MODULE 2

CLASSIFICATION OF ENTREPRENEURS

CHAPTER II – CLASSIFICATION OF ENTREPRENEURS

Classification of entrepreneurs

According to J.B. Say, French economist, “an entrepreneur is the economic agent who
unites all means of production, the labour force of the one and the capital or land of the others
and who finds in the value of the products which results from their employment, the
reconstitution of the entire capital that he utilizes and the value of the wages, the interest and
the rent which he pays as well as profit belonging to himself”. According to him an
entrepreneur is one who shifts economic resources out of an area of lower and into an area of
higher productivity and greater yield. Entrepreneurs can be classified on the following basis
which has been explained below:

- On the basis of objectives

- On the basis of type of business
- On the basis of use of technology
- On the basis of motivation
- On the basis of growth
- On the basis of stages of development
- On the basis of scale of operation
- On the basis of Indian context
- On the basis of capital ownership
- On the basis of gender and age
- On the basis of area
- Other classifications

I. On the basis of objectives (Clarence Danhof)

a. Innovative entrepreneurs – These are entrepreneurs who assemble and synthesize

information and introduce novel combination of factors. He is an aggressive figure
and industrial leader. They are the most vigorous type of entrepreneurs. He is equally
involved in big and small business units. The customers look forward to them for
change and development.
b. Adoptive or Imitating entrepreneurs – These are characterized by readiness to adopt
successful innovations made by other entrepreneurs. They play a vital role in
developing countries because such countries can adopt technology, knowledge and
skill already available in advanced countries. E.g. Cochin shipyard has adopted the
technology of Mitsubishi Heavy Industries ltd of Japan.
c. Fabian entrepreneurs – These are timid, skepticism and cautious in introducing any
change. These entrepreneurs have neither the will to introduce new changes nor the
desire to adopt new methods. He may imitate other innovations only if he is certain
that failure to do so may not damage his business. These are shy and lazy. Their
dealings are determined by customs, religion, tradition and past practices. They are
not interested in taking risks. They follow the footsteps of their predecessors.
 d. Drone entrepreneurs – These are ones who follows the traditional methods of
production. Under no circumstances will he change the method of production he has
introduced. They may even suffer losses but even then they refuse to adopt and use
new methods. They are laggards. They are thrown out of market due to poor
marketability of their products. E.g. The coir and bamboo industries of Kerala

II. On the basis of type of business

a. Business entrepreneur – He conceives an idea or a new product or service and starts a

business to materialize his ideas. He may set up a small or big business unit. E.g.
textile shops, printing press, confectionaries, etc.
b. Trading entrepreneur – He undertakes a trading activity and is not concerned with a
manufacturing activity. They engage in both domestic and foreign trade.
c. Industrial entrepreneur – He is basically a manufacturer. He identifies the needs of
customers and then starts industrial units to manufacture products which satisfy their
needs
d. Corporate entrepreneur – He is an individual who plans, develops and manages a
corporate enterprise like a company.
e. Agricultural entrepreneur – He undertakes agricultural activities like raising and
marketing or crops and fertilizers.
f. Retail entrepreneur – He promotes and operates a retail business.
g. Service entrepreneur – He initiates various kinds of service activities with an intention
of earning income in the form of fees, remuneration etc.

III. On the basis of the Use of Technology

a. Technical entrepreneur – He is like a Craftsman. He is skilled in production

techniques. He concentrates more on production than on marketing
b. Non-technical entrepreneur – He is concerned only with developing alternative
marketing strategies to promote the business
c. Professional entrepreneur – He is a very dynamic person. He is interested in
establishing a business enterprise, but not interested in managing or operating it. He
engages in selling out the present business unit and starting another one as the sale
proceeds
d. Hi-tech entrepreneurs – He is concerned with the application of high technology in
respect of production of goods. He always experiments with the latest technology
e. Low – tech entrepreneurs – He is not ready to take up risk. He operates with a low
technology

IV. On the basis of Motivation

a. Pure entrepreneur – He is motivated by psychological and economic rewards. He

undertakes an entrepreneurial activity for his own personal satisfaction or for profit
b. Induced entrepreneur – He is induced by the various incentives, facilities, subsidies
and concessions provided by the govt. in starting a new business.
c. Motivated entrepreneurs – He is motivated by the chances of producing and
marketing a new product for the use of customers.
 d. Spontaneous entrepreneurs – He starts business with the help of his natural talents. He
has a strong belief in his inborn initiative, courage and self-confidence which prompts
him to take up entrepreneurial activities

V. On the basis of Growth

a. Growth entrepreneur – He is interested in taking up a high growth industrial activity

which has a bright prospect
b. Super-growth entrepreneur – He attempts to bring about super growth of performance
in his industrial activity

VI. On the basis of Stages of development

a. First generation entrepreneur – He is basically an innovator who starts an industrial

unit by combining different technologies to produce a marketable product or service.
b. Modern entrepreneur – He is one who takes up those ventures which suit the current
marketing needs
c. Classical entrepreneurs – He is a stereo-typed entrepreneur. His main aim is to
maximize his profit by satisfying the customers’ needs through the development of a
self-supporting venture.

VII. On the basis of Scale of operations

a. Small scale entrepreneurs – He carries out businesses or service activities on a small

scale basis
b. Medium scale entrepreneurs – on a medium scale basis
c. Large scale entrepreneurs – on a large scale basis
d. Tiny industry entrepreneur

VIII. On the basis of Gender and Age

a. Man entrepreneur
b. Woman entrepreneur
c. Young entrepreneur
d. Old entrepreneur
e. Middle-aged entrepreneurs

IX. On the basis of Area

a. Urban entrepreneurs
b. Rural entrepreneurs

X. On the basis of Capital ownership

a. Private entrepreneurs
b. State entrepreneurs – undertaken by govt. itself
c. Joint entrepreneurs – combination of private entrepreneur and state entrepreneur
XI. On the basis of Indian context

a. Entrepreneurs by inheritance – These are family controlled units and their

management is passed from one generation to another. Only a minor portion of them
are innovative and majority of them are drone entrepreneurs
b. Individual entrepreneurs – These are small scale entrepreneurs. They encounter many
limitations like lack of sufficient finance, lack of efficient hands in marketing the
products, delay in the implementation of decisions, etc.
c. Institutional entrepreneurs – These are a group of entrepreneurs who act as a
corporate body where decision making is done after discussing with each other. They
co-ordinate different types of personal skill, ability and risk bearing capacity of
various entrepreneurs.
d. Technologist turned entrepreneurs – They are technically qualified persons who find
their own employment opportunities as self-made entrepreneurs. They commercially
exploit their inventions and technical knowledge by establishing their own business
units.
e. Self-employed entrepreneurs – These are educated but unemployed entrepreneurs.
They need financial assistance from the govt. or from other financial institutions.
They are also called govt. sponsored entrepreneurs. The circumstances force them to
act as entrepreneurs.
f. Foreign returned entrepreneurs – These are entrepreneurs who were employed in
foreign countries and earned attractive amounts. On return, some of them start new
business. These are usually seen in India, especially in Kerala
g. Non-resident Indian (NRI) entrepreneurs – They are also known as persuaded
entrepreneurs. They are persons with Indian citizenship residing outside India. The
central and state govts. Persuade the NRI to make investments in India.

XII. Others

a. Intrapreneurs (Already discussed)

b. Paper entrepreneurship – These are a new class of entrepreneurs who are engaged in
shrewd financial transactions of buying and selling of shares and enterprises, master
minding takeovers and mergers. These entrepreneurs are indulging in financial
speculation at the expense of actual production
c. Academic entrepreneurs – These are teachers who design new courses or make
innovations in curriculum/teaching methods or devise new teaching methods.
d. Educational entrepreneurs – These are entrepreneurs who find novel ways to keep
youngsters busy during vacations. E.g. entrance coaching, personality development
classes, computer coaching, music, dance, painting coaching’s etc.
e. Co-preneurs – These are married couples working together in a business. They share
ownership, commitment and responsibility for a business.
f. Social entrepreneurs – E.g. mahatma Gandhi
g. Ontrapreneur or online entrepreneurs – This concept was brought by Adam Bryant.
These are entrepreneurs who launches a new business or an innovation through the
internet
h. Co-operative entrepreneurs – E.g. Amul, Co-optex, etc.
i. Managing entrepreneurs – These are entrepreneurs whose main objective is safety
j. Power-crazy or controlling entrepreneurs – These are entrepreneurs who regard
supremacy as the greatest gift
k. Arthur H. Cole classification
 i. Empirical entrepreneurs – These hardly introduce anything revolutionary and
follows the principle of rule of thumb
ii. Rational entrepreneurs – They are well informed about the general economic
conditions. He introduces changes that look more revolutionary
iii. Cognitive entrepreneurs – They are well informed. He draws upon the advice
and services of experts and introduces changes that reflect a complete break up
from the existing scheme of things

Technopreneurship

Technopreneurs are entrepreneurs who are into the core businesses involving
technology-based industries. They make use of technology to come out with new or
innovative products through a process of commercialization. The businesses are generally
marked with high growth potential and high leverage of knowledge and intellectual property.
Potential Technopreneurs must be equipped with both technical and business skills. He is a
person who sets up a business concerned with computers or similar technology.
Technopreneurship begins with the customer experience and works backward to arrive at the
technology to provide that customer experience. He is an entrepreneur who uses cutting-edge
technology to develop new business. He involves himself in technological changes in
producing goods and services for his organization. They like to bring new technology and
destroy old technology:

1. Artificial Intelligence, Machine Learning and Expert System (AIML)

2. Augmented Reality expanding virtual reality extending the physical world as we
Know (AR)
3. Blockchain beyond Bitcoins, Distributed Ledger and Decentralised Data Base (BC)
4. The Internet of Things (IOT). This is something that has already reached our living
rooms with Amazon’s Alexa, Echo etc.
5. 3D Printing, Additive Manufacturing and Embedded Manufacturing (AM-3D) etc

Bill Gates (Microsoft), Steve Jobs (Apple), Sergey Brin and Larry Page (Google),
Mark Zuckerberg (Facebook), Jack Dorsey (Twitter), and Kevin Systorm (Instagram) are a
few examples of entrepreneurs who are engaged in the world of information technology.

Cultural entrpreneurship

Cultural Entrepreneurs are cultural change agents and resourceful visionaries who
organize cultural, financial, social and human capital, to generate revenue from a cultural
activity. Their innovative solutions result in economically sustainable cultural enterprises
that enhance livelihoods and create cultural value and wealth for both creative producers and
consumers of cultural services and products. He is an entrepreneur who creates a business
that is grounded in the arts, creatively inclined and/or is relevant to the cultural heritage of a
specific community.

Instead of developing physical products and systems that foster social change, they
create and share cultural products like visual art, music and film that present new ways of
understanding social problems. Culture is the lens through which we see our world. Cultural
entrepreneurs can drive social development through community engagement. This area spans
across sectors that center on culture, arts, or heritage. This encompasses traditional
professions, such as artists, writers, musicians, actors, dancers, advertisers, curators, and
architects, as well as the newer professions of game developers, TV/music producers,
bloggers, and graphic designers.

Cultural beliefs and attitudes are passed on from generation to generation through
vertical (parent and child), horizontal (peers and media) or oblique (teachers and similar
sources) transmission channels. The role of the cultural entrepreneur is to coordinate such
beliefs and fuse them into a coherent doctrine that others can share and develop and in this
way make change effective.

International entrepreneurship

International entrepreneurship is the process of an entrepreneur conducting business

activity across the national boundaries. It may consist of exporting, licensing, opening sales
office in another country etc. International entrepreneurship is defined as development of
international new ventures or startups that from their inception engage in international
business, thus viewing their operation domain as international from the initial stages of
international operations. Entrepreneur in process of satisfying foreign customers have to
produce product as per their quality expectation by which entrepreneur will not only produce
quality product in international market but also in national market.

Entrepreneurs can hire motivated, multi lingual employees, learn constantly about the
foreign markets. They will think globally and start developing an outlook from a global
prospective.

Importance of International Entrepreneurship to Firm -

i. Increased sales and profit: when the entrepreneurs are not able to earn profit or
demand for their product decreases in local market they can sell their products in
foreign market where life cycle of product is in favorable condition. E.g. Apple
earned more profits from international business than in local market US.
ii. Lower manufacturing cost: if the company manufacturing cost increases by
manufacturing product in home country, than company can opt in for production
process in host country, on the contrary if the company is in no profit or no loss
situation than company can choose in any option. E.g. Mc Donald's.
iii. Advantage of cheap labour: quantity and quality of labour is one of the major
challenge for every business, if the labour is cheap in foreign countries than company
can outsource required labour if organization is into foreign operations. E.g.
increasing cost of labour in china has forced companies to search in for other options
for outsourcing company activity to other countries were cost of labour is less.
iv. Utilization of talent and managerial competence: when businesses are not able to get
required talented work force in country, they can get the activity outsourced or hire
host country employee which has given birth to concept of expatriation.
v. Growth opportunity: An entrepreneur whose core business strategy is expansion and
diversification of business, international business is one of the primary platform to
achieve these objectives.

Ecopreneurship

Ecopreneurship is a term coined to represent the process of principles of

entrepreneurship being applied to create businesses that solve environmental problems or
operate sustainably. The term began to be widely used in the 1990s, and it is otherwise
referred to as "environmental entrepreneurship." Ecopreneurs are entrepreneurs whose
business efforts are not only driven by profit, but also by a concern for the environment.
Ecopreneurship initiatives can span a wide range of issues from ocean pollution to recycling
to food waste. They tend to follow reoccurring environmental principles such as systems
thinking, cradle to cradle product design, triple bottom line accounting, etc.
Systems thinking is an approach to problem solving that studies how something
interacts with its environment as a whole, whether that be social, economic or natural. Some
examples of ways to implement sustainable product design include:

a. streamline design - use fewer materials, find sustainable material substitutes

b. procure materials sustainability - choose resources whose extraction is not harmful
to the surrounding environment and use the most Eco-friendly extraction methods
c. reduce materials - reducing material weight or transportation volume
d. optimize production - use production techniques with as little as possible harmful
environmental side effects like toxic chemical release, reduce waste and emissions
e. improve distribution - use less or reusable packaging, transport and distribute
products more efficiently
f. cut impact - reduce energy consumption, use cleaner energy sources like solar panels
or wind power.
g. prolong life - improve durability and reliability of product, offer repair services,
re-purpose broken or unused products
h. manage waste - implement recycling or reuse programs, up-cycle product, dispose of
safely

Cradle-to-cradle design is popular environmental approach to product design that

seeks to eliminate waste by designing products that can be continuously recirculated through
our economy. Triple bottom line Accounting is an accounting method that combines
traditional accounting methods of measuring profit with those that measure social and
environmental benefits as well. The phrase was created by John Elkington in 1994.

Social entrepreneurship

A social entrepreneur is a person who pursues novel applications that have the
potential to solve community-based problems. These individuals are willing to take on the
risk and effort to create positive changes in society through their initiatives. Examples of
social entrepreneurship include microfinance institutions, educational programs, providing
banking services in underserved areas and helping children orphaned by epidemic disease.
Their efforts are connected to a notion of addressing unmet needs within communities that
have been overlooked or not granted access to services, products, or base essentials available
in more developed communities. Social entrepreneurship is doing business for a social cause.
It might also be referred to as altruistic entrepreneurship. Social entrepreneurship refers to the
practice of combining innovation, resourcefulness and opportunity to address critical social
and environmental challenges. Social entrepreneurs focus on transforming systems and
practices that are the root causes of poverty, marginalization, environmental deterioration and
accompanying loss of human dignity. Social entrepreneurship is driving the social innovation
and transformation in various fields including education, health, environment and enterprise
development.

Women entrepreneurs
 According to the Govt. of India, the enterprise of a woman entrepreneur is defined as
“One owned and controlled by a woman having a minimum financial interest of 51% of the
capital and giving at least 51% of the employment generated in the enterprise to women”. In
short, women entrepreneurs are those women who think of a business enterprise, initiate it,
organize and combine factors of production, operate the enterprise and undertake risks and
handle economic uncertainty involved in running it.

Outstanding Leadership qualities of women entrepreneurs

1. Willingness to face challenges

2. Aspiration to reach high levels
3. Intelligence
4. Patience
5. Skill in learning new things
6. Desire to acquire new knowledge and to apply it
7. Merciful approach
8. Power to withstand uncertainty
9. Enthusiastic
10. Power to resist criticism

Growth of women entrepreneurs

In Indian conditions the women entrepreneurs can be categorized into the following 5
broad categories:

1. Affluent Entrepreneurs – These are daughters, daughters-in-law and wives of rich

business families who have financial and other resource backing to take any business
risks. E.g. interior decoration, beauty parlour, restaurants, book publishing,
magazines, film distribution, etc.
2. Pull factors – These are town and city based women who take up some assignments or
enterprises as a challenge. They take it up as an adventure to do something new and
be economically independent. Generally they take up small and medium type
industries where risk factors are small. This category consists of educated women
with or without work experience. They are likely to take financial assistance from
banks or other sources. E.g. electronic industries, service centres, restaurants, schools,
food catering centres, event management, films production and grocery shops, etc
3. Push factors – This category of women takes up some business activity to overcome
financial difficulties. The family situation forces them to develop existing family
business or start something new to improve the economic lot of the family. This
category is small and consists more of widows and single women
4. Rural entrepreneurs – These are women in rural sector who try to start something
suiting to their resources and knowledge. E.g. dairy products, pickles, fruit juices,
papads, and jaggery making, etc. They work in those areas where minimum usage of
telephone, transport and monetary transaction is involved. They ensure that their
enterprise is of minimum risk and need least organizing skill.
5. Self-employed entrepreneurs – These are women from poor and very poor category of
society and rely on their own efforts for sustenance. Majority of them are from
villages and towns. E.g. vegetable and fruit vendors, brooms making, wax candle
making, providing tea-coffee to offices, ironing of clothes, knitting work, tailoring
 firms, etc. These are tiny and small enterprises which women find convenient to
manage.

The basic reasons for various growths of women entrepreneurship is related to literacy
level, industrial and economic growth and deep rooted traditional ethos. Modern writers are
of the opinion that women entrepreneurs undertake 3 types of industrial enterprises. They are:

i. Operating purely as a sub-contractor on raw materials provided by the customer,

ii. Manufacturing items that are usually used by large scale units, and
iii. Manufacturing of consumer products which are directly sold in the market

Problems of women entrepreneurs

The problems of women entrepreneurs can be categorized in 3 segments in Indian

conditions as given below:

(a). Women’s problem in India: These consist of tradition, socio-cultural values, ethics,
motherhood, subordinate to husband and men, physically weak, avoids tension, hard work
areas, avoids vehicle driving and cannot be tough, etc.

(b). Entrepreneurial problems in general:

1. Procedural delays, problems and corruption in govt. offices for various licenses,
electricity, water and shed allotments
2. Scarcity of raw materials - Raw materials price and availability are not consistent.
Middlemen play a significant role in creating artificial shortage
3. Stiff competition - Competition in low technology items is so high and hence
entrepreneurs have to work at very low margins and constantly be on lookout for cost
reduction
4. Financial constraints - Financial problems due to blockage of funds in W.I.P., finished
goods and raw materials; non receipt of payments from customers, hindrance in
providing collateral securities to avail loans from banks where the property are not in
their names, given less preferences in getting loans,
5. Technology obsolescence due to non-adoption or slow adoption to changing
technology.
6. High cost of production – The govt. grants and subsidies are available only at the
initial stages of its setting up but not for the expansion and diversification activities.
7. Lack of infrastructural facilities
8. Lack of information of availability of raw materials, financial facilities, govt. help and
various kinds of subsidies available.

(c). Specific entrepreneurial problems of women:

1. Limited mobility - Mobility is a problem in women due to the traditional values and
most of the cases inability to drive vehicles. Physically, they are not fit enough to
travel a lot. A woman running an enterprise independently and alone is often looked
upon with suspicion. Younger category women feel uncomfortable to deal with men
due to extra interest being shown in them than the work related matters
 2. Family Ties - Family responsibilities like extra attention to husband, children and
in-laws take away lots of their time and energy. Lack of support from family members
makes them difficult to concentrate in the enterprise
3. Low risk bearing capacity - Protected life from childhood has made them ‘abla’ i.e.
weak and hence many women are unable to face risks and troubles that may come up
in an organizational working.
4. Illiteracy - Women are provided less or inadequate education than men partly due to
early marriage, partly due to preference given to son’s higher education.
5. Over dependence on intermediaries - Since women cannot run around for marketing,
distribution and money collection, middlemen tend to exploit them in the guise of
helping
6. Male dominated society - In rural sector women have to depend upon men for
anything they have to obtain from towns and cities.
7. Lack of achievement motivation and self confidence

Solutions to the problems of women entrepreneurs

1) Separate finance divisions under the control and management of women officers can
be opened by various financial institutions and banks for providing easy and ready
finance at concessional rates to the women entrepreneurs
2) They must be given priority over other entrepreneurs in the supply of controlled and
scarce raw materials at minimum price
3) Co-operative women marketing societies should be started to collect the products
manufactured by the women entrepreneurs and sell them at competitive prices by
eliminating middlemen.
4) It is necessary to make people aware of entrepreneurship development, various
products, their marketing facilities, competition, etc.
5) The govt. agencies and financial institutions can set up separate divisions for giving
training to women entrepreneurs. The training scheme or the syllabus should be so
designed that woman can take full advantage of the training facilities
6) There should be a sound family background for the development of women
entrepreneurs. Parents in the initial stage and husbands in the later stage should
support women for doing the entrepreneurial activities successfully
7) Necessary steps should be taken to make the society aware of the role of women in its
economic and social development.
8) Both central and state govt.’s should give priority to women entrepreneurs for starting
new ventures by providing infrastructural facilities, raw materials, tax exemptions and
concessions, special grants and subsidies, etc

Future of women entrepreneurs

Since 1975 there was a awakening over the world about women entrepreneurs and in
a moderate way steps were been taken to gradually improve the conditions for them. Some of
the prominent events and developments towards this are given below:

⮚ The decade 1975-85 was declared by UNIDO (United Nations Industrial

Development Organisation) as ‘Decade for Women’
⮚ UNIDO arranged a meeting in Vienna during 6th to 10th February 1978 on the topic
“Role of women in Industrialisation in developing countries”. It raised issues of
 constraints such as social, attitudinal and institutional barriers, inadequate
employment, training and flow of information which have caused women to
participate lesser in industrial activities
⮚ UN arranged a global conference as ‘Decade for Women’ at Copenhagen on 30th June,
1980. It passed a resolution aimed at promoting equal opportunities and equal
treatment to women in employment and their access to non-traditional skills
⮚ In November 1981 India arranged its first “National conference for women
entrepreneurs” at New Delhi. It advocated for priority for women in allotment of land,
sheds, sanction of power, licensing, etc.
⮚ The 2nd conference on “Women entrepreneurs” was organized by NAYE in 1989 at
New Delhi. It adopted following declarations:
a) National and state govts. should promote women’s participation in social and
economic development programmes, organize requisite facilities, training and
enact legislations to remove constraints in their way, arrange for transfer of
relevant technology and financial assistance
b) Financial and expertise assistance should be given to women entrepreneurs
doing exports. For this UNO, ILO and national govts. must enact suitable
measures
c) Fairs and exhibitions of products manufactured by women entrepreneurs
should be widely displayed and advertised
d) UNESCO and the education ministries in different countries should provide
necessary literature, course books and publications for the benefit of students
⮚ The 6th five year plan suggested the idea of promoting female employment in women
owned industries
⮚ In the 7th five year plan govt. of India gave focus to “Integration of women in
Development” with suggestions like improvement in training, marketing assistance
and involving women in decision making.
⮚ In the 8th five year plan, efforts were made to increase employment and income
generating activities for women under various sectors of agricultural and its allied
activities of dairying, poultry, animal husbandry, handlooms, handicrafts, SSI’s, etc.

The govt. has thus been providing increasing importance to the development of
women entrepreneurs.

Supporting or Conducive conditions for emergence of women entrepreneurs

1. Proper education of women

2. Presence of industrial atmosphere
3. Liberal financial assistance
4. Easy banking facilities
5. Marketing facilities
6. Provision of legal assistance
7. Recognition of women by the society
8. Encourage and support from the member of the family
9. Training facilities and assistance
Growth of women entrepreneurship in Kerala

A study conducted by Women’s Industries Dept. of the state govt. has revealed the
following facts:

1. No. of industries by women in kerala in 1981 was 358. This rose to 2782 in March
1994. This included 2592 proprietary concerns, 43 partnerships, 42 charitable
institutions, 102 co-operative societies and 3 joint stock companies
2. During 1994-95 more than 3600 new SSI units were registered by women
entrepreneurs, the largest being in ernakulam district (1915 units), immediately
followed by that in trivandrum district (1758 units).
3. As on 31st March 1997, the total number of women owned units was 18361 and
highest number of women entrepreneurs was in trivandrum district and lowest in
kasarkode district.

The following are the conducive factors which promoted a very quick development of
women entrepreneurship in kerala

1) High literacy among women

2) Financial incentives offered by the govt. and state owned enterprises
3) Availability of capital and raw materials
4) Lack of employment opportunities
5) Desire of women to work at the place of residence
6) Desire of women for social status
7) Desire of women for self dependence
8) Development of kindergartens, nurseries and cresches
9) Reduction in the size of family
10) Encourage from husband and other members of the family
11) Encouragement and support by Mahila samajams.

Special incentives given by Govt. of Kerala to women entrepreneurs

1. Providing financial assistance through agencies like KITCO, SISI, and DIC
2. Assisting in the preparation of project reports
3. Meeting the cost of machinery, building and furniture subject to a maximum of Rs.
25000 or 50% of the cost of machinery, building, etc
4. Meeting the training and hiring charges of management personnel
5. Meeting the cost of technical expert for a period of one year
6. Providing exemption from the payment of sales tax for 7 years, limited to 100%
investment of fixed capital or for a period of 7 years whichever is earlier
7. Rent of the building subject to a maximum of Rs.500 p.m. on a tapering basis i.e. in
the 1st year 100%, 2nd year 75%, 3rd year 50% and 4th year 25%.

Role of Government to boost women entrepreneurship

1. Annapurna Scheme - This scheme is offered by the State Bank of Mysore for those women
entrepreneurs who are setting up food catering industry in order to sell packed meals, snacks,
etc. The amount granted as a loan under this scheme can be used to fulfill the working capital
needs of the business like buying utensils and other kitchen tools and equipment.
2. Stree Shakti Package For Women Entrepreneurs - This scheme is offered by most of the
SBI branches to women who have 50% share in the ownership of a firm or business and have
taken part in the state agencies run Entrepreneurship Development Programmes (EDP).

3. Bharatiya Mahila Bank Business Loan - This loan is a support system for budding women
entrepreneurs looking to start new ventures in the fields of the retail sector, loan against
property, MICRO loans, and SME loans.

4. Dena Shakti Scheme - This scheme is provided by Dena bank to those women
entrepreneurs in the fields of agriculture, manufacturing, micro-credit, retail stores, or small
enterprises; who are in need of financial assistance.

5. Udyogini Scheme - This scheme is offered by Punjab and Sind Bank so as to provide
women entrepreneurs involved in Agriculture, retail and small business enterprises to get
loans for business at flexible terms and concessional interest rates.

6. Cent Kalyani Scheme - This scheme is offered by the Central Bank of India with the aim
of supporting women in starting a new venture or expanding or modifying an existing
enterprise. This loan can be availed by women who are involved in village and cottage
industries, micro, small and medium enterprises, self-employed women, agriculture and allied
activities, retail trade, and government-sponsored programs.

7. Mahila Udyam Nidhi Scheme - This scheme is launched by Punjab National Bank and
aims at supporting the women entrepreneurs involved in the small scale industries by
granting them soft loans that can be repaid over a period of 10 years. Under this scheme there
are different plans for beauty parlors, day care centres, purchase of auto rickshaws,
two-wheelers, cars, etc.

8. Mudra Yojana Scheme For Women - This scheme has been launched by the Govt. of India
for individual women wanting to start small new enterprises and businesses like beauty
parlors, tailoring units, tuition centres, etc. as well as a group of women wanting to start a
venture together.

9. Orient Mahila Vikas Yojana Scheme - This scheme is provided by Oriental Bank of
Commerce to those women who hold a 51% share capital individually or jointly in a
proprietary concern.

ENTREPRENEURSHIP IN AGRICULTURAL SECTOR

Agriculture and allied sectors are considered to be the mainstay of the Indian
economy. They are the important source of raw material and demand for many industrial
products, particularly fertilizers, pesticides, agricultural implements and a variety of
consumer goods. They contribute nearly 22 per cent of Gross Domestic Product (GDP) of
India. About 65-70 per cent of the population is dependent on agriculture for their livelihood.

'Agriculture and allied' industry is further divided into several segments, namely:-
horticulture and its allied sectors (including fruits and vegetables, flowers, plantation crops,
spices, aromatic and medicinal plants); fisheries sector; animal husbandry and livestock; and
sericulture. India's varied agro-climatic conditions are highly favourable for the growth of
large number of horticultural crops, which occupy around 10 per cent of gross cropped area
of the country producing 160.75 million tonnes.

India is the second largest producer of fruits and vegetables in the world. It is also
second largest producer of flowers after China. It is also leading producer, consumer and
exporter for spices and plantation crops like tea, coffee, etc. While, sericulture is an
agro-based cottage industry. India is ranked as the second major raw silk producer in the
world.

Fisheries sector occupies a very important place in the socio-economic development

of the country. It is a big source of employment opportunities for the large number of people
in the country, especially rural population. It has a huge export potential. Similarly, India has
vast resource of livestock and poultry, which play a vital role in promoting the welfare of
rural masses. The Indian Dairy Industry has acquired substantial growth momentum from 9th
Plan onwards. India's milk output during the year 2006-2007 reached the level of 100.9
million tonnes (provisional), which has placed the country on top in the world in this field.

The Ministry of Agriculture is the main authority in India for regulation and
development of activities relating to agriculture, horticulture, fishing, animal husbandry, etc.
It is implementing various schemes and policies for the sector through its divisions like
'Department of Agriculture and Cooperation' and 'Department of Animal Husbandry,
Dairying and Fisheries'. Further, the Ministry of Food Processing Industries is actively
engaged in promotion of entrepreneurial activities in the segments of fish processing as well
as fruits and vegetables processing. Besides, commodity boards, like tea board, coffee board,
rubber board, medicinal plants board, etc. have been set up to boost the growth of the sectors
like tea, coffee, rubber, medicinal plants, respectively.

Several significant initiatives have been taken in recent years by the Government in
order to reverse the downward trend in agricultural production. Some of these important
initiatives include:
1. Bharat Nirman
2. National Rural Employment Guarantee Programme
3. National Horticulture Mission
4. Expansion of Institutional Credit to Farmers
5. Establishment of the National Bee Board
6. Establishment of the National Rainfed Area Authority
7. Establishment of the National Fisheries Development Board (NFDB)
8. Watershed Development and Micro Irrigation Programmes
9. Reforms in Agricultural Marketing and Development of Market Infrastructure
10. Revitalisation of Cooperative Sector
11. Agri-business Development through Venture Capital Participation by the Small
Farmer Agri-business Consortium
12. Reform and Support for Agriculture Extension Services
13. National Rural Health Mission
14. National Food Security Mission
15. Rashtriya Krishi Vikas Yojana to incentivise the states to invest more in agriculture
16. Integrated Food Law
17. Legislative Framework for Warehousing Development and Regulation
18. Protection of Plant Varieties and Farmers & rsquo Rights (PPVFR) Act, 2001
19. National Bamboo Mission and
 20. Knowledge Connectivity through Common Service Centres (CSC) and IT initiatives.

Agricultural Entrepreneurship can be defined as being primarily related to the

marketing and production of various agricultural products. Agripreneurship defined as
“generally, sustainable,
community-oriented, directly-marketed agriculture. Sustainable agriculture denotes a holistic,
systems oriented approach to farming that focuses on the interrelationships of social,
economic, and environmental processes”. Farmer-entrepreneurs are free and independent,
they do not work alone. They operate in a complex and dynamic environment. They are part
of a larger collection of people including other farmers, suppliers, traders, transporters and
processors, each of whom has a role to play in the value chain. Developing entrepreneurs in
agriculture will solve the entire problem.
i. Trim down the burden of agriculture
ii. Create employment opportunities for rural youth
iii. Control migration from rural to urban areas
iv. Increase national income
v. Sustain industrial development in rural areas
vi. Cut down the pressure on urban cities etc.

Agripreneurship plays various roles in the growth and development of national

economy through entrepreneurship development which increases the income level and
employment opportunities in rural as well as urban areas. Agripreneurship also play
following role in the economic system, it helps in inducing productivity gains by smallholder
farmers and integrating them into local, national and international markets.
● It helps in reducing food costs, supply uncertainties and improving the diets of the
rural and urban poor in the country.
● It also generating growth, increasing and diversifying income, and providing
entrepreneurial opportunities in both rural and urban areas.

Types of Enterprises -
Different types of ventures in agri-business.
a. Farm Level Producers: At the individual family point, every family is to be treated as
venture, to enhance the production by making best use of the technology, possessions
and demand in the market.
b. Service Providers: For optimizing agriculture by every family business, there are
diverse types of services requisite at the village level. These include the input
borrowing and distribution, hiring of equipment like tractors, sprayers, seed drills,
threshers, harvesters `dryers and scientific services such as setting up of irrigation
amenities, weed curb, plant security, yielding, threshing, conveyance, warehouse, etc.
related opportunities exist in the livestock husbandry sector for providing breeding,
immunization, disease diagnostic and treatment services, apart from allocation of
cattle feed, mineral combination, forage grains, etc.
c. Input Producers: There are many flourishing enterprises, which need critical inputs. a
few such inputs which can be produced by the home entrepreneurs at the village level
are bio pesticides, soil amendments, bio fertilizers, vermicompost, plants of diverse
species of vegetables, fruits, ornamentals, root media for raising plants in pots,
production of cattle feed concentrate, agricultural tools, irrigation accessories, mineral
mixture and complete feed. There are good openings to support, fishery, sericulture
and poultry as well, during sponsorship of critical service amenities in rural areas.
 d. Processing and Marketing of Farm Produce: well-organized management of
post-production processes requires higher level of knowledge as well as investment.
Such venture can be handled by People’s Organizations’, either in the form of
cooperatives, service joint stock companies or societies. The most successful
instances are the dairy cooperatives sugar cooperatives, and fruit growers’
cooperatives in lots of States. However, the success of such undertaking is exclusively
dependent on the reliability and ability of the leaders involved. Such undertaking need
good specialised support for running the activities as a competitive trade and to
contend well with other players in the market, mainly the retail traders and
intermediates.

Barriers to Agripreneurship -
It cannot be assumed that every enterprise will be successful. It needs the right
environment. But often there are barriers outside the control of the farmer that limit success
and make the environment hard for new businesses. This environment is affected by
government policy and the level of investment in agriculture. The environment is different in
every country; it varies greatly even within countries. To create and maintain an environment
that encourages profitable, market-oriented farm businesses, policy makers need to address
the following barriers:

a) Poor or absent infrastructure: Often, what is blocking starting and growing profitable
farm businesses is basic infrastructure. Simple things, such as poor roads leading to
markets, inadequate storage and market facilities, and even irregular supplies of
electricity create very real and practical barriers to developing farm businesses.
b) Unsupportive laws and regulations: Governments need to have a positive view of
entrepreneurship in farming. Land tenure and ownership, banking laws, trading
regulations, business law and tax law are some of the more common barriers that help
or limit the development of successful farm businesses. The ability to buy, sell and
hire land, the legal status of women, the complexity of business regulations and the
extent of bureaucratic procedures, all affect the environment in which new farm
businesses must operate. Countries need to look very carefully at laws and regulations
to make sure that they make it easier for small-scale farmers to develop their farm
businesses.
c) Lack of financial support: A major stumbling block for many farmers to expand
production or diversify into new high value enterprises is lack of access to finance.
Farmers who are starting new enterprises often face difficulty raising investment
capital.
d) Social barriers: There are also social barriers to entrepreneurship that farmers face.
The concept of entrepreneurship is not common to every culture or society. The fear
of failure can be a barrier. Creativity and innovation are not always valued traits.
Some countries have social systems that create dependence and hopelessness. Women
in business are often not supported or are even discouraged. In some cultures
communal enterprises may be more acceptable than individual businesses. Extension
workers will need to be aware of these social barriers and help farmers deal with
them.
e) Lack of training facilities: To have a healthy farming sector, training facilities and
support must be easily available to farmers. Effective institutions need to be
developed to provide education and training at the right time, in the right place, and
with the right balance of technical knowledge and practical skills.
 f) Lack of support services and trained extension staff: Farmers advancing through the
five stages of development will need information, advice and support. Services are
needed to advise, and support farmers in identifying, preparing, designing and
implementing efficient farm businesses. Advice and support to farmers must cover
areas beyond the traditional production-led services. The support needs of farmers are
much wider – covering all aspects of running a profitable, market oriented farm
business.
In many countries, there is a general lack of farm management advisors to deal
with the range of issues and questions faced by farmer-entrepreneurs. Further, support
services are often inadequate and inefficient, particularly in remote rural areas. The
public sector has an important role to play in servicing these areas and in ensuring that
the full range of information, advice and support is available.
g) Marketing constraints: When running a farm business, production must always be
linked to a market. Access to markets is often constrained by a number of factors.
These include poor communications, infrastructure and marketing facilities, lack of
reliable and timely market information, limited purchasing power and even negative
attitudes of buyers.

ENTREPRENEURSHIP IN SERVICE SECTOR

Services sector has always been an attractive investment option for the corporate
world. It has facilitated the creation of several infrastructural facilities in the country as well
as enhanced the productivity of various industries. It not only helps in economic upliftment of
the society, but also promote political and social well-being among the masses. The service
industry comprising of information technology (IT), education, health, media, tourism, etc.
helps to shape the people's opinion about various national and international issues as well as
increase their awareness by giving them participative role in formulation of policies/
schemes/ programmes/ plans . In other words, a country cannot achieve a higher growth rate
without a larger proportion of services in gross domestic product (GDP).
The services sector is not only the dominant sector in India’s GDP, but has also
attracted significant foreign investment flows, contributed significantly to exports as well as
provided large-scale employment. India’s services sector covers a wide variety of activities
such as trade, hotel and restaurants, transport, storage and communication, financing,
insurance, real estate, business services, community, social and personal services, and
services associated with construction. Services exports comprise a major part of the total
exports of India. India is the export hub for software services. It has a 55 per cent share in the
US$ 185-190 billion global sourcing market in 2017.

Following is a representative listing of service businesses in a range of commercial

sectors that could conceivably be launched by an enterprising entrepreneur:

1. Professional services (physicians, pharmacists, dentists, attorneys, architects, civil

engineers)
2. Business services (advertising, financial planning, mailing services, computer and
data processing, consulting, training, recruiting)
3. Counselling services (marriage, weight loss, career planning, pastoral, psychiatric)
4. Transportation services (trucking, busing, taxicab service, limousine service, car
rental)
5. Personal services (pet grooming, health clubs, catering, beauticians, barbers,
hairdressers, tailors and seamstresses, photography studios, realtors, funeral parlours,
wedding planning)
 6. Restaurants and lodging (diners, family restaurants, taverns, hotels, cottages)
7. Social services (individual and family services, child day care, residential care)
8. Maintenance services (landscaping, plumbing and electrical, appliance, equipment,
automobile, bicycle)

Opportunities in SBE

1. Travel & tourism (T&T) – It is one of the fastest growing sector in India. It has made
Rs.270000 crores in 2009 & made about annual growth rate of about 25-30% in both
domestic & international market. It is expected that this figures might be 3 times
bigger in next 10 years. Following are the features of T&T market
a. Average start-up investment is Rs.5 lakh to Rs.20 lakh
b. Payback period is 3 years
c. An entrepreneur may obtain another company’s franchise contract instead of
starting his business from scratch. Several hotel chains in India have taken the
franchising route
2. Food – It has made over Rs.280000 crores and accounts for about 2/3rd of the total
Indian retail market. It is expected that these figures might rise to Rs.600000 crore in
next 15 years. The restaurant market occupies around Rs.100 crore with an annual
growth rate of 25-30%. Following are the features of food market
a. Average start up investment is Rs.50000 to Rs.50 lakh, depending on the
location and the brand
b. Payback period is 1.5 years to 3 years
c. Govt. has taken initiatives to promote food market such as exemption from
excise duty on processed food, beverages, instant food mixes, aerated drinks,
etc.
3. Learning solutions – There are franchising opportunities in various areas such as
a. Corporate training
b. Competitive examination training – entrance coaching centres
c. Schools – pre-schools, KG-12 schools, tutoring, books, CD-ROMs, stationery
d. Technical training – computer training institutes, electronics engineering
training
e. Higher education – just preparation, graduation, post graduation
f. Vocational & training – child skill development, e-learning, vocational & IT
training, teachers training
g. Ancillary segments – database management, enrolment management,
admission outsourcing
The Indian education field has made over Rs.200000 crore & expects twice as
much as now within next two years. Following are the features of education field

i. Average start up investment is Rs.2.5 lakh to Re.1 crore depending on the

location
ii. Payback period is 3 to 5 years
4. Wellness & beauty – It has made over Rs.12 crore & is growing at over 20% per year
in both male & female market. Following are the features of this industry
a. Average start up investment is Rs.5 lakh to Rs.25 lakh
b. Payback period is 3 years
5. Apparel – Following are the features of apparel industry
a. Average start up investment is Rs.10 lakh to Re1 crore depending on the
location
 b. Payback period is 2 to 3 years
6. Finance – There is increasing scope for franchising in retail broking, investment
advising and consultancy services. It is expected that financial services will account
for 30% of all franchising activity in India by next two years. Following are the
features of this industry
a. Average start up investment is Rs.10 lakh to Re.1 crore
b. Payback period is from the first year of operations itself, depending upon the
market conditions
In finance area, following opportunities exist

i. Financial services
ii. Stock brokerage
iii. Foreign exchange
iv. Micro finance
v. Investment advising
vi. Consultancy services
7. Child care – It is a low investment high returns business options in India. It is
sub-segment of the education sector or it is synonymous with pre-schools. The
business has tremendous scope because more and more mothers are taking full-time
jobs and they have taken western concept of leaving their children aged 2 to 4 at
pre-school, where they can be engaged in basic activities that nurture them from KG
TO 12 and help makes them independent faster. Following are the features of this
industry
a. Average start up investment is Rs.5 lakh to Rs.20 lakh, depending on
geographic locations
b. Payback period is 18 months to 2 years
8. Health care – Indian health care sector is estimated to be worth around Rs.80000
crore. But there is a large gap between the supply of medical facilities and the demand
and this gap gives rise to the opportunities. There are abundant opportunities in areas
of medical infrastructure like beds, medical equipment industry, medical textile
industry, health services outsourcing sector, and domestic manufacture of medical
device like stenos, catheters heart valves and orthopaedic implants, etc. In health care
area, the following opportunities also exist
a. Clinics
b. Consultation services
c. Diagnostic services
d. Laboratories
e. Pharmacies
f. Ayurvedic health care which are attracting western customers

NEW AVENUES IN SERVICE SECTOR

1. Dealership-
Dealership is a business established or operated under an authorization to sell or
distribute a company’s goods and services in a particular area. Dealer is a person or
an entity who plays the role of a middleman in the distribution process. They are the
authorised seller of those commodities in the particular area.
 Definition- “An individual or a business concern, who is involved in the activities of
buying goods for their account and then selling it off from their stock is known as a
dealer. “
Eg- Two-wheeler and Car dealer, automobile dealer etc.

Features of Dealership

1. Dealers sell directly to consumers.

2. Dealers buy goods from Distributor or manufacturer to supply to consumers
3. Sales are made for personal use of consumers, and not for resale.
4. Investment in capital is limited
5. Both cash and credit sales are made by the dealer
6. They decorate the showroom for attracting the customers
7. They focus on consumer satisfaction.

Functions of a Dealer

1. Purchasing: Dealers act as intermediaries between manufacturers or suppliers

and customers, buying products in bulk or large quantities to sell to individual
customers or retailers.
2. Inventory Management: Dealers are responsible for managing their inventory,
ensuring they have adequate stock levels to meet customer demands while
minimising excess inventory costs.
3. Sales and Marketing: Dealers play a crucial role in promoting and selling
products to the target market. They use various marketing strategies and tactics
to attract customers, create brand awareness, and generate sales.
4. Customer Service: Dealers provide customer support and handle inquiries,
complaints, and warranty claims. They offer assistance, advice, and after-sales
services to ensure customer satisfaction and loyalty.
5. Distribution: Dealers are responsible for the distribution of products within their
designated territories or regions. They organize logistics, shipping, and delivery
of goods to ensure timely and efficient product availability.
6. Market Research: Dealers often gather and analyze market data to gain insights
into customer preferences, competitor activities, and emerging trends. This
information helps them make informed business decisions and adapt their
strategies accordingly.
7. Relationship Building: Dealers cultivate and maintain relationships with
customers, suppliers, and other business partners. They build trust, negotiate
contracts, and foster long-term collaborations to ensure mutual growth and
success.
8. Training and Education: Dealers may provide training and educational resources
to their customers, helping them understand product features, benefits, and
proper usage.
9. After-Sales Support: Dealers may offer post-purchase support such as product
installation, technical assistance, or repairs. They ensure that customers are
satisfied with their purchase and address any issues that arise.
NETWORKING

Networking is the practice of making connections and building relationships with others
for personal or professional purposes. It involves actively seeking out opportunities to
meet and interact with people who could be beneficial in some way, such as by providing
job leads, business partnerships, or mentorship.

Networking can occur in various settings, including social events, conferences,

professional organizations, and online platforms. It often involves engaging in
conversations, sharing information and resources, and exchanging contact details to
stay in touch.

Definition

“Networking is the process of enlarging the entrepreneurs circle of trust and stresses
that networking is a function of the negotiation process”. - Dollinger

ROLE AND IMPORTANCE OF NETWORKING FOR ENTREPRENEURS

1. Essential Skill: Networking is one of the most essential personal skills for business
people, but it is extremely important for entrepreneurs.

2. Build Strong Relationships: Networking ensures proper communication and strong

presence in the entrepreneurial ecosystem. These are productive approaches which will
help the entrepreneurs to build strong relationships with other entrepreneurs from
different age groups, nationality and fields of interest.

3. Developing New Ideas: Business networking events organised around the world bring
together extraordinary groups of highly skilled and talented entrepreneurs who are
united around the idea of communication, sharing, creating and developing ideas.

4. Attract New People: Business networking events attract people from different
experience levels and backgrounds. All these individuals are looking for connection,
inspiration, advice, opportunities and mentors. This networking ensures meeting with
potential investors also.

5. Feeling of Motivation: Networking is powerful in many different ways. Entrepreneurs

feel inspired and motivated after attending specific events or meet ups. Many new
exceptional opportunities can occur if they impress potential investors or business
partners.

6. Presentation: Entrepreneurs can present their enterprises the way they want other
people to see them in order to create honest fundamentals for one potential business
relationship.

7. Exchange of Information: Networks provide a conduct for the exchange of information

that can enhance the success and survival of the business enterprise. Entrepreneurs not
only use their existing social network, but as they acquire information and resources to
develop and grow their business, they create new ones.

8. Access Resources: Entrepreneurs with wide ranging, diverse networks are more likely
to have contacts that connect them to financial resources and especially the private
equity community. Most entrepreneurs start with a build-in-network i.e. parents, siblings,
spouse, in-laws, friends and neighbours to gain the need to access resources.

TYPES OF NETWORKS

1. Task Networks: Task networks involve the exchange of job related resources including
information, expertise, professional advice and material resources. In these networks,
entrepreneurs work with people to complete a particular task. These networks may be
within a new venture or cross between organisations.

2. Entrepreneurial Career Networks: These networks are relationships with different

individuals who provide entrepreneurial career direction and guidance. These persons
help the entrepreneurs to access higher level managers, equity providers and advisors.

3. Social Networks: Social networks are relationships characterised by a higher level of

closeness and trust than those which are exclusively job or career related. These
persons are generally the people within whom entrepreneurs have common background
or interests. Social networks may be inside or outside an enterprise. These networks
play a significant role in offering information, access to resources and gaining access to
advisors.

ADVANTAGES OF ENTREPRENEURIAL NETWORKING

1. New Contacts: The most important advantage of networking is to meet potential

clients and to generate referrals, which an entrepreneur can follow to build a strong
client base.

2. Identification of Opportunities: Networking can also assist the entrepreneur to identify

new opportunities for partnership, joint ventures or new areas of expansion of business.

3. Visibility: An entrepreneur needs to meet and communicate with potential customers

and business partners on a regular basis to maintain good business relationships.
Business networking events raises the personal profile and can assist the entrepreneur
to keep front and centre in the minds of the right people.

4. Staying Up-to-date: It is significant to keep up with the target market conditions and
overall trends in the industry in an ever-changing business climate. Attending business
seminars and networking with peers and business associates on a regular basis will help
the entrepreneur to stay up-to-date.
5. Problem Slowing: An entrepreneur can often find solutions to his business problems
through networking in addition to the potential of increase in business.

6. Sharing of Knowledge and Experience: Networking is ideal for expanding an

entrepreneur's knowledge by taking advantages of the view points and prior experience
of others.

7. Confidence and Morale: Most business entrepreneurs are optimistic and positive.
Regularly associating with such people can be a great morale boost, specifically in the
difficult early phases of a new business.

FRANCHISING

Franchising is a strategic alliance between groups of people who have specific

relationships and responsibilities with a common goal to dominate the market. A person
invests his assets and resources in a system to utilise the brand name, operating system
and ongoing support in a franchise business. It is a business strategy for getting and
keeping customers. It is a marketing system for creating an image in the minds of
existing and prospective customers about how the products and services of a company
can help them. Franchising is a technique for distributing products and services that
satisfy customer needs. Franchising is a network of independent business relationships
that allows a number of people to share:

(i) a brand identification

(ii) a successful method of doing business

(iii) a proven marketing and distribution system.

Eg- Coca-Cola is a franchise as a product distribution system and the largest beverage
company in the world. As a product and trade name franchisor, The Coca-Cola
Company licenses its franchisees to sell and distribute the end product using the
franchisor's trademark, trade name, and logo.

Definition

“Franchising is a system of distribution in which semi-independent business owners

(franchisees) pay fees and royalties to a parent company (franchiser) in return for the
right to become identified with its trademark, to sell its products or services, and often to
use its business format and system”

Franchise: A privilege or right officially granted to offer specific products or services

under explicit guidelines at a certain location for a declared period of time.
Franchise Agreement: The legal document between the Franchisor and the Franchisee
that governs the relationship between the two entities for a specified period of time. It
frames the relationship in a concise manner.

Franchisee: An individual or entity to whom the right to do a business is granted by the

franchisor or licensor.

Franchiser. The company owning or controlling the right to grant franchises to potential
franchisees.

TYPES OF FRANCHISE ARRANGEMENT

Franchise arrangements are broadly classified into three types:

1. Trade Name Franchising: Under this type of franchising, the franchisee buys the right
to utilise the trade name of the franchisor without distributing specific items exclusively
under the name of franchisor

2. Product Distribution Franchising: In product distribution franchising, a franchisor

provides licensing to a franchisee to sell particular articles under the brand name and
trademark of the franchisor through a selective limited distribution network.

3. Pure Franchising: Pure franchising is also called as comprehensive or business

format franchising. In pure franchising, franchisor provides a complete business format
including a licence for a trade name, the products or services to be sold, the physical
plant, the method of operation, a marketing plan, a quality control process, a two-way
communication system and the necessary business support services to the franchisee.

ADVANTAGES OF FRANCHISING

1. Management Training Support: Incompetent management is one of the main reasons

for business failure. Franchisors provide managerial training support to franchisees prior
to opening a new outlet. It helps to minimise the number of casualties. The
well-established franchisors also offer follow-up training and counselling services.

2. Brand Name Appeal: A licensed franchisee buys the right to utilize a recognized and
advertised brand name for a product or service. The franchisees can avail the benefit of
identifying their enterprises with a widely known trademark. The trademark, standard
symbols, store design and products of an established franchise are properly recognized
by the customers in the market. Franchisees often find a ready supply of buyers eager to
buy their products or services due to the name recognition of franchisors.

3. Standardised Quality of Products and Services: The quality of the products or services
sold decides the goodwill of franchisor as a franchise buys a licence to sell the goods or
services and brand name of the franchisor. It is not easy to build a sound image in
business. Hence, franchisors usually expect compliance with uniform quality standards
and service throughout the whole chain.

4. National Advertising Programs: The success of all franchise activities depends upon
an effective advertising program. A far-reaching advertising campaign is needed for the
marketing of a brand name product or service over a wide geographic area. A common
advertising program benefits all franchisees at national level.

5. Financial Assistance: Franchisor may provide the qualified franchisee the direct
financial help in particular areas like purchasing of equipment, stock etc. They are also
willing to support the qualified franchisee in establishing relationships with bank, financial
institutions and other sources of finances.

6. Proven Products and Business Formats: Franchisees buy the experience of a

franchisor in the form of a business system. A franchisee need not to start the enterprise
from scratch. He/She can adopt the methods, techniques and products of an established
business. It greatly enhances the chances of success of franchisee.

7. Centralised Purchasing Power: A franchisee can participate in the centralized and

large-volume purchasing power of the franchisor to avail quantity discounts and
economies of large scale purchasing. 8. Greater Chance of Success: The risk of
business failure is reduced by franchising as the business is based on a proven idea.
Franchising is a less risky affair than building a new business from the ground level.

9. No Need for Market Testing: Products and services will have already established a
market share. Hence, there will be no need for market testing in franchises.

DISADVANTAGES OF FRANCHISING

1. Franchise Fees and Ongoing Royalties: The costs may be higher than the expectation
of franchisee. A franchisee has to pay continuing management service fees as well as
the initial cost of purchasing the franchise. A franchise start-up cost may involve a
location analysis, site purchase and preparation, construction, particular fixtures and
equipment, training and management assistance along with ongoing royalty fees.

2. Restrict to Standardised Operations: The franchise agreement involves strict

restrictions to run the business. The franchisee might not be able to make changes to
suit the local market. The franchisor demands that the franchisee maintain certain
operating standards to protect its public reputation.

3. Restrictions on Buying: Franchisors may require franchisee to buys products, raw

material, special equipment specially from the franchisors or from a list of approved
suppliers.
4. Limited Product Line: The franchisee can sell only those items which are approved by
the franchisor as per the franchise agreement. There is restriction to adopt a product line
suited to local market conditions.

5. Profit Sharing: All profits are usually shared with the franchisor.

6. Contract Teams and Conditions: Franchise contracts are always designed and
prepared in favour of the franchisor. Franchisees are needed to pay a renewal fee.

7. Inflexible Nature: The inflexible nature a of franchise may restrict the ability of
franchisee to introduce changes to the business to respond to market or make the
business grow.

8. The franchisor might go out of the business.

9. It is difficult to sell the franchise. The franchisee can only sell it to someone approved
by the franchisor.

DIFFERENCE BETWEEN DEALER AND DISTRIBUTOR

DIFFERENCE BETWEEN DEALERSHIP AND FRANCHISE