Professional Documents
Culture Documents
Entrepreneurship J B
Entrepreneurship J B
SUB: ENTREPRENERUSHIP
Unit-I
Definition of Entrepreneur
The word ‘Entrepreneur’ is derived from the French word “Entreprendre” means, “to
undertake.”
Entrepreneurs are action-oriented highly motivated individuals who take risks to achieve
goals.
What is an Entrepreneur?
Adam Smith (1776) considers entrepreneur as a proprietary capitalist who supplies capital
and works as a manager intervening between labor and the consumer.
Francis A. Walker (1870) calls the entrepreneurs as engineers of progress and the chief
agents of production.
F. H. Knight (1921) propounds that entrepreneurs are a specialized group of persons who
bear risks and deal with uncertainty.
J-A. Mill (1848) advocates for using the word entrepreneur in the sense of an organizer who
is paid for his non-manual type of work.
J.B. Say (1824) defines an s entrepreneur as “an economic agent who assembles factors of
production, see the s price of produce in such a way that ensures the cost and profit, re-
accumulates capital and possesses administrative and productive knowledge.”
This concept is also supported by Hagen Se Robinson (1942). The emphasis on socio-
economic contributions and characteristics of entrepreneurs.
The innovation here is conceived as the introduction of new product or new utility of the old
product, new market, new production methods, a new source of raw materials and new
organization.
Herberton G. Evans (I957) defines, “Entrepreneur Is the person or group of persons who have
the task of determining the kind of business to be operated.”
Evan’s entrepreneur only engages m setting the nature of the business, the good to be
produced or the service to be served and the type of customers to be catered.
H. Cole (1959) observes, “The entrepreneur is the individual who initiates, maintains, or
aggrandizes a profit-oriented business salt for the production or distribution of economic
goods and services.”
Cole believes that the person engages in any economic activity to earn a profit is the
entrepreneur. Therefore, profit earning is the focal point to identify an entrepreneur.
This definition centers on the concept of managership and implies that an entrepreneur is a
manager too.
The entrepreneur has been understood differently under the contemporary condition in a
seminar held on entrepreneurship in Delhi in 1981.
The consensus was “Entrepreneur is a person who accepts challenges, gives emphasis on
production for development, exercises vigilance about success and failure at the time of
taking standard risks and considers, carefully and significant stove conditions before arriving
at any decision.”
The concept has taken us to the idea of efforts and venture that contribute to the advent of
facial progress leading to human welfare; it constructs upon physical activities involved with
the generation of products as writ as the psychological aspect associated with entrepreneurial
success.
Their entrepreneurs as strong achievers of goals and risk takers for any desired action for
attaining success of the ventures’ John G. Burch (1986) says, “The entrepreneur is the one
who undertakes a venture, organizes it, raises capital to finance it, and assumes all or a major
portion of the risk”.
Burch’s entrepreneur is not only a venture but also a risk taker and capital provider too.
Entrepreneur brings talents, product -service venture ideas, know-how and usually, provides
finance with taking necessary risks.
Characteristics of an Entrepreneur
An entrepreneur is a person who is action-oriented and highly motivated to take a risk and to
achieve such a goal dot brings about a change in the process of generating goods or services
or re-initiates progress in the advent of creating new organizations.
• Entrepreneur is an agent.
• Entrepreneur is an innovator.
The characteristics that encompass the concept of the entrepreneur are discussed below:
1. Entrepreneur is an agent
He is also understood as a change agent who brings about changes in the structure and
formation of the organization, market and the arena of goods and services.
Many experts – old and new, have emphasized this characteristic. Back I955, Redlich pointed
out that an entrepreneur is a person who identifies the nature of risk and takes a decision.
Later on, Burch, Meredith and other experts have agreed that entrepreneur is a risk taker
while undertaking a venture.
An entrepreneur is an individual who establishes and manages the business for the principal
purpose of profit and growth.
David C. McClelland has initiated this concept of the entrepreneur by calling him “as per sun
with a strong desire for achievement.”
Later on, Meredith and others have expressed the same concept while they termed
“entrepreneurs are action-oriented, highly’ motivated individuals.”
Therefore, entrepreneurs have to have a deep-rooted need for achieving their goals.
Entrepreneur a person who operates a business by investing his or her capital. Abbett first
pointed out this characteristic in 1967.
It a supported by Nadkami (l97S) and Sharma (1981). They perceived entrepreneur as the
founder of an enterprise who assembles necessary resources for the operation of the
enterprise.
This characteristic /concept of the entrepreneur was promoted by Evans in 1957 It says that
entrepreneur is the person or group of persons who perform the task of determining the kind
of business to the operated.
7. Entrepreneur is an innovator
Joseph A. Schumpeter {1934) characterized entrepreneur as an innovator of new combination
in the field of production Later on Robinson (1962) and Hagen (1962) have described
entrepreneur as a person who lakes a small venture to the edge of success by his efforts,
innovation and motivation.
Therefore, entrepreneur innovates something that brings about disequilibria in the industry.
An entrepreneur is a person who creates something new of value by devoting time and efforts
and in tum receives monetary and personal rewards. Max Weber, Hartman, Hisrich and
Peters have recognized this distinct phenomenon of entrepreneurs.
It perceives entrepreneur as a person who accepts challenges for developing and exercising
vigilance about success and failure to take a risk and to generate products.
Qualities of an Entrepreneur
Experts have listed a long list of qualities relating to general, mental, economic, social and
personal trails of entrepreneurs.
• Self-Confidence.
• Risk Taker.
• Leadership.
• Originality.
• Future-oriented.
Types of Entrepreneur
Researchers who have studied entrepreneurial behaviour suggest that there are different types
of entrepreneurs. Classifying entrepreneurs into various categories is a tricky issue. The
taxonomy of entrepreneurs can be carried out in various ways. Entrepreneurs can be
classified on various basis. Clarence Denhof Classifies entrepreneurs on the basis of stage of
economic development: some others have classified on the basis of their functions and
characteristics. In the initial stages of economic development, entrepreneurs tend to have less
initiative and drive. As development proceeds, they become more innovating and
enthusiastic. The various types of entrepreneurs are classified on certain parameters. Some
important classifications are described below:
• Innovative Entrepreneur: These are the ones who invent the new ideas, new products,
new production methods or processes, discover potential markets and reorganize the
company’s structure. These are the industry leaders and contribute significantly towards
the economic development of the country. The innovative entrepreneurs have an unusual
foresight to recognize the demand for goods and services. They are always ready to take a
risk because they enjoy the excitement of a challenge, and every challenge has some risk
associated with it. Ratan Tata is said to be an innovative entrepreneur, who launched the
Tata Nano car at a considerably low cost.
• Drone Entrepreneurs: These entrepreneurs are reluctant to change since they are very
conservative and do not want to make any changes in the organization. They are happy
with their present mode of business and do not want to change even if they are suffering
the losses.
Thus, this classification is done on the basis of the willingness of an entrepreneur to create
and accept the innovative ideas.
2. On the Basis of Type of Business: Under this category we can classify entrepreneurs as
described below:
a. Business Entrepreneurs: They are the entrepreneurs who conceive an idea for a new
product or service and then create a business to materialize their idea into reality. They tap
the entire factor of production to develop a new business opportunity. They may set up a big
enterprise or a small scale business. When they establish small business units they are called
small business entrepreneurs.
In a majority of cases, entrepreneurs are found in small trading and manufacturing business.
b. Trading Entrepreneur: There entrepreneurs undertake trading activities and are not
concerned with the manufacturing work. They identifies potentiality of their product in
markets, stimulates demand for their product line among buyers. They may go for both
domestic and overseas trade.
These entrepreneurs demonstrated their ability in pushing many ideas ahead which promoted
their business.
d. Corporate Entrepreneur: These entrepreneurs used his innovative skill in organizing and
managing a corporate undertaking. A corporate undertaking is a form of business
organisation which is registered under some statute or Act like a trust registered under the
Trust Act, or a company registered under the Companies Act. These corporate work as
separate legal entity. He is thus an individual who plans, develops and manages a corporate
body.
They cover a broad spectrum of the agricultural sector and include agriculture and allied
occupations.
a. Technical Entrepreneurs: With the decline of joint family business and the rise of
scientific and technical institutions, technically qualified persons have entered the field of
business. These entrepreneurs may enter business to commercially exploit their inventions
and discoveries. Their main asset is technical expertise. They raise the necessary capital and
employ experts in financial, legal- marketing and other areas of business. Their success
depends upon how they start production and on the acceptance of their products in the
market.
4. According to Motivation: Motivation is the main force that promotes the efforts of the
entrepreneur to achieve his goals. An entrepreneur is motivated to achieve or prove his
excellence in their performance.
c. Motivated Entrepreneur: New entrepreneurs are motivated by the desire for self-
fulfilment. They come into being because of the possibility of making and marketing some
new products for the use of consumers. They are motivated through reward like profit.
5. According to Growth: The industrial units are identified as high growth, medium growth
and low growth industries and as such we have ‘Growth Entrepreneur’ and ‘Super Growth
Entrepreneur.’
a. Novice Entrepreneur: A novice is someone who has started his/her first entrepreneurial
venture. A novice entrepreneur is an individual who has no prior business ownership
experience as a business founder, inheritor of a business, or a purchaser of a business. It is not
similar to early starter; a novice can also be a 50 year old with over 25 years of experience in
the industry.
7. Other Entrepreneurs:
The social norms in India had made it difficult for women to have a professional life. Now
this has changed. Progressive laws and other incentives have also boosted the presence of
women in entrepreneurial activity in diverse fields. In 1988, for the first time, the definition
of Women Entrepreneurs’ enterprise was evolved that termed an SSI unit/industry-related
service or business enterprise, managed by one or more women entrepreneurs in proprietary
concerns, or in which she/they individually or jointly have a share capital of not less than 51
per cent as partners / shareholders / directors of a private limited company / members of a
cooperative society, as a Woman Enterprise.
As copreneurs, couples struggle in ventures to establish equality in. their relationships. Such
couples represent the dynamic interaction of the systems of love and work.
h. IT Entrepreneurs: IT entrepreneurs are creating a new business platform that takes them
straight to the top. They are confident, ambitious innovative and acquired creativity in the
competitive global environment and created a niche of their self. They are the brave new
bunch of entrepreneurs who are raring to take on the world of information technology.
i. Social Entrepreneur: Social entrepreneur is one who recognizes the part of society which
is stuck and provides new ways to get it unstuck. Be it dedicated efforts for child upliftment,
fighting for the conservation of Assam’s rainforests, working for the betterment of the blind
or initiatives to empower women, the entrepreneur’s passion is very strong. Freedom, wealth,
exposure, social mobility and greater individual confidence are driving this huge wave of
social innovation and entrepreneurship. After all are tired with the Inefficiency of
governments and the indifference of corporate, and want to make a change and this is the
case everywhere.
j. Forced Entrepreneurs: The money-lenders of yesterday, who are thrown out of their
family business because of government legislation, the neorich Indians returning from abroad
and the educated unemployed seeking self-employment form this class of entrepreneurs.
Entrepreneurial Process
An entrepreneur must dedicate his sufficient time towards its creation, the major components
of a business plan are mission and vision statement, goals and objectives, capital requirement,
a description of products and services, etc.
4. Managing the company: Once the funds are raised and the employees are hired, the next
step is to initiate the business operations to achieve the set goals. First of all, an entrepreneur
must decide the management structure or the hierarchy that is required to solve the
operational problems when they arise.
The entrepreneurial process is to be followed, again and again, whenever any new venture is
taken up by an entrepreneur, therefore, its an ever ending process.
Functions of an Entrepreneur:
1. Innovation:
2. Assumption of Risk:
An entrepreneur, by definition, is risk taker and not risk shirker. He is always prepared for
assuming losses that may arise on account of new ideas and projects undertaken by him. This
willingness to take risks allows an entrepreneur to take initiatives in doing new things and
marching ahead in his efforts.
3. Research:
An entrepreneur is a practical dreamer and does a lot of ground-work before taking a leap in
his ventures. In other words, an entrepreneur finalizes an idea only after considering a variety
of options, analyzing their strengths and weaknesses by applying analytical techniques,
testing their applicability, supplementing them with empirical findings, and then choosing the
best alternative. It is then that he applies his ideas in practice. The selection of an idea, thus,
involves the application of research methodology by an entrepreneur.
The work of an entrepreneur involves the use of managerial skills which he develops while
planning, organizing, staffing, directing, controlling and coordinating the activities of
business. His managerial skills get further strengthened when he engages himself in
establishing equilibrium between his organization and its environment.
However, when the size of business grows considerably, an entrepreneur can employ
professional managers for the effective management of business operations.
New innovations are generally opposed by people because it makes them change their
existing behavior patterns. An entrepreneur always first tries new ideas at his level.
It is only after the successful implementation of these ideas that an entrepreneur makes these
ideas available to others for their benefit. In this manner, an entrepreneur paves the way for
the acceptance of his ideas by others. This is a reflection of his will power, enthusiasm and
energy which helps him in overcoming the society’s resistance to change.
6. Catalyst of Economic Development:
1. Employment opportunities
Entrepreneurs employ labour for managing their business activities and provide employment
opportunities to a large number of people. They remove unemployment problem.
They remove regional disparities and bring balanced regional development. They also help to
reduce the problems of congestion, slums, sanitation and pollution in cities by providing
employment and income to people living in rural areas. They help in improving the standard
of living of the people residing in suburban and rural areas.
Entrepreneurs help to mobilize and utilize local resources like small savings and talents of
relatives and friends, which might otherwise remain idle and unutilized. Thus they help in
effective utilization of resources.
4. Optimization of Capital
Entrepreneurs aim to get quick return on investment. They act as a stabilizing force by
providing high output capital ratio as well as high employment capital ratio.
5. Promotion of Exports
6. Consumer Demands
Entrepreneurs produce a wide range of products required by consumers. They meet the
demand of the consumers without creating a shortage for goods.
7. Social Advantage
Entrepreneurs help in the development of the society by providing employment to people and
paves for independent living They encourage democracy and self-governance. They are adept
in distributing national income in more efficient and equitable manner among the various
participants of the society.
8. Increase per capita income
Entrepreneurs help to increase the per capita income of the country in various ways and
facilitate development of backward areas and weaker sections of the society.
9. Capital formation
A country can attain economic development only when there is more amount of investment
and production. Entrepreneurs help in channelizing their savings and savings of the public to
productive resources by establishing enterprises. They promote capital formation by
channelizing the savings of public to productive resources.
Entrepreneurs raise money for running their business through shares and debentures. Trading
of shares and debentures by the public with the help of financial services sector leads
to capital market growth.
Entrepreneurs play an important role in the promotion of domestic trade and foreign trade.
They avail assistance from various financial institutions in the form of cash credit, trade
credit, overdraft, short term loans, secured loans and unsecured loans and lead to the
development of the trade in the country.
Entrepreneurs help to attract funds from individuals and institutions residing in foreign
countries for their businesses.
An entrepreneur when starting something new is taking an untraveled path. It’s entirely
an explored area for him. As travels through this path he will encounter various obstacles
and problems. He needs to address them creatively to achieve his goals. An entrepreneur can
address these problems in the following ways:
1. Continuous Market Research
2. Perseverance
An entrepreneur is the only individual who runs for all the permissions, do feasibility studies
and assembles all the things; he may face obstacles at every step. He should be ready to face
lots of delays and rejection. So an entrepreneur should be perseverant. He should not be
bothered by criticism and never give up. He should not lose patience and keep on trying. For
example : Jack Ma, founder of Alibaba Group Holding Limited applied for 30 different jobs
and got rejected. He went for a job with the police and was rejected. Ma went for interview at
KFC where twenty-four people went for the job, twenty-three were accepted and he was the
only one who got rejected. This shows one of the biggest trait s for entrepreneur’s survival is
“never-say-die” spirit.
3. Positive Attitude
An entrepreneur must always have positive attitude. Positive attitude enables an entrepreneur
to look at the things in right perspective. He should not be scared of the roadblocks. It is his
optimistic attitude and conviction that keeps him going.
4. Plan Ahead
An entrepreneur must plan for the future. Plans helps an entrepreneur track his own progress,
to judge how far he is from the actual launch. Plans make the actions time bound. Without a
plan an entrepreneur may find it difficult to launch the product/service on time. Plans should
be made not only at the start or till the launch but it is a continuous process. Even after
successful launch an entrepreneur should plan out future course of action. Plans keep the
companies on track. But a common mistake an entrepreneur does is not to revise the plan.
Since entrepreneurship is very dynamic activity and also the future is uncertain and
unpredictable, the plans need to be revised continuously else the business may lag behind.
One of the biggest problems that entrepreneurs face is hiring the right kind of people for the
job. Most of the talented people want to work for well-known company and also want a
higher package. An Entrepreneur can tackle this problem by hiring interns. Interns are the
freshers who want to work for experience and are enthusiastic to learn.
Success of any entrepreneurial venture depends a great deal on funding. Since majority of
entrepreneurs have an idea but no funds to finance that idea. They depend on raising funds
from outside sources like angel investors and venture capitalists. So the funds raised have to
be used wisely and logically across the activities. Any mis-judgment may lead the failure of
the entire venture. Not only this, an entrepreneur must keep a constant vigil on cash flow
management. There should be adequate liquidity to ensure smooth functioning. So an
entrepreneur should invest his maximum time on cash and all other fund management
activities to succeed.
The skill set required to run the business is not same as required to launch the business. In the
initial launch phase it is the entrepreneur who is doing the entire thing: from taking
permissions, strategizing, running for funding. But after the launch, scale of operations
expands, all of which cannot be handled by him alone. More men and machinery has to be
hired and work has to be distributed. Many entrepreneurs are in habit of doing everything
themselves, they do not delegate and give adequate freedom to their employees. This stifles
creativity among the employees. Employees see this as interference by the entrepreneur. As
the business grows entrepreneurs need to delegate and trust more for day to day activities and
focus on strategic issues.
9. Embrace Change
Entrepreneurs should not be afraid of change, rather they should look forward to change as a
new opportunity. To be successful an entrepreneur must be able to anticipate the change in
advance, so as to explore and face it. The entrepreneurs must continuously do SWOT
(Strength Weakness Opportunities Threats) analysis to be able to overcome failures and
exploit the opportunities. The entrepreneurs who are not able to keep pace with the change
may find it hard to survive.
Introduction
The success of an enterprise new or old depends upon the skills or characteristics of an
entrepreneur or entrepreneur. In order to be successful, an entrepreneur must possess certain
skills which are unique of its kind. If we go through the business history of India, we come
across the names of Tata, Birla, Modi, Dalmia and others who started their business with
small size and made good fortunes. This is possible only because they possess all the
entrepreneurial skills.
Robert D. Hisrich identified adequate commitment, motivation and skills to start and build
some of the important qualities of an entrepreneur. Flexibility, good social behaviour, open
mind and desire to take personal responsibilities will fit in the qualities of a true entrepreneur.
Some of the important skills or characteristics that are necessary for a successful entrepreneur
are discussed below :
1. Desire to Excel:
The first and foremost skill an entrepreneur should possess refer to a burning desire to excel.
The entrepreneur should always engage in competitions with self imposed standards with
himself to beat his last best performance. According to Mc Clelland, this high achievement
motive strengthened him to surmount the obstacles, suppress anxieties, repair misfortunes
and devise expedients. The entrepreneur must have a strong desire to be a winner.
2. Hard Work:
Entrepreneurs who successfully build new enterprises possess an intense level of strong
determination and willingness to work hard. They possess a capacity to work for long hours
and in spurts of several days with less than normal amount of sleep. Through their hard work
and intense desire to complete a task or solve a problem or overcome hurdles, they can able
to achieve the never ending goal of excellence.
3. Self Confidence:
Entrepreneurs must have confidence and belief in themselves to achieve their desired
objectives. They strongly believe that they can beat any one in the field. They do not believe
in status quo, rather they believe that the events in their life are self-determined and have
little belief in fate.
4. Initiative:
An entrepreneur must have initiative seeking personal responsibility for actions and use the
available resources for optimisation of objectives. They take full credit for the success and
assume full responsibility for the failure of the enterprise.
5. Moderate Risk-Taker:
An entrepreneur must be a moderate risk taker and learn from failures. The successful
entrepreneurs are neither high risk takers, nor gamblers. They work in between the two
extremes. They take moderate challenging risk to attain moderate returns which are
influenced within their abilities and decisions.
6. Innovative:
An entrepreneur must be innovative and creative. Through his innovative ideas and creative
thinking an entrepreneur can be able to engage himself in the analysis of various problems
and situations in order to deal with them. An innovative entrepreneur introduces new
products, develops new method of production, discovers new market and reorganises the
enterprise.
7. Motivation:
An entrepreneur should have a strong motivation towards the achievement of a task and must
be able to exert considerable efforts in getting things done by others. He should be a person
who likes working with people and has skills in dealing with them. He has to motivate people
to act, through his interpersonal skills.
8. Optimistic:
Entrepreneurs do not believe that the success or failure of a new business venture depends
mostly upon luck or fate or external uncontrollable factors. They are highly optimistic about
the success of the enterprises. They use positive knowledge to support their thinking. They
are rarely negative. They always look at the brighter side of the situation. They are never
disturbed by any internal or external threat to their business or intermittent problems in
accomplishing their goals.
9. Analytical Ability:
Entrepreneur must be realistic in their approach. They should not be affected by the personal
likes and dislikes. At the time of crisis, they must select experts rather than their friends and
relatives to solve the problems. They must analyse the problem in detail before taking any
decisions.
10. Mental Ability:
Mental ability refers to the inner strength of an entrepreneur which helps him to reach his
goal. It is that ability which helps him to quickly respond to difficult situation. It consists of
intelligence and creative thinking of an entrepreneur. Through this ability, entrepreneurs are
able to adjust themselves with the changing business environment.
An entrepreneur must be well-versed with the art of communication. It is that skill through
which both the sender and receiver understand each other and are being understood.
Entrepreneur are required in many situations to influence customers, employees, suppliers,
creditors, and government and make them think in his way and act accordingly. An
entrepreneur who can effectively communicate and convince the above people will be more
likely to succeed than the entrepreneur who does not.
12. Flexibility:
Entrepreneurs should be flexible in their decisions in the sense that they should not be very
rigid in the decision making process. If the situation demands a change in the decision that
will be beneficial to the enterprise, then after analysing the pros and cons of the decision, the
entrepreneur should revise or modify or change the decisions.
13. Independence:
Intrapreneurship
An intrapreneur is an employee who is given the authority and support to create a new
product without having to be concerned about whether or not the product will actually
become a source of revenue for the company.
Unlike an entrepreneur, who faces personal risk when a product fails to produce revenue, an
intrapreneur will continue to receive a salary even if the product fails to make it to
production. An intrapreneur is nothing but an entrepreneur within the boundaries of the
organisation.
An intrapreneur is an employee of a large organisation, who has the authority of initiating
creativity and innovation in the company’s products, services and projects, redesigning the
processes, workflows and system with the objective of transforming them into a successful
venture of the enterprise. Many big companies actively foster intrapreneurship within their
organizations, allowing their employees to spend 10 to 20 percent of their time on innovative
ideas that are not connected to their job description.
Examples of intrapreneurial activities are:
• Gmail, Google News, Google maps are entrepreneurial efforts inside Google,
• PlayStation is an innovation inside Sony.
Differences Between Entrepreneur and Intrapreneur
Basis Entrepreneur Intrapreneur
Meaning An entrepreneur is defined as a An employee of the organisation
person who establishes a new who is authorised to undertake
business with an innovative idea orinnovations in product, service,
concept. process, system, etc. is known as
Intrapreneur.
Approach An entrepreneur is intuitive in nature Intrapreneur is restorative in nature.
Resources An entrepreneur uses his own In the case of an intrapreneur the
resources, i.e. man, machine, money, resources are readily available, as
etc. they are provided to him by the
company.
Capital An entrepreneur raises capital Financed by the company.
himself.
Enterprise Newly established An existing one
Dependency Independent Dependent
Risk Borne by the entrepreneur himself. Taken by the company
Technopreneurship
Technopreneurs are those entrepreneurs who bring innovation and change in the
technology based products. An entrepreneur who merges technology with entrepreneurial
talent, skill, is known as technopreneur. Technopreneurs are technocrats who are driven
by technology to develop a new product or drastically reduce the cost of an existing
product. These entrepreneurs are usually highly skilled and knowledgeable just out of
college graduates driven by a passion to create something new.
For example: Paytm and Infosys Ltd.
Cultural Entrepreneurs
Cultural entrepreneurs are those who come out with a new product or service that enhances
and preserves the culture, cuisine, art form, tradition or anything related to the soul of a
region or a country. They are not driven by profit rather by the passion for promoting art and
culture and ancient practices. Their goal is to achieve long term sustainable growth. They
work with local people, artisans, and indigenous infrastructure and aim at satisfying the needs
of customers of cultural products and services.
For example: To educate children about the culture and tradition of a country, the content has
to be creative.
Stories and plays are richer and better source than texts; but when these stories were created
in the form of animation like Chotta Bhim, Jai Ganesha, they had a greater impact.
International Entrepreneurship
International entrepreneurs are those who bring our some innovation in product or service
which is highly successful not only in domestic market but also able to their mark in
international market.
may export, provide a licence or open a sales office in foreign country.
earn profit not only in domestic country but also generate and reap higher profits by utilising
the local resources, cheap labour, lower manufacturing costs, sales potential of domestic
markets.
Example: Apple Incorporation
Netpreneurship
Netpreneurs are those entrepreneurs who start a small venture which is usually only online
with no physical office. It is a virtual entrepreneurship.
Employees are located at different places and they connect with each other and with the
entrepreneur via information technology.
Such entrepreneurs usually provide services like:
online coaching,
online music classes,
online courses are also offered where a candidate needs to register online for a course, gets
online course material and appears in online exam or provide a platform for exchange of
news, information or ideas like Slideshare.
Everyone who provides online coaching or online music classes is not a netpreneur, but only
one who first came out the idea and started with the things is a net entrepreneur.
Facebook, a social networking site, which majority of us are aware of and use was launched
by Mark Zuckerberg on February 4, 2004 with his Harvard College roommates.
It was initially launched for the students of Harvard University only.
Later its membership was opened to other higher education institutions in Boston area and
Stanford University.
It further allowed students of other universities and later even high school students to be part
of it.
Since 2006, anyone above the age of 13 years across all countries is allowed to register and
create an account with Facebook.
Facebook, Inc. launched its initial public offer in 2012 and reached an original peak market
capitalization of $104 billion.
Ecopreneurship
Ecopreneurs are those entrepreneurs who come with a new product or service to protect
environment or to minimize the adverse impact on environment.
Focus - on finding innovative solutions to achieve sustainable future growth.
Ecopreneurs also referred to as green entrepreneurs focus on tackling ecological issues like
climate change, pollution, resource depletion, global warming, e-waste management.
Usually established in the form of non-profit organisations driven by the concern for
environment.
Such entrepreneurs come out with innovative eco-friendly, products based on use of natural
resources as raw materials.
Factors responsible for awareness about ecopreneurship
Increasing awareness to protect the environment
Increasing awareness created by various environmental agencies like Centre for Science and
Environment (CSE).
CSE has played a very important role in creating awareness about the pesticides contained in
soft drinks.
CSE also educates people about the environmental concerns
Today’s generation is more aware and health conscious, so a greater demand for
environmentally safe and organic products.
Example
Mitti cool an ecopreneurship venture by Mansukhbhai Prajapati, a clay craftsman, has
developed an entire range of earthen products like water filters, refrigerators, hot plates,
cooker and other such items of daily use.
These products are available at a very cheaper price as compared to other commercial
products.
Being the only son and the eldest child, he helped his father in their traditional profession of
clay pottery.
In the fateful earthquake of January 2001 in Kutch, Mansukhbhai suffered huge loss.
He distributed whatever stock was left to the quake affected people of Kutch. In February
2001, Sandesh Gujarati Daily carried a feature on the earthquake where at one place it
showed a damaged water filter of Mansukhbhai with the caption: The Broken Fridge of Poor.
Elrhino is a non-profit organization led by entrepreneur Nisha Bora, a young Assamese.
The objective of the company is to create livelihood as well as utilize the naturally available
raw material to create paper and paper products instead of cutting trees.
It manufactures and sells stationery items, packaging provisions and handcrafted luxury paper
made from recycled rhinoceros and elephant dung.
The company looks after the entire chain starting from collection, processing, production and
sale of recycled paper products.
Elrhino has the capacity to produce 15 tons of paper per year, which converts into 100 full
time jobs in paper creation and 500 part-time jobs in collection and processing of raw
material.
Social Entrepreneurship
Social entrepreneurs are those who take initiative to eradicate some of the problems a society
may be facing like issues relating to children, women, or any other underprivileged section of
the society.
A social entrepreneur is one who is deeply connected and affected by the various societal
issues.
He organises the resources and take steps to tackle certain social issues.
Here the main motive is not to make profit or set up a large enterprise rather community
development.
IKEA a social enterprise works for women artisans.
It enables the women to earn income by helping them produce and sell products using their
traditional handicrafts skills.
Many women from states of Uttar Pradesh, Rajasthan and Karnataka are associated with
IKEA.
Definitions of Micro, Small & Medium Enterprises In accordance with the provision of
Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small
and Medium Enterprises (MSME) are classified in two Classes:
Manufacturing Enterprises-he enterprises engaged in the manufacture or production of goods
pertaining to any industry specified in the first schedule to the industries (Development and
regulation) Act, 1951) or employing plant and machinery in the process of value addition to
the final product having a distinct name or character or use. The Manufacturing Enterprises
are defined in terms of investment in Plant & Machinery.
Service Enterprises:-The enterprises engaged in providing or rendering of services and
are defined in terms of investment in equipment.
The limit for investment in plant and machinery / equipment for manufacturing / service
enterprises, as notified,vide S.O. 1642(E) dtd.29-09-2006 are as under
Manufacturing Sector
Small Enterprises More than twenty five lakh rupees but does not exceed five crore
rupees
Medium Enterprises More than five crore rupees but does not exceed ten crore rupees
Service Sector
Enterprises Investment in equipments
Small Enterprises More than ten lakh rupees but does not exceed two crore rupees
Medium Enterprises More than two crore rupees but does not exceed five core rupees
1. Small & medium Enterprises are the back bone of Industrial Development.
2. Ministry of Micro Small & Medium Enterprises Contributes Nearly 8% in GDP, 40% in
Manufacturing output & 45% in Exports.
3. They provides the largest share of employment after agriculture
4. They have emerged as a dynamic and vibrant sector of economy.
5. They are widely dispersed across the country and produces a diverse range of product and
service.
6. It helps in the growth of a country
7. They are the nursery for entrepreneurship and innovation
EMERGENCE OF MSME
i. Based on Ghandhi model
ii. Encouraged by MSME act 2006
iii. During pre liberalization before 1991 India adopted Industrial policy resolution 1948
that defined the role of state in industrial development for the first time
iv. At that time India accorded high priority to small and medium enterprises
v. Despite numerous protection and policy measures MSME has remained mostly small
& technologically backward
vi. The scenario of small scale sector changed with industrial policy establishment in
1991
vii. Liberalization came into existence
viii. It was the post liberalization era (1991 to 2006)
ix. This reflected the growth of SSI’s
x. In 1991 the growth rate of SSI was almost 3 times of the total industrial sector from
1992 to 1995
xi. However in 1995 the growth rate was slightly lower but again it increased in 1996
MICRO ENTERPRISE
i. Micro enterprise generally refers to a small business employing 10 people or less
ii. It is an enterprise in which investments in plant and machinery is between 5lakh to 25
lakh.
iii. These enterprises works and operates not by choice but out of necessity
SMALL ENTERPRISE
i. Small enterprise generally refers to a business employing 50 persons or less
ii. It is an enterprise in which investments in plant and machinery is between 25 lakh to 5
crores.
iii. These enterprise works and operates to earn a small amount of profit.
MEDIUM ENTERPRISE
i. Medium enterprise refers to a business employing maximum to 250 employees
ii. It is an enterprise in which investment in plant and machinery is between 5 crores to
10 crores
iii. These enterprises works and operates to earn a fair amount of profits to increase their
standard of living.
As per the National Sample Survey (NSS) 73rd round (2015-16), there were 633.88 lakh
unincorporated non-agriculture MSMEs in the country engaged in different economic
activities
31% MSMEs were found to be engaged in Manufacturing activities, while 36% were in
Trade and 33% in Other Services.
Out of 633.88 estimated number of MSMEs, 324.88 lakh MSMEs (51.25%) were in rural
area and 309 lakh MSMEs (48.75%) were in the urban areas
The Micro sector accounts for more than 99% of total estimated number of MSMEs.
Small sector with 3.31 lakh and Medium sector accounts for 0.52% and 0.01% of total
estimated MSMEs, respectively.
State of Uttar Pradesh had the largest number of estimated MSMEs with a share of
14.20% of MSMEs in the country.
1. Access to Credit:
Legal provisions:
The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006:
New Classification:
A micro enterprise will be defined as a unit where the annual turnover does not
exceed five crore rupees;
A small enterprise will be defined as a unit where the annual turnover is more than
five crore rupees but does not exceed Rs 75 crore;
A medium enterprise will be defined as a unit where the annual turnover is more than
75 crore rupees but does not exceed Rs 250 crore.
Additionally, the Central Government may, by notification, vary turnover limits,
which shall not exceed thrice the limits specified in Section 7 of the MSMED Act.
Organizational structure
Steps taken:
1. Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE): Ministry
of MSME and Small Industries Development Bank of India (SIDBI), established a Trust
named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to
implement Credit Guarantee Fund Scheme for Micro and Small Enterprises and provide
financial assistance to MSMEs. The corpus of CGTMSE is being contributed by GoI and
SIDBI
Recent Measures:
Support and Outreach Initiative for MSME Sector:
59-minute loan portal (loans up to 1 crore) to enable easy access to credit for MSMEs.
2% interest subvention for all GST registered MSMEs, on fresh or incremental loans.
increase in interest rebate from 3% to 5%, for exporters who receive loans in the pre-
shipment and post-shipment period
All companies with a turnover more than Rs. 500 crore, must now compulsorily be
brought on the Trade Receivables e-Discounting System (TReDS). Joining this portal will
enable entrepreneurs to access credit from banks, based on their upcoming receivables.
public sector companies have been asked to compulsorily procure 25%, instead of 20% of
their total purchases, from MSMEs. Out 25% procurement mandated from MSMEs, 3%
must now be reserved for women entrepreneurs.
Technology upgradation: 20 hubs to be formed across the country, and 100 spokes in the
form of tool rooms to be established.
Way Forward:
1. Government of India and banks should design plans and measures to widen easy,
hassle-free access to credit.
2. The RBI should bring stringent norms for Non-Performing Assets (NPA) and it will
help curbing loan defaulters and motivate potential good debts. Further, according to
critics, the Credit Guarantee Scheme for MSME (CGTMSE) run by SIDBI is a
growing contingent liability and needs to be examined with urgency
3. Government should provide enhanced development and upgradation of existing rail &
road network and other infrastructure facilities in less developed and rural areas to
boost growth and development of MSMEs
4. There should proper research and development in respect of innovative method of
production and service rendering. Further, the government should promote and
subsidise the technical know-how to Micro and small enterprises.
5. Government should encourage procurement programme, credit and performance
ratings and extensive marketing support to revive the growth of sick units.
6. Skill development and imparting training to MSME workers is a crucial step to
increase the productivity of the sector. The government should emphasise
predominantly on skill development and training programs
Family Business
• Family business is a corporation that is entirely owned and managed by members of a
single family.
• Family firm is a corporation that is entirely owned by members of single family. It is also
known as company owned, controlled and operated by members of one or several
families.
• Family business is one in which one or more members of one or more families have
ownership, interest and significant commitment towards business.
2. Family owned and managed business : is a profit organization were number of voting
shares, but not necessarily majority of shares are owned by members of single extended
family but significantly influenced by other members of family. In this business has
active participation by one family member in the top management of company so that one
or more family members have ultimate management control.
3. Family owned and led company : is a profit organization were number of voting shares,
but not necessarily majority of shares are owned by members of single extended family
but significantly influenced by other members of family. In this business has active
participation by one family member in the top management of company so that one or
more family members have ultimate management control. But in this method one member
has major influence on business activities who in charge of regulating activities of
business and members of family business.
• Family council meetings for those families that benefit from a representative group of
their members doing planning, creating policies, and strengthening business-family
communication and bond.
• A family constitution—the family's policies and guiding vision and values that regulate
members' relationship with the business. This written document can be short or long,
detailed or simple, but every family in business benefits from this kind of statement.
Properly composed and managed, a family assembly and family council help:
a. Develop clarity on roles, rights, and responsibilities for family members.
b. Encourage family members, family employees, and family owners to act responsibly
toward the business and the family.
c. Regulate appropriate family and owner inclusion in business discussions.
b. Discuss current business, ownership, family issues and keep family informed about
the issues.
c. Help family reach decisions and collectively focus on attainment of single goal.
d. Keep the board of directors informed about family views on company and keep in
touch with the board about key business policies and plans.
e. Develop plans and policies in line with the board, that regulate family activity with
business.
f. Try avoiding issues in family while seeing that key family goals are satisfied.
g. Develop loyal, informed and contributing family shareholders.v Scout the family for
business talent.
i. Plan family social gatherings and rituals which help to create healthy, harmonious
relationship within the family.
d. Fair policies that protect shareholders interest but also requires their cooperation and
risk taking.
• Tax consequences.
2. Family first business or business first family: important issues to be determined before
beginning family succession plan is whether yours is family first business or business first
family. It is often seen that most of the business fail to succeed when managed by second and
third generation of business.
3. Succession management: business families take advice of business advisory board who
suggest on eligible person for transition. Advisory boards are not experts in managing
business but are consultants who suggest strategies for effective succession management.
4. Business valuation: may not be formal written report but is required as part of annual
strategic planning process. Reasons for valuing family business are as follows:
• Buying or selling shares to employees
5. Bur or sell agreement: is used to transfer share of ownership for buy and sell agreement.
• This agreement is established between related parties and shareholders in family.
• It is an agreement to transfer a business interest to hires for less than fair market value
2. A child than having right to inherit business should have ability to manage family
business. Children must be encouraged to out of family business so that they have
better insight about competition persisting in market and accordingly develop
strategies for development of own business.
3. Establishing an outsider as advisor for family business may prove to be risky for
which experts in succession planning should be chosen from management team with
in the family business.
4. Conducting family meeting on regular basis will help establish and keep the family
focused on rules, goals and objective
c. Depending on the purpose of the valuation, costs vary accordingly. Usually business
owners value family business.
e. Funds available for expansion should be retained in the process for transition. Family
business for purpose of strategic planning of their business.
2. Informal culture and structure. For many businesses, having a laid-back culture is a
positive. However, the informal structure and culture found in many family businesses
can equate to a lack of documentation, policies, and defined strategy and goals.
3. Pressure to hire family members. It can be difficult to resist the pressure that comes
along with requests from family members who want to join the business. This becomes
especially complicated if they lack the basic skills and experience needed for the position.
4. Lack of training. The informal culture found in many family businesses can result in a
lax approach to training new employees, whether they are family members or not.
5. High turnover of non-family employees. Non-family employees may feel that greater
opportunities exist within the business for those who are a part of the family and may
grow tired of the culture.
6. Sources for growth. A huge challenge for family businesses can be determining where
and how to get the capital and resources needed to grow the business.
7. Lack of an external view. While family members may not always have the same
opinions, they often have similar upbringing and life experiences which may lead to a
uniform view of the business. Businesses need to have external views of their company
and their competition in order to thrive.
9. Who will take over the business? It is important for family businesses to plan ahead for
business succession. Many family-owned businesses do not have a plan in place and this
can be a source of heated debate and intense family politics when the time arises to select
new leadership.
10. No exit plan. Family businesses often lack a defined strategy for what will happen if an
owner wants to retire, sell the business, or transfer responsibility. This goes hand in hand
with succession plan issues. All businesses need a plan for the future.
b. Arbitrary approach: in this approach the elder person of the family will be allotted with
the power to frame rules and control business activity. But this approach has not proven
to be successful as most of the time elder person in family may not prove to be effective
manager for business.
c. Managed approach: this approach states that person who has ability to maintain better
relationship with key individuals of business and have ability to understand business and
manage the same should be appointed as lead person for the business.
4. Ability to change: business environment is dynamic in nature for which business have to
renew their strategies on regular basis to meet demand of changing situation to compete
in market.
6. Have active board of directors: refers to have competent employees in business who
can assess future requirements and accordingly management business resources and take
decisions in business.
b. Impact of family values on business performance: when members of family are clear
about business expectation they can formulate their strategy well in advance which
helps them enhance quality of their performance towards business.
c. Training: members of family business should be trained about the family values,
competition existing in market and skills required to be possessed by in order to have
competitive advantage in business market.
The family firms are certainly changing the way they are managed and governed. The
decision making ability in a family run business is high, however, to manage the business
professionally and to get the right talent to run the business is always a challenge in even
large business and corporate houses.
There are many business houses where the trend is changing especially where the young
generation is educated, and educated well in India and overseas, and the new generation
realises the value which can be added by the right governance structure, right talent and right
delegation. The new generation is also keen to have alliances and joint venture in India and
overseas. The world is flat and global opportunities are available by way of FDI, JVs, and
equity participation which is being experienced and realised by the youth and the new
generation.
Furthermore, the ideas of listing the company in India and/or overseas and creating value is
also on the wish list and dream of the new generation. It can be noticed that large families are
shrinking to unit families; and families today are willing to give chance to next generation.
The families are increasingly retaining professionals to run the businesses and are also
interested in settling down the succession related issues relating to their personal assets as
well as running of business in a professional manner.
Succession Planning is a big issue today inter alia for the following reasons:
Increase in wealth and also increase in the number of HNIs and UHNIs. There is a noticeable
increase in wealthy Indians and with wealth comes a serious requirement to plan the
succession so that the wealth is preserved and not destroyed.
Most of the business houses are often exposed to local and overseas liabilities owing to their
borrowings or trade related activities. This compels them to plan for asset protection trust in
good times when the creation of such a trust and transfer of the assets to such a trust is not
perceived as a fraudulent transfer. This requires an early and matured planning.
Wealthy Indians have assets in India and overseas. Today the succession planning is not
required only for Indian based assets, it is also important and imperative in the global
context.
The Indians living in USA or the NRI community or persons of Indian origin living in USA
and inheriting assets in India are potentially exposed to global taxation and have to plan for
their estate and succession accordningly.
Nuclear families have a need for succession planning and services around succession
planning as people want to know how to do their Will and whom to appoint as the Executor
and with whom to keep the safe custody of Will.
There is a possibility of the introduction of Estate Duty again and if this happens all
concerned will have to do the succession planning in a proper way to ensure smooth
succession which is economical as well.
The practice and philosophy is different for each family depending upon size of the family,
the family wealth, their needs and the nature of business or professional activity. There is no
uniform practice on this.
Most of the families are happy and content to do their Wills and to declare their wishes on
inheritance in their Wills. The families with substantial wealth or special needs or for asset
protection from creditors in worst case scenario prefer to prepare their Trusts and do the
planning accordingly.
Increasingly families are looking for a mixed structure which encompasses Will and Trust
both to plan the succession for themselves and their next generations.
Large business houses as well as large families are increasing taking professional help to
write the Family Constitution and to put right legal structures in place so that one member or
one set of family members are not in a position to create any embarrassment or legal disputes
or disadvantageous situation for the family.
One such example is where shareholding of the company is with multiple family members.
To check any mischief it is an increasing trend that instead of holding the shares in individual
names, who may transfer the shareholdings, either the shareholdings are kept in a Trust or
some kind of escrow mechanism so that the other family members may have the right of first
refusal in the event of sale of shares by one family member or one branch of family. All these
are serious issues and increasingly the professional help is sought by families to balance such
conflicts or potential disputes.
Family patriarchs are often horrified when faced with the idea of succession and business
planning which may require softening of the tight grip on business at their end. Most Indian
business families are not ready and willing for this shift. Therefore even where Trusts are
formed or strategic estate and succession planning as well as business succession planning is
done, the family patriarch still prefer to be in commanding position.
The trend is slowly changing and evolving. The last two years has witnessed mushroom
growth in the number of players involved in this industry including the law firms, CA firms,
wealth management companies, Family Offices, the local Trusteeship companies as well as
international Trusteeship companies.
Some of the top business families including GMR, Godrej, Daburs have come out with a
family constitution which governs the succession related issues. The trend is emerging and it
is expected that once there is a maturity in the industry and more professional managers are
introduced who are credible the element of letting go will settle down well.
How do the next generation prepare for roles in the family firm?
The next generation today is matured, well read, exposed to western world, generally
educated and trained abroad and hence more armed with knowledge, ideas and information.
The example of FLIPKART is mind boggling. The young generation is now leading by
examples and are capable, responsible and instrumental in creation of large wealth.
Young generation needs the guidance and experience of the seniors in the family to run the
businesses in a matured way. The experience of elders combined with the modern knowledge
and information as well as the passion of the next generation is the key to success.
The professional help on Family Constitutions, Family Councils, the issues on division of
responsibilities based on capabilities and sound rewarding system based on performance even
for family members is being carved out. There is increasing participation of women / females
in the family businesses. All this require sound planning on the business structures and
business entities which cannot be ignored. The young generation today aspires for listing of
companies on the exchange, foreign direct investments in their ventures by way of private
equity or loans, joint ventures etc., which again require a sound professional approach.
The roles in the family are being carved out on the basis of performance and capability levels.
Where the talent is not available in the family the professionals are being retained and family
wealth is shared with them on agreed parameters by offering the equity in the business on the
agreed terms.
In India there is a huge emotional connect in addition to the business aspirations. Families
have established and running large businesses which are growing further. The commitment
levels and the passion has been astounding. What makes it special is the relentless
participation of the next generation in the existing businesses for further growth with a
modern and a very matured professional outlook. Today the young leaders are on the block
from the families of Ambanis, Jindals, Mittals, Adanis, Godrej, and so many other illustrious
families. All this makes the Indian Family firms special. This pattern holds good for the
SMEs and small partnership firms in the country.