MODULE 3: SOCIAL RESPONSIBILITIES OF BUSINESS AND

ENTREPRENEURSHIP

PART I: Social Responsibilities of Business

PART II: Entrepreneurship

PART I: Social Responsibilities of Business

1. Social Responsibilities –Meaning
DEFINITION: “Social responsibility is the idea that businesses
should balance profit-making activities with activities that benefit
society; it involves developing businesses with a positive
relationship to the society in which they operate”.

Social responsibility is a nebulous idea and hence is defined in

various ways.
Adolph Berle! has defined social responsibility as the manager's
responsiveness to public consensus. This means that there cannot
be the same set of social responsibilities applicable to all
countries in all times. These would be determined in each case by
the customs, religions, traditions, level of industrialisation and a
host of other norms and standards about which there is a public
consensus at any given time in a given society.
According to Keith Davis,' the term "social responsibility" refers to
two types of business obligations, viz., (a) the socio-economic
obligation, and (b) the socio-human obligation.
The socio-economic obligation of every business is to see that the
economic consequences of its actions do not adversely affect
public welfare. This includes obligations to promote
employment op-opportunities, to maintain competition, to curb
inflation, etc. The socio-human obligation of every business is to
nurture and develop human values (such as morale, cooperation,
 motivation and self-realization in work).
Every business firm is part of a total economic and political system
and not an island without foreign relations. It is at the centre of a
network of relationships to persons, groups and things. The
businessman should, therefore, consider the impact of his actions
on all to which he is related. He should operate his business as a
trustee for the benefit of his employees, investors, consumers, the
government and the general public. His task is to mediate among
these interests, to ensure that each gets a square deal and that
nobody's interests are unduly sacrificed to those of others.

2. SOCIAL RESPONSIBILITY OF BUSINESS TOWARDS

DIFFERENT GROUPS

Social responsibility of business refers to its obligation to take

those decisions and perform those actions which are desirable in
terms of the objectives and values of our society. Reality is that,
despite differing arguments relating to social responsibility,
business enterprises are concerned with social responsibility
because of the influence of certain external forces.
Business enterprises have responsibility towards
1. Towards the Consumer and the
Community

2. Towards Employees and Workers

3. Towards Shareholders and Other Businesses

4. Towards the government
A businessman's social responsibilities to each of these parties are
briefly enumerated below.
Towards the Consumer and the Community
1.Production of cheap and better-quality goods and services by
developing new skills, innovations and techniques, by locating
factories and markets at proper places and by rationalizing the use
of capital and labor.
2.Levelling out seasonal variations in employment and production
through accurate forecasts, production scheduling and product
diversification.
3.Deciding priorities of production in the country's interest and
conserving natural resources.
4. Providing for social audit (see section below).
5. Honoring contracts and following honest trade practices. Some
important but dishonest trade practices are: making misleading
advisements calculated to deceive the purchaser: misbranding of
articles with respect to their material. impediments, quality, origin,
etc.; selling rebuilt or secondhand goods as new; procuring
business or trade secrets of competitors by espionage, bribery or
other means: restraining free and fair competition by entering into
combination agreements; using containers that do not give a correct
idea of the weight and quantity of a product; making false claims
of being an "authorized dealer". "manufacturer" or "importer" of
certain goods; giving products misleading names so as to give them a
value which they do not possess; declaring oneself insolvent through
questionable financial manipulations.
6.Making real consumer needs as the criterion for selecting
messages to be given by product advertisements. Nearly all current
advertising seeks to create wants. Thus. people no longer buy soap
to make them clean. They buy the promise that it would make them
beautiful. Toothpaste is bought not to kill bacteria but to create
white teeth. Cars are bought for prestige rather than travel. Even
foodstuffs such as oranges are bought for vitality, not nutrition. This
kind of advertising promotes over- consumption, forces consumers
to constantly compare themselves negatively with others, creates in
them dissatisfaction with the old and outmoded. and makes them
feel that without a particular brand of a product they are losers.
7.Preventing the creation of monopolies. Monopolies are bad in
that they make the community face high prices, short supply and
inferior quality of goods. Inequalities of wealth distribution are
accentuated and the standards of public morality deteriorate as
bribing the
judges. legislators and the government to gain favors becomes very
common. 8. Providing for after-sale servicing.
9. Ensuring hygienic disposal of smoke and waste and voluntarily
assisting in making the town environment aesthetically satisfying.
10. Achieving better public relations (that is, creating a more
favorable attitude towards the enterprise) by giving to the
community, true, adequate and easily intelligible information about
its working.
11. Supporting education. slum clearance and similar other programs.
Towards Employees and Workers
1.A fair wage to the workers (and not merely one determined by
market forces of supply and demand), which is possible only when
the businessman is willing to accept a voluntary ceiling on his own
profits.
2.Just selection, training and promotion (without any
discrimination on grounds of sex, race, religion and physical
appearance).
3. Social security measures and good quality of work life.
4.Good human relations (i.e., maintaining industrial peace, creating
conditions for collective bar-gaining, educating workers to produce
their own leadership and participative management).
5. Freedom, self-respect and self-realization. A businessman should
devote his knowledge and ability not only to making his worker's
life more affluent, but also to making it more satisfying and
rewarding. There should he an awareness that the quality of man's
life is as important as the-quantity of his material wealth.
6.Increase in productivity and efficiency by recognition of merit,
by providing opportunities for creative talent and incentives.
Towards Shareholders and Other Businesses
1. Promoting good governance through internal accountability and
transparency.
2.Fairness in relations with competitors. Competition with rival
businessmen should always be fair and healthy, based on rules of
ethics and fair play rather than on rules of warfare. Businessmen
sometimes treat their rivals as enemies and try to harm each other by
malicious propaganda, price-cutting, interference in production and
distribution.
Towards the government
1. Shunning active participation in and direct identification with any
political party.
2. Observing all the laws of land which may have the following
objectives:
(a) To provide direction to the economic and business life of the
community.
(b)To bring about harmony between the limited enterprise interest and
the wider social interest of the country.
(c) To provide safeguard against errant business practices.
(d)To compel business to play fair to all participants in the
economy—employees, shareholders, minority shareholders, etc.
(e)
To prevent oppression or exploitation of the weaker partners in
business, such as employees, minority shareholders, etc.
(f)To enforce maximum production according to the priority of
sectors and production lines laid down by the government.
(g) To allocate limited resources according to social priorities and
preferences.
(h) To enforce distributive justice, especially to weaker sections of the
community.
(i) To implement rural uplift and secure balanced development of the
country

3. Social Audit

Definition: A social audit is a systematic study and evaluation of

the organization’s social performance as distinguished from its
economic performance. The term "social performance" refers to
any organizational activity that effects the general welfare of
society.
BENEFITS
1. It supplies data for comparison with the organization’s social
policies and standards. The management can determine how well it
is living up to its social objectives.
2.It develops a sense of social awareness among all employees. In
the process of preparing reports and responding to evaluations,
employees become more aware of the social implications of their
actions.
3. It provides data for comparing the effectiveness of different types
of programmes.
4.It provides data about the cost of social programmes, so that the
management can relate this data to budgets, available resources,
company objectives, etc.
5.
It provides information for effective response to external groups
which make demands on the organization.
LIMITATIONS
A social audit is a process audit rather than an audit of results. This
means that a social audit determines only what an organization is
doing in social areas and not the amount of social good that results
from these activities. An audit of social results is not made
because:
1. They are difficult to measure. If. for example, following a
company's S.C./S.T. employment programme in a certain region.
there is a fall in the violent crime rate by
4 per cent, it is difficult to measure how much of the benefit is
caused by this programme.
2. Their classification under "good" or "bad" is not universally
accepted. In other words, the same social result may be classed as
"good" according to one opinion, and as "bad" according to an-other.
3.Most of them occur outside the organisation, making it difficult
for the organisation to secure data from these outside sources.
Even though social results cannot be proved, an audit of what is
being done is still considered desirable, because it shows the
amount of effort that a business is making in area deemed beneficial
to society. Further, if effort can be measured, then informed
judgements can be made about potential results.
Social audits can be made either by internal experts, outside
consultants, or a combination of the two. The internal auditor has
the advantage of familiarity with the business, but his judgements
may be influenced by company loyalties. An outside consultant has
the advantage of an outsider's view, but he lacks familiarity with
organisational activities, so he may overlook significant data. In
any case, if audit information is to be released to the public, the
outside auditor has more credibility.
There is a difference of opinion on the issue whether social audit
should be made public by means of a social performance report or
not. Some say that these reports are too vague and inconcrete to
satisfy the public and anyone can find reasons for criticising a
firm's performance, which can increase social conflict. But some
others assert that these reports contribute to public understanding
for they replace rhetoric with facts.
The Tata Iron and Steel Company is the first industrial organisation in
India to have carried out a social audit of its performance in 1979.
The social audit was conducted by a committee under the
chairmanship of Justice S.P. Kotval, former Chief Justice of Mumbai
High Court. The committee's terms of reference were to examine and
report whether, and the extent to which the company had fulfilled
the objectives contained in clause 3A of its Articles regarding its
social and moral responsibilities to the consumers, employees,
shareholders, society and the local community. The Committee in
its report praised TISCO's social welfare work and made a number of
suggestions to improve its programmes.

4. Business Ethics and Corporate Governance

BUSINESS ETHICS
Business ethics is the application of moral principles to business
problems. However, ethics extend beyond the question of legality
and involve the goodness or badness of an act. Therefore, an action
may be legally right but ethically wrong. For example, a small
village community located twenty miles from the closest urban
shopping area has a single grocer's shop. The owner of the shop can
charge any exorbitant price for his product though legally but not
ethically.
Sexual harassment, discrimination in pay and promotion and the
right to privacy are some other issues specially relevant to the
study of ethics.
Sexual harassment in the workplace can be defined as unwelcome
sexual advances, sexual favor or other verbal or physical conduct
of a sexual nature. Although the landmark judgment of the
Supreme Court in the case of Vishaka& others vs State of
Rajasthan makes it a mandatory duty of the employer to prevent
this misconduct at the workplace, it does not appear that the
sensitivity of today's organisations has kept pace. The negative
aspects of sexual harassment are: costly lawsuits, decreased
productivity, increased absenteeism, lower morale and higher staff
turnover.
Discrimination against women in pay and promotion opportunities
is also unethical, which continues to exist despite there being the
Equal Remuneration Act, 1976. One of the most commonly cited
reasons for the lack of promotions of women is the glass ceiling
effect a term used for artificial barriers based on attitudinal or
organisational bias that prevent qualified women from progressing
in the organisation into senior management level positions.
Employees' right to privacy raises several questions, some of which
are: "Can a company refuse to hire smokers and/or make current
smokers quit smoking"? and "Can a company conduct drug tests on
its prospective employees"?
It should be remembered that the corporate "shield" which protects
a company's management from unlimited legal liability does not
protect it against unlimited public condemnation for its unethical
and immoral actions. The credibility of a business depends on its
high business ethics and integrity.
How does a manager decide what is ethical or unethical? There are
four important factors which affect his decision.
 Government legislation.
 Business codes. (But being voluntary in nature these codes,
though pointed to with pride, are usually ignored in practice.)
 Pressure groups. (For example, in recent years Indian carpet
industry has been facing consumer boycott from the west for
employing child labor.)
 Personal values of the manager himself. (But a manager with
strong personal values mostly finds himself in a dilemma
when an unethical course of action becomes his only choice
to achieve the company's goal. This has prompted many
major business houses, to teach executives the importance of
remaining true to their convictions, whether rooted in
organized religion or personal morality, amid the conflicting
demands and temptations they confront when taking
decisions. New approaches (e.g., asking participants to write
their autobiographies, as if they are at the end of their lives)
are being tried to make them inspiring decision-makers, with a
sense of morality. "Under-promise over-deliver" is a much-
revered motto at Infosys. The company can excuse
incompetence but not lack of ethics.)
CORPORATE GOVERNANCE

The term "corporate governance" is used to denote the extent

to which companies run in an open and honest manner in the
best interest of all stake- holders. The key elements of good
corporate governance are transparency and accountability
projected through a code which incorporates a system of
checks and balances between all key players, viz., board of
directors, auditors and stake-holders. In Britain, following
corporate scandals in the early
1990s, a committee was appointed in 1991 under the
chairmanship of Sir Adrian Cadbury to prepare a code for best
 corporate governance. Major recommendations of this committee
are as under:

• Non-executive directors whose most important role is to

bring an independent judgement to bear on issues of strategy,
performance, resources, etc. should be picked through a
formal selection process on merits.
• Companies should have remuneration committees consisting
wholly or mainly of non-executive directors which should
recommend to the board executive directors' emoluments.
Companies should have audit committees consisting of
minimum 3 non- executive directors to report on any matter
relating to financial management.
• Audit partners should be rotated and there should be fuller
disclosure of non- audit work.
This is a voluntary code and has only some moral pressure of the
London Stock Exchange requiring companies to mention in their
annual report whether they are following the code, and if not, why.
Benefits of Good Corporate Governance
I. It creates overall market confidence and long-term trust in the
company.
2. It leads to an increase in company's share prices.
3. It ensures the integrity of company's financial reports.
4. It maximizes corporate security by acting as a whistle blower.
5. It limits the liability of top management by carefully
articulating the decision-making process.
6. It improves strategic thinking at the top by inducting
independent directors who bring a wealth of experience and a
host of new ideas.
 PART II:ENTREPRENEURSHIP
5. Definition of Entreprenuership

Meaning and evolution of concept:

The term "Entrepreneur" is defined in variety of ways. It varies from
country to country, time to time and the level of economic
development.
The word "entrepreneur" is derived from the French verb
"entreprendre" which means "to undertake". In 16th century, the
Frenchmen who organized and led military expeditions were referred
to as "entrepreneurs".
In early 18th century, French economist Richard Cantillon used the
word entrepreneur to business. Since then the word entrepreneur is
used to one who takes the risk of stating new organization or
business or introducing a new idea, product or service to society.
According to Joseph Schumpeter "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 materials or of new markets
and the life”. Accordingly to him the functions of an
entrepreneurship are:
Introduction of new product Introduction of new methods of
production
• Development of new markets and finding fresh sources of raw
materials and
• Making changes
Cantillon defined entrepreneur as "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 summaries,
"an entrepreneur is the person who bears risk, unites various factors of
production, to explore the perceived opportunities in order to evoke
demand, create wealth and employment".

6. Importance of Entrepreneurship
Entrepreneurship is the dynamic process of creating incremental
wealth and innovating things of value that have a bearing on the
welfare of an entrepreneur. It provides civilization with enormous
amount of goods and services and enhances the growth of social
welfare. The man behind the entrepreneurship is an action oriented
and highly motivated individual who is ready to achieve goals.
M. Kirzner (1973) observes entrepreneurs as; “one who perceives
what others have not seen and acts upon that perception”.
Thus, entrepreneurs take the economy and the society that is the
whole civilization to the state of progress and prosperity.
Taking this into consideration we can describe the Significance or
importance of entrepreneurs which is stated below
1. Growth of Entrepreneurship
Entrepreneurship the advent of new venture particularly small
ventures in order to materialize the innovative ideas of the
entrepreneurs. Thus, the growth or establishment of small
enterprises ii the specific contribution of entrepreneurship in in
every economy of the world.
The statistics reveals that in USA economy nearly half a million small
enterprise are established every year. Our country is not an exception
in this regard.
2. A Creation of job opportunities
Entrepreneurship firms contributed a large share of new jobs. It
provides entry-level jobs so necessary fur training or gaining
experience for unskilled workers.
The small enterprises arc the only sector that generates large portion of
total employment every year. Moreover, entrepreneurial ventures
prepare and supply experienced labor to the large industries.
3. Innovation
Entrepreneurship is the incubator of the innovation. Innovation
creates disequilibria in the present state of order.
It goes beyond discovery and does implementation and
commercialization, of innovations. “Leap frog” innovation,
research, and development are being contributed by
entrepreneurship.
Thus, entrepreneurship nurses innovation that provides new ventures,
product, technology , market, quality of good etc. to the economy that
increase Gross Domestic Products and standard of living of the
people.
4. Impact on community development
A community is better off if its employment base is diversified among
many small entrepreneurial firms.
It promotes abundant retail facilities, a higher level of home
ownership, fewer slums, better, sanitation standards and higher
expenditure of education, recreation and religious activities. Thus,
entrepreneurship leads to more stability and a higher quality of
community life.

5. Consequence of business failure

The collapse of large industry almost has irresistible damage to the
development of state and to the state of economy and to the
financial condition of the relevant persons. The incumbents lost
their jobs: suppliers and financial institutions face a crisis of
recovery.
Customers are deprived from goods, services, and the government
losses taxes. This could not happen in the case of failure of
entrepreneurship. There shall be no measurable effect upon the
economy and no political repercussions too.
6. Political and economic integration of outsiders
Entrepreneurship is the most effective way of integrating those who
feel disposed and alienated into the economy. Minorities, migrants
and women are safely integrated into entrepreneurship that will
help lo develop a well-composed plural society.
7. Spawns entrepreneurship
Entrepreneurship is the nursing ground for new inexperienced
adventurists. It is the field where a person can start his/her idea of
venture, which may be ended up in a giant enterprise. All the large
industrial ventures started as a small entrepreneurial enterprise.
Therefore, entrepreneurship provides wide spectrum of ventures
and entrepreneurs in every economy. The vast open arena of
entrepreneurship thus, acts as incubator to entrepreneurs.
8. Enhances standard of living
Standard of living is a concept built on increasing amount of
consumption of variety of goods and services over a particular
period by a household. So it depends on availability of diversified
products in the market. Entrepreneurship provides enormous kinds
product of various natures by their innovation.
Besides, it increases the income of the people who are employed in
the entrepreneurial enterprises. That also capable employed persons to
consumer more goods and services. In effect entrepreneurship
enhances the standard of living of the people of a country.
9. Promotes research and development
Entrepreneurship is innovation and hence the innovated ideas of
goods and services have to be tested by experimentation. Therefore,
entrepreneurship provides funds for research and development with
universities and research institutions. This promotes the general
development of research and development in the economy.
Entrepreneurship is the pioneer zeal that provides events in our
civilization. We are indebted to it for having prosperity in every
arena of human life- economic, technological and cultural.
The above discussion in a nutshell enumerates that tremendous’
contributions of entrepreneurship.

7. Concepts of Entrepreneurship

Entrepreneurship is a process undertaken by an entrepreneur to

augment his business interests. Some authors define it as
"Entrepreneurship is the indivisible process flourishes when the
interlinked dimensions of individual psychological entrepreneurship,
entrepreneur traits, social encouragement, business opportunities,
Government policies, availability of resources and opportunities
coverage towards the common good, development of the society and
economy".
Entrepreneurship lies more in the ability to minimize the use of
resources and to put them to maximum advantage. Above all,
entrepreneurship in today's context is the product of teamwork and the
ability to create, build and work as a team.
Entrepreneurship is the process of identifying opportunities in the
market place, arranging the resources required to pursue these
opportunities and inverting the resources to exploit the opportunities
for better gains.
 Higgins defined entrepreneurship as "the function of foreseeing
investment and production opportunities, organizing an enterprise
to undertake a new production process, raising capital. hiring labor,
arranging the supply of raw materials, finding site, introducing new
technique, discovering new source of raw materials and selecting
top managers for day-to-day operation.
Cole's definition for entrepreneurship is "the purposeful activity of
an individual or a group of associated individuals undertaken to
initiate, maintain or organize profit by production or distributing of
economic goods and services".
Risk bearing, innovating and resource organizing, achieving goal
through production of goods or services. All the above definitions
highlight the risk bearing, innovating and resource organizing,
achieving goal through production of goods or services.

8. Characteristics of Successful Entrepreneur

The process of entrepreneurship is a complex one having
multidimensional characteristics. The following are some of the
commonly accepted characteristics suggested by experts.
(i) Innovation
Entrepreneurship involves innovation of new things to effect
dynamic changes and good success in economy. It should create
conditions for growth of the economy.
(ii) Risk-taking
Risk is a inbuilt element of any business. Entrepreneurship should
be risk bearing to cater uncertainty of future.
(iii) Skillful management
Entrepreneurship brings together various functions of the
management —planning, organizing, staffing, directing,
controlling and leading.
(iv) Organization
It brings together various facilities of production for an efficient and
economical use.
(v) Decision making
Decision-making is a very vital characteristic of an
entrepreneurship. Taking decisions at all levels and stages of an
entrepreneurship is a routine task.
(vi) Making the enterprise a success
Entrepreneurship is mainly an economic activity as it deals with
creating and operating an enterprise. it involves in satisfying the
needs of customers with the help of production and distribution of
goods and services. This makes the enterprise a success.
There are common qualities or skills found in successful
entrepreneurs, expansion of the word 'ENTREPRENEUR' gives a
good idea of successful entrepreneurs.

E – Effective Communicator
N - Negotiating skills
T - Total Commitment / Time management / Tactical / Team man
R - Risk-taking ability / Resourceful / Responsible
E - Emotional Stability / Ethical
P - Problem solving / Patience / Passion / Perseverance
R - Relations-Human & public / Realistic / Result-oriented
E - Energetic / Endurance
N - Networking ability.
E - Excellence in 'Economics'
U - Understands how to administer and organize / Unambiguous
R - Real innovator.
 9. Classification of Entrepreneur

Entrepreneurs in business can be broadly classified based on criteria

like - stages of economic development, types of business, use of
technology, area, age, gender and so on:
Among all the different types of entrepreneurs, we shall discuss
the first type, as described by Danhof, an American:
1. Innovative Entrepreneur

 An innovative entrepreneur is one who introduces a new product

or a new technique or a new market and can re-organize the
enterprise if needed.
 They are generally aggressive in experimentation and seize
opportunities. - They are capable of converting attractive
possibilities into practice.
 They raise money to start an enterprise, assemble the various
factors, choose the right employees and set the organization
going. Innovative entrepreneurs are more commonly found in
developed countries.
 This is because such entrepreneurs can work only when a
certain level of development is already achieved.
2. Imitative Entrepreneur or Adoptive entrepreneur -

 Imitative entrepreneurs are those who adopt or copy

successful innovations created by innovative entrepreneurs.
 They do not innovate the changes themselves, but only imitate
techniques and technology innovated by others.
 Imitative entrepreneurs are more commonly found in
developing countries because people there prefer to imitate
products, technology, knowledge and skill already available
in more advanced countries.
 They are nevertheless important for the development of poor
countries.
3. Fabian Entrepreneur
 Fabian Entrepreneurs are those who are very cautious and are
skeptical about any changes.
 they have neither the will to introduce any new changes
nor the desire to adopt new methods innovated by others,
unless pushed to the wall.
 they are generally driven by custom, religion, tradition and past
 practices.
 they imitate or bring in changes only when it is a question of
survival.
4. Drone Entrepreneurs
 Drone entrepreneurs are those who are highly resistant to
changes.
 They refuse to adopt, imitate or make changes in production
methods, come what may.
 They choose to sink rather than imitate or bring in changes.
 They may even suffer from losses but prefer to stick to
traditional ways.
 Such (old fashioned) entrepreneurs are found plenty in India.
 Ideal Jawa, a motorbike company based in Mysore is an
example

10. Myths of Entrepreneurship

Entrepreneurship is a career which is gaining popularity worldwide

but still isn’t very well understood which is why there are so many
myths regarding this career option. A lot of people believe these
myths to be true which is why they don’t pursue their ambition of
being an entrepreneur despite having a great idea. So, if you’re still
confused, don’t worry, we’ve got the most common myths debunked
for you.

1.Entrepreneurs are born, not mad This is the most common myth
that deters people from becoming entrepreneurs. However, this is
completely untrue. A normal person with an idea which solves a
problem the society is dealing with can become an entrepreneur if he
works on certain skills. If one is ready to develop on leadership and
managerial skills and isn’t scared to take risks, one can aim to
become a successful entrepreneur.
2.All you need is money

This myth is not completely justified because you may have great
investors pumping in a lot of money into your venture but if you’re
idea doesn’t appeal to the people, they will not buy your product or
service. Thus, money might be important but it is more important
to use the money wisely in places where it is required.

3.Entrepreneurs are usually college drop-outs

This is a common disbelieve because great people like Mark

Zuckerberg, Mukesh Ambani and Steve Jobs have managed to
become successful entrepreneurs without a college degree. However, a
formal and educated background only helps an entrepreneur to
understand concepts and the business better. An entrepreneur
becomes one because of his idea and developed skills set and not his
college degree.

4.You need an out of the box idea to start up

This is another myth about entrepreneurship which needs to be

debunked. It is true that you need an idea to develop on but the idea
doesn’t need to be a completely new or innovative one. Running a
restaurant, school or any kind of a business or adding value to an
already existing idea which solves problems of the society can also
serve as a great base for entrepreneurship.

5.Having no boss the best feeling

A lot of people consider entrepreneurship because they believe they

will get to set their own terms at work and lead a team. However, this
might not be a favourable scenario for every venture. With ideas like
leadership coaches catching up, it is proved that even entrepreneurs
who lead a team require help from superiors in order to succeed.
6.You need the perfect timing

People often comment saying that it is actually luck which will make
you a successful entrepreneur. They believe that it is important that
the time is right and destiny is in your favour. However, the history
of entrepreneurs has proved this to be absolute rubbish as successful
people like Reid Hoffman, the founder of LinkedIn, got success only
later in their life in spite of a brilliant idea.

7.Starting a business isn’t that difficult

A lot of entrepreneurs we see aren’t college pass outs which has led to
the common belief that entrepreneurship isn’t very difficult to
achieve. Instead of attending rigorous classes, they concentrated on
developing a skills set and an idea which they’ve grown only due to
their hard work. A typical entrepreneur fails many times before s/he
can succeed and defeating failure isn’t everyone’s cup of tea.

11. Entrepreneurial Development Models

The models for the development of the entreneurship fall in the

following categories
1. Psychological models
2. Sociological Models
3. Integrated Models

1. Psychological models
McClelland in 1961 has given a Signification of determinants of
entreneurship. In this model he ascribes importance to the
achievement motives which earlier related ‘’child rearing practices”
But D.G Winter in his model has ascribed it has intrinsic
determinant of the achievement motive.
Now change in motivation is seen primarily as a result of the
ideological arousal of the talent need for achievements among the
adults. After identifying achievement orientation as the key
variables in the development of entreneurship.
McClelland Suggest motivation-Training Programme as policy
measure which will make the entreneurs really willing and the
eager to exploit the new opportunities provided.
Everett Hagen’s theory of Social Change Lays emphasis on
“Creative Personality” as casual link in entrepreneurial behavior
and “Status withdrawal” as determinant of creative Personality.
Hagen elaborately explains the casual Sequence Entrepreneurial
behavior. But his model of Entrepreneurship fails to give any
positive variable for the development of the entrepreneurship
“status withdrawal” would occur in the natural Evolutionary
process of the society and not by any deliberate attempt.
John Kunkel in 1965 considered Entrepreneurial supply by suggesting
a behaviorist model. His model Suggest that Entrepreneurial behavior
is the function of the surrounding of Social Structure, Both Past and
the Present, and can really be influenced by manipulating economic
and social incentives.
Kunels Model is based upon Experimental Psychology, which
identifies sociological variables as the determinant of
Entrepreneurial supply.
2. Sociological Model
Frank W Young’s theory of Entrepreneurship is a theory of change
based upon the society’s in Corporation of relative sub- group. The
relativenss of Sub group which as a low status in a larger Society
will lead to Entrepreneurial behavior, if the group has better
institutional resources than others in the Society at the same level.
 Young’s model of entrepreneurship suggests the creation
of supporting
institution in Society as the determinant of Entrepreneurship.
3. Integrated model
T.V Rao in 1975 “Entrepreneurial disposition” has included the
following factors
1.Need for motive is the dynamic which for the prospective
Entrepreneur, has greatest possibility of achieving the goals if one
performs those activities.
2. Long term involvement is the goal either at thinking level or at the
activity level, in Entrepreneurial activity that is viewed as target to be
fulfilled.
3.Personal, Social and material resources which he thinks are related
to entry and Success in the area of Entrepreneurial activity
4. Soci-political
system to be perceived as suitable for establishment
and development his enterprise.

12. Entrepreneurial Development Cycle

Entrepreneurs are not just born, they can be developed and trained
to undertake ventures. However, everybody does not have the
potential to become an entrepreneur. Entrepreneurial development
is essentially an educational process and an endeavor in human
resource development. It is a process in which persons are
injected with motivational drives of achievement and situations
especially in business/enterprise undertakings.
In many developing countries and especially in certain backward
areas of these countries, the socio-economic environment has not
been conducive to the emergence of entrepreneurial talents. It has
been experienced that entrepreneurs have originated from all strata
of society, but entrepreneurial abilities/ talents have remained
latent and hence, a lot depends on activating these talents. It is,
therefore, necessary to identify, motivate, strengthen and support
people possessing these talents.
In many developing countries and especially in certain backward
areas of these countries, the socio-economic environment has not
been conducive to the emergence of entrepreneurial talents. It has
been experienced that entrepreneurs have originated from all strata
of society, but entrepreneurial abilities/ talents have remained
latent and hence, a lot depends on activating these talents. It is,
therefore, necessary to identify, motivate, strengthen and support
people possessing these talents.
In order to accelerate formation of indigenous enterprises,
imaginative development programmes and policies backed up by
sound institutional support are necessary, as it has been recognised
that, entrepreneurs do not respond spontaneously to available
business opportunities despite various inducements, schemes and
programmes to promote and assist them. It is necessary to have an
effective mechanism, once they are identified.
Entrepreneurship requires an environment in which an entrepreneur
can learn and discharge necessary functions. For an entrepreneurial
development, intelligence, motivation, knowledge, stimulation,
sustained efforts, human factor, government assistance and support
and opportunity are the pre-requisites, as entrepreneurship cannot
grow in vacuum. The process of entrepreneurial development
emphasis on training, education,reorientation and creation of
conducive and healthy environment for the growth of enterprises
Entrepreneurship Development incorporates four basic issues':
a. The availability of material resources,
b. The selection of real entrepreneurs,
c. The formation of industrial units, and
d. The policy formulation for the development of the region(s).

Entrepreneurial skills can be developed through inculcating

entrepreneurial traits, imparting the required knowledge,
developing the technical, financial, marketing and managerial skills,
and building the entrepreneurial attitude. The process of
entrepreneurial development involves equipping a person with the
information necessary for enterprise building and sharpening his
entrepreneurial skills. The objective of entrepreneurial
development is to motivate a person for entrepreneurial career and
to make him capable of perceiving and exploiting successfully, the
opportunities for enterprise. Thus, it is regarded as a tool of
industrialization and a solution to unemployment problem. One
trained entrepreneur can guide other on how to start their own
enterprises. The figure shows entrepreneurial development cycle"
consisting of simulatory, support and sustaining aspects for
entrepreneurship development.
MANAGEMENT & ENTREPRENEURSHIP Module2b
Simulatory:
1. Entrepreneurial education
2. Planned publicity for entrepreneurial opportunities
3. Identification of potential entrepreneurs through scientific method
4. Motivational training to new entrepreneurs
5. Help and guidance in selecting products and preparing project
reports
6. Making available techno-economic information and products
profiles
7. Evolving locally suitable new products and processes
8. Availability of local agencies with trained personnel for
counseling and promotions
9. Creating entrepreneurial forum
10. Recognition of entrepreneur

Support:
1. Registration of unit
2. Arranging finance
3. Providing land, shed, power,
water
,etc.
4. Guidance for selecting and
obtaining machinery
5. Supply of scarce raw materials
6. Getting licenses / import licenses
7. Providing common facilities
8. Granting tax relief or other
subsidy
9. Offering management
consultancy
10. Help marketing product
11. Providing information
 MANAGEMENT & ENTREPRENEURSHIP Module2b
Sustaining:

1. Help modernization
2. Help diversification / expansion / substitute production
3. Additional financing for full capacity utilization
4. Deferring repayment / interest
5. Diagnostic industrial extension / consultancy source
6. Production units legislations / policy change
7. Product reservation / creating new avenues for marketing
8. Quality testing and improving services
9. Need-based common facility centre
MANAGEMENT & ENTREPRENEURSHIP Module2b
12. Problems faced by Entrepreneurs

Entrepreneurs face a number of problems in the promotion of units

and during production, marketing, distribution, procurement of raw
material, and availing of incentives offered by the State government.

The problems of entrepreneurs may be divided into two groups-

external and internal. External problems are those, which result from
factors beyond the control of entrepreneurs while internal problems
are those, which are not influenced by external factors.

The problems of industries, whether in the small sector or in

organized sector are almost identical.However,given that the
organized industry is financially very strong and its resources large,
it can therefore, face its problems more effectively. Owing to its
weak financial structure, the resources of the small sector are
limited. While the large sector can employ trained and experienced
managers, in the small industry, its proprietor or partners or if the
unit is a company, its director or directors themselves have to take
care of all the problems. The large sector can influence its raw
material suppliers, its customers and at times even the government in
framing its policies, but the small entrepreneur is helpless in this
respect.
I. Internal Problems of Entrepreneurs

1. Planning
a) Technical feasibility
 Inadequate technical know-how.
 Locational disadvantage
 Outdated production process

b) Economic viability
 High cost of input.
 Break-even point too high
 Uneconomic size of project
MANAGEMENT & ENTREPRENEURSHIP Module2b
Choice of idea
 Feeble structure
 Faulty planning
 Poor project implementation
 Lack of strategies
 Lack of vision
 Inadequate connections
 Lack of motivation
 Underestimation of financial requirements
 Unduly large investment in fixed assets
 Overestimation of demand
2. Implementation

Cost over-runs resulting from delays in getting licenses, sanctions

and so on and inadequate mobilization of finance.

3. Production

a) Production management

 Inappropriate product mix

 Poor quality control
 Poor capacity utilization
 High cost of production
 Poor inventory maintenance and replacement
 Lack of timely and adequate modernization and so on
 High wastage
 Poor production

b)Labor management

 Excising high wage structure

 Inefficient handling of labor problems
 Excessive manpower
 Poor Labor productivity
 Poor labor relations
MANAGEMENT & ENTREPRENEURSHIP Module2b
 Lack of trained skilled labor or technically competent personnel

c) Marketing Management

 Dependence on a single customer or a limited number of

customers/single or a limited number of products.
 Poor sales realization
 Defective pricing policy
 Booking of large orders at fixed prices in an inflationary market
 Weak market organization
 Lack of market feedback and market research
 Unscrupulous sale purchase practices

d)Financial management

 Poor resource management and financial planning

 Faulty costing
 Dividend policy
 General financial indiscipline and application of funds for
unauthorized purposes
 Deficiency of funds
 Over trading
 Unfavorable gearing or keeping adverse debt equity ratio
 Inadequate working capital
 Absence of cost consciousness
 Lack of effective collection machinery

e)Administrative management

 Over centralization
 Lack of professionalism
 Lack of feedback to management (management Information
System)
 Lack of timely diversification
 Excessive expenditure on R&D
MANAGEMENT & ENTREPRENEURSHIP Module2b

II. External Problems of Entrepreneurs

a) Infrastructure

 Location
 Power
 Water
 Post Office and so on
 Communication
 Non-availability or irregular supply of critical raw materials or
other inputs
 Transport bottle neck

(b)Financial

 Capital
 Working capital
 Long term funds
 Recovery
 Marketing Taxation
 Raw material
 Industrial and financial regulations
 Inspections
 Technology
 Government policy Administrative hurdles
 Rampant corruption
 Lack of direction
 Competitive and volatile environment
 MANAGEMENT & ENTREPRENEURSHIP Module2b
13. Capacity building for Entrepreneurship

To be a successful entrepreneur, individuals must build

capacities in four key strategic areas – Operational, Management,
Financial Management, and Personal capacities. Entrepreneur
capacity building involves developing the combination of all four
capacity elements, to provide the ingredients for a great
entrepreneurial success soup.

Some of these capacities are gained through experience

throughout your career, while others are learned through educational
avenues. Some successful entrepreneurs are born with strong
personality traits, and some behaviors are strengthened through learned
responses in the business environment.

Here are the four key categories of capacity building leading to

the development of successful entrepreneurs.
Operational Capacity Building

Having a brilliant understanding of an industry and business at

ground level builds operational capacity. This of course involves
working in a variety of business operations for a period of time prior
to diving into entrepreneurship. This is where you gain valuable
insight into what makes businesses tick. Understanding the
dynamics on the floor, in the cubicles, in the field and out on the
road, gives you the perspective on how to lead, organize and plan for
operations.

Management Capacity Building

Taking operational experience one more step, gaining

management experience in a field or business will be directly
applicable to managing your own business. The valuable experience
you gain managing operations, resources and people will give you
 MANAGEMENT & ENTREPRENEURSHIP Module2b
the applicable tools for your own business. With a few years of
management experience, you will gain management capacity and an
understanding of responsibilities and accountabilities at that level…
all precursors to managing your own company.

Financial Management Capacity Building

Through a combination of work experience and education, you

need to be well-grounded and versed in managing finances. You
need to be able to accurately estimate and build financial statements
and to understand them. With gained skills, you will need to be able
to analyze financial statements, looking at trends and indicators and
what those all mean to your business. Financial reports provide key
indicators and information on the business’ financial health…there is
a wealth of information in the financial statements. Other parties,
partners and financial institutions will be looking at you and your
organization’s ability to manage finances.
Personal Capacity Building

Of extreme importance, if you don’t have some key personal,

entrepreneurial traits you may be closing up shop fast. Some people
are born with strong traits while other behaviors can be picked up
along the development pathway. Demonstrating strong traits and
behaviors such as dedication, perseverance, ambition, determination,
strong-will, openness, honesty, transparency, fairness, etc may move
you along the pathway to become a successful entrepreneur.
MANAGEMENT & ENTREPRENEURSHIP Module2b
14. Intrapreneurship & Elements & Differences between
entrepreneur,intrapreneur and manager
MANAGEMENT & ENTREPRENEURSHIP Module2b
 MANAGEMENT & ENTREPRENEURSHIP Module2b

15. Five stages of the Entrepreneurship process

16.Functions of entrepreneurs

An Entrepreneur has to perform a number of functions right from the

generation of idea up to the establishment of an enterprise. He also has
to perform functions for successful running of his enterprise.
Entrepreneur has to perceive business opportunities and mobilize
resources like man, money, machines, materials and methods. The
following are the main functions of an Entrepreneur.

1. Idea generation: The first and the most important function of an

Entrepreneur is idea generation. Idea generation implies product
selection and project identification. Idea generation is possible through
vision, insight, keen observation, education, experience and exposure.
 MANAGEMENT & ENTREPRENEURSHIP Module2b
This needs scanning of business environment and market survey.

2. Determination of business objectives: Entrepreneur has to state

and lay down the business objectives. Objectives should be spelt out in
clear terms. The Entrepreneur must be clear about the nature and type
of business, i.e. whether manufacturing concern or service oriented
unit or a trading business so that he can very well carry on the venture
in accordance with the objectives determined by him.

3. Rising of funds: All the activities of the business depend upon the
finance and hence fund rising is an important function of an
Entrepreneur. An Entrepreneur can raise the fund from internal source
as well as external source. He should be aware of different sources of
funds. He should also have complete knowledge of government
sponsored schemes such as PMRY, SASY, REAP etc. in which he can
get government assistance in the form of seed capital, fixed and
working capital for his business.

4. Procurement of machines and materials: Another important

function of an Entrepreneur is to procure raw materials and machines.
Entrepreneur has to identify cheap and regular sources of raw materials
which will help him to reduce the cost of production and face
competition boldly. While procuring machineries he should specify the
technical details and the capacity. He should consider the warranty,
after sales service facilities etc before procuring machineries.

5. Market research: Market research is the systematic collection of

data regarding the product which the Entrepreneur wants to
manufacture. Entrepreneur has to undertake market research
persistently to know the details of the intending product, i.e. the
demand for the product, size of the market/customers, the supply of the
product, competition, the price of the product etc.

6.Determining form of enterprise: Entrepreneur has to determine

form of enterprise depending upon the nature of the product, volume
of investment etc. The forms of ownership are sole proprietorship,
MANAGEMENT & ENTREPRENEURSHIP Module2b
partnership, Joint Stock
Company, co-operative society etc. Determination of ownership right
is essential on the part of the entrepreneur to acquire legal title to
assets.

7. Recruitment of manpower: To carry out this function an

Entrepreneur has to perform the following activities. (a) Estimating
man power requirement for short term and long term. (b) Laying
down the selection procedure. (c) Designing scheme of compensation.
(d) Laying down the service rules. (e) Designing mechanism for
training and development.

8. Implementation of the project: Entrepreneur has to develop

schedule and action plan for the implementation of the project. The
project must be implemented in a time bound manner. All the
activities from the conception stage to the commissioning stage are to
be accomplished by him in accordance with the implementation
schedule to avoid cost and time overrun. He has to organize various
resources and coordinate various activities. This implementation of
the project is an important function of the Entrepreneur.

All the above functions of the Entrepreneur can precisely be put into
three categories of innovation, risk bearing, and organizing and
managing functions.
 MANAGEMENT & ENTREPRENEURSHIP Module2b

17. ROLE OF ENTREPRENEURSHIP IN ECONOMIC

DEVELOPMENT
Economic development essentially means a process of upward change
whereby the real per capita income of a country increases for a long
period of time. The economic history of the presently developed
countries, for example, USA and Japan tends to support the facts that
the economy is an effect for which the entrepreneurship is the cause.
The crucial role played by the entrepreneurs in the western countries
has made the people of underdeveloped countries conscious of the
significance of entrepreneurship in economic development. After the
Independence, India has realized that, for achieving the goal of
economic development, it is necessary to increase the entrepreneurship
both qualitatively and quantitatively in the country. Parson and Smelter
described entrepreneurship as one of the two necessary conditions for
economic development, the other being increased output of capital.
Y.A. Say high describes entrepreneurship as a necessary dynamic force
for economic development. The important role that an
entrepreneurship plays in the economic development of an economy
can be put in a more systematic manner as follows.

1. Entrepreneurship promotes capital formation by mobilizing the idle

saving of the public.
2. It provides immediate large-scale employment. Thus it helps to
reduce unemployment in the country.
3. It provides balanced regional development.
4. It helps reduce the concentration of economic power.
5. It stimulates the equitable redistribution of wealth, income and even
 MANAGEMENT & ENTREPRENEURSHIP Module2b
political power in the interest of the country.
6. It encourages effective resources mobilization of capital and skill
which might otherwise remain unutilized and idle.
7. It also induces backward and forward linkages which stimulated the
process of economic development in the country.
8. It promotes country’s export trade i.e. an important ingredient for
economic development.