RAJALAKSHMI INSTITUTE OF TECHNOLOGY,

KUTHAMBAKKAM, CHENNAI – 600124.

Department of Artificial Intelligence and Data Science
UNIT-I

ENTREPRENEURIAL ENVIRONMENT IN INDIAN CONTEXT

1 Entrepreneur Development(ED):

1.1 INTRODUCTION

Entrepreneur plays a vital role in the economic development of a nation. Economic

development refers to the income levels and its stability. This chiefly depends on its
entrepreneurs. An Entrepreneur is a kind of individual who aims at achieving his goals and
who possesses knowledge, skills, inventiveness, drive and spirit of innovation. An
entrepreneur always finds opportunities and transforms opportunities into achievement and
gains economic benefits. Entrepreneurship involves process of manufacture, innovation in
production, usage of new materials, and market etc. An entrepreneur does have that mental
attitude to foresee risk and uncertainty with a view to achieve a specific motive.

1.2 CONCEPT OF ENTREPRENEUR

The word “Entrepreneur” is derived from the French verb ‘entrepredre’ which means ‘to
undertake’. It means Between Takers. Entrepreneur is another name of Risk Taker. An
entrepreneur is an individual who takes moderate risks and brings innovation. Entrepreneur is
a person who organizes/ manages the risks in his/her enterprise. “Entrepreneur is an
individual who takes risks and starts something new”

During the early 16th century the Frenchmen who organized and led military expeditions
were referred to as ‘Entrepreneurs’. During the early 18th century French economist Richard
Cantillon used the term entrepreneur for business. Since that time the word entrepreneur
means one who takes the risk of initiating a new organization or introducing a new thought,
product or service to society.

The term ‘entrepreneurship’ is associated with the term ’Entrepreneur’. Though, they
apparently look same, conceptually they are different. Entrepreneurship is the process of
finding opportunities in the market place, planning for the resources required to convert these
opportunities into success and to achieve long term gains. It involves creating capital by
exploiting resources in new ways to initiate and operate an enterprise. Entrepreneurship can
be defined by describing what entrepreneurs do. For example: "Entrepreneurs use individual
inventiveness, and take on calculated risk to create new business ventures by raising capital
to apply inventive new ideas that resolve problems, meet challenges, or satisfy the needs of a
clearly distinct market." But the entrepreneurship is not limited to business and profit:
"Entrepreneurship involves bringing about change to achieve some benefit. This benefit may
be financial but it also involves the satisfaction of knowing you have changed something for
the better.”

"Entrepreneurship is essentially the act of creation requiring the ability to recognize an

opportunity, shape a goal, and take advantage of a situation. Entrepreneurs plan, persuade,
raise resources, and give birth to new ventures."

According to Cole “Entrepreneurship is the purposeful activity of an individual or a group of

associated individuals undertaken to initiate, maintain and aggrandize profit by production or
distribution of economic goods and services”.

According to Higgins “Entrepreneurship is meant the function of foreseeing investment and

production opportunities, organizing an enterprise to undertake a new production process,
raising capital, hiring labour, arranging the supply of raw materials, finding site, introducing
a new technique, discovering new resources or raw materials and selecting top managers for
day to day operations of the enterprise”.

The above definitions highlight risk factors, innovative ideas and resource organizing aspects
and an individual or group of people who achieve goal through production or services. To
conclude ,entrepreneurship is a set of activities performed by an entrepreneur.

1.3 DEFINITION

An entrepreneur is an individual who takes moderate risks and brings innovation. An

entrepreneur is a person who has possession of a new enterprise, venture or idea and assumes
significant accountability for the inherent risks and the outcome. An entrepreneur is "one who
undertakes an enterprise, especially a contractor, acting as an intermediary between capital
and labour."

According to J.B. Say, “An Entrepreneur is the economic agent who unites all means of
production; land of one, the labour of another and the capital of yet another and thus produces
a product. By selling the product in the market he pays rent of land, wages to labour, interest
on capital and what remains is his profit”. Thus, an entrepreneur can be considered as a
person who possesses the initiative skill and drives to set up a business or enterprise on his
own and ultimately achieves his desired goals. He brings social change. He looks for
opportunities, and finds his own way mainly for economic gains. An entrepreneur is
generally a highly calculative individual who always undertakes risks in order to achieve his
goals.

According to Joseph Schumepeter, “An entrepreneur in an advanced economy is an

individual who introduces something new in the economy, a method of production not yet
tested by experience in the branch of manufacture concerned, a product with which
consumers are not yet familiar, a new source of raw material or of new market and the like”.

According to Cantillon “An entrepreneur is the agent who buys factors of production at
certain prices in order to combine them into a product with a view to selling it at uncertain
prices in future”.

To conclude, an entrepreneur is the person who undertakes risk, combines various factors of
production, exploits the supposed opportunities, and creates wealth and employment.

1.4 FUNCTIONS OF ENTREPRENEURS

An entrepreneur always seeks opportunity. He also manages and coordinates production and
services. He has to start with a small scale enterprise. He not only finds the business
opportunities but also utilizes the other resources like 5 Ms-man, money, machine, materials
and methods. However, the main functions of the entrepreneurs are as under:

1. Idea generation: This is the most essential function of the entrepreneur. Idea generation is
possible through the vision, insight, observation, experience, education, training and exposure
of the entrepreneur. It specifically implies proper selection of product and identification of
project. Ideas can be generated through surrounding environment and market survey. It is the
chief function of the entrepreneurs to generate as many ideas as possible so as to select the
best business opportunities for a commercially-viable business venture.

2. Determination of objectives: Another function of the entrepreneur is to determine and lay

down the objectives of the business. Entrepreneur should be quite clear regarding the
following things:

(i) The nature of business

(ii) The type of business Prime minister rojgar yojna

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This indicates whether the enterprise belongs to the category of a manufacturing concern
Prime minister rojgaroryojna
a
service-oriented unit or a trading business. Thus, the entrepreneurs can attempt to venture in
accordance with the objectives determined by him.

3. Raising of funds: Fund raising is the most essential function of an entrepreneur. All the
actions of a business depend upon the financial support and its apposite management. It is the
sole accountability of the entrepreneur to raise funds from both, internal and external
agencies. In this regard, he should be aware of the different sources of funds and the official
procedure to raise funds. He should be well aware of different government sponsored
schemes such as PMRY, SGSY, REGP, etc.

4. Procurement of raw materials: Another important function of the entrepreneur is to

procure raw materials. Entrepreneur has to find out the cheap and regular sources of supply
of raw materials, which will enable to reduce the cost of production.
5. Procurement of machinery: The next function of the entrepreneurs is to procure the
machineries and equipments for establishing the new venture. While procuring the
machineries, he should specify the following details:

(a) The details of technology

(b) Capacity of the Installed machines

(c) Details of the manufacturers and suppliers

(d) After-sales service

(e) Warranty period of the machineries and instruments

All these details are to be minutely observed by the entrepreneurs.

6. Market research: Another important function of the entrepreneur is market research and
analysis of product. Market research involves the systematic data collection regarding the
product which the entrepreneur wants to manufacture. It has to be done indefatigably in order
to know the details of the product, i.e. the demand for the product, the supply of the product,
the cost of the product, the customers, etc. while initiating an enterprise.

7. Determination of form of enterprise: Entrepreneur has to consider the nature of the

product, level of investment, nature of activities, types of product, quality of product, quality
of human resources, etc. to decide the form of enterprise. The principal forms of ownership
organizations are sole proprietorship, joint venture, Joint Stock Company and cooperative
society. Determination of ownership right is crucial on the part of the entrepreneur to obtain
legal title to resources.

8. Recruitment of manpower: Entrepreneur has to perform the following activities while

undertaking this function:

(a) Estimating manpower need of the organization

(b) Forming selection procedure

(c) Devising scheme of reimbursement

(d) Forming the rules of training and development

9. Implementation of the project: Entrepreneur has to work on the implementation of the

project. The acknowledged project is to be implemented in a time-bound manner. All the
activities from the initial stage to the final stage are to be accomplished by him in accordance
with the implementation schedule to manage cost and time, as well as to manage competition.
Thus, implementation of the project is an important function of the entrepreneur.
To conclude with, all these functions of the entrepreneur can precisely be put into the
following categories:

(i) Innovation

(ii) Risk bearing

(iii) Organization

(iv) Management

2. ASSESSING OVERALL BUSINESS ENVIRONMENT IN INDIAN ECONOMY

2.1 Introduction

In layman’s language business means buying and selling of goods. It is referred to as an

organized effort of enterprise to supply consumer with goods and services for a profit. This
simple understanding is limited for assessing the role of environment in today’s global
business activity. To gain better understanding, modern business may be defined as complex
field of industry and commerce which involves activities related to both production and
distribution. These activities on one hand satisfy society’s needs and desires and on the other
hand bring profits to business firms.
India is a key player in the world economy. The Indian economy is much diversified. The
diversity ranges from agriculture to latest modern technology. The contribution of
agricultural activity to the GDP is less while it employs higher workforce. Still today it
provides around 65 to 70 percent of direct and indirect workforce. This situation places
burden on Indian economy. At the same time India has the comparative advantage with
regards to higher proportion of people with technical skills and English language proficiency
skill. This factor is conducive for entrepreneurs.
Indian economy has changed from controlled public sector to more liberalized system
allowing both national and international players. Market has also changed from seller’s
market with limited competition to buyer’s market with increased competition. These
changes in competitive scenario also give rise to numerous entrepreneur opportunities.
Indian Economy has changed from quantitative restrictions and tariffs to quota free and open
economy and from a restricted financial market to a liberalized financial market. All these
major changes characterize the dynamic nature of Indian economy. The Indian economy has
achieved a growth rate of about seven percent in recent years. In recent years, service sector
contribution has increased as compared to other sectors.
Indian economy is considered as a developing economy based on its characteristic features.
The salient features of Indian economy can be specified as predominance of agriculture,
rapid, population growth, low per capita income, unemployment, capital scare economy.
Some of the problems of Indian economy are: inadequate employment opportunities,
economic inequality, poverty, poor infrastructure, fiscal deficit and higher proportion of non
performing assets.
2.2 Nature of modern business
The significant characteristics of modern business are: large size, oligopolistic nature,
diversification, global presence, technology orientation, and government regulation.
a) Large size of business: Modern business is large in size. Private sector companies of India
are not as large as some of the companies of developed nations in terms of sales and
assets but are quite large by the standards of developing countries and compare
favourably even with a large number of middle size companies of western world. The
notable private sector large business organizations include Reliance, Tata, Larsen &
Toubro, Bharati Airtel, Adani, etc.
b) Oligopolistic nature: Oligopoly is characterized by small number of firms seeking a
homogenous or a differentiated product.
c) Diversification: In order to grow and expand, today business houses adopt the policy of
diversification. The Tata is a big business organization of India. It has a diversified
portfolio consisting of different automobiles, iron and steel, insurance, telecommunication
etc. Reliance group also has a diversified portfolio of oil, telecom, textiles etc.
d) Global presence: In the wake of liberalization and reduction of trade restrictions, business
organization also expands by doing the business overseas. The Indian companies like
Reliance, Ranbaxy, Sundaram, Bajaj Auto, Tata etc also export their products to different
nations of the world.
e) Technology orientation: To satisfy ever changing needs of large number of consumers,
modern business organizations adopt new technology to introduce new products in the
market. They spend considerable amount of their budget to research oriented activities
directed to adopt new technologies.
f) Government regulations: with liberalization there is also reduction in government
controls. But government control over business organizations is also necessary to correct
market failures represented in the form of monopoly and pollution. Moreover government
attempts to create stable market conditions by monetary and fiscal regulations.
2.3 Business environment
It refers to all external factors which have direct or indirect influence on functioning of
business. It is divided in to two broad categories- external and internal environments.
External environment is further categorized as macro and micro environment.
Fig. 1.1 Macro and micro environment
At present Indian economy is characterized as developing economy. Indian economy is an
agricultural economy. More than 50% population is dependent on agriculture.
3 Entrepreneurial and managerial characterics
India has a mixed economy wherein both private and public enterprises prevail. Indian
constitution allows private ownership of means of production. Thus private sector also exists
with public sector. At the time of independence, due to huge resource requirement and long
gestation period to realize profit, several sectors of the economy were developed under public
sector mode by government. Although market mechanism in India is still not completely free
from government control, it holds a predominant position in Indian economy. After
liberalization in 1991, there is much higher growth in private sector compared to public
sector.
1. Low per capita income: In 2009 India’s per capita income was Rs 37490 per
annum. India’s per capita income is very low compared to developed nations of the world.
2. Unequal distribution of income and poverty: The inequality in income is gauged from
unequal expenditure on house hold items. Wide spread poverty is also prevalent in India.
Thus such a situation of poverty even after six decades of independence is detrimental to
the appropriate growth of business. People below poverty line can not create large
demands for industrial goods.
3. Agricultural based economy: India is referred to as agricultural country. At the time of
independence around 70% of people were dependent on agriculture for their livelihood.
This figure has not changed a lot. Only there is marginal decline in this number. In 2006-
 07, agriculture and allied activities contributed 18.5 percent of gross domestic product.
This figure is still higher compared to many third world countries like Argentina, Brazil,
Mexico etc. wherein contribution of agriculture is around 10% of GDP. Due to less
productivity of agriculture sector compared to industrial sector, the people who are
dependent upon it have less purchasing power.
4. Higher population: India is second largest populated country after China. This puts
tremendous pressure on the existing natural resources.
5. Unemployment: Coupled with higher population growth rate, large scale unemployment
and underemployment also characterizes the Indian economy.
6. Scarcity of capital: In India, saving and investment rates have risen at a low rate which
can realize only a moderate growth rate. Due to this, there is scarcity of capital which does
not allow business to grow at fast rate. It acts as hindrance to implement latest
technologies.
7. Technological backwardness: Success of any business in today’s globalized competitive
world depends on adoption of latest technology. Modern latest technology is certainly
scale neutral, but it is not resource neutral. This acts as a hindering factor for large number
of small and marginal farmers to adopt latest agricultural technology.
8. Limited Entrepreneur potential: An entrepreneur takes risks and ventures in to new
business. This results in growth of economy. Unfortunately in India there are limited
persons possessing entrepreneurial skills.
9. Hard work: Entrepreneurs should be willing to work hard to achieve success for their
enterprise.
10. Desire for high achievement: Entrepreneurs should be achievement oriented. They do
hard work to achieve their goals/ targets for the organization.
11. Optimism: Entrepreneur faces many hard ships and difficulties. A successful
entrepreneur tackles all kinds of such situations and is optimistic about bright future.
12. Independence: Entrepreneurs like to work independently. They do not like to be
followers or guided by someone else.
13. Foresight: They can approximately visualize the future based upon analysis of existing
environmental conditions. Based upon such a foresight they take appropriate decisions in
the present context so as to make their enterprise successful.
14. Organizing power: Entrepreneurs have limited resources when they start their
enterprises. They procure different resources from others and then organize them
appropriately so as to make a profitable product.
14. Innovative: Customer demand/tastes go on changing. In order to satisfy diverse customer
needs, entrepreneurs must be innovative.
15. Communication skills: In order to carry out business activities, the entrepreneur has to
interact with many stakeholders’ viz., suppliers, employees, customers etc. In order to
succeed entrepreneur should have excellent communication skills.
16. Technical knowledge: An entrepreneur can start business of diverse nature. Whatever
business they start, in order to succeed it is necessary that entrepreneurs have a
somewhat basic knowledge about that business.
17. Risk taking ability: Future is uncertain and risk is associated with it. Entrepreneurs take
a calculated risk. Several social scientists have considered risk taking as the most
important basic trait required by entrepreneurs.
18. Mental ability: It consists of intelligence and creative thinking. An entrepreneur must be
reasonably intelligent and should have thinking ability. Entrepreneur individually faces
many business problems. He must be able to analyze them and deal with them.
19. Human relations ability: Important personality traits required by entrepreneurs are
emotional stability, personal relations, consideration and tactfulness. An entrepreneur
should maintain good relations with all stakeholders so as to achieve growth in their
business.

4. Entrepreneurship Development
Programmes Meaning:
As the term itself denotes, EDP is a programme meant to develop entrepreneurial abilities
among the people. In other words, it refers to inculcation, development, and polishing of
entrepreneurial skills into a person needed to establish and successfully run his / her
enterprise. Thus, the concept of entrepreneurship development programme involves
equipping a person with the required skills and knowledge needed for starting and running
the enterprise.
4.1 Need for EDPs:
That, entrepreneurs possess certain competencies or traits. These competencies or traits are
the underlying characteristics of the entrepreneurs which result in superior performance and
which distinguish successful entrepreneurs from the unsuccessful ones.
Then, the important question arises is: where do these traits come from? Or, whether these
traits are in born in the entrepreneurs or can be induced and developed? In other words,
whether the entrepreneurs are born or made? Behavioural scientists have tried to seek
answers to these questions.
A well-known behavioural scientist David C. McClelland (1961) at Harvard University
made an interesting investigation-cum-experiment into why certain societies displayed great
creative powers at particular periods of their history? What was the cause of these creative
bursts of energy? He found that ‘the need for achievement (n’ ach factor)’ was the answer to
this question. It was the need for achievement that motivates people to work hard. According
to him, moneymaking was incidental. It was only a measure of achievement, not its
motivation.
 In order to answer the next question whether this need for achievement could be induced, he
conducted a five-year experimental study in Kakinada, i.e. one of the prosperous districts of
Andhra Pradesh in India in collaboration with Small Industries Extension and Training
Institute (SIET), Hyderabad.
This experiment is popularly known as ‘Kakinada Experiment’. Under this experiment,
young persons were selected and put through a three-month training programme and
motivated to see fresh goals.
One of the significant conclusions of the experiment was that the traditional beliefs did not
seem to inhibit an entrepreneur and that the suitable training can provide the necessary
motivation to the entrepreneurs (McClelland & Winter 1969). The achievement motivation
had a positive impact on the performance of entrepreneurs.
In fact, the ‘Kakinada Experiment’ could be treated as a precursor to the present day EDP
inputs on behavioural aspects. In a sense, ‘Kakinada Experiment’ is considered as the seed
for the Entrepreneurship Development Programmes (EDPs) in India.
The fact remains that it was the ‘Kakinada Experiment’ that made people appreciate the need
for and importance of the entrepreneurial training, now popularly known as ‘EDPs’, to
induce motivation and competence among the young prospective entrepreneurs.
Based on this, it was the Gujarat Industrial Investment Corporation (GIIC) which, for the first
time, started a three-month training programmes on entrepreneurship development.
Impressed by the results of GIIC’s this training programme, the Government of India
embarked, in 1971, on a massive programme on entrepreneurship development. Since then,
there is no looking back in this front. By now, there are some 686 all-India and State level
institutions engaged in conducting EDPs in hundreds imparting training to the candidates in
thousands.
Till now, 12 State Governments have established state-level Centre for Entrepreneurship
Development (CED) or Institute of Entrepreneurship Development (lED) to develop
entrepreneurship by conducting EDPs. Today, the EDP in India has proliferated to such a
magnitude that it has emerged as a national movement. It is worth mentioning that India
operates the oldest and largest programmes for entrepreneurship development in any
developing country.
The impact of India’s EDP movement is borne by the fact that the Indian model of
entrepreneurship development is being adopted by some of the developing countries of Asia
and Africa. Programmes similar to India’s EDPs are conducted in other countries also, for
example, ‘Junior Achievement Programme’ based on the principle of ‘catch them young’ in
USA and ‘Young Enterprises’ in the U. K.
4.2 Objectives of EDP:
The major objectives of the Entrepreneurship Development Programmes (EDPs) are to:
a. Develop and strengthen the entrepreneurial quality, i.e. motivation or need for
achievement.
b. Analyse environmental set up relating to small industry and small business.
c. Select the product.
d. Formulate proposal for the product.
e. Understand the process and procedure involved in setting up a small enterprise.
f. Know the sources of help and support available for starting a small scale industry.
g. Acquire the necessary managerial skills required to run a small-scale industry.
h. Know the pros and cons in becoming an entrepreneur.
i. Appreciate the needed entrepreneurial discipline.
j. Besides, some of the other important objectives of the EDPs are to:
k. Let the entrepreneur himself / herself set or reset objectives for his / her enterprise and
strive for their realization.
l. Prepare him / her to accept the uncertainty in running a business.
m. Enable him / her to take decisions.
n. Enable to communicate clearly and effectively.
o. Develop a broad vision about the business.
4.4 The entrepreneurship development programme (EDP) normally runs through three
important phases followed by EDP evaluation:
Phases of Entrepreneurial Development Programme An entrepreneurial development
programme consists of three broad phases:
1. Pre-training Phase
2. Training Phase
3. Post-training Phase
1. Initial Phase: This phase includes the activities and the preparations required to launch
the training programme. The main activities of this phase are: (a) Arrangement of
Infrastructure for training (b) Preparation of training syllabus and application form (c) Tie up
of guest faculty (d) Designing tools and techniques for selecting the trainees (e) Formation of
selection committee (f) Publicity campaign for the programme Thus, initial stage involves the
identification and selection of potential entrepreneurs and providing initial motivation to
them.
2. Training Phase: In this phase the training programme is implemented to develop
motivation and skills among the participants. The objective of this phase is to bring desirable
changes in the behaviour of the trainees. The trainers have to judge how much, and how far
the trainees have moved in their entrepreneurial pursuits. A trainer should see the following
changes in the behaviour of participants. (329)
(a) Is there any change in his entrepreneurial outlook, role and skill ?
(b) Is he motivated to plunge for entrepreneurial venture and risk that is expected of an
entrepreneur?
(c) What kind of entrepreneurial behaviour does the trainee lack?
(d) Does he possess the knowledge of technology, resources and other related entrepreneurial
knowledge?
(e) Is he skilful in choosing the right project, mobilising the right resources at the right time?
3. Post-Training or Follow-up Phase : Under this phase it is assessed that how far the
objectives of the programme have been achieved. Monitoring and follow up reveals
drawbacks in the earlier phases and suggests guidelines, for framing the future policy. In this
phase infrastructural support, counselling and assistance in establishing new enterprise and in
developing the existing units can also be reviewed. Selection of Potential Entrepreneurs
4.5 Problems of EDPs:
EDPs suffer on many counts. The problems and lacunae are on the part of all those who are
involved in the process, be it the trainers and the trainees, the ED organisations, the
supporting organizations, and the state governments. The important problems EDPs face are
but not confined to the following only:
a. Trainer-motivations are not found upto the mark in motivating the trainees to start their
own enterprises.
b. ED organisations lack in commitment and sincerity in conducting the EDPs. In some
cases, EDPs are used as means to generate surplus (income) for the ED organisations.
c. Non-conducive environment and constraints make the trainer-motivators’ role ineffective.
d. The antithetic attitude of the supporting agencies like banks and financial institutions
serves as stumbling block in the success of EDPs. Thus, it is clear that the problems are not
with the strategy but with its implementation.

5 Generation, incubation and commercialization of ideas and innovations

5.1. INTRODUCTION

It’s always very difficult to initiate business and it’s even more difficult to maintain it
smoothly. This process of establishment of business begins with generation of innovative
ideas followed by the incubation of those ideas and finally leads to the commercialization of
the same ideas. All these three steps are inter related.

5.2. GENERATION OF IDEA

All Entrepreneurs need to have ideas to initiate their entrepreneurial ventures. The process of
generating ideas is itself an innovative process. The question is from where an Entrepreneur
can get the idea. Different researchers have tried to find out the source of an entrepreneur’s
ideas. The sources for idea are as under:
Common sources:

Individual interests or hobbies

Work experiences, knowledge, and skills.

Existing products and current services, surrounding the environment.

5.3. HOW TO GENERATE IDEAS

(1) Environmental scanning: Entrepreneurs should make use of available information to

catch the current developing trend in business and for that he should keep reading local,
national, international; news papers, magazines, journals, commercial articles, and should
keep watching commercial news on TV. Moreover, it may look like a difficult task but the
potential entrepreneurs should do it passionately to get in touch with theEcurrent scenario.

(2) Use of Creativity to problem solving: entrepreneurs should use their creativity to have
solution of unusual problem. Creative thinking means to link new concepts in extraordinary
manner.

For example, here are a few specific techniques:

The checklist method, in which an entrepreneur makes use of different questions or

statements and thereby develops new ideas.

Free association, in which an entrepreneur develops a new idea through a series of word
associations;

Attribute listing, in which an entrepreneur develops a new idea by looking at the

constructive and unconstructive attributes of a product or service.

Any of the above mentioned methods help generate potential entrepreneurial ideas.

(3) Brainstorming: One of the most popular approaches to generating ideas is brainstorming.
It is an idea-generating process for getting dynamic solutions that gives a large number of
alternatives. Brainstorming is a simple technique that can be done with friends or colleagues.
In a brainstorming session, a group of people get together, mostly in a relaxed atmosphere,
where everyone feels free to broaden their minds and imagine beyond the ordinary. A group
leader presents the issue or problem to be solved and ensures that all participants identify
with it. Then members put up as many ideas as they can in a specified time by explaining
them orally. Participants are motivated to come up with as many ideas possible and to build
on one another’s ideas. In brainstorming sessions, discussion is nonstop as participants
propose a good number of ideas. No participant is allowed to criticize the ideas of other
participants during the brainstorming session. Moreover, all ideas delivered by the
participants get recorded and are further put for discussion. The purpose of brainstorming is
to open up as many alternatives as possible. It can lead to strong arguments and
counterarguments but it is certainly a fruitful way to generate abundant ideas.

(4) Focus groups: These groups of people’s present information about projected products or
services in a prearranged setting. In a focus group, a moderator focuses the group discussion
on number of issues. For example, a focus group might look at a proposed product and
answer specific questions asked by the moderator. Secondly, the focus group might be given
a moral general issue to discuss and the moderator simply leads the discussion based on
interpretations made by the group. Thus, a focus group can provide an outstanding technique
to generate innovative ideas.

(5) The Role of Intuition: Intuition is a cognitive process through which we knowingly or
unknowingly make decisions on the basis of our knowledge and experience. It is perhaps a
sudden outcome of the mind. Even though structured or systematic approaches to generating
ideas are important, intuition also plays an important role. Intuition is certainly a powerful
source of new ideas if you learn how to use it effectively. However, the best approach of all
could be to combine the structured with the intuitive as both of them complement each other.
We should listen to that intuition and use more structured approaches to modify our ideas.

5.4. IDEA INCUBATION

Idea incubation means to exercise the ideas in reality. It begins with basic elements by the
one who considers the particular idea as the best to be used. He/she involves others in the
process and proves the idea to be perfect. Finally, the idea results into a new product
believing that it is capable enough to avail fund successfully and is also commercially useful.
Numerous companies promote idea incubation by grouping workforce collectively in
cooperative environments. Cooperative groups work best for idea incubation so as to identify
strengths and weaknesses of the idea, and thereby product which is more refined and
strong can be gained. Several companies offer their services as professional idea incubators.
These companies use a trained staff that can think innovatively. There are lots of Idea
incubation firms which provide support to product development throughout the process from
the initial vague concept to viable manufacture. Successful idea incubation can result into all
types of products. Finally, what requires is strong leadership and administrative skills along
with entrepreneurial guts. Once an idea is incubated, it needs to be further developed and
commercially presented. This depends a lot on the team leader who can motivate the
employees to use the idea in productive way.

Business incubators are programme,s intended to speed up the successful improvement of

entrepreneurial companies. Incubators differ in the way of their services, in their
organizational constitution, and more or less in the types of consumers they serve. Successful
completion of a business incubation programme increases the probability that a new company
will continue in business for the long period.
5.5. The incubation process:

• Help with business fundamentals

• Networking management

• Promotional support

• Speedy Internet access

• assist with financial management

• Access to bank loan, funds and security programmes

• Deal with presentation skills

• Linkage with higher education resources

• Links to strategic partners

• Access venture capital

• Comprehensive business training programmes

• Advisory boards and mentors

• organization panel identification

• Technology commercialization assistance

• Intellectual asset management

Entrepreneurs who wish to enter a business incubation program must apply for admission.
Acceptance criteria vary from program to program, but in general only those with feasible
business ideas and a workable business plan are admitted. It is this factor that makes it
difficult to compare the success rates of incubated companies against general business
survival statistics. Although most incubators offer their clients office space and shared
administrative services, the heart of a true business incubation program is the services it
provides to start-up companies. The amount of time a company spends in an incubation
program can vary widely depending on a number of factors, including the type of business
and the entrepreneur's level of business expertise. Life science and other firms with long
research and development cycles require more time in an incubation program than
manufacturing or service companies that can immediately produce and bring a product or
service to market.

5.6. COMMERCIALIZATION
It is the process of introducing a new product into the market. It’s the most important aspect
of business as the success of any product depends a lot on the way it’s being commercialized.

The Commercialization Process:

Commercialization of a product is possible with only the following three facts:

1. The launching period:

The time to launch any product in the market should be decided after observing the market
condition and consumers’ interests.

2 Place to launch its product:.

A product can be launched at a single place or at many places at a time. This depends a lot on
the company’s resources, in terms of capital, administrative intelligence and operational
capacities. Smaller companies usually launch in attractive cities or regions, while larger
companies launch their products at national r international level at a time. Multinational
companies do launch their products at international level as they have that capacity as far as
finance and skilled staff is concerned.

3. To decide primary target consumer group:

This primary consumer group should consist of innovators, early adopters, heavy users
and/or opinion leaders. This will guarantee the success so as to be used in nearer future by
other buyers in the market place.

Thus, commercialization of new product is perhaps the most important aspect that needs to be
taken care for the success of new product

6. MOTIVATION AND ENTREPRENEURSHIP DEVELOPMENT

6.1 Introduction
Motive refers to drive and motivation means drive to achieve a goal. Motivation refers to the
way in which urges, drives, desires, aspirations, and strivings or needs direct, control or
explain the behaviour of human beings.
Motivation is related with human behaviour. Motivation is a complex phenomenon. In
general motivation is a psychological phenomenon as it is related to those factors operating
within the individual employee which compel him to act or not to act in a certain way. These
phenomena have been a subject of research by many people.
6.2 Characteristics of Motivation
1. Motivation is internal feeling of a person.

2. Motivation is a continuous process.

 3. Motivation varies with person and time.

4. Motivation may be positive or negative.

What motivates an entrepreneur to undertake risk and start new enterprise? Is it financial
scarcity or financial abundance which motivates an individual to start an enterprise? Is it the
family, social status or satisfaction from present life that motivates an entrepreneur to start a
new enterprise? The answer to such questions lies in the study of motivation.

Motivational factors involve the inner urge within an individual. Due to such an urge an
individual is motivated to do something new, unique and perform better than
others. :Research studies associated with finding an answer to the most important question as
“To what makes an entrepreneur?” reveals the following important points.

1. Entrepreneurship is associated with personality.

2. Personality development is closely associated with early childhood experiences.

3. Economic deprivation also acts as a motivating factor.

4. Family environment plays an important role. In a family where security and non risk
bearing situations are given importance, there are less chances of developing
entrepreneurs, whereas family environments which foster venturing in to uncertain
risky environment, tend to develop entrepreneurs.

5. Entrepreneurial characteristics are results of combination of various social, economic and

psychological factors which are developed right from childhood.

6. 3 Motivation Theories

Motivation acts as key to enterprise effectiveness. Motivation is originated from the word
motive. Motive means want, need, impulse or drive. Motivation is internal to person. It varies
from person to person and time to time. Motivation is on going process and may be positive
or negative. There are financial and non financial motivation techniques which can be used
by entrepreneur for effective functioning of the enterprise. Incentives directly or indirectly
related with money are referred to as financial motivations. Money acts as important and
most effective source of motivation. Salary and wages, bonus, leave with pay, medical and
housing facilities, profit sharing, vehicle allowance etc are some of the examples of financial
motivators which should be used by the entrepreneur for the employees of the enterprise. Non
financial motivators are psychological in nature. Status, respect, prestige, participation, job
enrichment, recognition, safety of job, responsibility, etc are examples of non financial
motivators.

Many motivation theories have evolved over the passage of time. These theories can be
grouped as follows
 Table 6.1 Theories of motivation

Content theories Process theories Theories related with

human nature

1. Maslow’s need 1. Vroom’s theory of 1. McGregor theory of

hierarch theory. valence and X and Y.
2. Herzberg two factor expectancy. 2. Ouchi’s theory Z.
theory. 2. Porter and lower 3. Contingency
3. McClelland theory of model of motivation. approach.
achievement, 3. Equity theory.
affiliation and power.
4. Alderfer’s theory of
existence, relatedness
and growth.

Maslow’s of theory holds that human needs form a hierarchy ranging from lowest order of
physiological need, security need, social need, esteem need to highest order need of self
actualisation. The theory suggests that various levels are interdependent and overlapping.
Each higher level need emerges before the lower level need is completely satisfied. As the
need does not disappear when other emerges, all needs tend to be partially satisfied in each
area. When the peak of a need is passed, that need does not work as a primary motivator. The
next level need then begins to dominate. Even though a need is satisfied it still influences
behaviour due to interdependent and overlapping characteristics of need.

Fredrick Herzberg and his associate of case western reserve university has conducted
research study by administering survey questions to 200 engineers and accountants in nine
different companies in the Pittusberg, U.S.A. Based upon analysis of the information, two
independent set of factors affecting human behaviour were found out. One set of factors
operate primarily to dissatisfy employees when they are absent, however their presence does
not motivate them in a strong way. They are referred to as hygiene factors. Another set of
factors are responsible for strong motivation and high job satisfaction. They are referred to as
hygiene factors. Hygiene factors found out by Herzberg include company policy and
administration, technical supervision, interpersonal relationship with subordinates, salary, job
security, personal life, working conditions and status. The motivation factors found out by
Herzberg include achievement, recognition, advancement, work itself, possibility of growth
and responsibility. The suggestion of Herzberg is to keep hygiene factors constant or higher
while increasing motivational factors.

6.4 Important guidelines for motivation

1. The enterprise must consider human resources as the most valuable resource from
among all the resources and give them respectable and honorable treatments.
2. Good quality working conditions should be maintained at the enterprise / factory
place
 3. Safety and health should receive topmost priority.
4. Adequate and fair salary structure should be provided to employees so as to maintain
good standard of living.
5. Job security and enough opportunities to rise ahead in their careers should be given to
employees.
6. Superiors should praise the subordinates when they deserve it.
7. Adequate tools and equipments should be provided to employees so as to perform
their task effectively.
8. Proper feedback system should be implemented so that subordinates can come to
know about their strengths and weaknesses.
9. The employees should be provided with opportunities to show their skills and creative
instincts in work performance through giving them more freedom, encouraging their
participation, implementing management by objectives and latest management
concepts.
10. Principles of natural justice should be followed in handling grievances of
employees. Full freedom should be provided to employees to express their problem.
11. Adequate training should be provided to the employees to develop skills and
creative abilities of the employees.

6.5 Entrepreneurship Development Training Programme

Entrepreneurship development is one of the key elements for promotion of MSME sectors.
To undertake this task on regular basis, the Ministry has set up three national level institutes.
These are 1) National Institute of Micro, Small and Medium Enterprises, Hyderabad; ii)
National Institute of Entrepreneurship and small Business Development, Noida; and iii)
Indian Institute of Entrepreneurship, Guwahati. All would be entrepreneurs, can avail the
multi-faceted training programmes geared for entrepreneurship cult which are tailor-made for
their individual needs and application within the country. Various training programmes are
organized on regular basis to cultivate the latent qualities in youths by enlightening them on
various aspects that are necessary to be considered while setting up micro or small
enterprises. These training programmes have attracted the attention of the educated
unemployed youths and have created confidence in them which led to the self employment
and creation of better employment. The individual MSME-DIs conduct the following training
programmes:-
a) Industrial Motivation Campaign
b) Entrepreneur Development Programme
c) Entrepreneurship Skill Development Programme
d) Management Development Programme
e) Skill Development
f) Business Skill Development Programme

Other Specialized programmes like Bio-technology, etc

7. GLOBALIZATION AND THE EMERGING BUSINESS / ENTREPRENEURIAL ENVIRONMENT

7.1 Introduction
The international monetary fund defines globalization as “the growing economic
interdependence of countries world wide through increasing volume and a variety of cross
border transactions in goods and services and of international capital flows and also through
the more rapid and wide spread diffusion of technology”.

7.2 Features of Globalization

1. Expansion possibilities of business throughout the world.

2. Differences between domestic and foreign markets are erased.
3. Buying and selling product and service from / to any nation of the world.
4. Establishment of production and distribution facilities based upon feasibility and economic
considerations at optimum location anywhere in the world instead of considering national
considerations.
5. Product planning and development are dependent on market conditions of the whole world.
6. Optimizing raw material sourcing from entire world.
7. Global orientations in strategies, organizational structure, culture and managerial expertise.
8. Viewing entire globe as a single market.

7.2.1 Factors influencing globalization

Many factors are responsible for favoring globalization. Not able among which notable ones
are:

1. Dismantling of barriers to international economic transactions.

2. Over capacity and over production.
3. Technological developments.
4. Emerging forms of industrial organizations.
5. Political factors
6. The intellectual revolution

7.3 Globalization Strategy for Enterprise

To establish global presence with minimum risk and maximum returns, the entrepreneur must
address following questions:

a) Which product line or product lines should be used for launching into global Markets?
b) Which markets should be chosen for entry?
c) Which optimal mode should be used for market entry?
d) How rapidly should the enterprise expand globally?

As globalization has many risks associated with it, it is advisable to select only most
profitable product/ product lines instead of introducing the entire product range.The choice of
the market is decided by market potential. The extent of entry barriers and intensity of
competition decides the market entry strategy. Lower entry barriers and less intensity of
competition in a market are conducive to a firms entry in the market. The mode of market
entry is dependent upon two factors.

(a) Enterprise’s policy of export versus local production.

(b) Extent of ownership control over locally performed activities.

Local production is more favorable when the local market is larger than the minimum
efficient scale of production so that local production translates itself into scale economies
while holding down tariff and transportation costs. With regard to extent of ownership
control, the possibilities vary from zero percent ownership mode like licensing or franchising
to partial ownership mode like joint venture or affiliates.More global presence by the
enterprise does not provide competitive advantage. Transforming global presence into global
competitive advantage necessitate the enterprise to exploit the value creation opportunities
generated by global presence and to meet related challenges. Global competitive advantage
can be realized by the enterprise by adopting to local market differences, exploiting
economies of global scale, tapping the optimal locations etc.

7.4 Indian Government Measures Towards Globalization

1. Scrapping the restrictive laws such as foreign exchange and regulation act (FERA)
1973. The foreign exchange management act (FEMA) has been passed by removing
the classes which restricted the entry of multinational companies (MNCs)
2. Allowing Indian companies to collaborate with foreign companies in the form of
foreign joint ventures (FJVs) and there by many Indian companies have started their
FJVs.
3. Reduction of import tariff to 15 percent on the advice of world bank.
4. Replacing import license with tariffs.
5. Reducing and removing some import duties.
6. Removing export subsidies.
7. Replacing license of export with duties.
8. Imposing low, flat tax on the export income.
9. Changing the policy related to export oriented units and export processing zones.
10. Liberalizing the inflow of foreign direct investments.
11. Providing incentives to MNCs & NRIs for investing in India.
12. Encouraging foreign institutional investors (FIIs) to invest in India.
13. Allowing Indian mutual funds to invest in foreign equity.
14. Allowing rupee to determine its own exchange rate in the international market
without an official intervention.
15. Full Convertibility of rupee in the current account.
7.4.1 Areas of Concern in Indian Economy with respect to globalization

1. The technology gaps of several years. The difficulty in securing technology

transfers from the developed countries.
2. Lack of Infrastructure
3. Difficult to implement true privatization policies in the light of political
interventions.
4. Indian products and services are rated inferior in terms of price, quality, delivery
schedules, etc.
5. High cost economy
6. The market access in the developed countries is very difficult as they are protected
by tariff and non tariff barriers.
7. Unstable political economy of India. The coalition governments are not suitable for
rapid progress.
8. Limited share in world export.

7.5 Globalization and India

For India, a good balance of payment position and the earning of foreign exchange are major
reasons for globalization. Indian consumer’s preference has changed due to impact’s of mass
communication tools. Thus Indian Industries have also globalized their operations so as to
satisfy consumer’s preferences. Due to liberalization policies initiated by India since 1991,
many multinational companies have started their operations in India. The Indian industries
and new enterprises face stiff competition from multinational companies. This has resulted in
improvement in their performance and ultimately benefiting the consumers. Globalization
helps domestic companies to acquire and update their technology, be cost effective and ward
of future competitive threat.

7.6 Importance entrepreneurial environment

Macro environmental factors are responsible for the growth of entrepreneurship. In

globalized world, all kinds of business are considered as a social and economic organization
which is influenced by political, economic and social forces. An enterprise operates in a
specific frame work created by political environment, industrial and licensing policy, foreign
exchange regulation, banking policy, technological development etc. Therefore it is necessary
that any business plan formulated by an entrepreneur & it must be based upon above
environmental factors.
A. Economic factors

1. Capital: This is perhaps the basic and most important requirement for establishing any
enterprises. It is required for purchasing land, different type of machines and raw materials.
Research studies have indicated that with an increase in capital investment, capital output
ratio tend to increase. This increases profit which then further goes to capital formation.
Thus, lack of capital and higher interest rate on borrowed capital hinders entrepreneurship
activity in the country. One of the reasons for progress of rich western countries is
availability of capital to entrepreneurs.

2. Labour: Quality of labour is more important than quantity for proper development of
entrepreneurship. Since, they have to deliver quality products for the successful growth,
quality of labour is very crucial.

3. Raw materials: Since raw material is one of the important components of production,
without which production cannot be accomplished. Entrepreneurs need to ascertain
continuous availability of requisite quantity and quality of different types of raw materials for
survival of the enterprise.

4. Market: The size and the composition of market both influence the entrepreneurship in
their own ways. Whether or not the market is expanding and the rate at which it is expanding
are the most significant characteristics of the market for entrepreneurship development.

B. Government actions

Government plays an important role in the development of entrepreneurs. Government can

support entrepreneurs through its clearly expressed industrial policy, by creating basic
facilities, utilities and services through providing incentives and subsidies. A supportive
conducive role by government reduces risk of entrepreneurs.

7.7 Globalization and India

Even after a long period after independence, India is not able to transform its economy into a
modern industrial democracy even though it enjoys political democracy. This is evident from
the large gap between have and have-nots. After liberalization probably this gap is increasing.
In order to pursue economic policies as dictated by WTO/World bank and other financial
institutions, India has been reducing space for state intervention and allow market forces to
govern the market. On one hand this leads to increase in entrepreneurial opportunities but on
the other hand have damaging effects on economically weaker sections of society. Thus
although it is not possible to stop the process of globalization but whatever policy reforms are
undertaken must be according to the socio economic conditions of our country and should be
such which serve the interest of general masses.

7.7.1 Sector specific impact of globalization in India

The effects of globalization on India can be studied by analyzing some specific sectors of
the Indian economy.

1. Telecom sector: The impact of globalization is directly visible in this sector. This sector
was totally under the public domain. It is now privatized and slowly and gradually foreign
investment upto 72 percent is now allowed. The positive effects are realized by the
consumers in terms of easy availability of large number of service providers at cheaper rates.

2. Insurance sector: This sector used to be one of the most regulated sector. But now it is
open for private players also. Insurance regulatory development authority has been
established by the government to regulate the sector.

3. Banking and financial sector: India has adopted gradual liberalization approach for this
sector. The reforms in the form of deregulation, liberalization of interest rates, pro market
policies etc are introduced at a slow pace. With each successive budget announcements, India
move towards full capital account convertibility. These measures along with strengthening of
prudential norms and market discipline and the adoption of international benchmarks to suit
specific needs of India helped to make the financial sector of India competitive, viable and
resilient. All these moves are helpful for entrepreneurs to obtain necessary financial support.

4. Retail sector: Indian retail industry cannot be new considered in a nascent stage. Due to
globalization large supermarkets are visible even in small towns and also throughout the
country. Opening up of retail sector has provided opportunities to many entrepreneurs.
Although it is seen as a threat to small street corner groceries but at the same time it can also
act as growth engine which can help in filling the resource and technology gaps in the retail
segment.

5. Agriculture sector: India is still regarded as agricultural country. Due to globalization,

advantages in terms of technology transfer, improved productivity and newer markets etc. can
be gained by Indian farmers. But if the Indian farming conditions and socio economic status
of large number of Indian farmers is taken into consideration then it has been seen that due to
globalization, Indian farmers have also faced many problems as against provision of
providing subsidy to farmers in developed countries, monopoly of many biotechnological
companies, threat to biodiversity and ecological stability due to biotechnology, pumping etc.

These are some of the sector specific examples to highlight the impact of globalization on
Indian economy. In general globalized world leads to influx of new technology and income in
economic opportunities and also leads to more entry of international companies in many
sectors. But at the same time it can also lead to increase in unemployment, economic and
social inequalities etc.