ENTREPRENEUR

Module 3
• Entrepreneurs are responsible for Industrial
Development & are greater Employment
Opportunities to the Unemployed.

• Increases in Income Levels of People, Improvement

in Standard of Living, Increased Revenue to the
Government in the form of Direct & Indirect Taxes &
Balanced Regional Development.
 India needs Entrepreneurs for Two Reasons :
1) To Capitalize on New
Opportunities & to Create Wealth.
2) To Create Wealth & New Jobs.
 MEANING

• An entrepreneur is one who always searches

for change, responds to it and exploits it as an
opportunity-PETER DRUCKER
• An entrepreneur is an individual who bears the
risk of operating a business in the face of
uncertainty about the future
 Model of Entrepreneurship

•
 Entrepreneur as an Innovator

• Innovation can be perceived simply as the

Transformation of Creative Ideas into useful
Applications by combining Resources in New
or Unusual Ways to provide Value to Society
for Improved Products, Technology, or
Services.
• Introduction of a new product in market
• Introduction of a new method of production
• Opening of a new market
• Discovery of new source of supply
• Carrying out new form of organization
 Characteristics of Entrepreneur

• Action-Oriented, Highly Motivated and ready

to take risk at all the levels.
• Creativeness and Result oriented,Hardworking
• Accepts responsibilities with enthusiasm
• Self confident,dedicated and self disciplined
• Both Thinker and doer,Planner and worker.
 Qualities of Entrepreneur
• Success and achievement
• Risk Bearer
• Opportunity Explorer
• Planner
• Stress taker
• Facing uncertainties
• Independent
• Flexible
• Self-confident
• Motivator
TYPES OF ENTREPRENEURSHIP

 Innovative Entrepreneur
 Imitative Entrepreneur
 Fabian Entrepreneur
 Drone Entrepreneur
TYPES OF ENTREPRENEURSHIP

Stages of Economic Development

Innovative Entrepreneur:
• Such entrepreneur introduce new product & new production
techniques and find out the new markets for their product.
• They utilize a chance to introduce a new technique or a new
product.
• They mobilize sufficient capital to start an enterprise
benefitting to this possibility.
 Imitative Entrepreneur

• This type of entrepreneur attempts to imitate innovative

entrepreneur
• They imitate the techniques & activities of others.
• Such entrepreneurs are particularly suitable for under
developed economies as adoption saves cost of trial & error.
• Imitative entrepreneurs do not imitate the changes
themselves, they only imitate techniques and technologies
innovated by others.
 Fabian Entrepreneur

• Entrepreneur who display great caution & skeptical in

experimenting with any change in their enterprise.
• They change only when there is an imminent threat to the
very existence of their enterprise.

• They are imitative by nature but are not determined and also
lack power
• Such entrepreneurs are shy, lazy and lethargic
The Fabian entrepreneurs are those who remain
unaware of the change in the era of a particular
product they are involved in business with, but when
their market leadership goes down they seem to
understand the change.
 Drone Entrepreneur

• These entrepreneur are unwilling to make any

change in the production system, even if the
system causes losses repeatedly.
• They never try to rise in accordance with the
opportunities or to accepts the warning given
by times.
• They can suffer loss but are not ready to make
changes in their existing production methods.
CLASSIFICATION OF ENTREPRENEUR
a) Types of business
b) Use of technology
c) According to Motivation
d)According to growth
e)According to the stages of development
f)According to Area
d) According to Gender & age
e)According to Scale of operation
f)Other type
 a) Types of business
Business Entrepreneur: Convert ideas into reality; deal
with both manufacturing and trading aspect of
business.
• Are those entrepreneurs who conceive the idea
of a new product or service and then translate
their ideas into reality.
• Entrepreneur examines the various possibilities
of sources of finance, supply of labour, raw-
materials or finished product
2. Trading Entrepreneur:
Undertakes trading activities and not
manufacturing; concerned with marketing.
•Trading means buying the finished product from
the producer and selling off to the customer
directly or through a retailer.
•A trading entrepreneur has to be creative enough
as he has to identify the market(desire,taste
&choice of customer).
•create demand through advertisement of his
product and thus inspire people to buy his product.
3. Industrial Entrepreneur:
Undertakes manufacturing activities only ; new
product development etc (textile, electronics,
etc).
•An industrial entrepreneur has the ability to
convert economic resources and technology
into a considerably profitable venture.
4. Corporate Entrepreneur :
Interested in management part of organisation;
exceptional organising, coordinating skills to
manage a corporate undertaking.
•Corporate entrepreneur is the one who
plans, develops and manages a corporate
body.
 5. Agricultural Entrepreneur :
Production and marketing of agricultural inputs
and outputs (Dairy, horticulture, forestry).
• Agricultural entrepreneur is the one who is
engaged in the agricultural activities. He uses
latest technology to increase the productivity
of agriculture and also adopts mechanisation.
• Retail entrepreneur
• Service entrepreneur
 b) Use of technology

• Technical Entrepreneur:
• Non-technical Entrepreneur
• Professional Entrepreneur
• High-tech Entrepreneur
• Low-tech Entrepreneur
Technical Entrepreneur:
The strength of a technical entrepreneur is
in his skill in production techniques.
• He concentrates more on production than
on marketing. He possesses craftsman
skill in himself which he applies to
develop and to improve the technical
aspect of the product.
2. Non-technical Entrepreneur:
non-technical entrepreneur is not concerned
with the technical aspect of the product but
marketing and distribution to promote his
business.
•His target is not to change the production
technique but how to increase the demand
of the product in which he is dealing.
Professional Entrepreneur:
Professional entrepreneurs are those who
make it a profession to establish business
enterprises with a purpose to sell it once it is
established.
 c) According to Motivation

• Pure Entrepreneur
• Induced Entrepreneur
• Motivated Entrepreneur
• Spontaneous Entrepreneur
 d) According to Growth

• Low Entrepreneur
• Medium Entrepreneur
• High or super high Entrepreneur
 e) According to Stages of
development
• First generation Entrepreneur
• Modern Entrepreneur
• Classical Entrepreneur
 f) Area

• Urban Entrepreneur
• Rural Entrepreneur
 g) Gender & age

• Men Entrepreneur
• Women Entrepreneur
– Young
– Old
– Middle age
 h) Scale of operation

• Small scale entrepreneur

• Large scale entrepreneur
 i) Others

• Innovative entrepreneur
• Initiative entrepreneur
 STAGES IN ENTREPRENEURIAL
PROCESS

• Identifying and evaluating an opportunity is a difficult task, and one

has to be watchful for opportunities,

• Ideas can be from various sources and one has to be careful in

evaluating the opportunities carefully.

• Once the identifying the opportunity and identifying a suitable

project, the next step is to develop a plan for the venture.

• further step is to assess the resource position and once the

enterprise is established, an entrepreneur should always look
forward to indefinite future, growth, development and continuation.
 Stages in Entrepreneurial Process

• Stage 1: Identification and evaluation of the business opportunity.

– Risk and returns.
– What market needs?
• Stage 2: Development of the business plan.
– Marketing, finance, production, organization and operations.

• Stage 3: Determination of the resource required.

– Quality, quantity, prices and sources.

• Stage 4: Creation and actual management of the enterprise.

– Legal and practical hurdles,
– Anticipate potential problems and possible solutions.
 ROLE OF ENTREPRENEURS IN
ECONOMIC DEVELOPMENT
1.Promotes capital formation by mobilizing the idle
saving of the public.

2. Provides immediate large scale employment

thereby reducing the unemployment problem in the
country.

3. Promotes balanced regional development.

4. Helps reduce the concentration of the economic

power.
the country. 8. Promotes .
5. Stimulates equitable redistribution of wealth, income
and even political power in the interests of the country.

6. Encourages effective resource mobilization of capital

and skill which otherwise would remain unutilized and
idle.

7. Also induces backward and forward linkages which

stimulate the process of economic development in

8.export trade which is an important ingredient for

economic development
ENTREPRENEURSHIP IN INDIA
• 18th century : British East India Company
encouraged Indian entrepreneur.

• 1947 : Socialist practices

• 1960 : not much of new development

 contd
• 1990 : economic liberalization, privatization
& globalization, initially pegged back the
existing entrepreneurs.

• 2008 : ‘Entrepreneurship’ introduced to

budding engineers.
 Entrepreneurship in India :
Entrepreneurship is regarded as closely associated with the Economic
History of India. This is traced way back to even as early as Rig Veda, when
Metal Handicrafts manufacturing cottage & small enterprises existed in the
Country.
It has passed thro several Ups & Downs. The important ones include
the Decline of Indian Handicrafts Industry towards the end of the 18th Century,
entry of the East India Company of the Britisher’s in India’s Business
Activities. The Swadeshi Campaign for Indian Manufactured Goods, the First
World War, Emergence of the Indian Managing Agency Systems by promoting
Joint Stock Companies, the Second World War, Partition of Undivided India &
undertaking planned development of Entrepreneurship in the Country by Govt
of India after Independence in 1947.
For the purpose of encouraging Entrepreneurship, the Govt of India
brought out the First Industrial Policy Resolutions in 1948 which was
subsequently revised from Time to Time. The Govt of India in order to promote
, assist & develop industries in the National Interest has taken the following
Three Important Resolutions in the Industrial Resolutions :
 i) To maintain a proper distribution of
economic power between Private & Public
Sector.
ii) To encourage Rapid Industrialization by
moving the concept of Entrepreneurship from
existing centers to other cities, towns & rural
areas.
iii) To disseminate the Entrepreneurship
acumen concentrated in a few dominant
communities to a large number of Industrially
Potential People of varied Social Background.
 To achieve these Objectives the Govt accorded emphasis on the
Development of Small Scale Industries in the Country. Since the 3rd Five Year
Plan, the Govt announced various Incentives & Concessions in the form of
Capital, Technical Know How, Reservation of Certain Items for Exclusive
Manufacture in Small Scale Sector Tax Concessions, Provision of
Infrastructural Facilities like Developed Land, Sheds, Roads, Communication
etc for Promotion of Enterprises in the Country etc.
This has helped in Speedy Economic Development in all the States in the
Country & to a great extent has minimized regional imbalances.
National Common Minimum Programme (NCMP) describes Small Scale
Enterprises as the Most Employment Intensive Segment. At the beginning of
the 10th Plan, (2002 – 2003), the Segment provided gainful employment to 24.9
Million People in the Rural & Urban Areas of the Country thro 10.5 Million
Units, engaged in Manufacturing & providing a Wide Range of Goods &
Services. If the Units in Khadi Village Industries are also taken into account,
the Employment would rise to 332 Million. Thus this is rightly called as the
segment which provides employment next only to Agriculture. The
Contribution of Small Enterprises Segment to the Economic Development of
the Country is very significant. Nearly 39% of the Gross Manufacturing
Output & 34% of the Exports of India arise from these Enterprises.
 Yet a large number of Entrepreneurs are facing lots of
Challenges. In order to assist them to fully harness their
potential by availing of the increasing opportunities
generated by Trade Liberalization, it is necessary to not only
build an enabling Policy Environment but also supplement the
former with a specific set of measures to address the
continuing challenges.

Therefore Ministry of Micro, Small & Medium

Enterprises, Govt of India has announced a package for
Promoting such enterprises in Feb 07 to provide full support in
the Areas of Credit, Technological Up gradation, Marketing &
Infrastructural Up gradation in Major Industrial Infrastructure
etc.
 BARRIERS TO
ENTREPRENEURSHIP
a) Environmental Barriers
b) Financial Barriers
c) Personal Barriers
d) Societal Barriers
e)Lack of capital
f)Lack of technical knowledge
g)Economic business cycle
h)Non availability of raw materials
i)Government regulations
j)Globalisation and Risk
 a) Environmental Barriers

• Raw materials
• Labour
• Machinery
• Land, building, & Infrastructure
 b) Financial Barriers

• Finance is the important factor of

any orgz
• Plenty of successful small businesses
 c) Personal Barriers

• Lack of self-confidence
• Lack of motivation
• Lack of patience
• Inability to invest in R&D & innovate
 d) Societal Barriers

• Religious & conservative attitudes of the

society can inhibit entrepreneurs
• Added to this the communistic feelings in
certain states in India definitely kills the
entrepreneurial spirit in many Indians.
TYPES OF SITUATIONAL FACTORS
•Product or service is still not in existence

•Product or service is already in the market but failed to satisfy the

customers – so need to be improved

EMERGENCE OF OPPORTUNITY
• when people decide they have certain needs and want to be
satisfied, or when people discovered a problem of some kind that
can be helped by a product or service.

• The presence of unfulfilled needs and want and/or problems

alerts the entrepreneur to the potential opportunity.

• The entrepreneur later creates a business that is able to fulfill the

needs or want and/or solve the problem.
KRISHNKANT CHATURVEDI 2
OPPORTUNITY IDENTIFICATION
Opportunity identification is a process that involved the search
for and discovery of business opportunities

APPROACH TO OPPORTUNITY IDENTIFICATION

1. Observe changes in the environment
2. Recognize a need that customers have that is not being satisfied
3. Recognize problems and find ways to solve it

OBSERVING CHANGES IN THE ENVIRONMENT

Changes in the environment give rise to needs and wants and/or
problems, and an opportunity emerges
Important environment forces to observe include :
1. Economic forces
2. Social forces
3. Technological advances
4. Political and regulatory statues
KRISHNKANT CHATURVEDI 3
 Examples of How Changes in the Environment Provides
Openings for New Product and Service Opportunities
Structure of Number of teenagers higher than number Cyber cafes, Cineplex's, recording studios
Population and of elderly and children
Income
People have higher purchasing power Passenger cars, household furniture, DVD

Social Increase incident of housebreaking Grills, alarm, sensor, security systems

Increase interest in fitness Fitness center, dancing class, in-house
exercise equipment, health food store
Increase mobility of population Hand phone, laptop computers
Increasing predominance of dual-income Restaurants, food delivery services
families leaves less time to cook at home
Technological Advances in biotechnology Biotech-related pharmaceutical products,
Advances foodproducts, veterinary products
Development of the internet E-commerce, improved communication
Increase pressure to improve Online marketing, cost control services
economicperformance
Government Increased driving standards Smoke emission control, helmet, seatbelt
Policies and
Regulations KRISHNKANT CHATURVEDI 4
RECOGNIZE NEEDS AND WANTS
Opportunity occurs whenever there is a need and want to
fulfill. The ter eeds refer to asi eeds that the
o su er ust ha e i order to li e hile the ter a ts
refers to a personal desire for something that is more than a
basic need.

RECOGNIZE PROBLEM AND FIND SOLUTION

Problems can be recognized by observing the challenges that people encounter
in their daily lives. Solution to the problem represented a business opportunity

OPPORTUNITY IDENTIFICATION PROCESS

Search for Recognize
Changes in needs and Discovery of
the wants, and Opportunity
environment solutions

KRISHNKANT CHATURVEDI 5
ABILITY TO SEARCH AND DISCOVER BUSINESS
OPPORTUNITIES
•Experience and exposure •Social network
•Knowledge and skills •Creativity
• Spe ial alert ess •Vigilant

MECHANISM TO IDENTIFY OPPORTUNITIES

• Customers • Consultants
• Retailers and • Employees
distributors • Others
• Business associates
• Bankers

EVALUATION AND SELECTION PROCESS

The evaluation and selection process involves judging
the viability of the opportunity and assessing its
potential.

KRISHNKANT CHATURVEDI 6
CRITERIA FOR EVALUATION AND SELECTION
1. Can make money and has potential for growth
2. Less competition
3. Good fit between entrepreneur and opportunity
4. Has competitive advantage
5. Workable and efficient
6. Not against the norms and values of the community
7. Conform with laws and regulations

KRISHNKANT CHATURVEDI 7
 Market feasibility study
 It is carried out to assess the market potential of a
project.
 The following questions need to be answered
 What would be the aggreagate demand for
products and spare parts in the month and years to
come?
 What would be the target groups for the products?
 Company’s market share?
 How competition affect the proposed company’s
market share?
 Information required to answer
previous questions
 Consumption trends in past,present and future
 General performance of the industry to which the product belongs.
 Past and present supply position
 Production possibilities and constraints
 Structure of competition
 Prices of competitng products
 Demand elasticity
 Consumer behaviour with respect to preferences ,attitudes etc
 Distribution channels
 Administrative, technical constraints.
 Demand forecasting techniques
 Judgemental methods: i) opinion polls
 ii)market trails
 iii)delphi technique
 iv) nominal group technique
 Analytical methods: i)time series methods
 ii)exponential smoothing
 iii) regression method
 Life cycle segmentation analysis
 Every product has its own life span. Every
product goes through following stages before
dying, although duration for each stage may
vary from product to product
 1. Introduction
 2. Growth
 3. Maturity
 4. Saturation
 5. Decline
 Technical Feasibility study
 It is carried out to assess the technical details of a
project and their viability.
 We need answers for the following questions
 Is the proposed layout of the site, buildings and plant
sound?
 Are the process choosen for production suitable?
 Are the equipment and machinery choosen
appropriate?
 Is the availability of raw materials, power and other
inputs confirmed?
 Is the selected scale of operation optimal?
Information gathered from questions
 Identifying the technical specifications of the
product with respect to
design,durability,reliability,safety and
standardization.
 Finding actual availability of various inputs
 To check whether transportation and supporting
services available.
 To check whether patent laws or intellectual
rights are being violated.
 To test prototype.
 Financial feasibility study
 What is the financial requirement of both, fixed
as well as working capital?
 Where does the money come from?rate of
interest? Risk involved?
 Will the proposed project satisfy expectation of
investors?
 What is the estimated profit?
 Answers

 Investement spent and costs involved in the

project
 Debt-equity ratio
 Projected future financial position
 Cash flow diagrams
 Investement worthiness of the proposers.
 Social feasibility study
 What natural resources of the country the project is
draining?
 What is the impact of project on its immediate
surroundings?
 Does the project displace people?
 What is the cost involved in restoring damages
done to environment?
 What is the contribution to achieve local
employment.
Economic/Social Cost-benefit Analysis:
An economic analysis looks at the project from the
viewpoint of the whole economy, asking whether the
latter will show benefits sufficiently greater than
project cost to justify investment in it.
This is concerned with judging a project from the larger
social point of view, where in the focus is on social costs
and benefits of a project, which may often be different
from its monitory costs and benefits.
● What are the direct economic benefits(savings) and costs
of the project measured in terms of shadow (efficiency)
prices and not in terms of market prices?
● What would be the impact of the project on the
distribution of income in the society?
● What would be the impact of the project on the level of
savings and investment in the society?
● What would be the contribution of the project towards the
fulfillment of certain like self-sufficiency, employment and
social order?
 Financial analysis: The purpose of the
appraisal of the financial aspects of a project is
generally to ensure its initiation of financial
conditions for the sound implementation and
efficient operation.

F
I
N
A
N
C
E
Financial analysis is necessary as certain whether the propose
project is financially viable in the sense of being able to meet the
burden of servicing dept and whether the propose project will
satisfy the return expectations of those who provide the capital.

● Investment outlay and cost of project

● Means of financing.
● Project profitability
● Break-even point
● Cash shows of the project
● Investment worthiness judged in terms of various
criteria of merit
● Project financial position
● Level of risk
 Market analysis: Examine the project to ensure
economic justification of investment details. Study the
marketing scope of the project and also its worth to the
national economy by analyzing the consumption pattern
and the potential demand for the project.
Market analysis covers the following:
● Anticipated market for the product
● Analysis of market opportunity and specifying marketing
objectives
● Planning the process of marketing the product
● Organization for the marketing process
● Life cycle of the product
 Technical analysis:
Technical analysis seeks to determine whether prerequisites
for successful commissioning of the project have been
considered and reasonably good choices have been
made with respect to location, size, and so on.
The important questions raised in technical analysis are:
● Has the availability if raw material, power, and other inputs
been established?
● Is the selected scale of operation optimal?
● Is the production process chosen suitable?
● Are the equipment and machines chosen appropriate?
• Have the auxiliary(additional) equipment and
supplementary engineering works been provided for?
● Has provision been made for treatment of
effluents(waste)?
● Is the proposed layout of the site, buildings and plant
sound?
● Have work schedules been drawn up realistically?
● Is the technology proposed to be employed appropriate
from the social point of view?
Location and site: factors that influence industrial location are raw
material, proximity to market, availability of water, power,
transportation facilities, man power, labour laws, taxes,
incentives, subsidies etc.
Size of the plant/scale of operation: determines the economic
and financial liability of a project.
Technical Feasibility:
 Organizational analysis: organizational aspects are
organization, structure, recruitment, training and development
and so on.
 Managerial aspects
 NETWORK ANALYSIS
 Network in simple words is defined as the graphical
representation of interrelated activities of the project.

 A network generally comprises a set of symbols connected with

each other in a sequential relationship with each step making
the completion of an event.

 The network diagram and scheduling computations enable the

project formulation team to identify the longest series of
activities through the project implementation phase which
determines the project duration.
Critical Path Method (CPM):
The CPM is a logical mathematical model of the
project based upon the optimal duration required for
each activity and optimal use of available limited
resources. It is a deterministic model.
Graphical Evaluation and Review Technique
(GERT):. In the networks representing research and
development project the process is repeated till the
desired out come is achieved.
Line of Balance (LOB):Line of balance uses graphic
techniques to show the progress achieved on the
project with respect to key events.
Program Evaluation and Review Technique (PERT):
It shows any job or project as a set of processes of
operations called ‘activities’ which must take place in
a certain sequence. All activities have to be
compelled in order to accomplish the project. It is a
probabilistic model
Optimistic Time(to)
Pessimistic time(tm)
Most likely time(tp)
Mean time(te) = (to + 4tm +tp)/6
Use of PERT(event oriented):
 The activities of the project are identified along with their
interrelationships and graphically represented using
networks.
 The time required for completing each activity is estimated
and noted on the network.
 The minimum time required for completing the entire
project is estimated.
 The critical activities are identified for the efficient
allocation of resources in order to complete the project
earlier, if necessary.
 Closer watch on critical and other activities so as to
complete the project on time.
The following table gives the activities and the time required to
complete each activity of the project.

Path 1-2-5-6 = 8+5+5 = 18 days

Path 1-3-4-6 = 3+2+4 = 09 days
Path 1-3-4-5-6 = 3+2+6+5 = 16 days
Since the path 1-2-5-6 consumes longest time, it is known as
critical path and the activities 1-2, 2-5 and 5-6 are known as
critical activities. Hence the project completion time is 18
days.
Use of CPM: it is activity oriented
 focuses on cost and not time.
 used to find the optimum project cost and time.
 used to find minimum time at which a project can be
completed, irrespective of cost, which may be
necessary under crisis situations.
Advantages of PERT
 It determines the expected duration of activities and
consequently of the project duration.
 It incorporates risk analysis in project network.
 It determines critical activities in the project.
 It determines the most economical scheduled for fixed
project duration.
 It enables optimal allocation of limited resources.
Limitations of PERT

 The time estimates to perform activities constitutes a

major limitation of this technique.
 The probability distribution of total time is assumed to be
normal which in real life situations may not be true.
 The simple PERT technique does not consider the
resources required at various stages. If a certain resource
must be used to perform more than one activity and at the
same time if it can be used for only one activity at a time
then the network diagram will become infeasible.
Advantages of CPM:

 CPM allows for a comprehensive view of the entire project.

Because of the sequential and concurrent relationships, time
scheduling becomes very effective.
 Identifying critical activities keeps the project manager alert
and in a state of preparedness, with alternative plans ready in
case these are needed.
 Selective management principle may be used in project
management. In the network analysis, the critical activities
become item ‘A’ the sub-critical activities item ‘B’ and all others,
item ‘C’. Breaking down the project into smaller components
permits better and closer control.
Limitations of CPM

 CPM is deterministic model based on certainty

assumptions as regards time. But
it may not be true in practice.
 CPM does not use statistical analysis in making
time estimates.
 It cannot be used as a controlling device since
any changes introduced will alter the entire
structure of network.
 Differences between PERT and CPM
PERT CPM
1. It is event oriented approach It is an activity oriented approach

2. It allows uncertainty It does not allow uncertainty

3. It is probabilistic model It is deterministic model
4. It is time based It is cost based
5. It averages time It does not average time
6. It has three estimates of time It has single estimate of time
7. It is suitable when high precision is It is suitable where reasonable precision is
required. required.