WHAT IS ENTREPRENEURSHIP & ITS CONCEPT..!!
The capacity and willingness to develop,
organize and manage a business
venture along with any of its risks in order to
make a profit. The most obvious example of
entrepreneurship is the starting of
Entrepreneurship is a process of
actions of an entrepreneur who is a person
always in search of something new and
exploits such ideas into gainful opportunities
by accepting the risk and uncertainty with
In economics, entrepreneurship
combined with land, labor, natural
resources and capital can produce profit.
Entrepreneurial spirit is characterized
by innovation and risk-taking, and is an
essential part of a nation's ability to succeed
in an ever changing and
increasingly competitive global marketplace.
CHARACTERISTICS OF ENTREPRENEURSHIP
Economic and dynamic activity:-Entrepreneurship is an economic activity because
it involves the creation and operation of an enterprise with a view to creating value or
wealth by ensuring optimum utilisation of scarce resources. Since this value creation
activity is performed continuously in the midst of uncertain business environment,
therefore, entrepreneurship is regarded as a dynamic force.
Related to innovation:- Entrepreneurship involves a continuous search for new
ideas. Entrepreneurship compels an individual to continuously evaluate the existing
modes of business operations so that more efficient and effective systems can be
evolved and adopted. In other words, entrepreneurship is a continuous effort for
synergy (optimization of performance) in organizations.
Profit potential: -“Profit potential is the likely level of return or compensation to the
entrepreneur for taking on the risk of developing an idea into an actual business
venture.” Without profit potential, the efforts of entrepreneurs would remain only an
abstract and a theoretical leisure activity.
Risk bearing: -The essence of entrepreneurship is the ‘willingness to assume risk’
arising out of the creation and implementation of new ideas. New ideas are always
tentative and their results may not be instantaneous and positive.
1. Idea Generation: To generate an idea, the entrepreneurial process has
to pass through three stages:
This is like seeding process, not like planting seed. It is more like the
natural seeding. Most creative ideas can be linked to an individual’s
interest or curiosity about a specific problem or area of study.
Once the seed of interest curiosity has taken the shape of a focused
idea, creative people start a search for answers to the problems.
Inventors will go on for setting up laboratories; designers will think of
engineering new product ideas and marketers will study consumer
This is a stage where the entrepreneurial process enters the sub-
conscious intellectualization. The sub-conscious mind joins the
unrelated ideas so as to find a resolution.
2. Feasibility study:- Feasibility study is done to see if the idea can be
It passes through two steps:
After the generation of idea, this is the stage when the idea is thought
of as a realistic creation. The stage of idea blossoming is critical
because ideas by themselves have no meaning.
This is the last thing to verify the idea as realistic and useful for
application. Verification is concerned about practicality to implement
an idea and explore its usefulness to the society and the entrepreneur.
IMPORTANCE OF ENTREPRENEURSHIP
Development of managerial capabilities:- Entrepreneurship results into
creation of organisations when entrepreneurs assemble and coordinate
physical, human and financial resources and direct them towards
achievement of objectives through managerial skills.
Creation of organizations:-Entrepreneurship results into creation of
organizations when entrepreneurs assemble and coordinate physical,
human and financial resources and direct them towards achievement of
objectives through managerial skills.
Improving standards of living:-By creating productive organisations,
entrepreneurship helps in making a wide variety of goods and services
available to the society which results into higher standards of living for the
Means of economic development:- Entrepreneurship involves creation
and use of innovative ideas, maximization of output from given resources,
development of managerial skills, etc., and all these factors are so essential
for the economic development of a country.
ENTREPRENEURIAL FUNCTIONS & TASKS
Delegation of work
Idea Generation or Creativity
Employment Generation for others
FACTORS AFFECTING ENTREPRENEURSHIP
Initiative (does things before being asked for)
Proactive (identification and utilization of opportunities)
Perseverance (working against all odds to overcome obstacles and never complacent with success)
Problem-solver (conceives new ideas and achieves innovative solutions)
Persuasion (to customers and financiers for patronization of his business and develops & maintains
Self-confidence (takes and sticks to his decisions)
Self-critical (learning from his mistakes and experiences of others)
A Planner (collects information, prepares a plan, and monitors performance)
Risk-taker (the basic quality).
These factors relate to the conditions in which an entrepreneur has to work. Environmental
factors such as political climate, legal system, economic and social conditions, market situations,
etc. contribute significantly towards the growth of entrepreneurship. For example, political
stability in a country is absolutely essential for smooth economic activity Unfair trade practices,
irrational monetary and fiscal policies, etc. are a roadblock to the growth of entrepreneurship.
Higher income levels of people, desire for new products and sophisticated technology, need for
faster means of transport and communication, etc. are the factors that stimulate
TYPES OF ENTREPRENEURS
Innovative entrepreneurs: These entrepreneurs have the ability to think
newer, better and more economical ideas of business organisation and management.
They are the business leaders and contributors to the economic development of a
country. Eg; Tata Nano (Ratan Tata), Reliance Mobiles
Imitating entrepreneurs: These entrepreneurs are people who follow the
path shown by innovative entrepreneurs. They imitate innovative entrepreneurs
because the environment in which they operate is such that it does not permit them to
have creative and innovative ideas on their own.
Such entrepreneurs are found in countries and situations marked with weak
industrial and institutional base which creates difficulties in initiating innovative
In our country also, a large number of such entrepreneurs are found in every
field of business activity and they fulfill their need for achievement by imitating the
ideas introduced by innovative entrepreneurs.
Development of small shopping complexes is the work of imitating
entrepreneurs. All the small car manufacturers now are the imitating entrepreneurs.
Fabian entrepreneurs: The dictionary meaning of the term ‘fabian’ is
‘a person seeking victory by delay rather than by a decisive battle’. Fabian
entrepreneurs are those individuals who do not show initiative in visualising
and implementing new ideas and innovations wait for some development
which would motivate them to initiate unless there is an imminent threat to
their very existence.
Drone entrepreneurs: The dictionary meaning of the term ‘drone’ is ‘a
person who lives on the labor of others’. Drone entrepreneurs are those
individuals who are satisfied with the existing mode and speed of business
activity and show no inclination in gaining market leadership. In other
words, drone entrepreneurs are die-hard conservatives and even ready to
suffer the loss of business.
Social Entrepreneur: Social entrepreneurs drive social innovation and
transformation in various fields including education, health, human rights,
workers’ rights, environment and enterprise development.
They undertake poverty alleviation objectives with the zeal of an
entrepreneur, business practices and dare to overcome traditional practices
and to innovate. Dr Mohammed Yunus of Bangladesh who started Gramin
Bank is a case of social entrepreneur.
MAJOR PROBLEMS FACED BY SMALL SCALE
ENTREPRENEURS WITH RESPECT TO INFRASTRUCTURE
Inadequate infrastructural facilities creates the problem of acute
shortage of basic raw materials, especially those which are scarce
and need to be imported from distant places, needed by small and
medium scale enterprises.
Small and medium scale entrepreneurs find it difficult to distribute
their products to the markets which are located at far off places
because of incomplete construction or non-existence of basic roads/
Lack of proper airways and waterways facilities also restricts the
growth prospects of those medium/small scale firms whose target
market is located abroad.
Small and Medium scale enterprises face shortage of power supply,
due to which they are unable to make full utilization of plant capacity.
Most of them find it difficult to install their own power generating
plants, so as to ensure their uninterrupted operations, due to lack of
Most of them are located in rural areas or remote areas of the
country, due to which they find it difficult to communicate with people
outside the region. This is because of non-existence of proper
SCOPE OF SMALL BUSINESS ACTIVITIES IN INDIA
Small entrepreneurs cover a wide range of business activities. The range of products
manufactured by small-scale industries is very wide from baskets to precision electronic
and optical instruments
1) Manufacturing Industries: This type of small entrepreneurs is involved in producing
complete articles used for direct consumption and also for processing industries:
(2) Village and Cottage Industries: Village and cottage industries are industries which
are carried on in homes of workers which we have designated as cottage industries.
(3) Handlooms and Handicrafts: These industries cover artisans, skilled craftsmen and
technicians who can work in their own houses if their work requires less than 300 square
feet space, less than 2 kW power less than 5 workers and no pollution is caused.
Handicrafts, toys, dolls, small plastic and paper products, electronic and electrical
gadgets are some examples of these industries.
4) Modern Small Entrepreneurs: These industries are :
(a) Small Entrepreneurs: According to Government of India, 2000, small scale industry
is an undertaking having an investment in plant and machinery of not more than Rs. 1
(b) Ancillary Industries: These are industrial undertakings having fixed investment in
plant and machinery not exceeding Rs. 75 lakes (Government of India, 1991) engaged
(i) the manufacture of parts components, sub-assemblies, tooling or intermediaries, or
(ii) the rendering of services supplying 30% of their production or services,
as the case may be, to other units for production of other articles
(iii) Tiny Units: This refers to undertakings having fixed investment in plant
and machinery not exceeding Rs. 5 lakes. These also include undertakings
providing services such as laundry, zeroing, repairs and maintenance of
customer equipment and machinery, hatching and poultry etc.
(5) Trading Industries: These types of small entrepreneurs are engaged in
sale and purchase or exchange of goods and services. These industries act as
middlemen between producers and consumers. This type of units includes
wholesaler, retailer and commission agents.
(6) Service Industries: These small entrepreneurs’ establishments are
engaged in personal or household services in rural areas and towns with
population not exceeding 5 lakes and having fixed investment in plant and
machinery not exceeding Rs. 2 lakes. These industries include:
(a) Professional services e.g. services of law, accounting medicine,
(b) Commercial services e.g. transport, constructing warehousing, real
estate, repair shops etc.
(c) Personal services e.g. fashion shops, dry cleaning restaurants, etc.
ROLE OF SMALL BUSINESS IN INDIAN ECONOMY
Small scale firms are helpful in the achievement of these goals in the following ways:
1. Employment: Small scale firms use labour-intensive techniques and, therefore, they have high
potential to provide employment to a larger number of people per unit of capital. For every worker
employed in large scale industries about three workers are engaged in small scale and cottage
industries. Next to agriculture small business constitutes the most popular occupation of people in
India. Small firms promote self-employment particularly among the educated and professional class.
They also provide employment to agriculturists who remain idle during a part of the year.
2. Balanced Regional Development: small scale industries promote decentralized development and
help to remove regional disparities in industrialisation. Decentralized development contributes to the
process of self-sustained growth and avoids concentration of industries in particular areas. By
providing employment in rural areas they help to check migration and overcrowding in urban areas.
Small scale firms can be a useful means of rural reconstruction and development. Development of
decentralized sector also improves the standard of living of people in backward regions.
3. Optimization of Capital: Small scale firms require less capital per unit of output and, therefore,
greater output can be obtained with small investment. The Annual Surveys of industries reveal that
fixed capital per employee in case of small scale industry was Rs. 3,706 as compared to Rs. 27,757
in case of large scale industry. Small firms also provide quick returns after their establishment on
account of short gestation period. In India where the rate of capital formation is low, small scale
industries are very suitable.
4. Mobilization of Local Resources: Small scale industries facilitate Mobilization and
utilization of local resources and family skills which might otherwise remain talent or utilized.
Small business promotes a new cadre of small entrepreneurs and self-employed and
encourages local talent. The growth of small enterprises helps in tapping talent resources like
entrepreneurial skills and small savings specially in rural areas. Small business helps to protect
technical skills and handicrafts.
5. Exchange Earnings: Small scale industries help in reducing pressure on the country's
balance of payments in two ways. First, they do not require imports of sophisticated machinery
and equipment. Secondly, they earn valuable foreign exchange through exports of their
6. Egalitarian Society : Small scale industries help in reducing concentration of economic
power in a few hands. They promote a more equitable distribution of national income and
wealth. Development of small scale industries helps to reduce monopolies and exploitation of
consumers. Benefits of small scale firms are derived by a wider population. A large part of the
earnings is distributed among workers.
7. Feeder to Large industries: small scale sector is complementary to the large scale
industries. Small scale industries manufacture various types of components, spare parts, tools
and accessories which are required by the large scale sector.
8. Social Advantage: Small scale units offer opportunity for an independent way of life to
people with small means. They offer savings in social overheads like education, housing and
medical facilities by taking industry nearer to the people. They help to raise per capita income
an standard of living in the country. A system of widely diffused ownership permits wider
participation of people in the process of economic development. Small scale sector provides a
base for democracy, socialism and self-government.
GOVERNMENT POLICY TOWARDS SMALL BUSINESS
(i) Small scale industries operate the local or State level. Different State Governments an local bodies
have framed their own regulations and it is necessary to coordinate and supplement their efforts for the
development of small scale units.
(ii) Full employment is a fundamental goal of economic planning in India. Small scale industries offer
large employment potential as they use labour-intensive methods of production.
(iii) A major cause of our under development is the underutilization of resources. In order to tap the local
and latent resources and skills, national policy of the growth of the Decentralized sector is necessary.
(iv) Development of small business at the national level helps to achieve a balanced development of
various regions, in particular the backward regions of the country. Small scale industries are an important
means of rural development.
(v) Small scale industries face several managerial, technical and financial problems, and there is need to
develop institutional an other facilities for them. A national policy is required to create coordination
between small scale and large scale sectors.
(vi) A national policy on small scale industries is helpful in the creation of a socialistic pattern of society.
Small Scale industries help in raising national income an standard of living in rural areas They help to
preserve skills an handicrafts. Small scale units are useful for reducing concentration of economic power,
monopolies and exploitation in the country.