A Book Of

BUSINESS
ENTREPRENEURSHIP
For Second Year B. Com.
As Per Pune University's Revised Syllabus
Effective from June 2014

Dr. M. D. Lawrence Dr. Anwar A. Shaikh

M.Com., M.Phil., MMS, Ph.D. M.Com., MICA, PG DPM & IR, Ph.D.
M.Com, M. Phil, MMS, B.Ed, Dip. in Mktg, Ph.D. Poona College of Arts, Science and
Principal, Marathwada Mitra Mandal's Commerce, Pune
College of Commerce, Pune

Dr. Sharad Dashaputre Dr. Abbas H. Lokhandwala

B.E. (Mech), MMS, M. Phil. (Mgmt)., Ph.D. (Mgmt.) M.Com., M.Phil., MMS, Ph.D.
Associate Professor and HOD Accountancy,
Research Guide (Business Administration)
Poona College of Arts, Science and Commerce, Pune

Price ` 150.00

N1685
BUSINESS ENTREPRENEURSHIP (S.Y.B.Com.) ISBN 978-93-5164-079-0
First Edition : June 2014
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Preface …
An entrepreneur is a person who has possession of an enterprise, or venture, and
assumes significant accountability for the inherent risks and the outcome. It is an ambitious
leader who combines land, labour, and capital to create and market new goods or services.
Entrepreneurship is the practice of starting new organisations or revitalising mature
organisations, particularly new businesses generally in response to identified opportunities.
Entrepreneurship is often a difficult undertaking, as a vast majority of new businesses fail.
Entrepreneurship today is considered to be one of the main requirements for the economic
development of a nation.
It is with this view in mind that the study of entrepreneurship has taken great
significance today. This book on Business Entrepreneurship would help the student to
become aware of almost all aspects of entrepreneurship and lend a hand in becoming an
entrepreneur in the near future.
This book is written as per the revised syllabus prescribed for S.Y.B.Com. students, by the
University of Pune from June, 2013. The authors have tried their level best to ensure that all
the points have been covered as per the prescribed syllabus. The authors also hope that this
book will definitely help in meeting the growing requirements of the students of Commerce.
All the topics included in the syllabus are explained in simple but lucid and apt language.
We are very grateful to Mr. Dineshbhai Furia and Mr. Jigneshbhai Furia and the entire
staff of Nirali Prakashan, Pune for their earnest help in bringing out this book with vigour and
accuracy. We have taken maximum efforts to make the text error free. Nevertheless, we do
not rule out the possibility of certain shortcomings or misprints still remaining, we will be
obliged to the reader if such errors are pointed out from time to time.
We must concede that this book would never have been written without the support,
encouragement and inspiration of our family members, many, many thanks to them.
Any criticism or valuable suggestions for further improvement of this book will be
gratefully acknowledged and highly appreciated.
We sincerely thank Shri. Dineshbhai Furia and Shri. Jignesh Furia, the publishers, for the
confidence reposed in us and giving us this opportunity to reach out to the students of
management studies.
We would also like to thank Mrs. Nirja Sharma, Prasad Chintakindi, Akbar Shaikh, Anjali
Mule, Neha and Sachin Shinde of Nirali Prakashan for their help extended towards the
preparation of this book.
We have given our best inputs for this book. Any suggestions towards the improvement
of this book and sincere comments are most welcome on niralipune@pragationline.com.

AUTHORS
Syllabus …
TERM I

Unit 1: Entrepreneur and Entrepreneurship (Lectures 12)

Definition, Meaning - Functions of an Entrepreneurship - Need and Importance of

Entrepreneurship - Problem of Unemployment – Importance of Wealth Creation –
Enterprise V/s Entrepreneurship - Self-employment V/s Entrepreneurship -
Entrepreneurial Competencies - Behavioural Pattern of an Entrepreneur – Entrepreneurial
Motives – David C. McClelland's Theory of Need for Achievement and Kakinada
Experiment.

Unit 2: Study of Biographies of Entrepreneurs (Co-operatives Sector)

1. Dr. Vitthalrao Vikhe Patil, Pravranagar (Lectures 12)

2. Karamveer Bhaurao Patil

3. Shree Bhausaheb Hire

4. Shree Ratnappa Kumbhar

5. Shree Dhanjajrao Gadgil

Unit 3: Creativity and Innovation (Lectures 12)

Creativity - Meaning – Creativity Process – Techniques and Tools of Creativity Innovation:

Meaning - Sources of Innovation - Peter Drucker's Principles of Innovation – Do's and
Don'ts of Innovation.

Unit 4: Business Ethics and Social Responsibility of Business (Lectures 12)

Business Goals - Social responsibility – Business Ethics – Social Responsibility towards

their Stakeholders: Investors – Owners – Employees – Government and Society at Large –
Leadership by Example – Code of Ethics – Ethical Structure – Social Audit – Brief
Introduction to Corporate Governance.
 TERM II

Unit 1: Group Entrepreneurship (Lectures 12)

Concept – Meaning and Significance – Individual Entrepreneurship V/s Group

Entrepreneurship – Advantages and Disadvantages of Group Entrepreneurship, Self-Help

Group - Definition – Meaning and Evolution – Nature – Scope of – SHG – Administration

Functions and Operation SHG's – Do's and Don'ts with suitable illustration of Self-Help

Group.

Unit 2: Various Entrepreneurial Opportunities (Lectures 12)

Various Entrepreneurial Opportunities – Role of Service Sector in National Economy -

Types of Service Ventures, Service - Industry Management, Success factors in Service

Ventures – Opportunities to Service Industry in Rural and Urban Areas – Distinction

between Service Industry and Manufacturing Industries.

Unit 3: Franchising (Lectures 12)

Definition - Meaning and Types - Advantages to the Franchisee and Franchisor -

Franchisee Relationship Steps in starting Franchisee - Cautions in Franchising - Business

Process Outsourcing.

Unit 4: Challenges in Entrepreneurship Development (Lectures 12)

Challenges – Social, Cultural, Educational, Political, Economical, International situation,

Cross Cultural Aspects, Measures and Challenges of Globalisation and Entrepreneurship

Development in India.
Contents …
TERM I

1. Entrepreneur and Entrepreneurship 1.1 – 1.40

2. Study of Biographies of Entrepreneurs (Co-operatives Sector) 2.1 – 2.12

3. Creativity and Innovation 3.1 – 3.20

4. Business Ethics and Social Responsibility of Business 4.1 – 4.36

TERM II

5. Group Entrepreneurship 5.1 – 5.22

6. Various Entrepreneurial Opportunities 6.1 – 6.24

7. Franchising 7.1 – 7.16

8. Challenges in Entrepreneurship Development 8.1 – 8.20

 TERM – I

Chapter 1…
Entrepreneur and Entrepreneurship
Contents …
1.1 Introduction
1.2 Definitions and Meaning of an Entrepreneur
1.2.1 Evolution of the Term Entrepreneur
1.2.2 Definitions of an Entrepreneur
1.2.3 Characteristics of an Entrepreneur
1.2.4 Qualities of a Successful Entrepreneur
1.3 Functions of an Entrepreneur
1.4 Definitions of Entrepreneurship
1.5 Need and Importance of Entrepreneurship
1.6 Features of Entrepreneurship
1.7 Problem of Unemployment
1.7.1 Introduction
1.7.2 Meaning and Nature of Unemployment
1.7.3 Forms of Unemployment
1.7.4 Nature of Unemployment in India
1.7.5 Causes of Unemployment
1.7.6 Measures for Reducing Unemployment and Government Policy
1.8 Importance of Wealth Creation
1.9 Enterprise Vs Entrepreneurship
1.10 Self-Employment Vs Entrepreneurship
1.11 Entrepreneurial Traits or Competencies
1.12 Behavioural Pattern of an Entrepreneur
1.13 Entrepreneurial Motives
1.14 David C. McClelland’s Theory of Need for Achievement and Kakinada Experiment
• Points to Remember
• Questions for Discussion
• Questions from Past Pune University Exams

1.1
Business Entrepreneurship Entrepreneur and Entrepreneurship

Learning Objectives …
• To understand the definition, meaning and concepts of ‘Entrepreneur’ and
‘Entrepreneurship’
• To differentiate between, ‘Self-employment’ and ‘Entrepreneurship’
• To get to know the definition and meaning of the terms - ‘Entrepreneur’,
‘Entrepreneurship’ and ‘Enterprise’
• Study and understand the functions performed by an Entrepreneur
• To be able to discuss entrepreneurial competencies, the behavioural pattern of an
entrepreneur and entrepreneurial motives
• To be aware of David C. McClelland’s Theory of Need for Achievement and the
Kakinada Experiment

1.1 Introduction
The word "entrepreneurship" has been used in various ways. It is derived from a French
word 'entreprede' which means "to undertake". Nowadays, it is often associated with "risk
taking", "innovating", "adventurism", "thrill seeking ", "creativity" and so on.
The concept and theory of entrepreneurship has evolved over a period of more than two
centuries. This concept was vague in the classical economic theory. Only in recent times has
entrepreneurship and the role of entrepreneurs in the process of economic development and
industrialisation been recognised in developed and developing countries.

1.2 Definitions and Meaning of an Entrepreneur

An entrepreneur refers to a person or a group of persons who possesses a certain set of
qualities and performs a certain set of activities.
According to Evans: "Entrepreneurs are persons who initiate, organise, manage and control
the affairs of a business unit that combines the factors of production to supply goods and
services, whether the business pertains to agriculture, industry, trade or profession."
An entrepreneur can be said to be an individual who creates something new, undertakes
risks, organises production and handles economic uncertainty. The entrepreneur is a crucial
factor in socio-economic changes; he or she is one who envisages new opportunities and
also coordinates various other activities.
Joseph Schumpeter regarded the entrepreneur basically as an innovator who carries out
new combinations to initiate and accelerate the process of economic development.
Innovation may assume the following forms:
(a) Introduction of new goods.
(b) Introduction of new methods of production.
(c) Opening of a new market.
(d) Conquest of new source of raw materials or half manufactured goods.
(e) Carrying of new organisation of any industry.
1.2
Business Entrepreneurship Entrepreneur and Entrepreneurship

1.2.1 Evolution of the Term Entrepreneur

As mentioned earlier, the word "entrepreneur" is derived from the French verb
"entrepredre" which means "to undertake."
• In the early 16th century, the term "entrepreneur" was used by Frenchmen to denote
men engaged in leading military expeditions. Later on, it came to be employed for
other types of adventures also.
• Around 1700 A.D. this term was used in France for contractors or architects, who
were concerned with public works such as construction of buildings, roads, harbours,
bridges and so on.
• By the early eighteenth century the term "entrepreneur" was applied to business and
economic activities by the French Economist Richard Cautillon. He defined
"an entrepreneur as a person who buys factor services at 'certain prices' with a view to
sell its products at 'uncertain prices' in the future".
• In a thought-provoking book ‘The Wealth of Nations’, authored by Adam Smith in
the year 1776, he explained clearly that “it is not the benevolence of the baker but self-
interest that motivates him to provide bread”. From Smith’s standpoint, entrepreneurs
were the economic agents who transformed demand into supply for profits.
• In 1848, the famous economist John Stuart Mill described ‘entrepreneurship’ as the
founding of a private enterprise. This encompassed the risk-takers, the decision-
makers, and the individuals who desire wealth by managing limited resources to
create new business ventures.
1.2.2 Definitions of an Entrepreneur
The term "Entrepreneur" has been defined in various ways by various authors:
• Peter F. Drucker defines an entrepreneur as "one who always searches for change,
responds to it and exploits it as an opportunity. Innovation is the specific tool of
entrepreneurs, the means by which they exploit changes as an opportunity for a
different business or service".
• According to J. B. Say: "An entrepreneur is the economic agent who unites all means
of production, the labour force of the one and the capital or land of the others and who
finds in the value of the products which results from their employment, the
reconstitution of the entire capital that he utilises and the value of the wages, the
interest and the rent which he pays as well as profit belonging to himself."
• Marshall treated an entrepreneur as "An undertaker of risks, bringing together
different factors of production, planning and supervising over the activities of the
enterprise."

1.3
Business Entrepreneurship Entrepreneur and Entrepreneurship

• Mc Clelland defined an entrepreneur as "Someone who exercises some control over

the means of production and produces more than what he can consume in order to sell
(or exchange) it for individual (or household) income."
• Francis A. Walker observes that the "true entrepreneur is one who is endowed with
more than average capacities in the risk of organising and co-ordinating the various
factors of production".
1.2.3 Characteristics of an Entrepreneur
An entrepreneur is a creative thinker and also a man of action. He is imaginative. He has
a strong sense of reality. He conceives the idea of a business, analyses its prospectus and
then takes steps to start it. He is a highly achievement oriented, enthusiastic and energetic
individual.
The characteristics of an entrepreneur may be briefly stated as follows:
1. Mental Ability: An entrepreneur should have reasonably good intelligence and
analytical and critical ability to analyse business situations. Capacity to anticipate
changes and ability to innovate are also required.
2. Clear-cut Objectives: An entrepreneur must have clear-cut objectives such as: What
business will he undertake? Nature of his business, type of products, markets, profit
goal etc.
3. Capacity to Guard Business Secrets: Secrecy is one of the fundamental aspects of a
successful business. Failure to keep business secrets may give ample opportunities to
the competitors to compete in the market.
4. Capacity to Interact with People: An entrepreneur must have sufficient maturity
and tact in dealing with people. He must be tactful when dealing with the
Government, suppliers, dealers, customers and also be considerate when dealing with
employees. Good human relations go a long way in building and sustaining a solid
business reputation.
5. Effective Communication: Good communication helps in conveying ideas,
messages, information etc. An entrepreneur should be able to communicate
effectively.
6. Technical Expertise: As technological innovation is present in all aspects of a
business, an entrepreneur should have sufficient technical knowledge to cope with
modern methods of production, communication and management.
7. Self-confidence: An entrepreneur must have self-confidence and the willingness to
achieve goals.
8. Initiative and Drive: An entrepreneur must have the initiative and drive to venture
into new areas and accept responsibility.

1.4
Business Entrepreneurship Entrepreneur and Entrepreneurship

9. Motivator: As leader of a business undertaking, an entrepreneur should be able to

motivate the members to achieve business objectives.
10. Decision maker: Running a business requires taking a number of decisions. Hence,
an entrepreneur should have the capacity to analyse the various aspects of the
business and arrive at a decision.
11. Energy: As constant attention is required for the successful running of the business,
an entrepreneur must have sufficient energy to work hard for long periods.
12. Risk-bearer: "No-risk, no business" or "no-risk, no-gains". There is an element of risk
in every business; hence, an entrepreneur should be prepared to accept failure in its
proper perspective and view failure as a challenge and opportunity.
1.2.4 Qualities of a Successful Entrepreneur
According to Frederick Harbison, a dynamic organisation needs its ideal men, creative
thinkers and people who can plan and initiate progressive changes. The organisational ability
is probably the most critical skill needed for entrepreneurial development.
An ideal entrepreneur creates new ideas, selects and develops persons for management
and control of business, stimulates initiative and enthusiasm in the accomplishment of the
goals of the organisation. He "multiplies" himself by delegating authority. He knows with his
sense of proportion and propriety, how much to delegate and to whom. He has practical
experience and training gained in the struggle of life and not only through books.
So, an entrepreneur is a very distinct personality having peculiarities not possessed by a
common man. He performs the functions of risk-bearing, innovation, organisation and
management.
Success of an entrepreneur depends on the qualities that he possesses. His qualities -
inherent as well as acquired – enable him to fetch good returns on capital investment in
business. Capital or finance is one of the factors, but not the only factor that lays the
foundation of ultimate success in business, in terms of profit, creating good image and
goodwill. The different qualities of a proprietor or owner of a business act as the invisible
assets of a business and cannot be valued in terms of money.
1. Inherent Qualities: These qualities are within a person, as a matter of 'natural gift'.
These include capacity for hard work, sincerity, loyalty, leadership etc. In normal
family life, these qualities develop through observing the behaviour of family
members, relatives etc. Senior family members, encourage a child to behave properly,
i.e. with sincerity and loyalty. Quality of leadership may have some originality,
developed in the person since childhood. Capacity for hard work is to some extent
both a mental and a physical quality. He must be mentally prepared as well as he
must be physically fit for doing a lot of work in one sitting. These qualities cannot be
developed externally by going to school or college or any other institution.
1.5
Business Entrepreneurship Entrepreneur and Entrepreneurship

Inherited qualities also include personality aspect, i.e. physical appearance and
physical fitness. Without these qualities, any proprietor/salesman cannot impress and
attract others e.g. conversation in soft voice and words to attract the attention of the
customer at the counter. It also saves energy and creates a good impression.
Attractive voice therefore, can also be included in the list of 'inherent' or 'original'
qualities.
2. Acquired Qualities: These are the qualities which can be 'learnt' by practical
experiences, both a person’s own and by observing others’ experiences. These include
cooperativeness, courtesy, honesty, balanced attitude, temperament etc. Cooperativeness
develops gradually when a person fails to overcome his own difficulties. Similarly, he shows
honesty in his work when he experiences that he is paid in the same coin.
According to B. C. Tandon, an entrepreneur should possess the following essential
qualities:
(a) Capacity to assume risk and self-confidence.
(b) Technological knowledge, alertness to new opportunities, willingness to accept
change and ability to imitate.
(c) Ability to secure resources.
(d) Ability to organise and administer.
It is only self-confidence that gives an entrepreneur the ability and courage to bear
business risks which are not borne by any person or institution. He must be willing to tie up
capital to have returns. In the dual capacity of innovator and financer, he should have a
flexible mind to shift from one opportunity of investment to another. He must confidently
guarantee stable remuneration to the owners of the factors of production. For this purpose,
he should have tact, sagacity, power of observation and wisdom and ability of discrimination.
He should be mentally alert, practically wise, acute-minded, shrewd and exceptionally
intelligent.
An entrepreneur should never remain satisfied with the present set-up and framework.
He should accept new challenges; he must welcome change, overcome obstruction and
difficulties with zeal and perseverance and must adapt himself to ever-changing business
environment.
An ideal entrepreneur is not an idle man; he is a creative thinker and always searches for
the new. He plans and initiates change. He explores and exploits new ideas, the latest
technologies, new markets etc. He discovers new products, new methods of production,
develops new markets and finds out ways for optimum utilisation of resources and
organisation. He is not timid and overcomes all social and economic pressures created by
customs, traditions, family background and poverty.

1.6
Business Entrepreneurship Entrepreneur and Entrepreneurship

He is not carried away by spiritual and unromantic sayings and values, like "simple living
and high thinking". He is not an idealist but a rationalist. He cannot be bound by ideas and
thoughts given by others. He wants results and works hard for it. For him, "Work is God". He
is not corrupt but understands that his monetary interests can be served, provided he serves
others' interests. He is tactful in business and his behaviour is governed by the established
ethics, customs and procedures in business. He is not shy of doing anything which may
increase his material prosperity, but he is not money minded and self-centred. He has a
social personality and attitude which he utilises for developing business contacts.
According to Sombart "the enterprising spirit" of the entrepreneur is dominated by the
principles of acquisition, competition and economic rationality. Schumpeter's hero, the
"innovating entrepreneur" plays a central part in the risk of modern capitalism of
entrepreneurship and analyses the psychological, social and economic factors which foster
the development of entrepreneurship. An analysis of qualities and functions of an
entrepreneur will help us to understand the success behind an entrepreneur. We need more
entrepreneurial talent to expand the field of trade and industry in India which alone can lead
us to faster economic development.
In a study of entrepreneurship in the State of Tamil Nadu, the following qualities of a
'good entrepreneur' were stressed.
(a) He is an enterprising individual; energetic, resourceful, alert to new opportunities,
able to adjust to changing conditions and willing to assume risks involved in change.
(b) He is interested in advancing technologically and in improving the quality of his
product.
(c) He is interested in expanding the scale of his operations and he reinvests earnings to
this end.

1.3 Functions of an Entrepreneur

An entrepreneur generally performs the following functions.
1. Innovation: An entrepreneur is regarded as an innovator of new ideas, new products
and new procedures. According to Schumpeter, an entrepreneur is basically an
innovator who introduces new combinations of means of production.
Entrepreneurship is a creative activity and the entrepreneur introduces something
new in any branch of economic activity. He understands what the needs of the
customers are and tries to give them new products in a prompt and satisfactory
manner.
According to Schumpeter: "Everyone is an entrepreneur only when he actually
carries out new combinations and loses that character as soon as he has built up his
business, when he settles down to running it as other people run their business."

1.7
Business Entrepreneurship Entrepreneur and Entrepreneurship

2. Risk Taking and Uncertainty Bearing: Risk arises out of the uncertainty of future
events. The essential elements in risk taking are the hope of success and the fear of
failure. It is said that profits in business depend upon the risks involved. It is generally
believed that the businessmen bear the risks with the hope of earning more profits.
Whenever an entrepreneur starts a new venture, he also has to accept a great deal of
risk. Economists like Cautillon, J. B. Say and others stressed risk taking as the specific
function of the entrepreneur. An entrepreneur reduces uncertainty in his plan of
investment, diversification of production and expansion of the enterprise.
3. Organisation and Management: An entrepreneur discovers business opportunities
and takes the necessary steps to make use of it by establishing a business. He raises
adequate capital, employs people, arranges for materials, machines, etc. He also
combines these resources to make his business efficient and profitable. He bears all
the risks and uncertainties of running a new business. Thus, an entrepreneur has to
combine in himself managerial functions, though they are strictly different from the
standard entrepreneurial duties.

1.4 Definitions of Entrepreneurship

• Peter F. Drucker: "Entrepreneurship is neither a science nor an art. It is a practice. It
has a knowledge base. Knowledge in entrepreneurship is a means to an end, what
contributes knowledge in practice is largely defined by the ends, that is, by the
practice."
• Higgins: "Entrepreneurship is the function of seeing investment production,
opportunity, organising an enterprise to undertake a new production, raising capital,
hiring labour, arranging the supply of raw materials, finding, introducing new
techniques and commodities, discovering new sources of raw materials and selecting
top managers for day to day operation of the enterprise".
• Diamond: "Entrepreneurship is equivalent to enterprise, which involves the willingness
to assume risks in undertaking an economic activity particularly a new one. It may
involve an innovation but not necessarily so. It always involves risk-taking and
decision-making, although neither risk nor decision-making may be of great
significance".
• Jaffrey A. Timmons: "The ability to create and build" something from practically
nothing. Fundamentally, a human creative activity, it is finding personal energy by
initiating, building and achieving an enterprise or organisation rather than by just
watching, analysing or describing one. It requires the ability to take calculated risks and
to reduce the chance of failure. It is the ability to build a founding team to complement
the entrepreneur's skills and talents. It is the knack of sensing an opportunity where
others see chaos, contradiction and confusion. It is the know-how to find, marshal and
control resources and to make sure the venture does not run out of money when it is
needed most!"
1.8
 Business Entrepreneurship

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Publisher : Nirali Prakashan
ISBN : 9789351640790
Author : Dr. M. D.
Lawrence, Dr. Anwar A.
Shaikh, Dr. Sharad
Dashaputre, Dr. Abbas H.
Lokhandwala

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