CHAPTER

13
LEARNING OBJECTIVES ENTREPRENEURSHIP
After studying this chapter, you DEVELOPMENT
should be able to:
SEEDS OF VIRCHOW
¾ state the meaning of the
terms, ‘entrepreneur,’ Until 1981 Narayan Reddy, M.Sc.
Organic Chemistry, had been working
‘entrepreneurship’ and ‘enterprise’;
for a pharmaceutical company where he
had developed a molecule. He was
¾ distinguish between contemplating commercial utilisation of
entrepreneurship and that molecule by setting up a small-scale
management and discuss the unit – much smaller than what he
characteristics of actually started. Actually, he met two
entrepreneurship; medicos, who had just returned from a
Gulf country and were looking for some
productive avenue for investment of
¾ explain the need for their savings (remember the Gulf
entrepreneurship; crisis?), Reddy’s idea appealed to them.
Thus, the willing entrepreneurs met–
¾ describe the roles and functions where there is a will there is a way–
of the entrepreneurs; and the seeds for the venture were
sown. After a detailed study of the
technical, economic, commercial and
¾ identify the entrepreneurial financial feasibility of the idea of
competencies; manufacturing a bulk drug from the
molecule, ‘Virchow Laboratories’ was
¾ explain and follow the process started in 1982 as a SSI with an initial
investment of Rs. 28 lakhs – Rs. 8 lakh
of entrepreneurship
in the form of equal contribution by the
development; and
three promoters and Rs. 20 lakh
funding from the Andhra Pradesh
¾ identify with the values, State Finance Corporation (APSFC).
attitudes and motivation for a Project implementation was even more
plunge in entrepreneurship. challenging as he set out to acquire land,
construct factory, purchase equipment,
negotiate with suppliers, potential
customers and obtain environmental,
drug control and other clearances.
Initially, it was he who acted as the pivot
of the enterprise wheel. In the course of
time, a strong managerial team was put
in place and thanks to persistent
emphasis on good management
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practices, Virchow emerged as the world’s largest and the best producer of the basic
drug from the chosen molecule. In fact, web search on ‘Virchow Laboratories’ takes
you to the home page saying “Welcome to Virchow Group of Companies”, the group
comprising 4 companies with Virchow Laboratories being the flagship company.

INTRODUCTION And, in the process, entrepreneurship

becomes crucial for overall economic
Entrepreneurship is the process of development of a nation.
setting up one’s own business as distinct Given its important role in the
from pursuing any other economic overall scheme of economic development,
activity, be it employment or practising it is interesting to note that not
some profession. The person who many persons opt for a career in
set-up his business is called an entrepreneurship. Traditionally, it was
entrepreneur. The output of the process, believed that entrepreneurs are born.
that is, the business unit is called an No society can wait for the chance
enterprise. You may invoke ‘subject- of ‘birth’ of entrepreneurs to pursue its
verb-object (SVO)’ relationship in English developmental plans. In fact, plans for
grammar to clearly understand these economic development would bear
terms. (See Figure on SVO Analogy) little fruit unless entrepreneurship
It is interesting to note that development is regarded as a deliberate
entrepreneurship besides providing process of making people aware of
self-employment to the entrepreneur is entrepreneurship as a career at an early
responsible to a great extent for creation age and creating situations where they
and expansion of opportunities for the may actually make a choice to become
other two economic activities, that is, entrepreneurs.
employment and profession. (Can you When you make this choice, you
think why and how?) Further, each become a job-provider rather than a
business gives rise to other businesses– job-seeker, besides enjoying a host of
the suppliers of raw materials and other financial and psychological
components, service providers (be it rewards. Taking to entrepreneurship is
transport, courier, telecom, distributor surely more a matter of aspiring to
middlemen and advertising firms, become an entrepreneur rather as
accounting firms and advocates etc. being born as one.

Entrepreneur Entrepreneurship Enterprise

The Person/The Actor The Process/The Act The Outcome

Subject Verb Object

SVO Analogy
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Entrepreneurship: All in your Hands

THE CONCEPT OF ENTREPRENEURSHIP pointed out that whereas the wars are
rare and far between, in today’s
You are aware that entrepreneurship competitive world, entrepreneurs wage
is regarded as one of the four major wars everyday. There is a tremendous
factors of production, the other three pressure to continually develop new
being land, labour and capital. products, explore new markets, update
However, it should surprise you that technology and devise innovative ways
as regards its French origin, the term of marketing and so on.
‘entrepreneurship’ (derived from the The term ‘entrepreneur’ was first
verb ‘entreprende’ meaning ‘to introduced in economics by the early
undertake’) pertained not to economics 18th century French economist Richard
but to undertaking of military Cantillon. In his writings, he formally
expeditions. So is true of many terms defined the entrepreneur as the “agent
in management such as strategy (a who buys means of production at certain
course of action to beat the competition, prices in order to sell the produce at
the ‘enemy’) and logistics (movement of uncertain prices in the future”. Since then
men and machines for timely a perusal of the usage of the term in
availability), etc. Historically, as wars economics shows that entrepreneurship
are followed by economic recons- implies risk/uncertainty bearing;
truction, it should be no surprise that coordination of productive resources;
military concepts are used in introduction of innovations; and the
economics and management. It may be provision of capital.
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We would like to define entrepre- does one first of all decide to choose own
neurship as a systematic, purposeful business as a career; how does one
and creative activity of identifying a sense a market opportunity; how does
need, mobilising resources and one muster up courage to embark
organising production with a view to upon it, and mobilise the requisite
delivering value to the customers, resources, etc.; so much so that
returns for the investors and profits for recourse to entrepreneurship, in
the self in accordance with the risks common parlance, is considered as an
and uncertainties associated with exclusive preserve of a few gifted
business. This definition points to certain individuals. In the following paragraphs,
characteristics of entrepreneurship that our effort would be to establish
we turn our attention to. entrepreneurship as a career that you
should aspire for. Remember, resources
may be limited, aspiration need not be.
CHARACTERISTICS OF ENTREPRENEURSHIP
So, you can aspire for something
In the SVO formulation of the concepts greater, bigger than your present status
of entrepreneur, entrepreneurship and and resources. And start today.
enterprise, we saw that entrepreneur- Remember, aspiration means desire
ship is about the process of setting up multiplied by action.
a business. One cannot help but 1. Systematic Activity: Entrepre-
marvel at the beauty of the process: how neurship is not a mysterious gift or

Nurturing Success
 ENTREPRENEURSHIP DEVELOPMENT
385
charm and something that happens industries, for example, zerox machines
by chance! It is a systematic, step-by- destroyed carbon paper industry,
step and purposeful activity. It has mobile telephony threatens landline/
certain temperamental, skill and other basic telephony, net gains accruing to
knowledge and competency requirements the economy lend such entrepreneurial
that can be acquired, learnt and actions as commendable as the acts of
developed, both by formal educational creative destruction.
and vocational training as well as by Entrepreneurship is creative also
observation and work experience. Such in the sense that it involves
an understanding of the process of innovation- introduction of new
entrepreneurship is crucial for dispelling products, discovery of new markets
the myth that entrepreneurs are born and sources of supply of inputs,
rather than made. technological breakthroughs as well as
2. Lawful and Purposeful Activity: introduction of newer organisational
The object of entrepreneurship is lawful forms for doing things better, cheaper,
business. It is important to take note faster and, in the present context, in a
of this as one may try to legitimise manner that causes the least harm to
unlawful actions as entrepreneurship the ecology/environment. It is possible
on the grounds that just as that entrepreneurs in developing
entrepreneurship entails risk, so does countries may not be pioneering/
illicit businesses. Purpose of entrepre- innovative in introducing path-
neurship is creation of value for breaking, radical innovations. They
personal profit and social gain. may be the first or second adopters of
3. Innovation: From the point of technologies developed elsewhere.
view of the firm, innovation may be cost That does not make their achievement
saving or revenue-enhancing. If it does small. For imitating technologies from
both it is more than welcome. Even if it developed world to the indigenous
does none, it is still welcome as setting is quite challenging. A lady
innovation must become a habit! entrepreneur wanting to introduce
Entrepreneurship is creative in the thermal pads for industrial heating
sense that it involves creation of value. faced tremendous reluctance form the
You must appreciate that in the owners of chemical and sugar mills
absence of entrepreneurship ‘matter’ despite the established superiority of
does not become a “resource.” By her products over the conventional
combining the various factors of heating of the vessels by burning of
production, entrepreneurs produce wood/coke or using LPG. Moreover,
goods and services that meet the needs there is no need to suffer from “it was
and wants of the society. Every not invented here” complex– there is
entrepreneurial act results in income no need to reinvent the wheel. The
and wealth generation. Even when global electronics major, Sony did not
innovations destroy the existing invent the transistor! It used the
 BUSINESS STUDIES
386

transistor to build entertainment preferences, there would be a need to

products that are world leaders. develop a pool of suppliers of the
4. Organisation of Production: diverse components or elements that
Production, implying creation of form, go into their manufacture.
place, time personal utility, requires 5. Risk-taking: As the entrepreneur
the combined utilisation of diverse contracts for an assured supply of the
factors of production, land, labour, various inputs for his project, he incurs
capital and technology. Entrepreneur, the risk of paying them off whether or
in response to a perceived business not the venture succeeds. Thus,
opportunity mobilises these resources landowner gets the contracted rent,
into a productive enterprise or firm. capital providers gets the contracted
It may be pointed out that the interest, and the workforce gets the
entrepreneur may not be possessing contracted wages and salaries.
any of these resources; he may just However, there is no assurance of profit
have the ‘idea’ that he promotes among to the entrepreneur.
the resource providers. In an economy It may be pointed out that the
with a well-developed financial system, possibility of absolute ruin may be rare
he has to convince just the funding as the entrepreneur does everything
institutions and with the capital so within his control to de-risk the
arranged he may enter into contracts business. For example he may enter
of supply of equipment, materials, into prior contract with the customers
utilities (such as water and electricity) of his production. So much so that he
and technology. What lies at the core may just be contract manufacturer or
of organisation of production is the marketer of someone else’s products!
knowledge about availability and What is generally implied by risk-
location of the resources as well as the taking is that realised profit may be
optimum way to combine them. An less than the expected profit.
entrepreneur needs negotiation skills It is generally believed that
to raise these in the best interests of entrepreneurs take high risks. Yes,
the enterprise. Organisation of individuals opting for a career in
production also involves product entrepreneurship take a bigger risk
development and development of the that involved in a career in employment
market for the product. Besides, or practice of a profession as there is
entrepreneur may be required to no “assured” payoff. (See Box above)
develop even the sources of supply of In practice, for example, when a person
requisite inputs. For example, whether quits a job to start on his own, he tries
it is a matter of putting together an to calculate whether he or she would
automobile manufacturing unit or be able to earn the same level of income
manufacture of burger/pizza, besides or not. To an observer, the risk of
cultivating a market and developing quitting a well-entrenched and
products to suit its tastes and promising career seems a “high” risk,
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Understanding Entrepreneurial Returns and Risks

Entrepreneurial returns are based on a mathematical expectation, E (Ri) where
the subscript ‘i’ shows that there are a number of possible rates of return
from a business decision, say, 20%, 18%, 17% and 15%. Actually, there may
be quite a large distribution of alternative returns from an investment decision,
we have taken just 4 observations to keep it simple. Supposing all these returns
are equally likely, then E (Ri) would be the simple average of these returns.
That is, E (Ri) = φ = 20+18+17+15/4= 17.5%. In other words, the expected
returns from the entrepreneurial decision in this case are 17.5 %. Risk can
be measured in terms of a measure of variation around this expectation, more
precisely it is the standard deviation of the distribution of returns or óRi. In
this case it works out be 1.8 %. In other words, actual or realised returns may
deviate from expected returns to the extent of 1.8%. Clearly, higher the value
of standard deviation, larger the risk. It is often said that higher the risk
greater the returns. What this means is as under:
(a) for a given risk, a rational person would prefer a higher than or equal to
the expected returns.
(b) for a given return, a rational person would prefer a lower risk.
(c) should the risk increase, there should be at least a proportional increase
in returns.
(d) because the risk runs either ways, that is, realised returns may be more
or less that the expected returns, entrepreneurs who are incorrigibly
optimistic, tend to believe that variation would only be one-sided, that is,
on the higher side.

but what the person has taken is a risk situations as business ceases to
calculated risk. The situation is be a game/fun! Risk as such more
similarly to a motorcyclist in the ‘ring than a financial stake, becomes a matter
of death’ or a trapeze artist in circus. of personal stake, where less than
While the spectators are in the awe of expected performance causes
the high-risk, the artists have taken a displeasure and distress.
calculated risk given their training, The characteristics of entrepreneur-
skills, and of course, confidence and ship discussed as above apply in
daring. It is said that the entrepreneurs diverse contexts, so does the usage
thrive on circumstances where odds of the term, viz., Agricultural/Rural
favouring and against success area Entrepreneurship, Industrial entrepre-
even, that is 50:50 situations. They are neurship, Technopreneurship, Netpre-
so sure of their capabilities that they neurship, Green/Environmental or
convert 50% chances into 100% Ecopreneurship, Intra-corporate/firm
success. They avoid situations with or Intrapreneusrhip and Social
higher risks as they hate failure as entrepreneurship. In fact, entrepre-
anyone would do; they dislike lower neurship has come to be regarded as a
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‘type of behaviours’, whereby one, In developing countries, however, the

(i) rather than becoming a part of the concept of owner-manager seems more
problem, proactively tries to solve it; apt for entrepreneurship as the
(ii) uses personal creativity and intellect entrepreneur remains attached even to
to develop innovative solutions; the day-to-day operations of the venture.
(iii) thinks beyond resources presently In fact, their lacking in managerial skills
controlled in exploiting the emerging is often forwarded as the cause of
opportunities or attending to the business failures. Just as managers are
impending problems; (iv) has the expected to play entrepreneurial roles in
conviction to convince others of one’s the times of need, likewise the
ideas and seek their commitment entrepreneurs must also demonstrate
towards the project; and (v) has the managerial abilities for the success of
courage of heart to withstand their ventures. Irrespective of whether the
adversities, persist despite setbacks entrepreneurs pave way for the managers
and be generally optimistic. or they themselves assume the
managerial responsibilities, it is possible
RELATIONSHIP BETWEEN to distinguish between the terms
ENTREPRENEURSHIP AND MANAGEMENT entrepreneurship and management. (See
the table on next page)
Entrepreneurship is about business
start-ups and renewals. That is, it NEED FOR ENTREPRENEURSHIP
appears at the time of starting a new
business, disappears for some time in Every country, whether developed or
the course of stabilising the venture as developing, needs entrepreneurs.
an on-going business and reappears in Whereas, a developing country needs
case there is a need for introducing entrepreneurs to initiate the process of
changes in product, market, technology, development, the developed one needs
structure and so on. In fact, it is said that entrepreneurship to sustain it. In the
everyone is an entrepreneur when he present Indian context, where on the
actually ‘carries out new combinations,’ one hand, employment opportunities
and loses that character as soon as he in public sector and large-scale sector
has built up his business, when he are shrinking, and on the other,
settles down to running it as other people vast opportunities arising from
run their businesses. In developed globalisation are waiting to be exploited;
countries, the distinction between the entrepreneurship can really take India
entrepreneurial focus on start-ups and to the heights of becoming a super
managerial focus on routine is so sharp economic power. (See the Box entitled
that it is argued that once the project ‘India Needs Entrepreneurs’)
has reached a level of maturity, the Studies by Global Entrepre-
entrepreneurs must move out and the neurship Monitor, a research programem
managers must come in. involving annual assessment of the
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389
Differences between Entrepreneurship and Management

S. Basis of Differentiation Entrepreneurship Management

No.
1. Focus Business start-up Ongoing operations of
an existing business

2. Resource orientation The entrepreneur A manager is

does not feel constrained by the
constrained by resources at his
resource. disposal
Entrepreneur
mobilises the
resources

3. Approach to the task Informal Formal

4. Primary motivation Achievement Power

5. Status vis-à-vis the Owner Employee

enterprise

6. Primary economic reward Profit Salary

7. Innovation orientation Challenges the Maintains the

status quo, that status quo
is, the existing

8. Risk orientation Risk-taker Risk-averse

9. Approach to decision- Driven by inductive Driven by deductive

making logic and personal logic and research
courage and
determination

10. Scale of operations Small business Large business

11. Primary skill requirement Opportunity Organising, systems

spotting, initiative, design and operating
resource procedures, people
negotiation management

12. Specialisation orientation Generalist has to Specialist

know and do all
the trades
by himself
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India needs Entrepreneurs

It needs them for two reasons: to capitalise on new opportunities and to create
wealth and new jobs. A McKinsey and Company–Nasscom report estimates that
India needs at least 8,000 new businesses to achieve its target of building a $ 87
billion IT sector by 2008. Similarly, in the next 10 years, 110-130 million Indian
citizens will be searching for jobs, including 80-100 million looking for their first
jobs; that’s seven times Australia’s population. This does not include disguised
unemployment of over 50% among the 230 million employed in rural India. Since
traditional large employers – including the government and the old economy players –
may find it difficult to sustain this level of employment in the future, it is
entrepreneurs who will create these new jobs and opportunities.
Source: http://www.uwcsea.edu. (First published in India Today,
February 2001)

national level of entrepreneurial activity the absence this function, all other
across a number of countries (visit, resources, namely land, labour and
www.gemconsortium.org) show that capital would remain idle. They may
differences in the levels of entrepreneurial not be inventing/discovering the
activity account for the differences in products, their role in commercial
the level of economic growth to the exploitation of the advancements in
extent of as much as 33%. science and technology via organisation
What is that the entrepreneurs do of the productive apparatus makes the
to affect economic development? This other resources productive and useful.
leads us to a discussion of the functions So much so that it is said that in the
of the entrepreneurs in relation to absence of entrepreneurial intervention,
economic development. As the every plant would remain a weed and
enterprise is the object of their every mineral would remain a rock.
endeavour, it is also necessary that we 1. Contribution to GDP: Increase in
examine their functions in relation to the Gross Domestic Product or GDP is
the enterprise as well. the most common definition of economic
Thus, the need for entrepre- development. You are aware that income
neurship arises from the functions the is generated in the process of
entrepreneurs perform in relation to the production. So, entrepreneurs generate
process of economic development and income via organisation of production be
in relation to the business enterprise. it agriculture, manufacturing or services.
You are also aware that income
FUNCTIONS OF ENTREPRENEURS IN generated is distributed among the
RELATION TO ECONOMIC DEVELOPMENT factors of production where land gets
rent, labour gets wages and salaries,
You are aware that entrepreneurs capital gets interest and the residual
“organise” the production process. In income accrues to the entrepreneur in
 ENTREPRENEURSHIP DEVELOPMENT
391
the form of profits. As rent and interest Ratio (COR); more precisely Incremental
accrue to those few who have land and Capital Output Ratio (ICOR) that
capital respectively whereas larger measures the percentage increase in
masses are destined to earn their capital formation required obtaining a
incomes via wage employment, the percentage increase in GDP. So, if a
biggest contribution of the country desires to grow @ 10.0 % p.a.
entrepreneurship lies in capital and its ICOR is 2.6, then it must ensure
formation and generation of capital formation @ 26.0% p.a.
employment. This is what we turn our Entrepreneurs, by investing their own
attention to. savings and informally mobilising the
2. Capital Formation: The entrepre- savings of their friends and relatives
neurial decision, in effect, is an contribute to the process of capital
investment decision that augments the formation. These informal funding
productive capacity of the economy supplements the funds made available
and hence results in capital formation. by the formal means of raising
In fact, GDP and capital formation are resources from banks, financial
related to each other via Capital Output institutions and capital markets.

Capital Formation
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3. Generation of Employment: Every a. Improving processes, reducing

new business is a source of employment wastes, increasing yield ,and,
to people with different abilities, skills b. Bringing about technical progress,
and qualifications. As such that is, by altering labour-capital
entrepreneurship becomes a source of ratios. You are aware that if labour
livelihood to those who do neither have is provided with good implements
capital to earn interest on nor have the (capital), its productivity increases.
land to earn rent . In fact, what they earn 6. Increasing the Spectrum and
is not only a livelihood or means of Scope of Economic Activities:
sustenance but also a lifestyle for Development does not merely mean
themselves and their families as well as ‘more’ and ‘better’ of the existing, it
personal job satisfaction. As such also and more crucially means
entrepreneurs touch the lives of many, diversification of economic activities–
directly as well as indirectly. across the geographic, sectoral and
4. Generation of Business technological scope.
Opportunities for Others: Every new You are aware that underdeveloped
business creates opportunities for the countries are caught in the vicious cycles
suppliers of inputs (this is referred to on the demand as well as supply side.
as backward linkages) and the Entrepreneurs penetrate into and break
marketers of the output (what is these cycles, for example, by organising
referred to as forward linkages). As a and orienting domestic production for
pen manufacturer you would create exports. Thus, production (and thereby
opportunities for refill manufacturers generation of income) is not constrained
as well as wholesalers and retailers of by the inadequacy of domestic demand.
stationery products. These immediate (Demand-side Vicious Cycle). In today’s
linkages induce further linkages. For context, you are aware that India is poised
example greater opportunities for refill to become a manufacturing hub for the
manufacturers would mean expansion global markets for diverse products.
of business for ink manufacturers. In Economic development is also
general, there are greater opportunities constrained by the supply-side
for transporters, advertisers, and, so on. pressures resulting into absence of
So, via a chain-reaction, entrepreneurship capacity to meet the demand whether
provides a spur to the level of economic domestic or overseas. Entrepreneurs
activity. mobilise local and even overseas
resources to augment the productive
5. Improvement in Economic capacity of a country. Indian
Ef ficiency: You are aware that Multinational Giants is fast becoming
efficiency means to have greater output a reality.
from the same input. Entrepreneurs Entrepreneurs lead the process of
improve economic efficiency by, economic development via bringing
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393
Small-Scale Entrepreneurship among Marginalised Groups in India

Marginalised Groups Proportional Representation

in Overall Entrepreneurship (%)
Women Entrepreneurs 8
Scheduled Caste (SC) Entrepreneurs 8
Scheduled Tribes (ST) Entrepreneurs 4
Entrepreneurs from the Other 49
Backward Classes (OBC)

Source: Third Census of Small Scale Industries in India, Ministry of Small

Scale Industries, Government of India

about sectoral change. You must be success stories. Local governments do

aware that as the economies grow, their bit in developing these
percentage of GDP originating from entrepreneurship clusters with a view to
agriculture decreases and that encouraging inter-firm collaboration and
originating in industry and services development of common facilities. entitled,
sectors goes up. Entrepreneurs through ‘Entrepreneurship Clusters in India.’
their decisions to divest from the stale In regard to the development of
sectors and invest in green-field sectors entrepreneurship for impacting local
bring about a virtual transformation of communities, some corporate-sector
the economy from ‘underdeveloped’ to initiatives also deserve a mention. ITC
an ‘emerging’ and ‘developed’ status. through their ‘e-Chaupal’ (visit http:/
7. Impact on Local Communities: www.itcportal.com agri_exports/
Entrepreneurship, in its natural e-choupal_new.htm) and HLL through
habitat, that is, small business is a great their ‘Shakti’ (visit www.hllshakti.com)
leveler. You may see from table on initiatives have sought to mobilise
marginalised groups. That small-scale native entrepreneurs for improving the
entrepre-neurship enables such lot of those lying at the bottom of the
marginalised groups as women, SC, ST economic pyramid.
and OBC to pursue their economic 8. Fostering the Spirit of Exploration,
dreams. As there are no entry barriers Experimentation and Daring:
in terms of educational qualifications, Economic development, among other
entrepreneurship is an even more things, requires breaking away from
attractive career option for such the shackles of traditions and beliefs
marginalised groups. that restrict growth. For example if
Agro-based rural industries and craft- ‘crossing the seas’ were a taboo, there
based cottage industries can really catapult would not have been international trade
local communities to socio-economic and the resultant economic growth.
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394

Indian Small and Medium Enterprises (SME) Clusters

With a contribution of 40% to the country’s industrial output and 35% to
direct exports, the Small-Scale Industry (SSI) sector has achieved significant
milestones for the industrial development of India. Within the SSI sector, an
important role is played by the numerous clusters that have been in existence
for decades and sometimes even for centuries. According to a United Nations
Industrial Development Organisation (UNIDO), there are 388 SSI clusters
having 4,90,000 enterprises, employing 7.5 million persons with an output of
Rs. 160,000 crore p.a. The number. of entrepreneurs in these clusters has
been growing @ 15-18% p.a. over the last ten years. Besides, there are
approximately 2000 rural and artisan based clusters in India.
Some Indian SSE clusters are so big that they account for 90 per cent of
India’s total production output in selected products. As for example, the
knitwear cluster of Ludhiana and Hosiery cluster in Tripur in Tamil Nadu.
Almost the entire Gems and Jewellery exports are from the clusters of Surat
and Mumbai. Similarly, the clusters of Chennai, Agra and Kolkata are well
known for leather and leather products.
However, the majority of Indian clusters, especially in the handicrafts sector,
are very small with no more than hundred workers, so specialised that no
other place in the world matches their skills and the quality of their output.
This is the case, for example, of the Paithani sarees cluster in Maharashtra.
However, only a tiny minority of such artisan clusters are globally competitive.
The formidable challenges created for the SSE sector by the liberalisation
of the Indian economy, as well as its closer integration within the global
economy, have generated a great deal of interest within India on novel
approaches to SSE development. As a result, both private and public sector
institutions at the Central as well as the State levels are increasingly
undertaking cluster development initiatives.
Source: www.smallindustryindia.com

The established ways of life need to be cricket team from the villagers who had
challenged and change must be seen not even seen the game? Don’t the feats
as an opportunity to improve rather of Karasn Bhai of ‘Nirma’ who
than something to be scared of. challenged ‘Surf’ from the mighty
Entrepreneurs, through their urge to Hindustan Lever Limited make you
do something new, seeing change as an proud of the daring of the
opportunity, experimenting with the entrepreneurs?
novel ideas and showing the courage Thus, whether one looks at economic
to try them prepare a fertile ground for development narrowly in terms of the
persistent economic development. Have increase in GDP or in the wider context
you seen the Hindi movie ‘Lagaan,’ of economic, institutional and social
where the protagonist Bhuvan raises a change, entrepreneurship plays a
 ENTREPRENEURSHIP DEVELOPMENT
395
crucial role. Global Entrepreneurship aspect; those with marketing background
Monitor studies report a lag of 1-2 may over emphasise creation of market.
years between entrepreneurial Investor type entrepreneurs may be
activity and economic development, over concerned with the returns from
suggesting that it takes time for the the project. One should resist the
impact of entrepreneurship on temptation of looking at the business
economic development. only from one’s own narrow perspective.
An important observation needs be Having said this, it is apt that we
made here. While entrepreneurship provide a brief description of the
leads to economic development, the various issues that may be relevant at
vice-versa is also true. That is, each stage.
economic development also fosters Opportunity Scouting: Entrepreneurial
entrepreneurship development. Growing opportunities have to be actively
economies provide a fertile soil for the s e a rc h e d f o r. O n e m a y r e l y o n
flourishing of entrepreneurship, an aspect personal observation, discovery or
that we will take up while discussing invention. Personal/professional
entrepreneurship development. contacts/networks and experience or
may also help in identifying business
ROLE OF ENTREPRENEURS IN RELATION opportunities. Alternatively, one may
TO THEIR ENTERPRISE rely on published reports, surveys
and the like. Narayan Reddy of
Drawing an analogy from musicology Virchow Laboratories relied on the
in explaining the role of the personal discovery of the molecule during
entrepreneurs in relation to their his employment with a pharmaceutical
enterprise, one may say that an company. As observation means
entrepreneur is not only the composer seeing/hearing/smelling with a
of the musical score and the conductor purpose, opportunity spotting
of orchestra but also a one man band. presupposes tendency to look at the
His roles and functions get much things and phenomenon from an
broader in scope in a developing entrepreneurial mindset. Most of us
country context like ours. entitled ‘Role have a consumer’s mindset. If we see
and Functions of the Entrepreneur in any object of desire, may be a pen,
Relation to his/her enterprise.’ laptop, latest model of the mobile
These elements are no sequential as phone or somebody eating pizza or
the figure may convey, the entrepreneur burger, we crave to have the same thing
may have to address to all these elements for ourselves. The entrepreneurial
simultaneously. Yet, depending upon mind, on the other hand starts
their backgrounds, the individual working out, what would be the
entrepreneur may prefer one over the market size, where to procure it from
other. For example, technicians tend to and at what price, will I able to woo
be over obsessed with the production the customers from the existing
BUSINESS STUDIES
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Roles and Functions of the Entrepreneur in relation the Enterprise

Developing Exchange Relationships
1. Perceiving market opportunities
2. Gaining command over scarce resources
3. Purchasing inputs
4. Marketing of Products and responding to competition
Political Administration
5. Dealing with public bureaucracy (approvals, concessions, taxes)
6. Managing human relations within the firm
7. Managing customer and supplier relations.
Management Control
8. Managing finance
9. Managing production
Technology
10. Acquiring and overseeing assembly of the factory
11. Industrial engineering (minimising inputs with a given production
process)
12. Upgrading the production process and product quality
13. Introducing new production techniques and products.
Note: The scope of the entrepreneurial functions varies with the level of
economy in which the entrepreneur operates; scale of production/operations;
and entrepreneurs’ comparative efficiency in utilising managerial employees.
In developed countries, entrepreneurship assumes upon themselves the
responsibility of introducing innovations and after some time, pave way for
the managers. In large-scale organisations, entrepreneurs provide leadership
and there is a team of managers to look after specific aspects of enterprise.
Likewise, those entrepreneurs who have the ability and willingness to delegate
may concentrate on a select few, strategic aspects of enterprise.
In terms of the process of setting up a business, therefore, an entrepreneur
is on the look out for and spots the business opportunity, assesses its value,
develops it in the form of a product/service idea, assembles he resources
and gets going.
Source: Peter Kilby, (ed.), Entrepreneurship and Economic
Development,? New York: The Free Press, 1971.
 ENTREPRENEURSHIP DEVELOPMENT
397

Resource mobilisation

Scanning the environment for entrepreneurial opportunities

Development of product/service idea

Assessment of feasibility of the idea and preparation of a business plan

Appraisal by the funding agencies

Project Commissioning and launch

Adaptation and management of growth

Process of Setting up a Business

players and how– by selling it offers a huge and varied pool of

cheaper, by providing more value or technical manpower that makes it a
by better service and so on. cost effective destination for in-bound
Entrepreneurial opportunities may global outsourcing in manufacturing
also be identified through a process of as well as Information Technology
research of international, domestic, Enabled Services (ITES).
sectoral/ industrial analysis. Identification of Specific Product
For example, post WTO, Offering: While the environment scan
international trade and investment have leads to the discovery of more
become freer of restrictions. Textile generalised business opportunities,
quotas are being phased out, and, there there is a need to zero in on to a specific
are greater opportunities for textile and product or service idea. For example,
textile made-ups from India. Global trade liberalisation since WTOs has
outsourcing is on the rise and India resulted in export opportunities, but
 BUSINESS STUDIES
398

the question is what to export and return of (safety and liquidity) of their
where? You may be required to compile investments. That is, the idea must be
a country-product matrix to be able to financially viable as well. There should
decide. (See proforma) be enough sales in the immediate and
This way you may arrive at the the prospect of growth in the foreseeable
product-market combination showing future; there should be adequate
the fastest growing import and from assurance on the commercial viability
your point of view export potential. of the chosen product offering. Now a
Deciding on the product offering day, it is also important to be sure that
makes the highest demand on the there aren’t any environmental and
entrepreneur’s creativity and other legal restrictions/necessity of prior
innovativeness. Yet, in a competitive approvals for setting up the business.
environment, it is possible to It is also to be decided as to whether the
differentiate your product offering even business will be organised as a
if the generic product is the same and proprietary concern/partnership firm/
serves the same need. company or cooperative entity.
Clearly decision on specific Clearly the chosen product offering
product offering necessitates decisions must be feasible from the diverse
on who is buying, why, and what are perspectives. You must compile these
the value expectations. You will be able findings in the form of a business plan
to succeed when the value delivered that would have to be submitted to the
not only meets but also exceeds funding authorities, in the Indian
customers’ expectations and create a context, the State Finance Corporation
‘Vow!’ impact. of your area. They may be having a
Feasibility Analysis: The product prescribed proforma in which the details
offering idea must be technically feasible, of the business plan are required to be
that is it should be possible with the furnished and, as such there may a
available technology to convert the idea need to adapt the contents accordingly.
into a reality. And this should be An idea about the generic contents of a
possible at a cost that can be covered business plan may be had from.
by the price it will fetch; in other words, The business plan may be
the idea must be economically feasible appraised by the funding institution,
too. The project cost should be within and upon satisfying itself about the
the resources available and the resource desirability of assisting your project
providers should be reasonably sure of and upon the furnishing of some
an appropriate return on (profit) and margin money it may sanction the loan

International State of the State of the

Environment Domestic Economy Sector/Industry

IDS Analysis for Entrepreneurial Opportunities

 ENTREPRENEURSHIP DEVELOPMENT
399

Countries
Products

A B C D E
Import Statistics for Immediately Preceding Years
1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5
X1
X2
X3
X4
X5

Proforma Country-Product Matrix

amount. Recall, Narayan Reddy and his view to starting the manufacture and
two other associates provided Rs. 8 marketing the product.
lakhs and the APSFC contributed As noted earlier too, entrepreneurial
Rs. 20 lakhs toward the overall project functions do not come to an end with
cost of Rs. 28 lakhs. Upon the project the business start-up. He often looks
approval, the entrepreneur can proceed after its day-to-day operations and
for project commissioning, that is strives for its stability and growth.
putting up the factory premises, Entrepreneurial roles and
installing the equipment, obtaining the functions clearly seem onerous.
supplies of the input materials with a Perhaps that is why many shy away

Need of the Generic Product Examples of Differentiating

Customer Specific Offering
• Size
• Zero Waiting time
• Dine- in/Carry Away
Delivery
Food Burger • Add-ons e.g., Beverage/
Chips or No-frills
• Choice of Fried/Grilled
• Customisation of topping,
choice of ingredients

Product Differentiation
 BUSINESS STUDIES
400

to simpler, softer and safer options of between the person and the
employment and practice of environment. Ultimately the choice of
profession. Entrepreneurial going may entrepreneurship as a career lies with
be tough; but then that is where the the individual, yet he must see it as a
tough get going! Do not worry if desirable as well as a feasible option. In
presently you may find yourself short this regard, it becomes imperative to
on those competencies, values and look at both the factors in the
attitudes. It is just a matter of making environment as well as the factors in the
up your mind for a career in individual as having a nearing on the
entrepreneurship and grooming perception of desirability and feasibility
yourselves for it. This takes us to the and thereby entrepreneurship
discussion of the process of development. One may, therefore, model
entrepreneurship development. the process of entrepreneurship
development in terms.
THE PROCESS OF ENTREPRENEURSHIP In general, capitalist economy with
DEVELOPMENT its emphasis on individual achievement
is more suitable for entrepreneurship.
Entrepreneurship does not emerge Lower rates of taxation on personal
spontaneously. Rather it is the outcome income, lower rates of interest and
of a dynamic process of interaction moderate inflation stimulate

Technical

Administrative/Legal Economic

Commercial Financial

Aspects of Feasibility Analysis

 ENTREPRENEURSHIP DEVELOPMENT
401
entrepreneurial activity. (Can you think An important enabler or disabler of
why it is so?) Moderately low external entrepreneurship is the prevailing
value of domestic currency or in other socio-cultural milieu. Those societies
words, moderately lower exchange that respect individual freedom to
rates, stimulate import substituting choose among occupations, that
and export promoting entrepre- encourage the spirit of enquiry,
neurship. (Can you rationalise why?). exploration and experimentation,
Well developed financial system, good celebrate individual accomplishment
infrastructure, helpful bureaucracy all and in general accord important status
these have a favourable impact on to the entrepreneurs are likely to have
entrepreneurship. Specially designed self-sustaining supply of able and
and dedicated institutions such as willing men and women for taking to
National Institute for Entrepreneurship entrepreneurship as a career.
and Small Business Development (visit,
niesbud.nic.in), Entrepreneurship THE ROLE OF THE INDIVIDUAL IN
Development Institute of India (visit, ENTREPRENEURSHIP DEVELOPMENT
www.ediindia.org) that conduct
entrepreneurship awareness and Mr. Narayan Reddy was desirous of
entrepreneurship development starting a small scale industry and also
programmes (EAPs and EDPs) a further had a sense of efficacy or readiness to
fillip to this activity. pursue it given his qualifications,

Business Plan

1. Executive Summary
2. Business/industry background
3. Product/service to be offered
4. Market analysis
5. Sales and marketing strategy
6. Production/operations strategy
7. Management
8. Risk factors
9. Funds required
10. Return on and off investment and exit routes
11. Use of the sales proceeds
12. Financial summaries
13. Appendices, e.g., Reports on Market Survey,
Financial Statements, Track Record etc.
 BUSINESS STUDIES
402

experience and the necessary values, entrepreneurship. They could be having

attitudes and motivation (the opening a low perception of self-efficacy either
case does not elaborate this. We will on account of lack of resources (or to be
discuss these at suitable places). Even more correct, resourcefulness),
you may like to see as to where do you knowledge or know-how, and the skills.
find yourself on the desirability Collectively, these are referred to as
(willingness)-efficacy (ability) matrix, competencies, which now we turn our
won’t you? attention to.
As you may see from the matrix
figure able and willing men and women ENTREPRENEURIAL COMPETENCIES
are a “ready” source of entrepreneurship.
Such persons leap up the first Every opportunity and successful
opportunity comes their way to be on performance of every role and function
their own. Recall, Narayan Reddy leapt has a competence requirement. Its true
up the opportunity as he met the two of entrepre-neurship as well. entitled
medicos who had returned from the Gulf. ‘Cash OR KASH?’
At any point of time, there are The term ‘competence’ refers to a
many men and women who “want” to composite of knowledge, skills and a
set up a business of their own but host of psychosocial attributes
experience self-perceived barriers to (including Attitudes and Motivation that

Individual Personality: Environmental Influences:

competencies, motivations, Economic Development, Economic
values and attitudes Policy and Institutional Framework

Shape

Individual perception that Individual perception that

entrepreneurship is a “I can live up to the challenge
desirable career option of being on my own”

Entrepreneurship
Development
 ENTREPRENEURSHIP DEVELOPMENT
403

The Role of Environment in Entrepreneurship Development

Entrepreneurs bring about economic growth and development, and the
latter in turn provides a fertile soil for the flourishing of entrepreneurship.
There certainly is a mutually facilitating reciprocity between economic
growth and entrepreneurship development.

Economic
Entrepreneurship
Development

we will be discussing separately) in a McClelland’s work when we discuss

person that mark his/her effectiveness entrepreneurial motivation.) McClelland
for a task. The phrase ‘composite’ is set out to define competency variables
crucial. For example, the competence that could be used in predicting job
“ability to communicate vision” is much performance and that were not biased
more than proficiency in writing/ by race, gender, or socio-economic
speaking skills. It would involve, just to factors. As a result, it becomes more
illustrate, vision clarity, understanding important to learn what a person does
the audience background, interest and rather than who he/she is. That is why
readiness, knowledge about the media management and also entrepreneurship
and choosing the most appropriate one, is better defined as what a manager or
attracting attention, delivery, leaving not an entrepreneur does. Because
merely an impression but also an competencies can be built via a process
impact and, assessing effectiveness. So, of education and development, we may
when the entrepreneur in the television say that entrepreneurs are made.
interview pointed out KASH as the What are the distinct competencies for
determinants of successful entrepreneurship? In this regard one may
entrepreneurship, he was indeed refer to the efforts of Entrepreneurship
referring to the competencies. Development Institute of India (EDI), a
Competency approach to human national resource institution in the area
resource development in general and of entrepreneurship education research
entrepreneurship development in and development (visit, www.ediindia.org).
particular was pioneered by David EDI has identified a set of 15
McClelland, a Harvard University competencies that contribute toward
psychologist in the late 1960’s and early entrepreneurial performance and success.
1970’s. (You will be learning more on These are briefly stated hereunder.
 BUSINESS STUDIES
404

Initiative: Acting out of choice rather Efficiency Orientation: Concern for

than compulsion, taking the lead conservation of time, money and effort.
rather than waiting for others to start. Systematic Planning: Breaking up
Sees and Acts on Opportunities: A the complex whole into parts, close
mindset where one is trained to look for examination of the parts and inferring
business opportunities from everyday about the whole; e.g. simultaneously
experiences. Recall ‘oranges’ example.
High

Eager Ready
Entrepreneur Entrepreneur
Desirability

Not Ready Potential

Entrepreneur Entrepreneur
Low

Low High

Self-Efficacy

Efficacy-Desirability Matrix
Persistence: A ‘never say die’ attitude, attending to production, marketing and
not giving up easily, striving financial aspects (parts) of the overall
continuously until success is achieved. business strategy (the whole).
Information seeking: Knowing and Problem-solving: Observing the
knowing who knows, consulting experts, symptoms, diagnosing and curing.
reading relevant material and an overall
openness to ideas and information. Self-confidence: Not being afraid of the
risks associated with business and
Concern for High Quality of Work:
relying on one’s capabilities to
Attention to details and observance of
successfully manage these.
established standards and norms.
Commitment to Work Contract: Assertiveness: Conveying emphatically
Taking personal pains to complete a one’s vision and convincing others of
task as scheduled. its value.
 ENTREPRENEURSHIP DEVELOPMENT
405

Cash or KASH
“What do you need to be a business person?” was the opening question the anchor of
a television interview asked an eminent business personality. “Caash” she heard and
though that her interview is going to be a spoil, for it was an answer so obvious and
exhaustive that there was not anything else to talk. Or this is what she thought.
The entrepreneur saved her day, “young lady,” he continued, “you seem to have got it
wrong!” “What I meant was not C_a_s_h_=Cash, but K_A_S_H= KASH!”
Interview was off to a flying start! And the interviewee went on to elaborate what he
meant, K=Knowledge, A=Attitude, S=Skills and H=Habits.

Persuasion: Eliciting support of others You would, now, be interested in

in the venture. knowing as to how to build these
Use of Influence Strategies: Providing competencies. Knowledge competencies
leadership. (what you know regarding facts,
technologies, a profession, procedures,
Monitoring: Ensuring the progress of
a job, an organisation, etc.) can be
the venture as planned.
developed by, for example by reading
Concern for Employee Welfare: and interacting with people who know.
Believing in employee well being as the Skill competencies (what you say or do
key to competitiveness and success and that results in good or poor
initiating programmes of employee performance) can be acquired by
welfare. practice, haven’t you heard “practice
 BUSINESS STUDIES
406

makes a man perfect”? For example, Need for Achievement (N-Ach.): Need
‘persuasion,’ and ‘use of influence for achievement implies a desire to
strategies’ require presentation skills. accomplish something difficult. To
You may do double the homework on master, manipulate, or organise
what you want to say, how you want physical objects, human beings or
to say, who is your audience and what ideas. To do this as rapidly and as
are their backgrounds, what could be independently as possible. To overcome
the possible questions that may be obstacles and attain a high standard.
asked, what would be their answers To excel one’s self. To rival and surpass
and so on. Practice it all over a number others. To increase self–regard by
of times, may be before mirror or your successful exercise of talent. Yes
friends, so that when you are actually entrepreneurship provides you with the
in that situation, you perform well. best opportunity for making the best
use of your talents as in employment
ENTREPRENEURIAL MOTIVATION the 9-5 routine, pressure to adhere to
rules and regulations, preference for
Men and women who have a perception compliance of boss’s instructions over
of self-efficacy and are yet to feel the use of personal creativity and
interested in or motivated by the idea innovativeness stifles your progress
of being on their own comprise a and self-development. You can create
potential, future source of a work environment that suits your
entrepreneurship. What motivates a abilities and interests.
person is a question easier asked than
Need for Power (N-Pow): Need for
answered. Mr. Narayan Reddy was
Power is the concern for influencing
driven by the desire to utilise his people or the behaviour of others for
discovery of the molecule as a business moving in the chosen direction and
opportunity. In terms of Maslow’s need attaining the envisioned objectives. In
hierarchy theory, one may say that Mr. common perception, politicians, social-
Narayan Reddy was driven by the need religious leaders Chief Executive Officers
for self-actualisation. Since (CEOs), Government Bureaucrats/Civil
entrepreneurial situation is characterised Servants typify the need for power. Such
by personal accomplishment in a perception seems more based on the
competitive situations and involving belief that the source of power lies in
higher standards of excellence, one the “position” a person occupies in
often come across reference to ‘need for organisational/societal context. In the
achievement’ or N-ach for short as the same vein, business ownership too may
primary driver of entrepreneurial imply a need for power. Moreover, you
behaviour. See Box entitled ‘How N- would appreciate that the process of
Ach. Drives Entrepreneurship and founding a business, one has to win
Economic Development’. the commitment of capital providers,
 ENTREPRENEURSHIP DEVELOPMENT
407
suppliers of equipment and materials, needs. Entrepreneurs are believed to be
the employees and that of the low on affiliation, as they are and
customers. Power may not be used to expected to be, innovative, trendsetters
further one’s self- interests alone, it may and tradition breakers. However, it is not
be also be used to touch the lives of necessary that affiliation should only
others, to make a difference. interfere with achievement. In certain
Entrepreneurs driven by this socialised cultures, family comprises the bedrock
face of the need for power. They found on which the successful careers are
organisations that are a source of built. One works, as if, not for personal
sustenance and self- respect for many. gratification but for family. Desire to

How N-Ach. Drives Economic and Entrepreneurship Development

Credit for investigating and bringing to the fore the role of need for achievement
goes to McClelland, the Harvard professor whom we referred to also in the
discussion of competency based approach to human resource and
entrepreneurship development. He set out to investigate why some countries
are more developed than others He sought to find answer to this question by
examining the proposition that ‘differences in the level of achievement
motivation are responsible for ‘differences in the level of economic development’.
For this he examined the popular stories and folklore and readers up to primary
classes of 39 countries for finding out whether they focused on personal
accomplishment, triumph of human courage and effort over the circumstances
and so on. McClelland’s research upheld the proposition that differences in
the levels of achievement motivation as revealed by the analysis of the stories
and the readers accounted for the differences in the level of economic
development. How? What would be the process? McClelland observed that
entrepreneurship becomes the medium through which the achievement
motivation manifests the best and through which the development takes off.

Need for Affiliation (N-Aff.): Often you carry on the tradition of business in the
must have heard your parents saying family and the community to which one
that whatever they do they do it for their belongs, may be interpreted as reflecting
children. If a man thinks about need for affiliation as well. In the
interpersonal relationships, he has a countries with the colonial past, such
concern for affiliation. It implies, among as ours, the first generation of
other things a tendency of the people to entrepreneurs in Independent India was
conform to the wishes and norms of driven by patriotic fervor and the desire
those whom they value. Apparently, to rebuild the economy left stagnated
social activists, environmentalists, by the alien rulers. One can certainly
teachers, and doctors and nurses may trace some elements of affiliation
seem as predominantly driven by these motivation in such instances.
 BUSINESS STUDIES
408

Need for Autonomy (N-Aut.): The for the avenues for their expression and
need for autonomy is a desire for hence are drawn to entrepreneurship.
independence and being responsible Persons eager to be on their own may
and accountable to oneself rather than strive hard to acquire the necessary
some external authority for competencies to realise their dreams.
performance. It is the desire for an How truly one has said that
opportunity for the fullest expression entrepreneurs are the dreamers
of one’s abilities. In the context of who do!
entrepreneurship, it is usually In explaining and developing
interpreted as the determination not to entrepreneurial motivation, it is
work for someone else. In most job important to learn that different
situations, employees are given little individuals are motivated differently, and
freedom to exercise their discretion in that one may be trying to satisfy more
taking decisions and choosing a course than one need through one’s pursuit.
of action so much so that absence of it This is an important observation as
drives them into starting their own economic theory very simply says that
ventures. As such n-pow. becomes the objective of the firm or that of the
more a desire for preserving one’s ethos entrepreneur is profit maximisation.
rather than the freedom from the boss.
Take the example of another ENTREPRENEURIAL VALUES AND
Hyderabad based entrepreneur entitled A TTITUDES
Entrepreneurship for Preserving
Personal Work Ethos). While explaining human behaviour,
What does the above discussion one often comes across the terms
mean for entrepreneurship development? values and attitudes. Rather than
It means that for promoting entrepre- attempting to distinguish between these
neurship it is important to kindle and two terms, it would be sufficient to say
arouse the right motivation. In the here that taken together, entrepreneurial
absence of motivation, even able men values and attitudes refer to the
and women may not take to entrepre- behavioural choices individuals make
neurship. Hence. In every Entrepre- for success in entrepreneurship. The
neurship Awareness Programme (EAP) word ‘choice’ is important, as there are
or Entrepreneurship Development alternative ways of behaving too.
Programme (EDP), there are special In entrepreneurship, a host of
sessions on entrepreneurial motivation, behavioural tendencies or orientations
besides sessions on entrepreneurial have been reported as having a bearing
competencies. on success. The entrepreneur in ‘Cash
You may note that motivation and or KASH’ labeled these as ‘Habits’,
ability can positively reinforce each some researches have called these as
other. Persons having abilities search policies or strategies. Be it the decision
 ENTREPRENEURSHIP DEVELOPMENT
409
to make a choice about entrepreneurship profile some of the dimensions relating
as a career, be it the decision to choose to starting and managing a business
the product line, growth strategy, profit and the associated behavioural
making and social responsibility you alternatives, we have considered here
would be required to make choices. The two to keep the things simple. We have
choice that you make may have a highlighted those alternatives that have
tremendous impact on your been generally observed to be
performance. What we do here is to associated with superior performance.

Entrepreneurship for Preserving Personal Work Ethos

In industries having captive power plants, a day’s downtime can cause a loss
of crores of rupees. While working for a public sector electrical major, an
engineer found it really difficult to cope with the bureaucratic attitude in
servicing the customers. It clashed with his personal value, ‘client’s problems
be attended first, paperwork can wait’. He quit the job and started a turbine
repairing and furbishing company. Incidentally, it takes more money to travel
or to transport than to repair or refurbish the turbine. But the downtime is
reduced and the clients are happy. Later the company also diversified into
the manufacture of the parts and commissioning of the captive power plants
on a turnkey basis.
BUSINESS STUDIES
410

Behavioural Choices for Entrepreneurial Success

S. No. Dimensions Behavioural Alternatives
1. Type of Entrepreneurship Choose pioneering/innovative products
Choose tried and tested products
2. Business Decision Choose business as per qualifications/experience
Grab whatever opportunity comes your way
3. HRM: Recruitment Policy Recruit trustworthy, dependable and obedient employees
Recruit qualified and trained professionals
4. Managing Growth: Pace Grow only at/to manageable pace/extent
Make a hay while the sun shines
5. Organising: Ability Supervise closely
to Delegate Delegate and decentralise
6. Marketing Management: Sell hard what you produce
Marketing Concept Produce according to customers’ requirements
7. HRM: Compensation Reward good performance by additional
increments/promotions
Reward just as you please
9. Managing Growth: Grow around core-competence
Direction Grab whatever opportunity comes your way
10. Marketing Management: Change the product only if absolutely necessary
Product Planning Innovate/improvise continually
and Development
11. Operations Management: Locate the business near social contacts
Locational Decision Locate purely on economic merits
12. Operations Management: Increase profit by negotiating hard with suppliers,
Cost Rationalisation workers and customers
Reduce cost by cutting the overheads and
improved efficiency
13. Managing Competition Fight the competition
Avoid competition
14. Planning: Approach to Scan the environment for business information
Decision-making Rely on intuition/judgment
15. Organising: Formalisation Do everything by yourself
Appoint specialists and professionalise the systems
16. Ethics Never compromise on business ethics
Everything is fair in love, war and business
17. Succession Planning Plan and train a successor
Business will find a successor
18. Planning: Time Horizon Have a long term perspective
Live your business day-by-day
19. Operations Management: Invest in R and D
Research and Development R and D is an ill-affordable luxury
 ENTREPRENEURSHIP DEVELOPMENT
411

KEY TERMS
Entrepreneurship Enterprise
Entrepreneurial Risks Experimentation
Exploration Rural Entrepreneurship
Entrepreneurial Opportunities Entrepreneurial Competencies

SUMMARY
The terms ‘entrepreneur,’ ‘entrepreneurship’ and ‘enterprise’ can be understood
by drawing an analogy with the structure of a sentence in English language.
Entrepreneur is the person (the subject), entrepreneurship is the process (the
verb) and enterprise is the creation of the person and the output of the process
(the object).
Entrepreneurs play important roles both in relation to economic development
and in relation to the enterprise. In relation to economic development, entrepreneurs
contribute to growth in GDP, capital formation and employment generation besides
creating business opportunities for others and bringing about an improvement
in the quality of life in the community in which they operate. In relation to the
enterprise, they perform a number of roles right from the conception of a business
idea, examining its feasibility and mobilisation of resources for its eventual
realisation as a business firm. They bear the uncertainties and risks associated
with the business activity, introduce product, market, technological and a host of
other innovations. In the developing country context they also assume the
responsibility for the day-to-day management of the enterprise.
Given its critical role in economic development at a broader level and business
start-ups at the micro level, it is imperative that a conscious effort be made to
popularise entrepreneurship as a career option. In this regard, EAPs and EDPs
can play an important role. Besides, there is a need to create an entrepreneurship
friendly environment. Since, entrepreneurship is the outcome of a dynamic
interaction between the person and the environment, there is need also for
developing entrepreneurial competencies, motivations, values and attitudes.

EXERCISES
Multiple choice questions
Put a tick against the most appropriate answer to the following questions.
1. Entrepreneurs undertake
a. Calculated risks
b. High risks
 BUSINESS STUDIES
412

c. Low risks
d. Moderate and calculated risks
2. In economics, which of the following is not a function of the entrepreneur?
a. Risk-taking
b. Provision of capital and organisation of production
c. Innovation
d. Day to day conduct of business
3. Which of the following statements does not clearly distinguish between
entrepreneurship and management?
a. Entrepreneurs found the business; managers operate it
b. Entrepreneurs are the owners of their businesses; managers are
employees
c. Entrepreneurs earn profits; managers earn salaries
d. Entrepreneurship is once for all activity; management is a
continuous activity
4. In the roles and functions of the entrepreneur identified by Kilby, which
of the following is not an aspect of ‘political administration’?
a. Dealing with public bureaucracy
b. Managing human relations within the firm
c. Introducing new production techniques and products
d. Managing customer and supplier relations
5. Which of the following attitudes is not generally associated with
successful entrepreneurship
a. Investing in R and D
b. Live your business day by day
c. Innovate and improvise continually
d. Produce as per customers’ requirements
Short answer questions
1. Clarify the meaning of the terms ‘entrepreneur,’ ‘entrepreneurship,’ and
‘enterprise.’
2. Why is entrepreneurship regarded as a creative activity?
3. “Entrepreneurs undertake ‘moderate’ risks.” Elaborate this statement.
4. How does entrepreneurship result in increasing the spectrum and scope
of economic activities?
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5. Describe briefly the role of achievement motivation in entrepreneurship.
Long answer questions
1. Describe briefly the steps involved in starting a new business.
2. Examine the nature of relationship between entrepreneurship and
economic development.
3. Clarify how motivation and abilities impact an individual’s decision to
choose entrepreneurship as a career.
Application question
Anshuman was a very industrious sales executive with a small herbal cosmetic
manufacturer. He earned a good salary and commission on the business he
brought for the firm and had very good command over the Delhi market for
which he had virtually become indispensable. He was aware of the enviable
position he held in the firm and thought aloud:
“The key to success in any business is the sale of its products. The beginning
and end of the business cycle is nothing but sale and “other” people working in
the factory to manufacture products are mere cogs in the business machine set
in motion by sales people. So why carry this burden and get only a tiny share of
the prosperity of the firm? Instead others enjoying the fruits of my labour, why
should I not start my own business?”
Should Anshuman take a leap? Give reasons for your answer.

Case Problem
Inspiring Feat: Dailywage Labourer Turns Entrepreneur
A landless woman from Bihar has been nominated among the top 25 farmers in
Asia by a Mexican website.
Forty-five-year old Lalmuni Devi was a daily wage labourer when she decided to
take destiny into her own hands and transformed herself into a successful
mushroom farmer. Today she manages to make Rs. 12,000 every year for an
investment of only Rs. 600.
Her feat finds mention on a Mexican website that has grouped her as the top 25
inspirational farmers in its photo gallery.
”I am a poor woman. I thought that mushroom farming would profit henceforth
I started it. Now I can earn a living for my family,” said Lalmuni Devi.

Successful enterprise
The success story has caught on with many women in the Azadpur village on
the outskirts of Patna.
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”It is effortless farming, which we can even do in our village. Working in the
scorching heat is very tiring. Mushroom farming generates more profit,” said
Urmila Devi.
Lalmuni and other landless women have been encouraged by the Indian Council
for Agriculture Research to take up mushroom farming.
”It is to help the poorest of the poor through alternative livelihood support system.
For that we have chosen a village where people have no land and they have to
share croppers,” said Dr A.R. Khan, Principal Scientist, ICAR, Patna.
Lalmuni’s efforts have paved the way for many other landless women to take up
mushroom farming and earn a livelihood for their family with little effort.
Source: - www.ndtv.com/features downloaded on 15/3/2006 at 1.35 am

Question
1. What inspiring feat did Lalmuni Devi perform?
2. Do you feel that you can also become an entrepreneur?
3. What qualities of entrepreneur did Lalmuni Devi exhibit?
4. What are the benefits and risks of becoming an entrepreneur? How can you
guard against the risks?
(Teachers should highlight the qualities of entrepreneurs and motivate
students to do so. Help that is available from the government of India is
listed on the website www.india.gov.in.).

Project Work
1. Visit a newly started small business in your neighbourhood and interview
the owner. Prepare a report on how he/she decided to start the enterprise
and the difficulties he/she faced. Also include steps taken by the owner to
overcome them. Discuss the findings in the class.
2. Study the life history of great entrepreneurs such as Dhirubai Ambani,
Jamshedji Tata, G.D.Birla or Kiran Mazumdar Shaw etc. Prepare a list of
common traits in these people and discuss it in your class. Can you imbibe
some of these qualities and start some enterprise later on in life?