketing.
Contd..
4. Resourcing:
The entrepreneur identifies the sources from where the
finance and the human resource can be arranged. Here, the
entrepreneur finds the investors for its new venture and the
personnel to carry out the business activities.
5. Organising & Managing :

Business operations are initiated. Individual and group tasks
are assigned and organisational structure takes shape.
6. Harvesting :
Here, the actual growth is compared against the planned
growth and then the decision regarding the stability or the
expansion of business operations is undertaken accordingly,
by an entrepreneur.
Business Plan
A business plan is a written document that describes a
business, its objectives, its strategies, the market it is in and
its financial forecasts.
It is the formal written expression of the entrepreneurial vision,

describing the strategy and operations of the proposed venture.
A business plan is an essential roadmap for business success.

This document generally projects 3-5 years ahead and outlines
the route a business intends to take to grow revenues.
A great business plan is a living, breathing blueprint for any
business that can help navigate and manage an enterprise. It
also helps potential investors, partners, lenders, and others
understand the business strategy and its chances at success.
Business Plan
A well-written business plan is important in different ways :
1. Helps describe the product or service
2. Identifies the target market
3. Details the marketing & distribution strategy
4. Lay out the sales and operational forecasts
5. Identifies resources required
6. Prepares cash-flow projections
The purpose of the plan is to enable the top executives of the

firm to think about their business in a comprehensive way, to
communicate their objectives to individuals who may have a
stake in the firm's future, to have a basis for making decisions,
and to facilitate the planning process.
Purposes of a Business Plan :

1. Define objectives and decide programmes to achieve
the objectives
2. Regular reviews and course corrections
3. Define a new market segment
4. Support a loan or financing proposal
5. Basis for an agreement between partners
6. Set a value on a business
7. Evaluate a new product-line, promotion or
expansion
Components of a Business Plan :
1. Marketing Plan
2. Manufacturing/ Trading Plan
3. Distribution Plan
4. Financial/ Investment Plan
5. Competition Strategy
6. Internal Procedures and Systems

Marketing Plan Manufacturing/ Trading Plan

• Product • Plant Location
• Target Customer • Technology & Processes
• Target Territory • Raw Material Sources
• Competitors • Sub-Contracting/ Outsourcing
• Pricing • Quality Systems
• Advertising Plan • Labour (Skilled/ Unskilled)
• Distribution & Logistics • Packaging & Storing

Distribution Plan Financial/ Investment Plan

• Intermediaries • Equity Capital
➢ Stockists
➢ Wholesalers • Borrowings (Short-Long Term)
➢ Retailers
➢ Franchisees • Capital/ Revenue Expenses
➢ Agents
➢ Service Network • Cash-Flow Plans
• Transportation • Interest Cost
• Warehousing • Repayment Schedule

Competition Plan Internal Procedures & Systems

• Pricing Strategy • Organisation Structure
• Product Offerings • Authorities & Responsibilities
• Incentives & Commissions • Reporting Systems
• Advertising Strategy
• Customer Relationship
Pitfalls of Entrepreneurship (By Peter Drucker)
Peter Drucker, the ‘founder of Modern Management’ has

identified 4 types of most common mistakes, which leaad to
failures in entrepreneurship. These four ‘pitfalls’ of
entrepreneurship are as below :
1. Knowing better than the Market : The entrepreneur fails to

recognise in time, that their product/ service is succeeding
elsewhere than their intended (target) market.
2. Focusing too much on profits : Entrepreneurs don’t

understand that ‘cash flow’ is more critical to the success
of a business than profits, because growth-spurt companies
need continual stoking with fresh money. Business fail
more due to lack of liquidity, than lack of customers.
Pitfalls of Entrepreneurship (By Peter Drucker) Contd..
3. Management Crisis: As a business grows, the person who

founded it becomes incredibly busy. Rapid growth puts an
incredible strain on a business. You outgrow your
production facilities, you outgrow your management
capabilities. Cultivating and nurturing talent, delegation
and effective control are the keys to avoiding such crisis.
4. Loss of perspective: For an entrepreneur, the needs of the

business should always get the highest priority. However,
once the company is up and running, the entrepreneur’s
priorities shift from business to his own needs. This may
lead to loss of focus and the business may flounder as a
result.
Project Management
What is a Project ?
A Project is a planned activity with a specific objective, within
specified time, and with a specified beginning and an end.
Every project has three basic dimensions :
• Input Characteristics : Define what the project will
consume, in terms of materials, manpower, power or fuel,
financial resources and the organisational setup.
• Output Characteristics : Define what the project will
generate – goods, services, by-products, etc.
• Social Cost-benefit Characteristics : Affecting the current
equilibrium of the available resources in the environment,
thus involving entire society in its implications.
Characteristics of a Project :
a. Investment Pattern
b. Benefits or Gains
c. Time Limit
d. Location
A well-planned project includes a correct consideration of
alternatives, identification of key issues, broad participation,
compactness and enforceability.
Types of Projects :
1. Quantifiable and non-quantifiable projects :
Quantifiable projects are those in which a plausible
quantitative assessment of benefits can be made. Projects
of industrial development, power generation etc. are
quantifiable. Projects involving health, education, defense
etc. are non-quantifiable.
Types of Projects …Contd.

2. Sectoral Projects : This classification has been accepted by
the Planning Commission of India. Accordingly a project
may fall in any of the following categories :
a. Agriculture & Allied Sector
b. Irrigation and Power Sector
c. Industry & Mining Sector
d. Transport & Communication Sector
e. Social Service Sector
f. Miscellaneous
3. Techno-Economic Projects :
a. Factor-Intensity oriented
b. Causation-oriented
c. Magnitude-oriented
Financial Institutions Classifications :

a. New Projects
b. Expansion Projects
c. Modernisation Projects
d. Diversification Projects
Importance of Projects :
1. They are catalytic agents of economic development
2. They initiate the process of development
3. They have long-term consequences
4. They provide framework for future activities of the enterprise
5. They involve substantial financial outlays
6. Projects initiate development of basic infrastructure
7. Projects accelerate the process of necessary changes in society
In order to provide adequate supply of credit to various

sectors of the economy, the Govt. of India has evolved a
well developed structure of financial institutions in the
country. These include all-India level as well as State-level
institutions.
National-level Institutions :
• IDBI
• IFCI
• NABARD
• SIDBI
• IIBI
Venture Capital
Venture Capital is money provided by investors to startup firms
and small businesses with perceived long-term growth
potential. It is capital provided to early-stage, high-potential,
high risk, growth startup companies.
Venture capital is a subset of private equity. The VC fund
makes money by owning equity in the companies it invests in,
which usually have a novel technology or business model in
high technology industries, such as BT, IT, services etc.
VC funding usually entails high risk for the investor, but it has
the potential for above-average returns. VC is a very important
source of funding for startups that do not have access to capital
markets, for various reasons.
Venture Capital
Most venture capital comes from a group of wealthy investors,
investment banks and other financial institutions that pool
such investments or partnerships.
Venture capital can also include managerial and technical

expertise.
Important Features :
• High degree of risk
• Equity Participation
• Long-Term Investment
• Participation in Management
• Achieve Social Objectives
Advantages of Venture Capital Financing

a. VC funding not being a loan scheme, there is no repayment
schedule. For a start-up company, this frees up important cash flow
that might otherwise be needed to service debt.
b. With VC financing, companies can acquire large sums

of capital that would not be possible through bank loans or other
conventional methods.
c. The involvement of high-profile investors may also help increase

the credibility of a new business.
d. Many VCs have consultants and professionals on their staff that

have deep knowledge of specific markets. These experts can help
the business avoid many of the pitfalls that are usually associated
with start-ups.
Disdvantages of Venture Capital Financing
a. Securing a VC deal can be a difficult process due to accounting and

legal costs a firm must shoulder.
b. he start-up company must also give up some ownership stake to
the VC company investing in it. This results in a partial loss of
autonomy that finds venture capitalists involved in decision-
making processes.
c. VC deals also come with stipulations and restrictions in

composition of the start-up's management team, employee salary
and other factors.
d. Most VC firms do not release all the needed funds up front. Rather,
they usually release funds in stages with an eye on the expansion
of the business. Because this approach may not be suitable for
your funding plans, it may have an adverse effect on the business.
Role of Government :
Entrepreneurship has the potential to support economic growth and

social cohesion; it is the policy goal of many governments to develop
a culture of entrepreneurial thinking.
Through a number of agencies, the government tries to promote

entrepreneurship through financial assistance, training, resource
management etc.
Financial assistance is available from institutions such as Nationalized

Banks, Small Industries Development Bank of India, Regional Rural
Banks, National Small Industries Corporation, State Financial
Corporations etc.
Small and Medium-sized Enterprises (SMEs) in market economies are

the engine of economic development. SMEs have strategic
importance for each national economy due a wide range of reasons.
a) Training : There are a number of Government organizations as

well as NGOs who conduct EDPs and MDPs. These EDPs and MDPs
and are conducted by MSME's, NIESBUD, NSIC, IIE, NISIET,
Entrepreneurship Development Institutes and other state
government developmental agencies.
b) Marketing Assistance : There are Governmental and non-

governmental specialized agencies which provide marketing
assistance. Besides promotion of MSME products through
exhibitions, NSIC directly market the MSME produce in the
domestic and overseas market. NSIC also manages a single point
registration scheme for manufacturers for Govt. purchase.
c) Promotional Schemes: Besides providing developed land and sheds

to the entrepreneurs on actual cost basis with appropriate
infrastructure, special schemes are designed for specific purposes
like quality upgradation, common facilities, entrepreneurship
development and consultancy at nominal charges.
d) Duty Concessions: MSME units with a turnover of Rs. 1 Cr. or less

per year have been exempted from payment of Excise Duty.
Moreover there is a general scheme of excise exemption for MSME
brought out by the Ministry of Finance which covers most of the
items.
e) Credit Facilities : Small Industries Development Bank of India

(SIDBI) has been established as the apex institution for financing the
MSME. Specific schemes have been designed for implementation
through SIDBI, SFCs, Scheduled Banks, SIDCs and NSIC etc
Entrepreneurship Development Institute of India
The Entrepreneurship Development Institute of India (EDI), is an
autonomous body and not-for-profit institution, set up in 1983. EDI is
sponsored by apex financial institutions, namely the IDBI Bank Ltd.,
IFCI Ltd. ICICI Ltd and State Bank of India (SBI).
Objectives of EDI
• Enterprise creation
• Employment generation and poverty alleviation at grassroots

through developmental interventions.
• Training of rural youth, develop entrepreurial skills,
• Enhancing competitiveness of SMEs through cluster development
• Create a cadre of trained social entrepreneurs.
• Repository of knowledge in the area of women entrepreneurship

National Institute of Entrepreneurship and Small
Business Development (NIESBUD)
The National Institute for Entrepreneurship and Small Business
Development is a premier organisation of the Ministry of Micro, Small
and Medium Enterprises, engaged in training, consultancy, research,
etc. in order to promote entrepreneurship.
The major activities of the Institute are Training of Trainers,

Management Development Programmes, Entrepreneurship-cum-
Skill Development Programmes, Entrepreneurship Development
Programmes and Cluster Intervention.
Objectives of NIESBUD :
• To evolve standardised materials and processes for selection, training,
support and sustenance of entrepreneurs, potential and existing.
• To help/support and affiliate institutions/organisations in carrying out

training and other entrepreneurship development related activities.
Objectives of NIESBUD : (Contd.)
• To train trainers, promoters and consultants in various areas of

entrepreneurship development
• To offer consultancy nationally/internationally for promotion of

entrepreneurship and small business development.
• To provide national/international forums for interaction and

exchange of experiences helpful for policy formulation and
modification at various levels.
• To share international experience and expertise in

entrepreneurship development.
• To share experience and expertise in entrepreneurship

development across national frontiers.
INNOVATION
Innovation is the process of translating an idea or invention into a

good or service that creates value or for which customers will pay.
Innovation can be viewed as the application of better solutions that

meet new requirements, inarticulated needs, or existing market
needs. In business and economics, innovation is the catalyst to
growth.
In economics, management science, and other fields of practice and

analysis innovation is generally considered to be a process that
brings together various novel ideas in a way that they have an
impact on society.
In business, innovation often results when ideas are applied by

the company in order to further satisfy the needs and expectations
of the customers.
INNOVATION
To be called an innovation, an idea must be replicable at an
economical cost and must satisfy a specific need. It involves
deliberate application of information, imagination and initiative in
deriving greater or different values from resources, and includes
all processes by which new ideas are generated and converted into
useful products.
Entrepreneurs as innovators always seek to create new combinations

of the three factors : 1. Raw material 2. Physical and intellectual
efforts and 3. Capital
Innovation is the specific tool of entrepreneurs, through which they

exploit change as an opportunity for a different business or service.
Entrepreneurs need to search purposefully for sources of innovation,
the change and their symptoms that indicate opportunities for a
successful innovation.
INNOVATION
Innovation is the means of exploiting a business opportunity. Smart
innovators frame their ideas to stress the ways in which a new
concept is compatible with the existing market landscape, and
their company’s place in that marketplace
Too often, companies focus on a technology instead of the

customer’s problem. But in order to truly turn a great idea into a
world-changing innovation, other factors must be taken into
account.
Innovation is mainly of two kinds :

• Product Innovation – Introducing new and/ or improved
products or services
• Process Innovation – Finding better or more efficient ways of

producing existing products, or delivering existing services.
INNOVATION
Product (or service) innovation

As the name suggests, this is all about launching new or improved
products (or services) on to the market. Advantages might include :
‘First mover advantage’ – which can include some of the following:

• Higher prices and profitability
• Added value
• Opportunity to build early customer loyalty
• Enhanced reputation as an innovative company
• Public Relations – e.g. news coverage
• Increased market share
INNOVATION
Process Innovation
This has to do with finding better or more efficient ways of
producing existing products, or delivering existing services.
Advantages might include:

• Reduced costs
• Improved quality
• More responsive customer service
• Greater flexibility
Possible drawbacks
▪ Loss of jobs, especially if work is outsourced
▪ Need for re-training of workers
According to Venkatakrishnan Balasubramanian, a research analyst

with Infosys Labs, the key to ensuring that innovation is successful is
aligning your idea with the strategic objectives and business models
of your organization. He offered five considerations : (Contd.)
INNOVATION
1. Competitive advantage: Your innovation should provide a unique
competitive position for the enterprise in the marketplace;
2. Business alignment: The differentiating factors of your innovation

should be conceptualized around the key strategic focus of the
enterprise and its goals;
3. Customers: Knowing the customers who will benefit from your

innovation is paramount;
4. Execution: Identifying resources, processes, risks, partners and

suppliers and the ecosystem in the market for succeeding in the
innovation is equally important;
5. Business value: Assessing the value (monetary, market size, etc.) of the
innovation and how the idea will bring that value into the organization
is a critical underlying factor in selecting which idea to pursue.
INNOVATION
INNOVATION V/S INVENTION
In its purest sense, “invention“ can be defined as the creation of a

product or introduction of a process for the first time. “Innovation,”
on the other hand, occurs if someone improves on or makes a
significant contribution to an existing product, process or service.
Invention is about creating something new, while innovation

introduces the concept of “use” of an idea or method.
Innovation implies much more than merely invention. Invention can

be an aspect of innovation and, in fact is often the first step in
innovation. Innovation involves the process of convincing people to
change their material or intellectual habits and replace old
behaviors with new ones.
INNOVATION
Invention is a new device or process. To qualify for a patent an

invention must pass a test of originality--that is, be sufficiently
different from previous inventions.
Most inventions are minor improvements on existing inventions which

do not qualify for patents. Only a small percent of patented inventions
have any economic value.
Innovation is a better way of doing things. Innovations can occur in all

goal-directed behavior such as profit maximization, electoral politics,
sports and personal lifestyles.
Thus an innovation improves performance in goal directed behavior as

measured by a criterion, such as improved performance or reduced
costs in business.
Thank You..
Prof. Shashank Divekar
Pune
shashankd@yahoo.com

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Entrepreneurship

“An entrepreneur is an economic agent who unites all means of

He shifts economic resources out of an area of lower and into an

Entrepreneurship comes from the French verb 'entreprendre'

An Entrepreneur is one who identifies an opportunity/

An entrepreneur is a person who has possession of a new

Entrepreneurs identify an innovation to seize an

“An entrepreneur searches for change, responds to it and

“An entrepreneur is a person with a high need for

• Persistent • Strong work-ethics

What does an Entrepreneur do ?

• Use Personal Initiative

• Create new business venture

• Engage in calculated risk-taking

• Apply innovative new ideas that solve problems

• Satisfy the need of a clearly defined market

The four key elements involved

Entrepreneur V/S Manager

2. All the risks involved in the 2. No risk is taken by the

3. Objective is to innovate, 3. Objective is to create

4. Income and rewards are 4. Income can be assured to a

Entrepreneur V/S Manager

6. Deals with faults and 6. Every effort is made to

7. Can perform the functions 7. Cannot perform the

Entrepreneur V/S Manager

9. Is driven by perception of 9. Is limited by resources he

10. May not necessarily be 10. Has to follow discipline

Intrapreneurship is a concept of an employee thinking and

Entrepreneurship development (ED) refers to the process

One goal of every entrepreneur should be to get a competitive

Overall, a sustainable competitive advantage requires value-

1. Introduction of a new product

Individuals who are motivated by Power (N-Pow) want their

David McClelland’s Theory of Needs-Achievement Motivation:

Those with high need for ‘Affiliation’ need harmonious

Such individuals are effective performers in a team. They

X-Efficiency is the degree of inefficiency in the use of resources in

Harvey Leibenstein’s theory was that when companies aren't

The theory believes that the actual cost of production of a

Risk-Bearing Theory of Prof. Frank H. Knight

Theory of Social Change by Everett Hagen

Hagen postulates that four types of events can produce status

a) The group may be displaced by force

Theory of Social Change by Everett Hagen

Indian Economic Environment :

Factors favourable for India’s Economic Growth :

Business Environment in Indian Economy :

Business Environment in Indian Economy : (Contd..)

Growth Constraints in Indian Economy

• High fiscal deficit discouraging public and pvt.

• Establishing business operations or acquiring business

FDI are distinguished from portfolio investments in which an

• Gambling & Betting

The entrepreneurial process consists of the following stages :

1. Idea Generation/ Innovation

5. Organising & Managing :

It is the formal written expression of the entrepreneurial vision,

A business plan is an essential roadmap for business success.