es

CHAPTER11
ENTREPRENEURSHIPDEVELOPMENT:
CONCEPT AND PROCESS
Entrepreneurshipiscrucial for overall economic development of a nation

Learning Objectives
a
After studying this chapter, you will be able to understand:
ld
1e
Entrepreneurship: Concept
Meaning of Entrepreneurship
nd Characteristics of Entrepreneurship
Relationship between Entrepreneurship and Management
th
by Differences between Entrepreneurship and Management
Need for Entrepreneurship
nd Functions of Entrepreneurship
ny Functions of Enlrepreneurs in velation to Economic Development
he
relation to their own Enlerprise
Functions of Entrepreneurs in
Process of setting up an Enterprise
Process of Entrepreneurship Developmen
Entrepreneurial Competencies
Entrepreneurial Motivation
Entrepreneurial Values and Allilude
Success
Behaviourial Choices for Entrepreneurial

Entrepreneurship: Concept
words
the meanings of
three closely resembling
t will be beneficial to understand
These are:

bet undertaking a detailed study of entrepreneurship.

 192

) Business Str
Entrepreneur: It refers to the person who
(ii) sets up his

(ii)
Entrepreneurship: It refers to the
own
process of setting up one's
business unit.
Enterprise: It refers to the outcome of own
business unit.
We can further increase our
entrepreneurship.
reference to English
grammar. They
understanding of these three words
can be by making
following way: seen as
Subject -

Verb -

Object (SVO) in tF
Entrepreneur
L (The Person) Entrepreneurship Enterprise
(The Process)
(The Outcome)
Subject
Verb
Object
An
entrepreneur is a person who establishes a
earning profit. The efforts business unit with the
put in by the purpose of
enterprise is called entrepreneur for the establishment of
entrepreneurship. an

Meaning of Entrepreneurship
Out of four factors
of
labour, capital and production entrepreneurship is at the top.
three factors become entrepreneurship. In the absence of They are land,

On the basis of
meaningless. entrepreneurship, all the other
the views
defined in the expressed by different scholars,
following way: entrepreneurship can DE

"Entrepreneurship is systematic, purposeful and

of risk and
an

uncertainty of creative activity which

provide value (goods and busines manages to
a in
tneeaface
consideration to investors services) to
buyers,
and profit to
entrepreneur by finding out the the
t
Entrepreneurship?
the resources
and needs, utilising refers to the process of creating a
arranging for production."
business unit toto eam
ean profit under the
prou
conditions of risk and uncertainty.
 193
neurship Development: Concept and Process

On
On the basis of this definition of entrepreneurship the following characteristics are
noticed:

Characteristics of Entrepreneurship
Following are the chief characteristics of entrepreneurship:

Systematic Activity: Entrepreneurship is not a spontaneous activity. This is a

cdematic activity. One has to take various steps one after the other to achieve it. One
yste

weds special knowledge to complete this activity in a disciplined manner. This special
tnowledge can be acquired through education, training and experience.
is related to the establishment
2) Lawful and Purposeful Activity: Entrepreneurship
cannot be called
af a lawful and purposeful business. Therefore, any illegal activity
entrepreneurship simply because it involves risk. On the other hand, entrepreneurship
the buyers, consideration to the investors
aims at providing value (goods and services)
to

nd profit to the entrepreneur.

(3) Innovation: Innovation doing something new. Under entrepreneurship

means

new combinations of
different modes of production are created. An entrepreneur
so that the cost of production is reduced
and
performs his job in a new and improved way
those possibilities which remain
income gets an impetus. An entrepreneur exploits
enters the market with a
unnoticed by others or are ignored by others. An entrepreneur
products, new raw material
and new marketing methods. All these are
new technique, new

e examples of innovation.
Under entrepreneurship new methods of
(4) Organisation of Production: individual
to be a thinker and talented
production are adopted. An entrepreneur happens
and makes good use of them. When
an
who tries to find out good opportunities
their availability
the need for s o u r c e s of production,
entrepreneur gets information about
of production.
and ensures better utilisation, it is called organisation
their
is surrounded by risk onevery side. Hence, risk
(5) Risk Taking: Entrepreneurship
entrepreneur ensures the
from entrepreneurship. For example,
an
Cannot be separated
into some contract depends on the
but its payment
Supply of raw material and enters
establishes his enterprise with a
Success or failure ofthe project. Similarly, an entrepreneur
but the possibility of loss cannot be ruled out. Although every
View to earning profit
 194

Business Studies
entrepreneur manages his activities by
presence of risk properly controlling the risk factor but
continues to be still the
an
important characteristic of
entrepreneurship.
Relationship between Entrepreneurship and
There is a
deep relationship between
Management
of entrepreneurship and management. The work
entrepreneurship starts with the thought process of the
establishment of the business
andcontinues in operation till the unit is
established. The work of
immediately after the establishment of business. Whenever there ismanagement
a need
starts

important changes during for some

the life-time of the business,
existence once again. entrepreneurship comes into
The relationship
between entrepreneurship and
differently in the developed and the developing countries. management
is understood
Such as:
(i)
Developed Countries: In the developed countries it is felt that the
job of an
entrepreneur is simply to establish a business. Immediately after the establishment of
business the job of an entrepreneur ends and the
the
job of a manager starts.
(ii) Developing Countries: In the developing countries it is felt that the
entrepreneur
remains attached to the enterprise even after its establishment. He looks after the
day to
day functioning of the business. In other words, it can be said that a person plays double
role of an entrepreneur and a
manager.
Differences between Entrepreneurship and Management
Basis of Difference Entrepreneurship Management
1. Focus Focus is on the activities related Focus is on the activities
with the establishment of related with the operation of
business. business.

2. Resource Relation Pays attention to collect Pays altention to utilise re

resources. Sources.

3. Task Approach A manager works in formal

An entrepreneur works in an a

informal way. way.

4. Primary Motivation motivated by
Anentrepreneur gets motivatedA manager gets
when he finds his objective the power he gets.
being achieved.
5. Status An entrepreneur is the owner. The manager is only an

employee.
 195
repreneurship
Development: Concept and Process

dies
6. Primary Economic Profit Salary
he Reward

7. Innovation
He makes effort to do something He tries to maintain the prio
new. condition or status quo.

8 . Risk An entrepreneur encounters The manager avoids taking

risk. risk.
rk
sS 9. Decision Making Decision is born out of Decisions are the outcome of
ts individual courage. experience and research.

e An entrepreneur starts the work in scale

10. Scale of Operations Managers large
busines on small scale. busineses.
to
11. Skill Required Recognising opportunities and Efficiency in functions and
exploiting them profitably. principles of management.
d

12. Specialisation An entrepreneur has an all | Manager is a specialist in man-

round knowledge. agerial activities.

Need for Entrepreneurship

The need for entrepreneurship is indicated from the following facts:

countries the need for

(1) Initiating the Process of Development: In the developing
of development. Entrepreneurship
entrepreneurship originates to start the process
esablishment of more and more businesses
results in the establishment of businesses. The
reflects the development of a country.

In the developed countries entrepreneurship is

(2) Sustaining the Development:
it is essential
needed to maintain the rate ofdevelopment. In order to sustain development
established business units. This is possible
tokeep innovating in the previously o r already
only with the help of entrepreneurship.
in the
Absence of employment opportunity
(3) Providing Employment Opportunity:
eliminated
This danger can be faced or

public sector creates the danger ofunemployment. to the

business units. New business
units provide self-employment
Dy establishing new
to others
the other hand, provide employment
entrepreneurs on the one hand, and on

and thus serve a social purpose.

 196

Functions of Entrepreneurship Business Studies

For the
convenience of study functions of
divided into two entrepreneurship or
parts: entrepreneur canbe
(A) Functions of
Entrepreneurs in Relation to Economic
(B) Functions or Roles of Development
Entrepreneurs in Relation their own to
(A) Functions of Enterprise
Entrepreneurs in Relation to Economic
The
development of a country has a direct
Development
other words, if a relationship with entrepreneurship. In
country has
entrepreneurship of
high quality, its economic
development will automatically be at its peak it will be otherwise.
a

or
The chief functions
entrepreneurship in relation to development are the following:
of

(1) Contribution Gross Domestic Product

to
(GDP): Gross Domestic Product is a measure of a
country's economic development. With the increase Gross Domestic
in the Gross Domestic Product It refers to
Product GDP?
the sum total the
there is
value of
of financial
all the produced
corresponding economic development or the case is goods and
services during a year, in a country.
otherwise. Gross Domestic Product is related to the
total financial value of the
goods produced
and services provided. Now the
important
question is as to how to increase the value of goods produced and services provided. The
answer is inherent in entrepreneurship. Entrepreneurship establishes business which in
turn increases goods and services. The result is an increase in GDP.

(2) Capital Formation: Capital formation means that the flow of savings of the people
towards the businesses regularly. The business established under entrepreneurship needs
capital. The entrepreneur makes investment of the savings made by himself and by the
people known to him in his business. The business yields profits, these profits are divided
among different investors. They invest the money received as income again in the

business. Again they receive income. In this way, the regular flow of money in the business
1S called capital formation. Capital formation is the indicator of a country's economic

development.
(3) Generation of Employment: The economic development ofa country is related
the
prosperity of its people. People become prosperous only when they get employment
 197
urntpre
ereneurship Development: Concept and Process

establishes business.
. is possible through entrepreneurship. Entrepreneurship new

thismew business makes numerous opportunities for employment.

Each
results in the
4) Generation of Business Opportunities for others: Entrepreneurship
business which further makes it possible to establish many other
hlishment of
extabli
a

sinesses. This becomes clear in the following diagram:

busine.

Entrepreneurship
Establishment of Establishment of Establishment of Wholesale
Main Business and Retail Businesses
Suppliers' Businesses

business.
diagram shows that the entrepreneurship results in one major
The above
established and while o n the
the one hand the suppliers' business will be
Consequently on the
and goods to
retail business will be established in order to supply
ather hand, wholesale business helps
In this way, entrepreneurship apart from establishing major
the consumer.
business units.
a the growth of subsidiary
Economic Efficiency: Eficiency producing
means more goods
(5) Improvement in to be
costs. Under entrepreneurship
something new and better is sought
on existing
results in high quality production while
modern techniques. This effort
achieved by using increased. In other words,
the costs are reduced. Consequently, profits get
entrepreneurship results in
economic efficiency.
of Economic Activities: Economic activities
(6) Increasing the Spectrum and Scope
retail trade etc.
means manufacturing activity, wholesale trade,
production or

and scope of economic activities by inventing

Entrepreneurship changes the spectrum
modern techniques. On the other hand, entrepreneurship increases the total production
restricted to the
of the nation. As a result ofthis, the scope ofeconomic activities is no longer
national level but it assumes an international form.
(7) Impact on Local Communities: Generally, it has been observed that people
do
Delonging to backward classes lag behind in the field of education. Consequently, they
Oget better employment opportunities. But they need not get worried. They have
an

attractive alternative of livelihood in the form of entrepreneurship. They can create

istory by establishing small scale industry through their entrepreneurship.This does not
Cquire great educational ability. These days the government is also providing numerous
ncentives and concessions to encourage such business activitues.
 Jalae Addd tuna
im Scde
Aiaurhddad
200

Process of Setting up an Business Snudies

Enterprise
Following are the chief stages in the
establishment of business:
a

(1)
Analysing Environment

(2)
Development of Product'Service

(3)
Assessment of Feasibility

(4)
Appraisal by Funding Agencies

(5)
Resource Mobilisation

(6)
Project Commissioning and Launch

(7)
Adaptation and Management Growth

(1) Analysing Environment: When an idea to establish an enterprise arises in one's

mind first of all an analysis of environment is undertaken. For this purpose, one has
depend on one's experience. One has to take into consideration the detailed informatio
issued by the government from time to time. Similarly, information from professionals has
to be obtained. This analysis helps in providing information about the opportuniües
available in the environment. Taking these opportunities into consideratuon a
entrepreneur can fulfil his desire.
 201
Concept and Process
Development:
nreneurship
lies basis of the analysis of
environment a
On the
of Product o r Service: the analysis
(2) Development taken. For example,
selection of a product or service is
the this
business. From
dedsion regarding to start the lap-top
shows that it would be profitable the
fenvironment starts. Under
it the size of
of development of product/service
service, etc.
noint, the process international) after sale
market (national o r
its colour, weight, price,
roduct,
business is taken
s decided. care

At this stage, the feasibility of the

of Feasibility:
(3) Assessment
business is discussed from
the following points ofview:
feasibility of the proposed which
o. The considered whether the technique
At this stage, it is
Technical Feasibility:
) will be readily
available or not.

the basis of the proposed business

shall form consideration the fact
takes into
Economic feasibility
Economic Feasibility: order to determine
(ii) profitable. In
business shall be economically
whether the proposed undertaken.
of production and selling price is
of the cost
this an analysis feasibility, it is
now
financial
From the point of view of
Feasibility: of
(iii) Financial
available and whether the payment
finance will be
ascertained whether the
necessary

could be made.
dividend, interest,
etc.
decided on the basis of
Commercial feasibility is
Commercial Feasibility: business organisation
(sole
(iv) and the type of
like the sale, purchase
commercial activities be established.
organisation) to
partnership, company the proposed
proprietorship, considered whether
has to be
At this stage, it
(v) Legal Feasibility: acceptability.
to gain legal
business shall be in a position business is given the final
feasibilities the proposed
studying these
Only after carefully
are
contacted.
shape. At this stage,
the funding agencies
Agencies: funds for it. The required
(4) Approval by Funding Plan before providing
evaluate the
Business satisfied with the
m one's hese agencies agency
is fully
fund providing
after the
has to
unance is available only
the business plan.
mation nlormation provided in information:

nalshas the following major

contains
The business plan
tunities
) Executive Summary
tion an
(i) Business/Industry Background

(i) Proposed Product/Service

202 Business Studies

(iv) Market Analysis

() Sale and Marketing Strategy
(vi) Production/Operations Srategy

(vii) Management Business Plan?

It refers to the formal written expression
(vii) Risk Factors
of the entrepreneurial vision.
(ix) Funds Required

(x) Return from Investment and Exit Routes

(xi) Use of Sales Proceeds

(xii) Financial Summary
Market Survey
(xii)Appendix such as Report on

Financial Statements
Track Record
(5) getting a go-ahead from the funding agency, the
Resource Mobilisation: After
resources. These resources are primarily
entrepreneur starts mobilisation of the requisite
material, money, machine, technology, human resource, etc.

(6) Project Commissioning and Launch: Commissioning means the collection of

various resources and the establishment of the enterprise. Immediately after the
started.
establishment of the enterprise, production gets
and Growth: With the start of the business,
(7) Adaptation Management
this, the entrepreneur often thinks about the
does not end. Even after
entrepreneurship
routine.
development of business and manages its daily
translates his imagination into reality.
In this way an entrepreneur

Process of Entrepreneurship
Development
both by the
born automatically but is encouraged
Entrepreneurship is not
There are many factors which are inherently
environment and the individual himself.
wih
and are in someway o r the
other connected
the environment
available in in the
an individual has many
latent abilities which help
entrepreneurship. Similarly,
these factors:
of entrepreneurship. We shall now study in detail both
development
Role of Environmental
Factors in Entrepreneurship Development
(A)
Role of Individual Factors in Entrepreneurship Development
(B)
 areneurship Development: Concept and Process 203
pntrepre.

(A) Role of Environmental Factors in Entrepreneurship Development

It 1s
Here environment simply refers to the economic environment of the country.
lated
relate
to development of the country. Economic development and
the economic

alrepreneurship are closely related to each other. Forexample, industries are established
ih the help of entrepreneurship in turn ensures economic development of the country.
When the country gets economically developed, new industries get an impetus. Again,
nltrepreneurship gets developed which brings in economic development. In this way, this
arOcess moves on. Their relationship can be shown in this way:
pro

Entrepreneurship Development) Economic Development

in the developmentof
The following characteristics of economic environment help
entrepreneurship:

i) Economic System
(i) Strong Infrastructure

Reduced Rate of Interest

ii)
(iv) Reduced Taxation

(v) Moderate Inflation

(vi) Capitalistic Economy

career.
individuals opting for entrepreneurship
(vii) Availability of
in Entrepreneurship Development
Individual Factors
(B) Role of are important:
of entrepreneurship
the development
Two individual factors in
and (ii) Willingness.
(i) Competency or Ability the development
of
competency
and willingness
both Willingness
If a person possesses
betwen Competency and
The relationship
ntrepreneurship is almost certain.
matrix:
the following
Can be understood from
204
BusinessStudie

3. Eager Entrepreneur 4. Ready Entrepreneur

1. Not Ready Entrepreneur 2. Potential Entrepreneur

Low
(Competecy)
High

Competence - Willingness Matrix

This matrix shows four relations of a person's competency and willingness.

(i) Not Ready Entrepreneur: This is a condition in which a person lacks both the
competency and willingness to do something. There is no entrepreneurship in this case.
(ii) Potential Entrepreneur: In this condition, a person has the competency or ability
to work but he lacks willingnes. If he develops the willingness, he can be a good

entrepreneurship.
work but
(iii) Eager Entrepreneur: person has the willingness
1n this condition, a to

he lacks ability. If he can develops ability, he can be a good entrepreneur.

ability and
this condition, person has both the
(iv) Ready Entrepreneur: In
a

willingness to work. Such a person

is called ready Entrepreneur.
he
develops entrepreneurship when
comes
In conclusion, it can be said that a person
do work.
to possess both the ability and willingness to some

which determine the competency and willingness of an

We shall now study the factors
attitude and values.
individual, such as motivation,

Entrepreneurial Competencies
individual to do a
in
Ability o r competency
means the presence of a special quality an

and
training
can be gained with the help of education and
particular work. Competency
the entrepreneurial competency ofasuccesstu
It can be said in comnection with
practice. but KASIH that is necessary for it.
tat it is not the GASH
entrepreneur
 ce0reneurship Development: Concept and Process
Gntrep 205

Llere KASH signifies: K = Knowledge, A = Atitude, S = Skills, H = Habits

The above detail shows that a successful entrepreneur must possess adequate

nowledge,
positive attitude, absolute skills and creative habits. Hence, the KASH is
ing but the inform: of the qualities of a successful enurepreneur.
nothin

Entrepreneurship Development Institute (=EDI) has advocated 15 such qualities

hich are necessary for entrepreneurship. They are the following:

q) Initiative: An entrepreneur should have the quality of taking initiative. He should

able to act while the others are going through the process of thinking.

(2) Sees and Acts on Opportunities: Opportunities something better remain

to do
An entrepreneur should have the quality to visualise
nresent
pr
in the business environment.
them.
suchopportunities and act upon
should always stick to his decision. Too much
(3) Persistence: An entrepreneur
weakens an entrepreneur.
lexibility
An entrepreneur has the desire to do something new. In
(4) Information Seeking:
information.
he should be constantly seeking latest
order to fulfill this desire,
Work: An entrepreneur is considered successful only
(5) Quality
Concern for
High of
that
when he is capable ofproducing high quality
products. He should make every effort so
maintained.
the quality of the work is
should special attention to his commitment to
Commitment: An entrepreneur pay
(6)
task on time.
accomplish a
the
Orientation: An entrepreneur
should have a complete control on

(7) Efficiency maintained.

misuse of time, money and labour
so that his efficiency is
is always expected of an entrepreneur.
(8) Systematic Planning: Systematic planning attention to every part.
the whole task in small parts and paying deep
This means dividing
Problem Solving: An entrepreneur should
take care of every cause of a problem
(9)
future.
that the problem does not appear in
and handle it thoroughly so
be
have self-confidence. He should
Self-Confidence: An entrepreneur
should
(10)
Confident about this work that he undertakes.
success in every
to himsell true
should have the quality prove
(1) Assertiveness: An entrepreneur
and important.
 usiness Studien
(12) PersuasiveneNs: An
entepeneur slunilkt haVe the qualiiy of
ot othets andbringnng people to his point ot view. winning contideuce
(3) Use of lntluening
Strategyi n enivepieneur shoukt have the
eadership s that the povple workimg Wuh him a r alwavs quality of
with hun and
ntuen unde his
(14) Monitoring: Au
entrepreneur should ensre that the work
exptad lines. pe1lomance N

(13) Coneern f»r

Emplovees' Weltare: An cnrepreneur should have the
eulise that the weltane ot the qualiiy
cnplove the ouly kev to sucess, lt neans that by
is
atr of ihe weltarv ot the enplovees, suvess can be taking
achieved.

Entrepreneurial Motivatioon
For the
develoypment ot cnuepreneurship the presence ol cntrepreneurial
ompetener and entrepneneurial
willingness both are essential. Fnrepreneurship
competener depends on the tautors like KASU and others. On the other
hand.
enteprvneurial willngness edepemds on otivaton.
lov.ation neans tha prn ess which ineucates a ddesire to work in the mind of the
people. A motiv.ated peron.albw.ansotle1s to work withoutanv pressure tromothers. Again,
queston auses s to hon n entrrpmeneur gris motivated. The answer s sinple and that
is that a person gcts motivated bv the need ot sell satistaetion. A person gets motivated
chiet m the tollowing needs
( Need tor Achievement- n ACH
Need tor Powe n PWR
) Need tor Attilition-n AFF
4) Need tor Autonomy n AU'T
Need tor Achievement: A person gets motivated by his desive lor achieving ns
(
object. lt means sucvestiul completivn ot some dittieuld job. A person can satisties his eed
tor achievement br adopting entnepreneuship. 1heretore, we can say that the needi
tor

achievenent bevvmes motivation tor

a
entrepreneurshp.
) Need for Power: Evervbndy wants that he should have power
ones under his intuenoe. The sounve ot power is the stauus of an indvdual. t
so that evervb
*
Enirepreneurship Development: Concept and Process 207

the rank, he greater is the power.

is the
Entrepreneurship is competent to fulfil this desire. An
entrepreneur owner of a business and
nobody has greater power than a owner.
Therefore, the need for power motivates the entrepreneurship
of an individual.
(3) Need for Affiliation: Everybody wants do
something for others apart from his
to

Own self. This he wants to do for having better

relationship. By adopting entrepreneurship
an individual can do a lot for himself, his
family, his employees, customers and society.
Hence, need for affiliation motivates entrepreneurship.
(4) Need for Autonomy: Everybody wants to be his own master. This desire can be
accomplished with the help of entrepreneurship. Under it a person does not work for
somebody else, but works for the establishment of his own business. Therefore, we can say
that the need for autonomy works as a motivation for enurepreneurship.

Entrepreneurial Values and Attitude

An entrepreneur works in a diflerent manner in a particular situation. It is for his to
decide how to behave. His success depends on his behavioural choice and his choice is
determined by his values and attitudes.
Values mean those things which a person brings into his behaviour. For example,

and when entrepreneur takes a decision, this value is reflected in his

honesty is a value an

decision.
he has towards individual, a
tendency of an individual which
an
Attitude means the
situation. For example, it can be the attitude person that to become an
of a
thing or a
a diflerent attitude
entrepreneur is a matter of great pride while some other individual has
and he feels that it is better to serve than to be an entrepreneur.

The following table gives the possible behavioural alternatives of an entrepreneur in

ditlerent situations which can ensure success.